COERCION AND VALUES MAIN CHINA ISSUES

Conventional Wisdom Ignores Beijing Capture of Foreign Entities

China’s slow economic recovery from the Covid induced downturn has led to a revival of the conventional wisdom notion that all the free world has to do better to compete with China is to ignore national security red flags raised by the Biden team, open free world markets wider to Chinese exports, and focus on greater “engagement” with the dragon.

This is evident from recent commentaries in the Washington Post and Foreign Affairs by two champions of the conventional wisdom. CNN commentator Fareed Zakaria and Peterson Institute for International Economics President Adam Posen have made strong arguments for continued free trade and economic “engagement” with China while downplaying the national security, technological, and economic welfare risks now driving much U.S. and global thinking on policy toward China.

ZAKARIA

Zakaria begins by saying that the China Shock should really have been called the Globalization Shock because the western jobs that went to China over the past twenty odd years would have gone to other developing countries even if they had not gone to China. He further claims that while the shock ended fifteen years ago, it is still politically relevant despite what he calls the “fact” that the situation today is completely different.

He then argues that the Chinese economy is really now in bad shape and enduring a slowdown characteristic of economies like those of Turkey, Venezuela, Russian, and Hungary in which the government role has become too big and actually suppressive of the key elements necessary for continued rapid growth. He argues that the situation with China today is similar to the concerns of the United States over the trade situation with Japan in the 1980s-90s that he claims turned out to be “unfounded” as the Japanese economy relatively declined as a result of an aging population.

He continues that the real problem for America now is the “Trump Shock” that seems to be capturing the Republican Party and that Zakaria says is completely counter-productive to establishing a vibrant relationship with China that will ultimately redound to America’s benefit.

In mentioning Turkey, Hungary, and Russia, Zakaria alludes to the much more serious recent analysis of Posen in the latest Foreign Affairs edition which concludes that far from the recent efforts of the Biden administration to “de-couple” or “de-risk” from China, now is the time for the United States to keep to the original course of increasing engagement and coupling with China’s economy.

POSEN

Posen notes that although it was widely expected that China’s economy would revert to the growth rates of the past ten years with the end of Covid, that is not now the case. Indeed, he emphasizes that China is continuing to have declining growth and an unbalanced structure that is likely to handicap China for years to come with consumers saving more and buying less while citizens and corporations save instead of investing. The main problem, says Posen, is excessive government intervention in the economy both in terms of investment in state owned rather than in privately owned corporations and in terms of assuring ordinary citizens that there will be some limit on the intervention of the government into their lives.

In the face of this, Posen says that far from imposing limits on exports of certain items like advanced semiconductors to China or of the numbers of Chinese students, scientists, investors, and scholars coming to the United States, Washington should be welcoming more of them. The more the better because they will only further stimulate U.S. technology development, job creation, and growth, he says.

He further makes the point that countries like Australia and Singapore have already been benefitting from an increased flow of students and scholars to their universities from China and the U.S. should enjoy the same bounty.

ON TO THE REAL WORLD

I could not help smiling at Posen’s comments about Chinese students going to Singapore. In a meeting I had with Singapore Prime Minister Lee Hsien Long in 2018, we discussed the significance of Chinese students. It was he who raised the issue and he didn’t raise it as an example of all the good things embracing engagement with China could bring. Rather he pointed out that students could be used as a weapon by Beijing which has the power to force the students to withdraw as a way of punishing the host countries if they say or do something Beijing doesn’t like. Noting that the Australians had suffered from a sudden halt by China of its imports of Australian barley due to Beijing’s irritation at certain political comments by leading Australian politicians, Lee commented that Singapore leaders well understood the potential economic loss from a possible withdrawal of Chinese students if Beijing happened to become irritated by some action or lack of action by Singapore. In other words, the students could be a possible long term threat as well as a short term blessing.

This brings us to the critical point. It is a point that has been present since I helped lead the very first official U.S. trade mission to China in the fall of 1982. It is a point that Presidents George H.W. Bush, Bill Clinton, George W. Bush, and Barack Obama thought they could finesse. It is a point that former World Bank President Robert Zoellick thought he could finesse when he said that the free world wants “China to be a responsible stakeholder in the liberal, rules based, global order.” It is a point that The Economist, in its March 3, 2018 cover story proclaiming that the “West Made the Wrong Bet” in its “engagement” with Beijing said all the western players had lost. It is one of the few points that President Trump may have gotten right. It is the main point that drove the Biden administration’s National Security Advisor, Jake Sullivan, to advise strongly that the United States restrict sales of key semiconductors and semiconductor production equipment to China despite twenty eight years of “positive engagement” under the above Presidents with the exception of Trump.

Sullivan was also aware of another key fact never mentioned in the long forty odd years of the China-free world dance but of immense reality and importance. U.S. and other free world business leaders with big investments in China are effectively hostages subject to coercion by the Chinese government. In America, CEOs like Tim Cook of Apple are tremendously powerful. They make big political donations, have instant entre to the President and other key American leaders, and often file and win legal cases against the U.S. government. In China, these same leaders are on the knees kowtowing to Xi Jinping and the CCP. They do not make political donations, do not have easy entre to key Chinese leaders, and definitely do NOT file legal cases against the Chinese government or the Communist Party. Effectively, they are hostages and agents of the Chinese government propaganda efforts in Washington DC and elsewhere. Nearly everything Cook and Apple sell worldwide is made in China despite the fact that most of the technology was developed by the Defense Advanced Research Projects Agency with U.S. taxpayer money. If things don’t go as Beijing wishes in China, Cook has no recourse but to kowtow and try to be a better boy.

The point is that the relationship between China and the free world is not fundamentally about trade or globalization. It is about power and the direction of global political evolution and whether that evolution will favor free speech, democracy, and rule of law or authoritarianism. China sees itself as on the way to the “great rejuvenation of the Chinese People” which means to its ancient position as first among nations and to a more authoritarian global power system centered more on China and less on America. It is important to understand that many in the CCP, including especially Chairman Xi Jinping, are true believers in communist theory which predicts the eventual eclipse of the rotten bourgeoise and the eventual victory and domination of Communism. An important element of the CCP seems to believe that all the signs of the global situation today point to the relatively near downfall of the United States and its eclipse by China.

For the better part of forty years, U.S. Presidents, business leaders, members of Congress, leading journalists, and top academics have clung to the faith articulated by Presidents Clinton and George W. Bush. Clinton said that China’s efforts to control the Internet wouldn’t work, that attempting to do so would be like trying to nail Jello to the wall. Bush said the “free trade inevitably plants the seeds of democracy.” Both, along with all the other Presidents until Trump, and certainly with the vast majority of business leaders, most of the academics, most of the economists, and most of the commentators believed that making money, constant economic growth, and expanding intercourse with the free world would eventually undermine the Chinese Communist Party’s own convictions and its power thereby leading to a great global and liberal rapprochement among the nations.

The advent of Xi Jinping’s rule has proven all this to be no more than wishful thinking. Commentators and others often forget that the CCP is not only a Communist Party but also, and far more importantly, a Leninist Party. It trusts no one, seeks power above all things, and inevitably sees threats everywhere. This is being extremely well demonstrated by Xi and the party today as they insist on greater Chinese self-sufficiency and “Made in China 2025 and 2035”.

The immense effort to couple with China has been based on false assumptions about China’s intentions and its modus operandi, about the full costs of the China based supply chain, (for example, the costs of China’s enormous greenhouse gas emissions are never included in the final cost of products), on short term gain objectives, and on wishful thinking. It has not been at all realistic and sadly neither Zakaria nor Posen seem to get it. The world they are talking about is, like it or not, long gone if it ever existed.