Tuesday, 18 September 2018

The Chinese Empire Up In Smoke!

Not a minute goes by without a fresh and devastating account or news of how the God-forsaken Chinese Dictatorship, this malevolent scourge of humanity, this most execrable imperialist inheritor of that sorry tale of slavery and human rot that was formerly known as the Celestial Kingdom - of how this suppurating pile of infamy is being torn apart by its its own internal tensions, and crushed by the external avalanche of revulsion and disgust that it has heaped upon itself! Here is the latest instalment from the Australian’s Dr. John Lee. Enjoy and rejoice!

China takes the long view and is assiduously planning its Great Rejuvenation while democratic governments think only as far as the next election. Chinese leader Xi Jinping is a master strategist who has consolidated his power beyond the traditional two-term limit while President Donald Trump — who yesterday slapped tariffs on about $278 billion of Chinese imports to take effect next Monday — is raging even as the US retreats as leader of the free world.
A narrative straight out of Beijing’s public affairs bureau, it is the perspective shared by some of our living former prime ministers, retired foreign affairs officials and China watchers. But if you separate propaganda from the facts, that view is simplistically premature. Most likely, it is wrong.
Let’s put China’s best card on the table: the expectation it will become the dominant economic superpower in the region and world. Beijing has two related masterplans to that end: the Made in China 2025 blueprint, and the Belt and Road Initiative.


MIC 2025 is Beijing’s plan to transform the country into a hi-tech superpower by dominating advanced industries such as robotics, next-generation information technology, aviation, advanced materials and green energy. The plan is not just to join the ranks of advanced economies such as the US, Europe and Japan but to leave them in China’s wake.
MIC 2025 is based on the twin pillars of Chinese “self-sufficiency” and Chinese domination of global exports in these sectors. Beijing has set a target of achieving 70 per cent self-sufficiency in core components and basic materials essential for these advance sectors — which, by the way, is against World Trade Organisation rules.
China has yet to adequately confront or overcome limitations intrinsic to its state-led political economy. It needs more robust intellectual property rights, which would reward innovation and risk. Its economy must allow creative destruction, which would see the best firms thrive and less deserving ones fail. Lending and investment decisions must be based on commercial reasoning rather than the purpose of meeting political objectives.
Reform would strike at the heart of the Communist Party’s role in Chinese the economy and society and necessitate a fundamental restructuring of the country’s political economy.
Unable to go it alone, MIC 2025 works only if international collaboration offers Chinese firms the lion’s share of benefits and advanced economies agree to further lower barriers even as China raises more of its own. It needs other global economic powers to remain compliant suckers.
They won’t. American threats of escalating tariffs against Chinese goods is really about demanding reciprocity and payback for IP theft. Detested by Democrats for almost everything else, there is bipartisan political and popular support in Washington for Trump taking on China. While Trump’s needless salvos against other trading partners is hardly conducive to getting similarly aggrieved nations on side, advanced economies in Europe and northeast Asia are as resentful with respect to Chinese mercantilist policies even if they remain on the sidelines of the US-China fray for the moment.
What is becoming clear is that global pushback against China is only beginning. A similar dynamic is playing out with respect to the BRI. Promoted as a vast infrastructure investment scheme to increase prosperity throughout Eurasia and the Indo-Pacific, nations are catching on that the promises of trillions of dollars are inflated. Worse, the BRI increasingly is being blamed for burdening smaller nations with unsus­tainable debt, entrenching rather than lessening corruption, delivering disproportionate benefits to Chinese companies, and negative social and environmental impacts.
The “Chinese port” of Hambantota in Sri Lanka has become exhibit A in terms of suspicion that the BRI is a platform through which indebted nations mortgage their sovereignty to China. Malaysia was once an enthusiastic recipient of Chinese largesse, but Malaysian Prime Minister Mahathir Mohamad calls it “a new version of colonialism”. The EU sees the BRI as a scheme to divide Europe and advance Chinese strategic and commercial objectives rather than as an act of economic benevolence. European co-operation is needed if China is to redefine Eurasian markets, rules and standards as Beijing hopes to do.
Finally, China’s strategic grand plan of easing the US out of the region by weakening its alliances and partnerships has gone even worse than the economic masterplans. In the last decade of the previous century, a wiser and more cautious China concluded relatively generous treaties with Russia, Kazakhstan, Kyrgyzstan and Tajikistan to resolve border disputes and improve ties. With relations smoothed over, China’s economic weight eventually allowed it to replace Russia as the most significant player in Central Asia. Under Xi, China has been reigniting age-old territorial disputes or doubling down on selective and even fabricated history to justify extended claims. In doing so, Beijing has managed to alienate every significant naval power in the Indo-Pacific, which all happen to be US allies or security partners. Although Chinese strategists long have feared the formation of a hostile maritime coalition of great powers, Beijing’s hubris is pushing these countries in that direction.
The Trump administration has made needless errors such as withdrawing from the Trans-Pacific Partnership, but these and other mistakes can be rectified by this administration or the next.
China’s mistakes are far more serious and consequential because they cause countries to balance against rather than welcome its Great Rejuvenation. Even Chinese commentators are now openly accusing Xi of overreach.
Who said autocrats have decisive strategic advantages over the muddling democracies?
John Lee is a fellow at the US Studies Centre and the Hudson Institute, Washington. From 2016 to this year he was a senior adviser to the Australian foreign minister.

RATS FEELING THE HEAT - It’s only the beginning

China's companies gagged from talking up tariff fears

Trump slaps $200b more tariffs on China
"We can't complain because we are not allowed to complain," a taxi driver in Shanghai told me this week when I asked him if he was worried about the impact of a trade war with the United States on China's economy.
The same is true for Chinese companies exporting goods to the US. In a country where state-run media and businesses are discouraged from making negative comments about the impact of Donald Trump's trade tariffs, it is hard to gauge sentiment on the ground.
Dozens of trading companies, logistics firms and manufacturers contacted by The Australian Financial Review over the past week refused to talk about the potential impact of Trump's trade tariffs on their operations. Many of the companies who have spoken freely to foreign journalists in the past said they were worried about attracting trouble from government officials if they spoke candidly.
However, there are clear signals that manufacturers in China are worried. Logistics companies in Shanghai say freight costs to the US are soaring and it is hard for exporters to book a container until October because they are sending as many goods as possible to the US before the tariffs kick in. While the trade war rarely gets a headline in the state-run media, there are other signs of nervousness. China's biggest stockmarket index, the Shanghai Composite, is down more than 20 per cent so far this year and the local currency, the yuan, has lost more than 7 per cent of its value against the US dollar since June.

China's biggest stock market index, the Shanghai Composite, is down more than 20 per cent so far this year as investors ...
Washington's aggressive stance on trade is not exactly a dinner party conversation for many ordinary Chinese though. Other issues such as the disappearance of a local movie star embroiled in a tax evasion scandal are hotter topics on social media platforms.

Erratic and unpredictable

Behind-the-scenes at senior levels in Beijing, it is a different story. Like many, China's leaders have been caught off guard by the erratic and unpredictable US President. Privately they never believed Washington would follow through on its threats to escalate a trade war that will also hurt American consumers. Beijing's past strategy of getting Wall Street powerbrokers to talk sense into a sitting US president no longer looks like it will work.
Linda Jakobson, an Australian who is well-connected in Beijing and met with senior decision-makers and economists in the capital this month, says there are "deep concerns" in the Chinese leadership about the potential impact of a US trade war on China's economy and efforts at reform. She was surprised at the candid admission from some that China is running out of options to respond to Trump. Many in Beijing will be hoping that US domestic political hurdles, or at best impeachment, solve the Trump problem for them although that looks unlikely.
How will China respond? In the short-term, it is likely to put tariffs on another $US60 billion ($83 billion) in American imports. It cannot match the US$200 billion in tariffs because it does not import that amount of US goods into China. China has other options such as more tightening, managing the exchange rate and stimulating the domestic economy but these are not preferred options. Beijing has made it clear it is willing to return to the negotiating table but this looks unlikely. President Xi Jinping does not want to provoke Trump any further but he will not want to be seen kowtowing to him either.

Monday, 17 September 2018

How We Shall Soon Hang the Beijing Rats in Tienanmen Square

A man walks by a propaganda poster in Beijing, Aug. 28.
A man walks by a propaganda poster in Beijing, Aug. 28. Photo: Andy Wong/Associated Press
China’s real problem isn’t the so-called Thucydides trap, which holds that a rising power like China must clash with an established power like the U.S., the way ancient Athens clashed with Sparta. It was Lenin, not Thucydides, who foresaw the challenge the People’s Republic is now facing: He called it imperialism and said it led to economic collapse and war.
Lenin defined imperialism as a capitalist country’s attempt to find markets and investment opportunities abroad when its domestic economy is awash with excess capital and production capacity. Unless capitalist powers can keep finding new markets abroad to soak up the surplus, Lenin theorized, they would face an economic implosion, throwing millions out of work, bankrupting thousands of companies and wrecking their financial systems. This would unleash revolutionary forces threatening their regimes.
Under these circumstances, there was only one choice: expansion. In the “Age of Imperialism” of the 19th and early-20th centuries, European powers sought to acquire colonies or dependencies where they could market surplus goods and invest surplus capital in massive infrastructure projects.
Ironically, this is exactly where “communist” China stands today. Its home market is glutted by excess manufacturing and construction capacity created through decades of subsidies and runaway lending. Increasingly, neither North America, Europe nor Japan is willing or able to purchase the steel, aluminum and concrete China creates. Nor can China’s massively oversized infrastructure industry find enough projects to keep it busy. Its rulers have responded by attempting to create a “soft” empire in Asia and Africa through the Belt and Road Initiative.
Many analysts hoped that when China’s economy matured, the country would come to look more like the U.S., Europe and Japan. A large, affluent middle class would buy enough goods and services to keep industry humming. A government welfare state would ease the transition to a middle-class society.
That future is now out of reach, key Chinese officials seem to believe. Too many powerful interest groups have too much of a stake in the status quo for Beijing’s policy makers to force wrenching changes on the Chinese economy. But absent major reforms, the danger of a serious economic shock is growing.
The Belt and Road Initiative was designed to sustain continued expansion in the absence of serious economic reform. Chinese merchants, bankers and diplomats combed the developing world for markets and infrastructure projects to keep China Inc. solvent. In a 2014 article in the South China Morning Post, a Chinese official said one objective of the BRI is the “transfer of overcapacity overseas.” Call it “imperialism with Chinese characteristics.”
But as Lenin observed a century ago, the attempt to export overcapacity to avoid chaos at home can lead to conflict abroad. He predicted rival empires would clash over markets, but other dynamics also make this strategy hazardous. Nationalist politicians resist “development” projects that saddle their countries with huge debts to the imperialist power. As a result, imperialism is a road to ruin.
China’s problems today are following this pattern. Pakistan, the largest recipient of BRI financing, thinks the terms are unfair and wants to renegotiate. Malaysia, the second largest BRI target, wants to scale back its participation since pro-China politicians were swept out of office. Myanmar and Nepal have canceled BRI projects. After Sri Lanka was forced to grant China a 99-year lease on the Hambantota Port to repay Chinese loans, countries across Asia and Africa started rereading the fine print of their contracts, muttering about unequal treaties.
Meanwhile, China’s mercantilist trade policies—the subsidies, the intellectual-property theft, and the coordinated national efforts to identify new target industries and make China dominant in them—are keeping Europe and Japan in Washington’s embrace despite their dislike of President Trump.
China’s chief problem isn’t U.S. resistance to its rise. It is that the internal dynamics of its economic system force its rulers to choose between putting China through a wrenching and destabilizing economic adjustment, or else pursuing an expansionist development policy that will lead to conflict and isolation abroad. Lenin thought that capitalist countries in China’s position were doomed to a series of wars and revolutions.
Fortunately, Lenin was wrong. Seventy years of Western history since World War II show that with the right economic policies, a mix of rising purchasing power and international economic integration can transcend the imperialist dynamics of the 19th and early 20th centuries. But unless China can learn from those examples, it will remain caught in the “Lenin trap” in which its strategy for continued domestic stability produces an ever more powerful anti-China coalition around the world.