China Insider

China Insider Podcast | Xi’s Plan to Divide the EU, and the CCP’s International E-commerce Scam

Senior Fellow and Director, China Center
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Shane Leary joins Miles Yu to discuss Xi Jinping’s recent trip to France, Serbia, and Hungary, what the People’s Republic of China hoped to gain by engaging these specific countries, and how successful their European Union diplomacy has been. They then discuss a massive e-commerce scam network operating in China, which was recently uncovered in a report by The Guardian, Dei Zeit, and Le Monde.

China Insider is a weekly podcast project from Hudson Institute's China Center, hosted by Miles Yu, who provides weekly news that mainstream American outlets often miss, as well as in-depth commentary and analysis on the China challenge and the free world’s future.  

Episode Transcript

This transcription is automatically generated and edited lightly for accuracy. Please excuse any errors.

Miles Yu:

Welcome to China Insider, a podcast from the Hudson Institute's China Center. I am Miles Yu, senior fellow and director of the China Center. Join me each week along with my colleague, Shane Leary, for our analysis of the major events concerning China, China threat, and their implications to the US and beyond.

It's Tuesday, May 14th, and we have two topics this week. The first is Xi Jinping's recent trip to Europe where he visited France, Serbia, and Hungary. We discussed the purposes behind this trip, why these three countries and how successful this was for the PRC’s diplomatic efforts in Europe. Second, we discussed a massive international e-commerce scam operating out of China, which was recently uncovered in a report by the Guardian, Dei Zeit, and Le Monde. Miles, how are you?

Miles Yu:

Very good. Shane, nice to be with you again.

Shane Leary:

Yes, wonderful. Well, so for our first topic, Xi Jinping took his first trip to Europe since 2019. He visited France, Serbia, and Hungary, and his visits to each country coincided with the 60th anniversary of China's relations with France and the 75th anniversary of its official ties with Hungary. What was the purpose of this trip and why now?

Miles Yu:

China has been selling the world the falsehood that the predominant paramount problem of the world, is China versus United States. United States is hedge among China is victim. China don't lead the all nations of oppressed and victimized by the United States to salvation. So that's the idea. So to do this, that China must prolong this myth and is most afraid of one thing, that is, unity of the world. In other words, the reality is not just China versus the United States, China versus the rest of the world. So the rest of the world consists of a lot of alliances and almost all of them has some kind of elements to prevent China from dominating the world. Therefore, China's ultimate tactic for decades has always been unity busting. Whenever there is a coalition of people, association of free peoples and free nations and China is going to break that unity one by one by focusing on the individual nations, but not on the union and alliance at all. So, for example, China has spent the major portion of its diplomatic and political assets to bust unity of ASEAN, the Southeast Asian Alliance of Nations Association of Nations, and the Trans-Atlantic Alliance between US and the EU countries. Particular reason you can see, the US led bilateral mutual defense alliance in Asia and Southeast Asia. That is the US, Japan, South Korea and the Philippines. Japan trip to Europe follow the same kind of tactic. So therefore, its primary goal is to defeat EU unity. And because [the] EU has been relatively strong on China recently. 

Shane Leary:

Yeah, and as you say, I mean tensions between the EU and China are higher than Xi would like, particularly on the issue of trade. Why these three countries to single out?

Miles Yu:

Before I answer that question directly, EU is being strong on China, not just on trade. Mostly political eus definition of the EU China relationship is one of systemic rivalry. I myself personally ask[ed] the EU’s China chief, what does the systemic rivalry mean? What does the system mean? Is the coverage the area of engagement involved or is political ideological? And he said, without the blink of [an eye], it is ideological and political rivalry. So that is a very, very good definition. The EU’s chief Joseph Borrell has said many times, even though he's been weak on China at some point, but on issues of regional security, for example, Taiwan, he has written articles directly urging EU countries to send [warships] to patrol Taiwan Strait. And this is kind of very strong. Then of course you use economic and trade self-protection has been growing particularly against China's sudden surge of exports to European countries, the electric vehicles.

So that's why you EU’s unity has been relatively strong. So Xi Jinping didn’t like that, to answer your question, why these three countries, France, Serbia, and Hungary, because Xi Jinping wants to find a crack within the EU system to derail EU’s collective power and inference. And CCP wants to find the crankiest, the most opportunistic EU national leader and to do this job. And that's Emmanuel Macron, France. He wants to have a strategic autonomy of NATO from the United States. He has said that NATO is brain dead, yet he following Beijing's queue and absolutely oppose NATO's expansion to Asia, particularly to reject on the resolutely opposed to Japan's request to have a NATO office in Tokyo. And he was the first EU national leader to allow Chinese police to station in Paris, harming France's sovereignty. And to China's greatest delight, white Serbia. Well, Serbia is a very interesting case because Serbia carries a direct anti-west message because of the Kosovo war.

And you mentioned about several anniversaries, but there's one anniversary [not mentioned], that is the 25th anniversary of the NATOs accidental bombing of Chinese embassy in Belgrade during the coastal world war. That was a turning point. China used that incident to find enormous anti-US anti-American national campaign. You mentioned the Belgrade embassy bombing in China, and you are going to have a lot of people riled up. That's Chinese property, the impact of Chinese propaganda, and Xi even [inaudible] an editorial during his visit to Serbia blaming the United States as the source of instability globally and China is a savior. And now keep in mind that Serbia is China stand. During the Kosovo war, China was the biggest champion of Serbia.

Cause when Serbia's embassy in the United States was closed, China stepped in and to assume all the consular affairs for Serbia in Washington DC during the coast of war, war during the bombing of Serbia and Montenegro, virtually every foreign embassy evacuated except the Chinese. Their embassy staff actually increased. They sent a lot of people over there and many of them were in intelligence people to collect the NATO military intelligence during this conflict. And also there's another thing that why China is so key, so keen on Serbia. This is one of the reasons why Xi Jinping wants to visit Serbia because Serbia is the center of what used to be Yugoslavia. Yugoslavia basically is a combination of many ethnic groups, ethnic countries together, and every single one of them wants independence. NATO’s war on Serbia carrying a very strong message that Chinese most afraid of, that is the message of national self-determination.

Kosovo [is related to] Tibet and Xinjiang. So China is afraid that Kosovo may set by example for Tibetan and Uyghurs who wants independence anyway, so that's why this bond between Serbia and China has been very, very strong. It's a huge propaganda topic for domestic anti-American hysteria. Xi Jinping said in his editorial published in Belgrade during his visit, that the relationship between Serbia and China was created by blood shed together. That's the language that China usually reserves for countries like North Korea. So that's the political thing. China also invested very heavily in the Belt and Road Initiative in Serbia. One of the biggest one is the Belgrade Budapest railway, which is very heavily invested, built by Chinese engineers, which brings us to the next country that should be visited. Hungary, whose capital is of course Budapest. Hungary is very interesting because Hungary, first of all is perhaps the most intrinsically related to China's recent history.

You recall many of the Chinese political campaigns had a lot to do with what's going on in the Soviet bloc. Last week we talked about the impact of the Soviet system on China. One of the most landmark event[s] was a 1956 Hungarian uprising that is Hungarian people rose up and to oppose Soviet domination, which was cracked down by the Soviet tanks and machine guns. In 1956, China got the cue from that, and that was the source of the 1957 anti-rightist movement [that] Mao Zedong launched and one of the guys I knew very well, his name, his passed away, Harry Wu, who was then a college student in China. And he was openly opposed to China's support for the Soviet crackdown of the Hungarian uprising in 1956. For that he was sentenced eventually to a life term in prison. This guy basically was released earlier, came to the United States in 1980s, and became a staunch anti-CCP human rights advocate.

But also during China's opening up and reform movement under Deng Xiaoping, it was Hungary that gave China inspiration to open up its rigid command economy and created something called the special economic zone because Hungary itself under Soviet direction, became the Soviet bloc special economic zone in the 1970s and the early 80s. So, this is a very impactful now. Hungary right now serves a particularly different purpose for China. That is Hungary has been used by China as a Trojan horse for EU because EU has this very unfortunate requirement on major economic and political system. That is EU requires unanimity. This unanimity rule is hurting [the] EU and China sees opportunity and the use Hungary to break the EU’s power. Hungary has been very pro-China and Hungary has been very pro Russia, particularly on [the] war in Ukraine. The Hungarian leader right now, Victor Orban thought he was fighting a woke war against the woke west.

But in fact, he was actually fighting the war against the western values and the western alliance by siding with Russia, siding with China. Now, Hungary has allowed major Chinese companies, Huawei, ZTE and the battery maker, CATL in particular to set up factories, bypassing many regulatory barriers and to set up a lot of plants in Hungary. I was there last year, I saw in my own eyes how penetrated Hungary has been by China. So that's why Xi Jinping want to go to Budapest and to hobnob with the Hungarian government and to create a very strong stronghold for China as the base from which to penetrate the EU market with this surge in EV products. And that's why EU has been very, very alerted to this Chinese move.

Shane Leary:

That's a great lay of the land. And I want to talk about, go through each country one by one in terms of how this trip went. So you mentioned France has recently and historically sought strategic autonomy. They've been a little bit friendlier to China on that front. Did this trip go as expected for Xi Jinping? How did he make out with Macron?

Miles Yu:

These three countries are very different in terms of impact and impact of power. France obviously was a very big one. France is at the heart of [the] EU and is big economy, and France traditionally has been the leader of a lot of political moves. And most importantly, France wants to be the leader of EU since United States. It did not go very well as Xi Jinping would like in France because Macron obviously is afraid of a backlash from EU and also he's afraid of isolation and estrangement from EU. So during his visit, Macron actually seated his leading role as a host. He led the leader of EU, the lady Ursula von der Leyen, to take the lead. So it was supposed to be a bilateral meeting, turned out to be a trilateral meeting between Xi Jinping and the EU leader, Ursula and also Macron. So the EU president, chairman, and she played very tough role and she was very straightforward to Xi Jinping and Macron basically almost sitting on the back bench.

So that's why, I don't know whether is this a design? This is by design or is by default? That's how it went out. I don't think there is some kind of political message yet Xi Jinping successfully extended it to EU during this particular visit to France, to Serbia. Obviously Serbia needed China more. I think China is looking for new Albania, if you will. If you know Cold War history. China has no friend in Europe. And so, the only country that was friendly to China was the socialist, communist country of Albania who openly rebelled against the Soviet Union. China like[d] that. And most importantly, Albania of course is a political country, and Albania's main ideological rivalry was Yugoslavia. So up and down, up and down, China chose Albania. Remember when Yugoslavia was good comrade? Albania was the revisionist bad guy. When after Stalin die[d], Khrushchev resumed good relationship with the Yugoslavia and China, of course split with the Soviet [Union] under Khrushchev.

Albania all of a sudden became a friend and a good comrades and Yugoslavia become a bad revisionist country. This is all very, very utilitarian within the communist ideological camp. This kind of fight has been very deadly, very much like what China is doing right now to Serbia, China invest[ed] heavily to Albania and to the tune of $1.2 billion. Those days, billion is a lot of money. So China was a very poor country. Tens of millions people were starving. China put a lot of money to Albania. Virtually the country was basically bankrupted by China. That is what China is doing, by bribery, by ideological alliance. China wants to have Serbia as the new Albania in southeastern Europe, eventually to entire Europe, Western Europe, Europe. I don't think Serbia is a very popular country in Europe. Serbia still harbors a lot of resentment against the EU, against the Western Europe.

So this is not a very good time for Xi Jinping to play politics with China itself has been increasingly unpopular worldwide, particularly in Europe. The embassy bombing is just silly. I mean there is no political capital to begin on this. That was 25 years ago and the United States explained to China what happened. By the way, why is it that China send so many people? It has such a strong political, diplomatic and military presence in the middle of the war when everybody is evacuated. So this is not entirely the United States to blame. Hungary obviously is a very mixed [bag]. I think Victor Orban continue[s] to be stubborn and I think the image is very telling between the warm greetings of these two leaders. However, I think precisely because of China's enhanced massive investment in Hungary in terms of building up cheap electrical vehicles and batteries, I think that really caused a much heightened alert within EU. You will see very strong discussion within Brussels leadership circle about the Hungary’s role in the US-China and the EU-China rivalries. 

Shane Leary:

We have a little bit of time left. I want to move to another topic that is an international investigation by the Guardian, Dei Zeit, and Le Monde have uncovered a vast network of fake e-commerce shops, which falsely claim to sell designer goods and operate out of China, which have stolen the credit card information of over 800,000 people in Europe and America. Miles, can you expand a little bit on what happened here and how common is activity like this in China?

Miles Yu:

China's economic development in the last several decades obviously had a lot to do with the diligence and hardworking Chinese workers and non-state companies because they were linked to the global economic free trade system. That is for sure. On the other hand, the very system under the Chinese CCP encouraged and created economic and political culture, encouraged stealing of other people's intellectual properties. You might even say people's Republic of China literally is a people's republic of knockoffs. And so many Chinese brand names right now are exactly copying of some other international brands. You name it, I mean it's from sneakers to the computer system to the electronic major selling items to even its electrical vehicle cars. Xiaomi, as we discussed earlier, had the exact copy of German car automobile maker purchase design. So it's been getting away with a lot of things, a lot of fake bogus merchandises.

In this case, we used to focus on hacking of countries like Russia, Iran, but the Chinese hacking has been much, much more alarming because China is a country of the strongest, the most efficient electronic surveillance. They can catch you very easily. That's run by the state agencies. Yet the hacking criminals from China will somehow allow to hack the world economic system en masse by the millions of cases. In this case, the guardian has reported more than 800,000 people in Europe, and the United States appear to have been duped into sharing card details and other sensitive personal data with a vast network of fake online designer shops and apparently operated from China. That's the quote from the first paragraph of the Guardian report. So you see, without the collusion and almost like oblique help by the Chinese state operator, this kind of hacking intellectual property, stealing on a massive scale would become very, very impossible. So that's why I say this is a sense about China is not necessarily the act of individual hooligans, [it] normally has a state factor behind.

Shane Leary:

So I just want to push on that a little bit further. I mean, you make some excellent points that China has in many ways encouraged a culture of economic, maybe indecency, let's say with intellectual property theft and that it's very suspicious that such a powerful security state and surveillance state would not be able to catch this. So there seems to be some negligence involved. Would you say that it goes so far as to say the state is actually coordinating this? Or is it simply something that they're sort of providing the grounds for and they're happy to ignore?

Miles Yu:

The state normally stay behind and to carry out its state policies very clearly must give them credit for that for reason. For example, China literally hasn't banned all these foreign social media outlets to operate in China, for example, Facebook, Twitter, Google, et cetera, et cetera. They never have the ban on it. They just created a condition for those foreign media outlets to operate in China impossible. You have to give up your trade secret. You must really store your consumer data inside China. You must comply with the Chinese intelligence and the public security bureau hundred percent. Otherwise you'll not be allowed. That's like a surrender. So that's why those companies were not allowed to operate. So if you say this is a bank, we never buy it. So it's very clever over there. It affected the same thing. Chinese economy is in shambles recently except at two areas.

One of them is the electric vehicles, another one is e-commerce. E-commerce in China has been enormous. The Chinese government encouraged the e-commerce by giving them political coverage. For example, China's state actor has been trying to hack into the largest e-commerce in the United States., hack the corporate data because that's where the chrome jewel of Amazon is. That is the consumer information including some of the highly sensitive cloud storage information. So that has not been totally successful. So China's new strategy is to create a company e-commerce company to replace and they choose two. One is a Temu, another one SHEIN. Those two Chinese companies have been given a lot of green lights by the Chinese government to operate in the United States with the enormous state subsidies, right? Temu, you can see, and SHEIN in the US e-commerce are selling exactly same items in many cases [that] Amazon are selling, but at a fraction of the price, and they use a very salacious advertisement to attract customers to buy stuff from them.

Eventually, they use this kind of development model to provide subsidy, provide political coverage for those companies to operate in a free market system and eventually to beat and destroy each of these competitors in a free market system one by one. So this pattern has been going on for a long time, and this is why this has a serious national security concern, because ultimately the future of e-commerce, the future of international economy to a large degree depending on the control of the new platform of commerce, of security and of war even, and that is such as artificial intelligence and artificial intelligence, is data-driven. Without collection of a massive amount of data globally, artificial intelligence won't work. That's why the stake is extremely high and we have to be very, very careful about this.

Shane Leary:

Well, miles, that's all the time we have this week. Thanks so much and look forward to doing this again next week.

Miles Yu:

Looking forward to you sharing thoughts with you next week. Again, thank you. Thank you for listening to this episode of China Insider. I'd like to thank my colleague Shane Leary, for taking part in this undertaking every week. I'd also like to thank our executive producer, Philip Hegseth, who works tirelessly and professionally behind the scenes for every episode. To make sure we deliver the best quality podcast to you, the listeners, if you enjoy the show, please spread the words for Chinese listeners. Please check our monthly review and analysis episode in Chinese. We'll see you next time.