Commentary on Political Economy

Wednesday 6 January 2021


China crackdowns make trade a side issue

While Australia has focused on the death by a thousand cuts in its once booming trade with China, the longer-term question is the fundamental shift going on within China as its moves to a more Maoist, centrally controlled administration.

While Australia naturally ­focuses on each specific trade move (such as tariffs on wine and barley or problems with exports of coal or timber), the changes can be seen as part of a broader authoritarian view within China, which does not tolerate dissent or criticism and which could ultimately have more profound economic consequences for the world as it plays out.

While it is tempting, inside COVID-19-locked Australia, to see the current trade issues with China in a narrow bilateral sense, the reality is life has been changing significantly within China under Xi Jinping, who has led the country for the past eight years.

China’s actions in Hong Kong over the past year have been a public face of its power with human rights activists, and concerned governments have been unable to do more than issue public statements that may appease their own domestic constituencies but have little real influence.

Angered at months of bitter protests in Hong Kong in 2019, China’s People’s Congress passed tough new security laws for Hong Kong in May last year that came into force in June.

Recent months have seen the arrests of a wide range of Hong Kong citizens under the law, culminating in the unprecedented ­arrests of more than 50 people on Wednesday. These included long-term critics of the government and China, including those involved in demonstrations in 2019 and moves to select candidates for Legislative Council elections last year.

Australia, which traditionally has had a very close relationship with Hong Kong — which still plays host to thousands of Australian citizens — currently has a travel warning issued for the city, saying its citizens face possible ­detention under the new security laws.

Wednesday’s actions have elicited expressions of concern from the Morrison government as well as US president-elect Joe Biden’s proposed secretary of state — but it appears that Beijing has no intention of letting criticism from foreign governments affect its ­determination to quell dissent in what has been one of the great ­financial capitals of the world.

At the same time there has been continued action within China to crack down on various perceived crimes, including the ­arrests of two journalists, one working for Bloomberg and the other an Australian citizen working for China’s government television.

There has also been the public slapdown of Alibaba founder Jack Ma, once considered one of the entrepreneurial heroes of China’s great “opening up” policies.

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In what was clearly a shock move for him, Ma was forced to scrap the proposed $40bn float of his Ant Financial Group in November last year, only days before it was scheduled to go ahead.

This followed public criticism by Ma at a conference in Shanghai in October in which he criticised the Chinese government’s controls on financial businesses.

While Ma was becoming known for his flamboyant ways, including his involvement in a self-financed kung fu movie and the use of high-profile stars such as Nicole Kidman to launch his annual Alibaba 11/11 shopping festivals, there are questions now about his whereabouts.

The message has been delivered loud and clear that Beijing and its rulers do not want to see any more high-profile tech entrepreneurs strutting the world stage.

The comments levelled at the Morrison government, including the 14 points of dissent outlined by the Chinese embassy in Canberra, are nothing compared to what has been happening within China as Beijing has moved aggressively to crack down on dissent — including thousands of arrests of business people and officials ostens­ibly on the grounds of corruption.

Last January the former president of Interpol, Meng Hongwei — one of the most high-profile Chinese to be prosecuted — was sentenced to more than 13 years jail for corruption.

Meng, who was China’s vice-minister of security for more than a decade and the first Chinese head of Interpol, pleaded guilty to using his position in China to receive more than $US2m in bribes between 2005 and 2017.

This week saw another big step in China’s anti-corruption drive, with a death sentence for the former chairman of one of the country’s biggest state-owned asset management companies on bribery and corruption charges.

Lai Xiaomin, chairman of China Huarong Management Company from 2012 to 2018, was accused of taking more than $US200m in bribes.

The move is seen as part of a broader crackdown on the financial sector under way in China.

While it is possible to see each incident as separate, together they paint a picture of a much more ­authoritarian government in Beijing less willing to tolerate the more freewheeling entrepreneurialism and diversity that helped to drive its economic success, be it in China or Hong Kong.

China is also becoming less hospitable to long-term expats, taking a tougher line on journalists and foreigners getting business visas, even those super careful about making any public comments.

As China continues its crackdown in Hong Kong, the real focus will be on the stance of the Biden administration on China.

Some see Beijing using the shift to improve ties with the US, which took a tough turn under President Donald Trump, but all indications are that the Biden administration will be a vocal critic of China for its human rights policies.

The Trump administration fired the shot gun for a decoupling of Western economies with China.

China will remain an important economic player in the world but there are now constraints on its global influence — such as the curbs on the role of its telecommunications giant Huawei —while its policies internally could dampen the growth of the private sector.

Informed independent commentary on what is going on in China is almost impossible to get, but from the outside Australia’s economic troubles with China are part of a broader picture that will see much slower economic growth as the Communist country, previously celebrated for its opening up, closes ranks.

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