CHINAwatch

Beijing's reaction to arrest in Canada of Huawei's CFO

TV interview on The World with ABC (Australian Broadcasting Corporation) on 7th December.

Download Huawei CFO arrest - Australian Broadcasting Corporation (ABC)  

 

 

China-America tensions heat up: Huawei CFO faces extradition to US

 Live interview with RT on 6th December, 2018. 

Interviews with Aljazeera and RT on US-China trade war and long-term rivalry before and post G20 Summit

With Aljazeera English Channel on 1 December, 2018. 

With RT International on 2 December, 2018. 

Why APEC meeting failed to reach consensus?

Live interview with Press TV on 18 November, 2018

ASEAN Summit discussed RCEP as world's largest trading bloc with implications of possible erosion of dollar dominance

Live TV interview with RT on 14 November, 2018

The Trade War and Sino-US relations

Radio Hong Kong's Backchat live panel discussion on 5 November, 2018 looks at the dynamics of the trade war and shifts in future Sino-US relations. (My input runs from time-counter 20:59 to 27:43 in the Full series.)

View this photo

Trade, People, and Money: Understanding China's Unique Capabilities

Stephen Olson, Hong Kong-based research fellow of the Hinrich Foundation, in an article of 24 October, 2018 in The American Prospect, a liberal magazine based in Washington D.C., suggests that the West, (particularly the United States), needs to  negotiate a modus vivendi with China's very different economic system and unique global capabilities in trade, peoples and money, "to pursue national objectives and shape it relations—economic, trade, strategic, and diplomatic—with other countries and multilateral institutions." This may well be pivotal in helping to shape a looming Chinese Century

The Chinese Century is well under way: Many trends that appear global are in fact Chinese

An infographic of The Economist (27 October, 2018) shows that -

• Chinese economy in PPP terms became the world’s largest in 2013;
• Its GDP per person at PPP has risen tenfold since 1990;
• Because China is so populous and is developing so quickly, it is responsible for a remarkable share of global change. Since the start of the financial crisis in 2008, for example, China has accounted for 45% of the gain in world GDP;
• In 1990 some 750m Chinese people lived in extreme poverty; today fewer than 10m do. That represents two-thirds of the world’s decline in poverty during that time;
• China is also responsible for half of the total increase in patent applications over the same period;
• China’s record has exerted a “gravitational pull” on the world’s economic output, tilting it towards the East;
• The People’s Liberation Army accounts for over 60% of the total increase in global defence spending since 1990;
• China is also the source of 55% of the increase in the world’s carbon emissions since 1990.

The infographic, however, does not capture the reality that China now sits at the centre of a global supply and value chain. Even if not made in China, many goods have imbedded a Chinese component in terms of materials, parts, logistics or trade. Many countries across the globe depend significantly on Chinese trade and investments.

This global centrality will intensify with China's Belt and Road Initiative, driven by Policy, Infrastructure, Trade, Finance and People-to-People Connectivity, covering 64 countries representing 62% of world population and 30% of world GDP with potential investment $5 trillion, many times the size of the post-war Marshal Plan in comparable money-of-day terms.

According to a McKinsey Global Institute Report of September, 2018, emerging economies (of which the Chinese economy is bigger than the rest of the BRICS combined), have accounted for almost two-thirds of the world’s GDP growth and more than half of new consumption over the past 15 years. This translates into a declining relative share of global GDP contributed by the United States, its recent positive growth notwithstanding.

Taking into account all of the above, it seems unlikely that the "Chinese Century" scenario will be reversed, America's current 360-degree pushback against China notwithstanding. 

However, it begs the question how a transition into a possible Chinese Century could be benign. China's state-directed capitalism and authoritarian regime are not everybody's cup of tea. Helping to shape a benign transition into a World Order of global appeal may well call for negotiating a modus vivendi with a now-wide-awake giant with unique capabilities to shake the world. 

Belt and Road is alive and kicking

A Standard Chartered Bank special report of 9 October, Belt and Road - Making its presence felt examines the latest developments on the ground in Asia, Africa and the Middle East, including what has happened after the US has declared a trade war against China. 

The report shows that -

"Trade and investment links between China and BRI countries continue to deepen, cementing alliances, improving competitiveness and shifting the global supply chain amid the US-China trade war. Rapid BRI expansion comes with challenges and risks – BRI partner countries face widening trade deficits and rising external debt. Bilateral debt relief offered by China should help to avoid systemic debt fallout. Increased transparency would likely improve project quality, address growing concerns and facilitate debt resolution. Commercial, environmental and social viability would help ensure project sustainability."

Download Standard Chartered - Belt and Road Report 9 October 2018  

According to a report dated 26 October, 2018 in the Asia Times, China's trade with Belt and Road countries exceeds US$860 billon over the first three quarters in 2018, a rise of 13.2% from a year earlier. Over the same period, Chinese enterprises have made a total US$10.78 billion of non-financial direct investment in these  countries, a rise of 12.3% from last year. They have helped establish 82 economic and trade cooperation zones, creating 244,000 local jobs and paying taxes and fees to host countries totalling US$2.01 billion.

During a historic visit to Beijing, the first in seven years, and accompanied by a 500-strong business delegation, Japan's Prime Minister Abe pledged to change course in relations with China, from confrontation to a "new era of cooperation", paving the way to Japanese participation in China's Belt and Road Initiative in some 30 joint infrastructural projects. Click here  Not only would this breakthrough reinvigorate interest in China's global Initiative, it would also help to shore up the corporate governance and credibility of both the projects concerned and the whole Initiative as well. 

China-US Trade Relation and Challenges: Past, Present, Future and Policy Options

The Center for China and Globalization (CCG), a leading global think tank in China of international repute, released a Report (Issue 7 of Volume 25) dated September 2018 titled China-US Trade Relation and Challenges: Past, Present, Future and Policy Options. 

A CCG delegation traveled to Washington for a five-day visit to conduct over 20 activities in September as part of Track II diplomacy efforts to promote bilateral trust and understanding. 

On September 26, with the Hudson Institute, a leading conservative think-tank, CCG co-hosted a symposium titled “40 Years of Sino-US relations: Past, Present, Future and Policy Recommendations.” Hudson Institute President and CEO Kenneth R. Weinstein gave opening remarks. Michael Pillsbury, Hudson Institute senior fellow and Director for China Strategy chaired the event. His 2015 book "The Hundred Year Marathon: China's Secret Strategy to Replace America as the Global Superpower" is widely held to have inspired Vice President's fiery anti-China speech at the Hudson Institute on 4 October, declaring nothing less than a full-blown new Cold War against China. Click here

The following extracts usefully highlight the potential damage that a protracted trade war may have on the American and global economy -

"The National Association of Chemical Distributors released a study this month that predicted nearly 28,000 chemical distributor and supplier jobs would be eliminated because of higher prices due to the USD 200 billion round of tariffs. The US Chamber of Commerce estimated that as many as 2.6 million jobs could be threatened by the Trump administration’s trade policies. An Axios analysis claims that the retaliatory Chinese tariffs would affect 11 million American workers concentrated in rural, deeply red, already-struggling parts of the US. Forecasting sectoral employment impacts under a full trade war scenario, the Peterson Institute for International Economics (PIIE) expects large employment decline to occur. Even short-term aborted trade war could lead to private sector employment falls of 1.3 million. The chief economist of Moody predicts 150,000 fewer jobs in the US if current and proposed tariffs are continued. More than 60 US industry groups launched a coalition called Americans for Free Trade, comprising thousands of companies, farmers and manufacturers, arguing that the trade war will kill US jobs and raise prices for US households."

"Goods originating in China will also become more expensive, pushing up costs for both businesses and consumers. Apple sent a letter to the USTR highlighting how the upcoming tariffs on USD 200 billion Chinese goods would “increase the cost of our US operations, divert our resources, and disadvantage Apple compared to foreign competitors.” Intel pointed out that many products in the list have final assembly or testing done in China, but chips will be subject to tariffs on the full value. Intel estimates it would cost USD 650-875 million to relocate a chip factors away from China. Tech companies Dell, Hewlett-Packard and Juniper Networks have raised similar concerns about harm to US companies, workers and consumers from applying tariffs to networking products and accessories."

"In September, IMF Managing Director Christine Lagarde warned that as well as triggering vulnerabilities in China’s Asian neighbors, a US-China trade war could also deliver a shock to already struggling emerging markets such as Turkey, Argentina, and Russia via a domino effect on global value chains and the impact on risk appetite around the world."

"Work by the IMF predicts that if threatened trade barriers are implemented, each country could see the cost of imports rise by 10%, leading to a 15% contraction in global trade over five years and 0.5% fall in global output compared to the projected level by 2020. The European Central Bank and Bank of Korea have already revised down their growth forecasts for the Euro area and Korea respectively due to the introduction of tariff measures."

"A report by the Brookings Institution forecasts that a relatively minor global trade war where tariffs rise 10% would reduce GDP of most countries between 1 and 4.5%. The authors of the report warn that a 40% hike in tariffs could cause a deep global recession akin to the Smoot-Hawley tariff of 1930.61 Meanwhile, Roberto Azevêdo, director general of the World Trade Organization, emphasizes that a trade war would hurt people all over the world, citing research that found that the poorest consumers could lose up to 63% of their spending power."

CCG puts forward the following recommendations for both China and US policymakers:  

• Build on the agreements already reached through bilateral negotiations and work to increase Sino-US bilateral trade and opportunities in services trade.
• Forge a new bilateral agreement on intellectual property rights (IPR).
• Increase opportunities for US companies in China Manufacturing 2025.
• 4. Seek further tariff reduction through bilateral negotiations and re-engage in BIT talks.
• Build on the foundation of domestic reforms to rebalance the Chinese and US economies as ways to achieve trade balance.
• Update the way that Sino-US trade is measured to more accurately reflect the value derived by each side.
• Expand cooperation in infrastructure and explore creating a Sino-US infrastructure investment fund.
• China and the US can work together to reform the WTO.
• Strengthen Sino-US cooperation between provinces and states. 1Develop the role of Track II diplomacy and promote bilateral dialogue.

While the above recommendations are all practical and realistic, they do not address the hidden unease about a rising powerful challenger of worrying governing model and ideology to the world order underpinned by American supremacy. Indeed, this is the crux of Michael Pillsbury's seminal book. However polite and balanced he might have chaired the symposium, one wonders how much the American powers that be agreed that the CCG recipe is sufficient to stop the brewing Cold War in its tracks, even if it may ultimately fail to contain China.