China bids for world leadership

China has the world’s largest or second largest economy, depending on how it is measured.  It is world’s leading manufacturer and exporter.  It has nuclear weapons and the world’s largest standing army.

Its leader, Xi Jinping, has a plan to connect the interior of Eurasia an integrated whole, through construction of railroads and oil and gas pipelines.

This Belt and Roads Initiative, together with China’s informal military alliance with Russia, would make the interior of Eurasia an economic zone dominated by China and largely invulnerable to U.S. sea and air power.

It would mean world leadership for a nation whose leaders explicitly reject such ideas as universal values, intrinsic human rights, freedom of the press and an independent judiciary—ideas that we Americans consider foundations of Western civilization.

How likely is it that China’s leaders can realize these ambitions?  A scholar named Elizabeth C. Economy took a calm and skeptical look at China in a 2018 book entitled THE THIRD REVOLUTION: Xi Jinping and the New Chinese State.

The first revolution, in her view, was Mao Zedong’s victory over Chiang Kaishek in 1949.

Mao made China a unified nation free of foreign influence, and started China on the road to industrialization.  But his utopian dreams and totalitarian government brought China to the brink of collapse.

Hundreds of thousands and maybe millions of Chinese were killed in purges.  Millions and maybe tens of millions starved to death because nobody dared tell the truth about his failed agricultural policies.  Mao’s Cultural Revolution, intended to break up a new emerging social hierarchy, reduced the whole country to chaos.

The second revolution, in her view, was the emergence of Deng Xiaoping.  He accomplished what few leaders in history have been able to do—reform an authoritarian government.   Typically reformers fail to change the system, like Khrushchev, or undermine the stability of what they are trying to reform, like Gorbachev.

Deng loosened the authority of the Communist Party and relaxed economic controls just enough to allow for individual initiative, while keeping control.   He set up a system of collective leadership with an orderly succession.

Unlike Mao, he kept in the background and exercised power from behind the scenes,  On the world scene, his policy was to quietly make China stronger without alarming the existing great powers.

His policies, and not Mao’s, produced a great leap forward in economic development.  China’s rise from the wreckage of the Cultural Revolution was as great an economic miracle as the rise of Germany and Japan from the ashes of World War Two.  Deng was one of the great statesmen of the 20th century.

Many Western observers thought that as China became integrated into the world economy, it would adopt liberal and democratic values.  Xi Jinping’s third revolution is intended to prevent this from happening.

Xi has eliminated tern limits.  He evidently intends to serve for life, which could mean a succession struggle like the one that followed the death of Mao.  He has reaffirmed Communist Party control of the economy, and insists on ideological orthodoxy.

But what is the meaning of Communist ideology in a country with a stock exchange, giant profit-seeking corporations and 485 billionaires?  Under Xi, Communism is reduced to Chinese nationalism and obedience to authority.

One reason for the downfall of the Soviet Union was that people stopped believing in Marxism-Leninism as an ideal.   How long can the Chinese believe in a “socialism with Chinese characteristics” that is indistinguishable from capitalism?

The advantage of a controlled economy such as China’s is that the government can disregard profit and loss while pursuing long-term national objectives.

Elizabeth Economy devotes most of a chapter to widespread waste, mismanagement and corruption in the development of China’s electric car industry.  One manufacturer sold its output to a corporate subsidiary, collecting government subsidies on both ends of the transaction.  Yet the end result, as she said, may well be to create another world-class industry.

Similarly, the Belt and Road Initiative includes projects with little or no economic justification, she said, but the Chinese government pursues its strategy anyhow.

If China fully achieves its goal, it would be the biggest change in the balance of the world economy since the voyages of Columbus and Vasco da Gama launched the current era of globalization.

If not, it will have been a huge waste of resources.  Or perhaps the result will be somewhere in between.  The unification of Eurasia would happen, but piecemeal and over a long period of time.

The problem is that if you are an autocrat without a loyal democratic opposition, and if you direct a command economy that can ignore supply and demand, you have no reality check.  The Chinese government could be pursuing a doomed policy and never know it until too late. That was the fatal flaw of Maoism.

One chapter of the book is about Xi Jinping’s drive against China’s high levels of air pollution.  This was also a big problem for the old Soviet Union and its eastern European satellites.  In a planned economy, a manager is given production targets to meet, and woe betide him if he doesn’t.  There is no incentive to be concerned about environmental side effects.

Another is about innovation, and the dilemma of trying to encourage originality and creativity in science and business enterprise, while insisting on conformity and obedience in society in general

China has great entrepreneurs, such as Jack Ma, who started with virtually nothing and created Alibaba, one of the world’s largest Internet companies.  In general, though, China has less than its share of start-ups, and many of them are founded by Chinese who were educated in the USA.

I previously read a book, We Have All Been Harmonized, about China’s emerging totalitarianism and regulation of human behavior through social media.  I found it  frightening.

Elizabeth Economy mentions this, but she gives greater emphasis to the conflict between government censors who want “Internet sovereignty” and scientists, engineers and scholars who say they need access to Google.  For now Xi Jinping’s surveillance state is still a work in progress.

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The great challenge for the USA is how to compete with China economically and diplomatically.  The first step for us Americans in competing economically is to extricate ourselves from economic dependence on China.

That doesn’t mean ceasing to trade with China.  It means that we should not allow China, or any other country, to be in a position to cut us off from crucial medicines, electronics components or other products vital to our lives or to our national defense.

Xi Jinping

We also need to look at technology transfer to China.  China, like many countries but unlike the USA, requires foreign companies who want access to its market to locate manufacturing operations in China and to give Chinese access to U.S. technology.  Of course we’ve now reached the point where Chinese technology is sometimes ahead of U.S. technology.

President Donald Trump deserves credit for putting trade relations with China on the national agenda.  But trade barriers with China are not in themselves the answer.  Trade barriers alone will not rebuild U.S. industries that have been allowed to decline for so many years.

Neither was President Barack Obama’s proposed Trans-Pacific Partnership agreement a solution, even though Elizabeth Economy thinks it was a good idea.

The TPP agreement was a trade agreement among all the major Pacific nations except China and was advertised as a way for the USA and not China to set the rules of trade.

But it was structured to protect American corporations and not American workers or the American people as a whole.  Unfortunately what’s good for Apple Computer and other U.S.-based companies is not necessarily good for the USA.

The decline of the U.S. economy and the rise of China took place over decades.  Rebuilding the U.S. economy will not be accomplished overnight.  It will take longer than two Presidential terms, at least.  It will mean investing in infrastructure and also in so-called human capital—skills, knowledge and attitudes.

The great advantage China has over the United States is that in China, business serves the state, and, in the USA, the state serves business.

We have business leaders who openly fantasize relocating their headquarters to a floating island in the sea, so that they won’t be under the jurisdiction of any government.  If there are any Chinese CEOs who think this way, they keep it to themselves.

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The other great advantage that China has over the USA is that that Chinese diplomacy is based on offering benefits while U.S. diplomacy is based on making threats.

The Chinese government offers low-interest loans to foreign governments to undertake construction projects of their choice, but with the work done by Chinese companies employing Chinese workers.  Ideally, the foreign nation benefits; the Chinese benefit no matter what.

The U.S. government in recent decades has been reduced to exercising power by means of bombings, assassinations, covert action to support insurrections and military coups and economic sanctions that cut the target off not only from doing business with the USA, but from participating in the world economy.

I think many governments are torn between a desire to form closer ties with China and a fear of the U.S. government.  At some point they are going to lose their fear.

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China under Xi Jinping is conducting an ideological offensive against historical ideals of liberal democracy.  Within China, this is done through a combination of censorship and unrelenting propaganda.  Externally, there also is unrelenting propaganda and attempted censorship.

Chinese tanker in Iran

Executives of companies that want to do business in China have to watch what they say.  If they express sympathy with China’s Uighur or Tibetan minorities and refer to Taiwan as if it were an independent nation, they risk their business ties with China.  The same is true for scholars who want to visit China or have access to Chinese archives.

China subsidizes Confucius Institutes in many countries, including 78 on U.S. university campuses.  They help scholars and students lean about Chinese culture, but they also represent the Chinese government’s point of view.

What should be the U.S. response to this?  We Americans don’t want to turn our country into an imitation of China, with its information firewalls and surveillance state.

We should, as Elizabeth Economy suggests, insist on reciprocity.  If the Chinese want freedom to set up Confucius Institutes in the United States, our government should insist on the right to set up American cultural institutes on Chinese campuses.  Likewise we should insist on reciprocity in business and economic access.

But if we oppose Xi Jinping’s authoritarian ideology and do not wish it to spread, we need to set an example of living by our own ideals—the rule of law, freedom of association, respect for individual rights.  No reasonable person would say the United States represents those ideals today.

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The value of Elizabeth Economy’s book is that she shows both the challenge of Xi Jinping’s China and the problems that may cause China to falter or fail.

The recent coronavirus crisis illustrates Chinese strengths and weaknesses.  Eight medical professionals in Wuhan were silenced by police for “spreading false rumors” when they detected and called attention to the disease.  One of them, the brave Dr. Li Wenliang, later died treating coronavirus patients.

But then, as a blogger named Fred Reed noticed, China had the genome sequenced and online for the world in a month. They also very quickly developed a mass-produced test kit in giving results in eight to fifteen minutes, and built a hospital in 10 days.

China is a nation of 1.4 billion people, who have many problems and conflicts.  I don’t know what the future holds, but I wouldn’t bet against China.

LINKS

China’s rise, America’s fall by Ron Unz for The American Conservative.

How Bill Clinton and American Financiers Armed China by Matt Stoller.

National Champs or National Chumps: US Big Business vs. China by Matt Stoller [Added 2/21/2020]

The New China Syndrome: American business meets its new master by Barry C. Lynn for Harper’s magazine.

The China Culture Clash by Ben Thompson for Stratechery.

U.S.-China tech war and the US intelligence community by “Spengler” (David Goldman) for Asia Times.

Viral Alarm: When Fury Overcomes Fear by Xu Zhangrun, professor of law at Tsinghua University, for Chinafile.

Is Political Change Coming to China? by Yuen Yuen Ang for Project Syndicate.

Everybody Hates China by ‘Nikolai Vladivostok’ [Added 2/24/2020]

Tags: China, China as number one, Xi Jinping