CHINAwatch

State of The Play on US-China Competition - Center for Strategic and International Studies

Audio interview with Steve Hadley, former National Security Advisor, on 8 October, 2019, touching on the debate on U.S.-China competition.  "Is the Washington panic on China out of step with how the rest of the country views China? How can we best encapsulate the current state of the relationship? Are China’s domestic politics or foreign policy shapeable".

China's Greater Bay Area embraces fintech and supports Macao's bid to become China's offshore RMB-denominated NASDAQ

A speech (in Chinese) of 12 October, 2019 by the Party Secretary of Guangdong's Provincial Financial Supervision Bureau reveals the extent of economic and technological transformation of the dynamic Greater Bay Area. Of note is the rise of fintech and the support of Macao's bid to become China's offshore NASDA. 

Following are the salient points - 

(1) Guangdong's traditional strength lies in its 500 "specialization townships" producing special products for the entire world, e.g. Guzhen produces 80% of the world's lighting products; Xiaolan 70% of the world's lock cylinders; Xintang, 70% of the world's jeans etc;

(2) Transsion Holdings' best-selling smart phones account for 48% of Africa's entire market;

(3) Now the province is advancing towards Innovation and High Technology, including finance applications; 

(4) Regardless of quality, filed patent applications in 2017 reached 176,000, 16 times New York, 8 times Tokyo, and 5 times San Francisco;

(5) Blockchain technology enables accumulated commercial credits for SMEs to obtain bank credits on strength of secured orders without collaterals;

(6) Guangdong's 600 listed companies represent only 1.3% of the province's 45,000 national-level high-and-new technology enterprises. The sky is the limit for IPO's. A tailored-made application has been submitted to Beijing to promote Macao as China's offshore RMB-denominated NASDAG; 

(7) A Guangzhou Futures Exchange is expected by year-end, embracing Green Bonds in light of EU's  mandated requirements for Green Belt and Road Projects; 

(8) The Greater Bay Area has a population of 77 million, among the world's youngest population with per capita GDP of US$20,000, within the range for advanced countries, a dynamo amongst consumer markets worldwide, driven by 5G and short video clips; 

(9) Fintech is embraced in cross-border finance. A three-year-old WeBank has reached RMB 3 trillion in loan books, with 150 million subscribers. 70% are blue-collar workers, 37% without any credit records. Average loan amount RMB 8,000 and average interest only RMB 100 for 90% of the loans. Loans below RMB 300,000 are approved on the same day. Driven by blockchain, the Bank has 2,000 staff - half are technologists;

(10) With nearly 100,000 technologists, Ping An Technology owns 1,700 world fintech patents, including world's No. 1 position in Voiceprint Recognition, Facial Recognition, Machine Reading Comprehension, AI Music Composition etc, ahead of the U.S.

 

Cross Talk: Communist China at 70

Cross Talk debate on RT released on 2 October, 2019. (Broadcasting from Moscow and Washington D.C. channels, RT was the first news channel to break one billion YouTube viewers benchmark. It is now the No.1 TV news network on YouTube with more than nine billion views across its channels and over 14 million subscribers.)

China at 70 has much to celebrate, but its biggest challenges lie ahead

Cary Huang's column of 29 September in the South China Morning Post gives an up-to-date catalogue of China's impressive achievements under the Communist Party of China. In just seven decades, what would have taken the West centuries, a poverty-stricken, internationally weak, and backward Chinese nation has been turned into an economic and geopolitical powerhouse, a leading engine of global growth projecting influence across continents and oceans. A video clip From Ashes to Prosperity shows what breathtaking transformation the nation has undergone since the ravages wrought by the Japanese invasion. 

Huang mentions that "per capita GDP rose from just US$200 in 1979 – when 80 per cent of Chinese lived in absolute poverty in rural areas – to around US$10,000 last year, firmly in middle-income territory." This is singularly instructive, as China seems to have successfully escaped the much-hyped "middle-income trap". 

At his latest address at the United Nations, President Trump suggested that as the world's second largest economy, China is already an advanced country. It cannot pretend to remain a developing nation, thereby gaming the international trading system. Huang's observation is timely that "China is still neither an advanced nor a developed country. Nor can it properly be described as a rich nation. It is a developing giant on the world stage." His assertion is supported by China's GDP per capita below the worldwide average of US$11,570, not to mention backwardness in many other metrics, including the environment and institutions. 

This helps to debunk popular Sinophobia that China is a global superpower threatening to impose an authoritarian model on the rest of the world. "To be a true superpower, a country must wield global influence in many, varied spheres: in economics, in science and technology, in military matters and in soft power." In economics, China perhaps scores an A. But the country still lags far behind the United States in global military capabilities and behind many Western advanced countries, big and small, in scientific breakthroughs. "China has just three Nobel Prizes; one for science, one for literature and one for peace (the last of which was awarded against Beijing’s will)," Huang observes. 

Above all, "Today, every single nation to have joined the 36-member Organisation for Economic Co-operation and Development (OECD) has been not only a market economy, but also a free democracy." Despite its dramatic ascendancy, China's massive deficit of soft power stands in the way of its achievement of great power status. No matter how well China may excel in other fields, and how more influential China becomes globally, this deficit in soft power of universal appeal is likely to remain a stumbling block along the nation's ambitious trajectory. 

The concentration of power under President Xi may be necessary to combat corrupt interests and political detractors in order to steer the nation on course to realize the China Dream of becoming a fully developed nation by 2049, the hundredth anniversary of the Communist Party of China. However, with the rapid rise of a university-educated middle class, the goal's realization is likely to depend on a willingness to embrace modernity in governance – democracy, freedom and the rule of law.  

Has the US overplayed its hand on trade?

Zhang Jun, dean of School of Economics at Fudan University and director of China Center for Economic Studies, a Shanghai-based think tank, thinks so in an Op-ed in Project Syndicate of 21 June, 2019. According to Zhang, 

"China is too deeply embedded in global supply chains simply to go away. Alienating the world’s leading manufacturer and industrial producer — with its consumer market of 1.4 billion people — will severely disrupt global value chains and cast a shadow over the entire world economy." "... deviations from free-market orthodoxy and abuses of state power could shake America’s own economic foundations and threaten its institutions."

"Beyond retaliating directly, through tariffs on agricultural products and commercial aircraft, it could tighten capital controls, dump its unparalleled holdings of US treasury debt or allow its currency to depreciate. (The wave of competitive devaluations triggered by the latter option would destabilize the U.S. dollar, as well as the international monetary institutions.)"

"But, rather than allow the Trump administration to push it to increase imports unilaterally — an approach that is both naive and reckless — China is insisting on resolving the problem in stages. The world should support this method, with the U.S., in particular, relaxing restrictions on exports to China and welcoming Chinese investment in the U.S."

America Must Prepare for the Coming Chinese Empire

Writing for The National Interest on 17 June, 2019, Robert Kaplan, managing director for global macro at Eurasia Group, warns of "the coming Chinese Empire".

A different class of America competitor multiple degrees more formidable than the former Soviet Union, China's ascendancy is driven by efficient state capitalism supported by robust civilizational culture and its Belt and Road Initiative of global ambitions.

Kaplan proposes that the United States should avoid getting entangled in the Middle East and should focus instead on the Indo-Pacific. While unlikely to become a firm US ally, India's capabilities should be strengthened together with boosting Taiwan's defences, both as counterweight against the spread of China's growing influence in the region.

He concludes by saying that "the last thing American policymakers or strategists should assume is that somehow we are superior to the Chinese, or worse: that somehow we have a destiny that they do not."

Digital Cold War? How Beijing's Striking Back Against US Crackdown on Huawei

Op-ed in Sputnik News of 10 June, 2019.

China connects the world: Creation of a Sino-centric or more inclusive world order?

PowerPoint presentation to the British Business Association of Macao (BBAM) at Hotel St. Regis, Macao on 6th June, 2019.

Download China connects the world - Creation of a Sino-centric or more inclusive world order 

Reality check on China’s push for self-reliance in semi-conductor industry

An article of the South China Morning Post of 4 June gives a thorough reality check of Beijing's call for self-reliance in semi-conductor technologies. After decades of neglect of basic research in favor of applied research, for some 95% of semi-conductor parts, components and technologies, China has had to rely on  markets largely dominated by the US, particularly Operating Systems (OS). Such dominance has not been achieved overnight but through decades of basic research, innovation and entrepreneurship.

The article estimates that even if China mobilizes the resources of the entire nation, it would probably be over a decade before China can attain total self reliance, even without counting the impact of a worsening trade war spreading into technology tariffs, sanctions and restrictions of Chinese access applying to a whole swathe of foreign businesses across the globe. 

State Council White Paper on Facts of US-China trade frictions and China's position

On Sunday 2 June, the State Council released a "White Paper" clarifying facts surrounding the current US-China "trade frictions" (avoiding the "war" word) and China's position on the matter. The Paper confirms speculation that months of painstaking negotiations with substantial agreement reached on multiple fronts finally became derailed because of US insistence on inserting specific provisions infringing on China's sovereignty. It was also felt that the Americans kept on upping ""impossible" demands without giving anything in return, including insistence on retention of tariffs. Click here and here . 

Download 白皮書 (2019.6.1.) (Official Chinese version)

Without sounding too belligerent, the Paper enumerates facts and statistics that bilateral trade between the United States and China has been mutually beneficial. The US has been reaping much gains in services (including royalties for proprietary technology) and in lower prices for high-quality goods for American consumers. It reaffirms that China will not back down on "core interests", including its own development model and rights of economic and technological advancement. It appeals to better judgment that mutual cooperation trumps all-out conflict.

While showing confidence and resolve, the Paper is an attempt to redress the imbalance in rhetoric in the international media. It tries to portray China as a sincere,  reasonable and consistent negotiator while highlighting the American side as "unreasonable", "capricious", and "bullying".

As the US is pushing back against China on multiple fronts including Huawei and the South China Sea, the White Paper serves as a shot across the bow that while preferring to resolve differences through negotiations, China is able and ready to dig in its heels for prolonged conflict and rivalry with the United States.

By adopting a firm, measured and rational approach, China is showing signs of wanting to harness more soft power as the Trump administration seems not bothered about losing America's.

However, knowing that soft power alone is not enough, running out of retaliatory tariffs, China is gearing up for non-tariff weapons starting with implementing China's own list of "unreliable entities" of organizations and individuals considered hostile to China's firms or national security interests on account of non-commercial or underhand behaviour. Separately, China may be reaching for its rare earth gun, according to a Stratfor Worldview article reprinted in The National Interest of 2 June, 2019.