CHINAwatch

Xi Jinping's Russia Visit: Official talks between Putin and Jinping held on March 21

LIve TV interview on 21 March 2023 with WION (World is One News), a leading private English TV channel in India. 

RTHK (Radio Television Hong Kong) on economics of the Two Sessions in Beijing

BackChat on RTHK on 6 March 2023 (My intervention start from time counter 15:50 and 28:33 in the first bar.)

China's troubled economy Q2 2022

Exclusive live interview  with Aljazeera English News, Washington D.C. on 15 July, 2022

How the Ukrainian Crisis Impacts on Eurasia Geopolitics and US-China Relations

A PowerPoint presentation to the EGN Founding Chairmen Group in  Hong Kong on 7 April, 2022.

Download How the Ukrainian Crisis Impacts on Eurasia Geopolitics US-China Relations including HK 

 

The Impact of the Crisis in Ukraine on Global Supply Chains and China’s Economy.

An unbiased, critical Report dated 24.03.2022 by Beijing-based Centre for China and Globalization (CCG). 

Download CCG-Report-The-Impact-of-the-Crisis-in-Ukraine-on-Global-Supply-Chains-and-Chinas-Economy1 (1)

"This report begins by analyzing the massive shock caused by the Ukraine crisis and the US-European sanctions against Russia, providing initial estimates of the impact on the Russian economy, world financial markets, energy and food markets, global supply chains, the European economy and more widely the global economy. Second, the report posits several possible conclusions to the Ukraine crisis and the subsequent geostrategic impact on Europe. Finally, the report concludes by examining the Chinese economy beyond its borders and providing relevant recommendations. In summary, CCG believes that China could play the role of mediator in this crisis and potentially promote better multilateral relationships among Europe, the US and Russia."

The Report flags up the need for early resolution of the crisis, which is upending the world's stability and economy in myriad ways. It mentions China's possible role in acting as mediator but does not address the essential ingredients of a sustainable peace deal which may balance the demands on all sides.

China is in a delicate situation, not wanting to contravene the hallowed UN Charter principles of national sovereignty and opposition to unilateral action. See a 28 March 2022 report by a Hong Kong correspondent of Washington D.C.-based Feature Story News. Download 220325 i24 Chi Rus

On the other hand, it's clear that the United States wants to put maximum pressure on China to help strangle Russia. CGTN anchor Liu Xin famously quipped,  "Can you help me to fight your friend so that I can later concentrate on fighting you?"

So the sooner China can become the good guy by helping to broker an enduring peace over Ukraine, the better. A practical way-out may a "Swiss Solution" outlined in How to resolve the Ukrainian crisis dated 5 March, 2022 on Rome-based World Geostrategic Insights. 

What the US-led Democracy Forum doesn't say

Live interview on 11 December, 2021 with Press TV. 

How will a new US-China "Cold War" play out?

Denials and semantics aside, there is little doubt that a new US-China "Cold War" is playing out. 

A US-bipartisan  "China Scare" is in full swing in the name of national security and the US-led global liberal order.

US allies are pressurized to fall in line, pushing back against China on all fronts, targeting trade, high-end semiconductors, Artificial Intelligence (AI), bio-tech, investments. and ideology, including human rights and democracy. Global supply and value chains are being disrupted, aside from Covid-19 repercussions. Most of the world's nations have China as their largest trading partner; they find themselves in a quandary. 

Will a scheduled Biden-Xi video meeting next month achieve a meaningful breakthrough in the US-China Cold War?

Don't hold your breadth. Here's why. 

A Dangerous Decade of Chinese Power Is Here, warn Andrew Erickson, a professor of strategy in the U.S. Naval War College’s China Maritime Studies Institute, and Gabriel Collins, the Baker Botts fellow in energy and environmental regulatory affairs at Rice University’s Baker Institute for Public Policy. They venture that Beijing knows time isn’t on its side and wants to act fast, for example, on Taiwan. 

The AUKUS Dominoes Are Just Starting to Fall, warns Stephen Walt in Foreign Policy on 18 September, 2021.

Will China’s New Missile Lead to Escalation or Stability?, ask Emma Ashford, a senior fellow in the New American Engagement Initiative at the Atlantic Council’s Scowcroft Center for Strategy and Security, and Matthew Kroenig, deputy director of the Scowcroft Center. Would China's successful launch of a Fractional Orbital Bombardment System (FOBS) provoke an arms race—or a more stable mutual deterrence relationship? A globe-circumnavigable nuclear-armed FOBS could bypass US defense systems concentrated in the northern hemisphere by mounting a guided attack via the South Pole. 

In The Inevitable Rivalry, John J. Mearsheimer, father of "offensive realism" argues in Foreign Affairs (November/December 2021) that America and China are trapped by The Strategy of Great Power Politics. Through a policy of "engagement", the United States had for decades helped China to integrate with the global trading system, in the mistaken belief that China would become more liberal like many democracies. Instead, according to Mearsheimer, “Washington now faces its most dynamic and formidable competitor in modern history.” "The new U.S.-Chinese rivalry is not ending anytime soon. In fact, it is likely to intensify, no matter who is in the White House".

In The New Cold War, Hal Brands and John Gaddis argue in Foreign  Affairs (November/December 2021) that "echoes of history" reminiscent of the managed relatively-stable relationship with the former USSR under Mutual Assured Destruction could offer a clue to the US tectonic contest with China: "the patient management of internal threats to our democracy, as well as tolerance of the moral and geopolitical contradictions through which global diversity can most feasibly be defended". 

Much of the anti-China narrative centers on its demonization as an assertive aggressor, unwilling to follow Deng Xiaoping's wise counsel of "hiding one's light under the bushel, and binding one's time". Its state-backed "predatory" trade practices and lack of market reciprocity are thought to be compromising foreign businesses; its militarized island-building in the South China Sea threatening "freedom of navigation"; its Belt and Road Initiative entrapping host countries with over-indebtedness and environmental damage; and its policies on Xinjiang, Taiwan and Hong Kong sacrificing human rights and democracy. Some assert that the Chinese Communist Party (CCP) needs to rely on external aggression to shore up its legitimacy. 

Such rhetoric ignores the fact that the United States has all along been the world's biggest aggressor without peer. Up to now, including the disastrous wars on Iraq and Afghanistan, it has been at war for 225 out of 243 years since its founding in 1776.

It is also blind to the reality that as the second largest economy closely connected to the world, China can no longer "hide and bind". Its economy has been a boon to foreign businesses. Decoupling notwithstanding, many are staying put, producing for the exploding China market.

Neither is the CCP monolithic. A raft of new legislation has been enacted, targeting violation and "forced transfer" of intellectual property. More sectors including financial services are open to majority foreign ownership.    

The South China Sea is a critical artery for China's economic life-blood of international trade and energy imports. China is only too eager to keep it open and free.

Apart from sovereignty claims, China is compelled to erect defenses against encirclement of the First and Second Island Chains (read US bases in Okinawa and Guam) as well as the Strait of Malacca Choke Point controlled by the U.S. Seventh Fleet. In many ways, China's Belt and Road Initiative is also a pivot to the west, hedging with overland energy pipelines across Eurasia and Russia. 

Despite recent setbacks, there is no doubt that Belt and Road projects meet host countries' dire needs for infrastructure, including power plants, roads, highways, schools, hospitals, and digital connectivity. More projects are partnering with other stakeholders, including the World Bank, subject to tighter Environmental, Social and Governance (ESG) safeguards, including debt sustainability. They are now required to be "coal-free".

As for Xinjiang, Taiwan and Hong Kong, these are critical matters of national sovereignty, separatism, and terrorism.

For Hong Kong, following two years of near-anarchy by violence-infested "protesters", aided and abetted by foreign powers, the city is returning to law-and-order stability under the Basic Law, Hong Kong's mini-constitution with enshrined national security safeguards. Visit Chapter 7 - One Country Two Systems Revisited: A Personal Real-Life Perspective, in an anthology published by the UK liberal-democratic think-tank Paddy Ashdown Forum . 

Meanwhile, China's pro-government civil society is mushrooming. Within four days of a recent freak flooding in Zhengzhou, Henan Province, Beijing Blue Sky Rescue, part of China’s largest nonprofit civil rescue organization, helped evacuate 200,000 people from Weihui, a small city nearby. Millions of volunteer groups have long been taking part in serious disaster relief, including 1.4 million volunteers during the massive 2008 Sichuan earthquake. They are also playing an active role in ecological preservation, poverty relief, and other civic activities.  

According to a recent Harvard Kennedy School Ash Center report,  perceived authoritarianism notwithstanding, the CCP tops the world in terms of people's support for their government, multiple ranks above the United States. It hardly needs to rely on external aggression for legitimacy. 

All the CCP wants now is to realize the China Dream of achieving the Two Centenary Goals - growing a moderately-well-off economy by 2021, the centenary of the founding of the CCP, and becoming a "strong, democratic, civilized, harmonious, and modern socialist country" by 2049, the centenary of the founding of the People's Republic of China. The first Goal has practically been achieved. 

For a glimpse of why a more constructive relationship with China could benefit both sides, visit with a critical eye a YouTube video Why the World Needs China by Cyrus Janssen, an American YouTuber and entrepreneur now based in Canada, his pro-China background notwithstanding. 

With a DNA of American Exceptionalism, and City Upon a Hill, the United States, as guardian of the global liberal order, is unlikely to concede power-sharing with a rising China under an "authoritarian regime" it poorly understands or desists from understanding, as highlighted in a TikTok video, a crie de coeur, of Peter Walker, retired senior partner of McKinsey. Download VID-20211030-WA0004

This is unlikely to change anytime soon until both sides learn how to accommodate each other, perhaps when China overtakes the United States as the world's largest economy by 2031 (according to Bloomberg Economics). 

As for comprehensive power, at the end of the day, while China has to address the West's real concerns, "the United States needs to accept it may be returning to a more equitable state of affairs, one in which mutual deterrence is maintained, at the cost of the United States no longer being so far ahead of the pack", as Emma Ashford insightfully observes in Foreign Policy.  

New Concert of Powers: How to Prevent Catastrophe and Promote Stability in a Multipolar World

My PowerPoint presentation via Zoom on 22 September, 2021 at the 8th Annual Conference on Eurasian Politics and Society (IEPAS) 2021, Lisbon, Portugal 

Download New Concert of Powers for a more stable World Order Revised 2 September 2021 

Download IEPAS2021-Final Conference Programme 

The New Concert of Powers: How to Prevent Catastrophe and Promote Stability in a Multipolar World

With the waning if not passing of Pax Americana, the world is increasingly torn between fears and denialism in trying to avoid the unavoidable. A more powerful, assertive and self-confident China sees its time has come to return to the future where a large part of the world had been dominated by China and India, the two oldest Eastern civilizations, for millennia before the 17th century.

Amidst a transitional era of uncertainty, Richard N. Haass and Charles A. Kupchan's ground-breaking insight for a "New Concert of Powers" in their 23 March 2021 think-piece in Foreign Policy has much to commend itself. Haass is President of the Council on Foreign Relations, and Kupchan is Professor of International Affairs at Georgetown University and a Senior Fellow at the Council on Foreign Relations. Both are éminences grises in global affairs and international relations. 

The concept borrows from the Concert of Europe, a loose consensus among the Great Powers of 19th Century Europe to maintain balance of powers through a mutual commitment to upholding the territorial settlement at the 1815 Congress of Vienna. The consensus allowed for cooperation, disputes, as well as  jockeying for position and influence. After the Napoleonic Wars, the Concert managed to sustain relative peace and stability in Europe for a hundred years until the 1914 First World War.  

Far from ivory tower theorizing, there are many practical considerations in the Foreign Affairs thick-piece:

"A global concert would have six members: China, the European Union, India, Japan, Russia, and the United States." 

"A global concert would be a consultative, not a decision-making, body. It would address emerging crises yet ensure that urgent issues would not crowd out important ones, and it would deliberate on reforms to existing norms and institutions. This steering group would help fashion new rules of the road and build support for collective initiatives but leave operational matters, such as deploying peacekeeping missions, delivering pandemic relief, and concluding new climate deals, to the UN and other existing bodies."

"Members would send permanent representatives of the highest diplomatic rank to the global concert’s standing headquarters. Although they would not be formal members of the concert, four regional organizations—the African Union, Arab League, Association of Southeast Asian Nations (ASEAN), and Organization of American States (OAS)—would maintain permanent delegations at the concert’s headquarters."

"A global concert would shun codified rules, instead relying on dialogue to build consensus. Like the Concert of Europe, it would privilege the territorial status quo and a view of sovereignty that precludes, except in the case of international consensus, using military force or other coercive tools to alter existing borders or topple regimes."

"At the same time, the concert would provide an ideal venue for discussing globalization’s impact on sovereignty and the potential need to deny sovereign immunity to nations that engage in certain egregious activities. Those activities might include committing genocide, harboring or sponsoring terrorists, or severely exacerbating climate change by destroying rainforests."  (Japan's recent plan to dump radioactive water in the ocean may fit this category.) 

"Members would reserve the right to take unilateral action, alone or through coalitions, when they deem their vital interests to be at stake. Direct strategic dialogue would, though, make surprise moves less common and, ideally, unilateral action less frequent."

"Although members would, in principle, endorse a norm-governed international order, they would also embrace realistic expectations about the limits of cooperation and compartmentalize their differences. "

"A global concert would give its members wide leeway when it comes to domestic governance. They would effectively agree to disagree on questions of democracy and political rights, ensuring that such differences do not hinder international cooperation..... But the concert would also work toward a shared understanding of what constitutes unacceptable interference in other countries’ domestic affairs and, as a result, are to be avoided."

"The international system, for one, will exhibit characteristics of both bipolarity and multipolarity. There will be two peer competitors—the United States and China. Unlike during the Cold War, however, ideological and geopolitical competition between them will not encompass the world. On the contrary, the EU, Russia, and India, as well as other large states such as Brazil, Indonesia, Nigeria, Turkey, and South Africa, will likely play the two superpowers off each other and seek to preserve a significant measure of autonomy."

".... the twenty-first century will be politically and ideologically diverse. Depending on the trajectory of the populist revolts afflicting the West, liberal democracies may well be able to hold their own. But so too will illiberal regimes. Moscow and Beijing are tightening their grip at home, not opening up. Stable democracy is hard to find in the Middle East and Africa. Indeed, democracy is receding, not advancing, worldwide—a trend that could well continue. The international order that comes next must make room for ideological diversity."

"Pax Americana is now running on fumes. ..The absence of U.S. leadership during the COVID-19 crisis was striking; each country was on its own. President Biden is guiding the United States back to being a team player, but the nation’s pressing domestic priorities and the onset of multipolarity will deny Washington the outsize influence it once enjoyed."

"Allowing the world to slide toward regional blocs or a two-bloc structure similar to that of the Cold War is a nonstarter. The United States, China, and the rest of the globe cannot fully uncouple when national economies, financial markets, and supply chains are irreversibly tethered together. A great-power steering group is the best option for managing an integrated world no longer overseen by a hegemon. A global concert fits the bill."

Terry Su, president of a Hong Kong-based online publishing house and geopolitics think tank, opined in the South China Morning Post in support of the Concert idea, provided that Japan and India are removed from the suggested list of Members. I tend to agree.

After all, the idea is a proposed mechanism for Great Powers, defined in terms of substantial global, rather than regional, gravitas, and not in terms of size of economy (otherwise Russia would hardly qualify). But more importantly, India and Japan are seen by China and Russia as US "allies", whose formal inclusion may upset the intended balance. In any case, depending on issues, they will often have to be involved as important Members of the United Nations and other international organizations and platforms including the G7 or G20. 

Having said all this, the world is still in transition. Everything remains in a flux. The Concert idea may need time to incubate and nurture, even absent a torrent of destabilizing undercurrents amidst an intensifying Great Power rivalry. 

Why is China moving to a digital RMB?

The dollar displaced the British Pound as the world’s leading reserve currency at the beginning of the last century. After the Bretton Woods Agreement in 1944 which linked world currencies to the greenback, it has been reigning supreme. Click here

As China opened up and became integrated with the world trading and financial systems, it has been caught in a "Dollar Trap", having to convert excess national savings into secure, internationally-convertible US treasuries.

Despite the global financial crisis of 2008-09, dollar hegemony was strengthened, rather than weakened, argued Eswar Prasad, Chair Professor in International Economics and Senior Fellow at the Brookings Institution. Click here

Over the years, the United States has been enjoying the dollar’s “exorbitant privilege” of almost unlimited money-printing (“quantitative easing” in central bank parlance). As Richard Nixen’s Treasury Secretary John Connally famously said in 1971, “The dollar is our currency, but it’s your problem.” Click here

Arvind Subramanian, Senior Fellow at the Washington D.C. -based Peterson Institute for International Economics, pointed out in 2011 that the world is living in the shadow of China’s economic dominance. More national currencies were moving in tandem with the renminbi (the Chinese yuan) instead of the dollar. Click here

Nevertheless, the still-mighty dollar is now increasingly weaponized to impose economic sanctions on China.

Niall Ferguson, Senior Fellow at the Hoover Institution, opined in 2019 that the explosive growth of Alipay and Tencent online-payment platforms represented a real threat to dollar’s hegemony. Click here

Owing to America’s dwindling domestic savings and a gaping current account deficit, Stephen Roach recently warned in the Financial Times that the dollar’s “exorbitant privilege” is about to end. 

Now China is actively pursuing the issue of a national digital currency. Click here Unlike a speculative cryptocurrency, the digital renminbi is China’s sovereign currency fully backed by the state. It's a natural development as China has become by far the world leader in digital payment systems, accounting for 44% of the global volume.

Driven by latest blockchain technology, China's digital currency doesn't require a bank account. This has huge poverty-relief potential for the massive "unbanked" poor across the globe.

As Chinese banking authorities have full control, the digital currency would help combat illicit financial transactions. The financial data would facilitate the formulation and execution of monetary policies.

As its transactions are instant and transnational, the digital currency would be attractive for international trade settlements with China, including projects in the "Digital Silk Road" of the Belt and Road Initiative.

Admittedly, the latter has been facing increasing headwinds from host countries, such as debt unsustainability, ecological neglect, non-transparency, and corruption. But China’s authorities are learning fast. Working more closely with international organizations like the World Bank and broader stakeholders in host countries and elsewhere, China is making significant headway with Belt and Road projects, doubters and the pandemic notwithstanding. Click here

What is more, the digital currency doesn't depend on the US-controlled SWIFT (Society for Worldwide Interbank Financial Telecommunication) banking system. It is thus immune from dollar-based US sanctions. Click here

According to a July 2019 McKinsey Report China has become more self-sufficient while the rest of the world, particularly Asia and resource-rich countries across the globe, have grown more dependent on China for parts, components, materials, trade and investments. This supply-chain connectivity is not easy to shift, anti-China decoupling notwithstanding. Click here

While the United States and Western allies are not about to warm to China's digital currency anytime soon, more and more countries in Asia, Africa and Latin America, by definition, most of the world's population, are likely to embrace the convenience and opportunities of China's digital payment systems, made even easier and safer by its sovereign digital currency. 

This trend is likely to accelerate with the commencement of the Regional Comprehensive Economic Partnership (RCEP), comprising a third of the world’s population, a third of world GDP, and half of the world’s manufacturing.

The developing world accounted for 49% of world GDP in 2010, and is expected to reach 60% by 2030. Click here China's growing global integration augurs well for widespread acceptance of its sovereign digital currency, speeding up the internationalization of the renminbi.

China’s digital sovereign currency would also help drive China's "dual circulation economy" - accelerating both domestic consumption as well as international trade and investments. The strategy is expected to be formalized in China's upcoming new Five Year Plan (2021-25). 

With the Covid-19 pandemic under much better control compared with other nations, China’s economy is now surging ahead, including exports, investments and domestic consumption. Click here As Alibaba’s “Singles Day” e-shopping bonanza successes show, digital payments will continue to transform retail sectors both in China and worldwide. Click here

Additionally, China’s outbound tourism has occupied the world’s top spot since 2013. Barring the pandemic, it is estimated to be worth $365 billion by 2025.  Click here Even with a trade war, Chinese outbound tourists are expected to make 160 million trips a year. Click here The digital sovereign currency is therefore well-timed. 

In October the dollar lost its top position as the world’s most used payment currency, falling behind the Euro since August 2013, thanks to erosion of perceived value of the dollar, emergence of more attractive Euro and Renminbi-denominated assets, and aversion to greenback-based sanctions. Click here With worsening United States geopolitics, China is likely to park more of its hard-earned savings in other assets, including its own bonds and some of the more viable Belt and Road projects.

Thanks to vastly different performance over the pandemic, China’s economy is now expected to overtake the United States’ five years earlier, by 2028, according to UK’s Centre for Economics and Business Research. Click here

All these developments by no means dethrone the dollar all at once. No other sovereign currency, let alone the renminbi, can remotely compare with the greenback’s global financial width and depth. Even falling by 10% over the past two decades, the dollar still accounts for 62% of global currency reserves.

However, as the Chinese saying goes, nature moistens everything on the quiet 潤物細無聲.  China’s digital sovereign currency is now poised to mitigate the dollar trap, accelerate internationalization of the renminbi and offer an escape route from dollar-based sanctions.