Economists generally agree that the cumulative economies of China and India will be larger than that of the G7 by 2030. At present, China’s GCP stands at $9.2 trillion, or nearly 5 times that India.
The two countries have taken very different economic paths. China has chosen to become an exporter of labor-intensive products while India still relies on agriculture and services, particularly in IT.
Russia’s GDP at $2 trillion in 2013, and expected to shrink by 3 to 5% in 2015, less than a quarter of China’s. Russia is a raw material powerhouse and a manufacturing dwarf. As such it should be a natural supplier of oil and gas to China – it is a closer supplier than the Middle East. However, the pipeline that will be built across Siberia will deliver its goods to Nakhodka, a port facing Japan. Russia seems to fear that it will become dependent on China for its gas exports and that China will consider Russia as a vassal state and sideline it on the international scene as the disparities between the two countries grow. China has also to date not given a definite reply to the role Russian gas will play in its energy policy. Price is also an issue since China tends to compare the price of gas with that of domestic coal.
While economists forecast that China’s GDP will overtake that of the US, it still has some way to go as US GDP stands at $15 trillion.
By building its extremely large dollar reserves, $4 trillion, the Chinese Central Bank has allowed the US to borrow at very low interest rtes and has created a situation in which banks have searched for higher yields through lending massively to the housing market. The risk on the currency and on the value of US Treasury paper is extremely large. It is estimated that China holds over 6% of the US debt.
China could, if it so wished, put pressure on the US economic system by buying less US debt, or even selling it, thus precipitating a fall in the dollar and an increase in interest rates. Reprisals from the US could come in the form of new barriers to trade for products made in China.
Should there be a major economic recession in the US, with a consequent loss of jobs, the country may well turn to protectionism. The idea that the globalization process has been essentially beneficial to China will be a driver to reduce imports from that country.
China is also worried that US government borrowing to cover its enormous deficit will lead to high inflation and that therefore the bonds held by the Central bank will lose value.
The US has been putting considerable pressure for China to revalue its currency, the RMB, and thus reduce its competitive advantage based on cheap labor. Some economists, however, believe that a revaluation of the currency may well lead to precisely the opposite effect as funds may then float out of the RMB and into other currencies, thus leading to a de facto devaluation.
The fall of the dollar has revaluated the RMB and thus made Chinese exports more expensive, hurting mostly privately-owned SMEs and halting the modernization process of the economy. The US could allow its currency to depreciate further, to the point where its goods would be significantly more competitive than they are today.
China could take advantage of a weaker dollar to acquire assets denominated in dollars, whether in the US or in other countries. It has thus become a major lender and investor in South America – particularly in Ecuador, Nicaragua and Venezuela where it has committed to invest $250 billion over the next 10 years. This might well be the reason for the US to have softened its stance towards Cuba.
China could also use its reserves to acquire major European corporations in the hope that they will out-compete US companies thus creating an economic war between the US and the EU. It could also use its vast financial reserves to hoard oil and uranium forcing prices of these products to reach new highs.
China feels that the US administration under President Obama has not delivered on its pledge of including China, and other emerging countries, into major economic decisions. Thus, the Obama administration has put pressure on its allies in the Asia-Pacific area to stay away from the Asia Infrastructure Investment Bank, one of China’s pet projects.
As of Japan’s GDP at $5 trillion stands also at four times that of South Korea.
Trade and investment
Asia is in a unique tradition with several world powers sitting on a nuclear arsenal and harboring resentments and old, deep rooted hatreds and territorial disputes. Military budgets are on the rise and economic growth has slowed considerably. Competition exists between the countries we have been considering in this series of articles – it exists in the industrial world, in cyberspace and in outer space.
Asia’s history is one of constant conflicts and long-seated hatred and there are too many potential conflicts that threaten to erupt into wars. There is also a seeming disdain of leaders towards their own people, the most flagrant case being North Korea.
There is also a major gender imbalance in favor of men and this situation has led to fears of a rise in militarism. There is contradictory evidence that unmarried men tend to be more violence-prone than married man.
Almost all the countries covered have strong economic interconnections.
India runs a major trade deficit with China which in 2013 was of over $ 30 billion, with India complaining that Chinese goods take advantage of a whole series of measures put in place by the Chinese government while Indian companies have problems entering the market.
Similarly, Indian companies have had problems entering the Japanese market, but due to quality issues.
With the opening of the Indian economy to foreign investments, Japanese corporations, catching up to a late start, are expected to invest $35 billion over the next 5 years in public-private partnerships. Japan is also expected to become a partner in a major public-private infrastructure partnership project, so large many knowledgeable observers of Indian politics doubt it can be realized, estimated at $100 billion, to create a high technology corridor – the Delhi Metro Industrial Corridor – linking Mumbai to New Delhi. Terrorist attacks have so far frightened would-be investors, however.
China has also been an important investor in India. A sustained economic cooperation between the two countries would make them less dependent on exports to the European Union and to the US.
China has regularly complained about the long delays for India to approve investments by Chinese firms and of a total ban in investments in infrastructure. Chinese workers also have difficulties in obtaining working visas.
Bilateral trade between India and Russia is much lower at $12 billion but after President Putin’s visit, ambitious targets have been set for 2030, essentially in infrastructure projects. Thus, Russia will supply four nuclear power plants.
India’s largest market is the US with bilateral trade between the two countries being of the order of $100 billion with plans to reach $500 billion. The US has thus displaced China as India’s largest trading partner in spite of India’s complaint that US subsidies to cotton farmers undermine Indian exports and that steel exports are unjustly submitted to high tariffs. In turn, the US complains at the difficulties companies face in attempting to enter the Indian market and at the limitations imposed on them when investing.
China and Japan are each other’s largest trade partners, China having replaced the US in that role. Japanese tourists are the main visitors to China. Japan is the major foreign investor in China, taking advantage of low labor costs. However, the tense situation between the two countries, and the increased cost of manpower, has led Japanese companies to sharply reduce their investments.
China is also South Korea’s main trading partner with two-way trade of $230 billion and the signing of a bilateral trade agreement that took effect in February of this year. Koreans are also large investors in China.
China and Russia, in spite of the fact that they are both export-oriented economies, are complementary in that the first is a big consumer of raw materials, primarily energy, while Russia is a major exporter of oil and gas. This has led China to increasingly see Russia as a petro-state with little technological capabilities and unable to pose any type of threat.
Hence, while in the years following the Second World War Russia saw itself dwarfed by the Western economies, the country is, today, overtaken economically by both the West and the East, the latter being represented by China, Japan and South Korea.
In the Chinese-Russian partnership, China appears to be the senior partner and it is safe to say that Russia needs China more than China needs Russia.
Russia sees China as a hedge of its European energy markets. This hedge, however, can only be fully operational in the future as building the right infrastructure that would allow Russia to move its energy exports eastwards is a long-term venture, particularly since Russia’s most productive wells are in the European part of the country while the bulk of China’s population is in the eastern part of their own country.
Two-way trade in 2014 was over $100 billion and while China is Russia’s second largest trading partner, trade with the EU is 4 times that amount. The value of trade is very dependent on the price of oil and gas. It is nevertheless expected to reach $200 billion by 2020.
On completion of the Eastern Siberian Pacific Ocean Oil Pipeline (ESPO), Russia could supply 20% of China’s imports and 33% of Japan’s on condition these two countries choose this dependency.
The two countries have launched the world’s largest joint gas project – the Sila Sibiri pipeline – which will deliver gas to the Russian Far East and to China. There are other joint projects, including in the Arctic, which have received President Putin’s blessing.
Since 2014 commercial contracts between the two countries intensified as Russia was looking for credit and investors in the face of the sanctions imposed by the EU and the US as well as the serious dip in the price of oil. The oil and gas contracts signed between the two countries are, respectively, of $270 and $400 billion over a thirty-year period with Gazprom deliveries due to start in 2019.
Chinese investments in Russia are of the order of $10 billion and new investments have been earmarked for a large variety of projects. The largest investment is a partnership with Rosneft, valued at several billion dollars meant essentially for the Sakhalin-3 block. Rosneft has also secured a $35 billion loan from China in exchange for oil supplies. This envelope is to be used to purchase several smaller oil producers.
China will also invest in a high-speed train between Kazan and Moscow – a $25 billion investment, and other major infrastructure projects are being discussed.
Russia has, in turn, agreed to supply China with the know-how to produce uranium-enrichment facilities and to supply enriched uranium.
Economic ties between China and the US are also important and the interdependence between them appears to be growing rather than slowing in spite of constant mutual accusations of retreating from free trade. The US ran in 2013 a deficit of $318 billion for merchandise trade, one third of the total trade deficit. China is the US’ biggest supplier.
Imports by the US of cheap Chinese products – essentially manufactured goods, machinery, chemicals and transport products – has been of great assistance in controlling inflation and the US has thus transferred to China increasingly large amounts of dollars. Since China is a major supplier of goods to other Asian countries, in particular in South-East Asia, that assemble products for export to the US, the US’ importance to the Chinese economy is even greater than what the above figures show. The US has started a large number of cases against China at the WTO claiming the country is practicing illegally high import tariffs on US goods while simultaneously subsidizing exports. By limiting or banning exports of raw materials, such as bauxite, and allowing prices to climb, China has been accused of developing one more strategy of subsidizing its industry.
Chinese investments in the US are of the order of $50 billion but are dwarfed by the over $400 billion invested by US corporations in China, even though the investment flow has slowed. Statistics in this respect are not meaningful, as often these investments are not reported in US statistics as the flow of funds is channeled through favorable tax havens.
A large number of American firms have established manufacturing facilities in China, and this allowed the US economy to grow with minimal inflation. There is a generally shared belief that China has entered a period of uncertainty, that local competition is adopting a more aggressive stance that in some areas there is over-capacity, that intellectual property is not respected and that the country is increasingly adopting a protectionist stance. Nevertheless, an increasing number of US corporations are dependent on the Chinese economy for their profits and sometimes on products, such as tobacco, whose sales are dwindling in traditional markets.
Also, the US is attempting to sell, in China, alternative energy sources such as solar or wind power technology. This is a major market considering that the Chinese government has announced its intention of investing $200 billion in renewable energies by 2020. US companies, however, are loath to export their latest technology in a country known for closing an eye to the trespassing of intellectual property.
Chinese investments in the US could be even bigger if they were not met by obstacles – the most glaring example being that of Huawei, the telecommunications company, which was blocked from entering the US market.
The Chinese have also become very large buyers of real estate in the US, amassing a portfolio of $22 billion.
The relationship between Japan and Russia is more complex since the two countries have never signed a final peace agreement and Japan still lays claim on the Kurile Islands. Russia is ill at ease with Japan’s future involvement in a missile defense system and has proposed to join the initiative which is led by the US.
Bilateral trade is of the order of $33 billion with oil and LNG taken an important part of this volume, in particular from the Sakhalin deposits. After the Fukushima incident Japan has felt the need to diversity its sources of energy and Russia is a natural supplier. In Russia’s eyes, supplying Japan would counterbalance the increasing dependence on China. Several cooperation agreements to develop new gas and oil fields have also been signed between the two countries.
Total Japanese investments are small, with car makers have plants in Russia, but the most likely investments will target Russia’s Far East, particularly for infrastructures. Several joint ventures have been started in agriculture, energy and infrastructure.
Japan and South Korea are each other’s fourth largest trading partners. Russia has proposed building a railway that would link North and South Korea to the European markets via Russian territory – i.e. connecting to the Trans-Siberian Railway. Such an undertaking would allow South Korea to increase trade with Europe and reduce its dependency on the American and Asian markets.
Bilateral trade between South Korea and the US amounted to $115 billion in 2014 and represented a US deficit of $25 billion. In June 2007, the two countries signed a trade agreement that phases out all tariffs, on consumer and industrial products over a period of three years. Total investments from South Korea to the US is estimated to be $25 billion while US investments in South Korea are of $35 billion.
Bilateral trade between the US and Russia was, in 2014, of $34 billion with a US deficit of $13 billion. Russians are big investors in New York – particularly Manhattan – real estate particularly since the sanctions and the decrease in the price of oil led to a collapse of the ruble. US investments in Russia stand at around $15 billion and are rather diminishing, again in view of the sanctions.
Economic growth has not eradicated poverty in East Asia and estimates of the extremely poor are of the order of 250 million persons. Although continuing economic growth should lead to a reduction in poverty, this should still touch 15 to 17% of the population. The imbalance stems in part by the fact that there is an imbalance between skilled and unskilled labor as well as regional imbalances due to the rapid industrialization of certain areas.
East Asia is today’s the world’s fastest aging. Projections show 20% of the population over 60 by 2050, or two-thirds of the world’s seniors. Already by 2040, the number of people over 60 will be higher than the people under 15.
Just as China is the world’s most populated country, India is the world’s largest democracy. They are the only two countries with a population larger than 1 billion. It is forecast that sometime between 2015 and 2025, India’s population will have overtaken China’s as the former’s population is growing at twice the rate of China’s population. Furthermore, India’s population has a low average age while China’s is aging. Therefore while India may be considered to have an infinite supply of cheap labor, this will not be the case of China in the mid-term future. Thus, while India’s dependency ratio will improve, China’s will worsen.
China’s population is aging rapidly, partly because of a vastly improved health system. This expanding health care system will require substantial additional funding. So will the pension system even though traditionally, children support their elderly parents.
Both China and India suffer from a growing ratio of males to females. The devotion of the children to their parents, when these age, will be difficult to maintain if single men, due to absence of the brides, migrate in search of employment of opportunities.
As the economies of both countries expand at a similar rate, they will need trained engineers and scientists. China graduates 600 000 engineers per year and India 350 000. However, China has a qualitative advantage due to a better educational system.
Japan’s economy is to a large extent driven by demographic change. Birthrates have collapsed with a total fertility rate dangerously approaching 1. With a life expectancy of 88 years, it has today the world’s oldest population, with the largest number of centenarians, but may well cede this place to China by 2050. By 2025 its population over 80 years of age will be equal to that under 15. Thus, two persons of working age will have to support one retiree. On the other hand, they will be a reduction in supporting children.
Older persons invest very conservatively, and therefore the economy might lack the dynamic financial markets required to fuel growth and entrepreneurship.
To a large extent, the same analysis applies to South Korea. North Korea is faring slightly better with a total fertility rate of nearly 2.
Russia has a population of 142 million for a country representing 19% of immerged land. There has been a small rebound in birth rates, but it may not be sustainable. The percentage of the population over 60 is low compared to China, Japan and South Korea, and is of only 20%. The imbalance between women and men – 1 160 women for 1 000 men – and the fact that women in rural areas are unable to find husbands who are not addicted to alcohol, contribute to a low level of marriages, and consequently low fertility. With life expectancy expected to rise in the coming years, while fertility is expected to remain at its present level, the old-age dependency ratio is expected to double by 2050. This would mean that spending on allowances and pensions would rise from the present figure of 9% to 12% by 2030 and 16% by 2050.
The situation in the US, while not as bad, is worrying. Its population of 316 million is growing at the rate of 0.7% and is expected to reach 400 million by 2050. 22% of the population will be over 65. The life expectancy is slightly higher than 78 years but the total fertility rate at 1.9% is below replacement. The reduction in birth rate applies also to immigrants, usually an important component in US demographics.
India’s demographics are quite different. Its population is only slightly below that of China, at nearly 1.3 billion, and it has the world’s largest number of young people since two thirds of its population is under 35, and the average age of the population is 27. But in India too the population is aging and is expected to reach 37 by 2050. At that time 300 million people with be over 60. The total fertility rate is 2.5. It should therefore still enjoy a demographic dividend compared to the ageing societies we have reviewed.
There is a large Tibetan diaspora in India where the Dalai Lama has established his headquarters and this has been an irritant to the Chinese government while achieving little for the Tibetans. The Dalai Lama relinquished his political responsibilities in March 2014 and has been replaced by a Harvard scholar who has never visited Tibet
The presence of a Chinese diaspora in Russia is a more complex issue as there is an important labor movement, of legal and illegal immigrants, along the border and is becoming an important issue in the relations between the two countries. Migrant labor is essentially employed in agriculture and construction. The total number of Chinese in Russia is estimated to be 400 000 including nearly 20 000 Chinese students in Russian universities. The vast majority of the migrants come to make money and have no plans to settle permanently.
The Chinese diaspora in the United States is much larger with 1.6 million immigrants and just as many US citizens of Chinese origin, heavily concentrated in the states of California and New York. Several incidents have questioned the loyalty of some of the immigrants to the host country.
There is a small but concentrated Korean diaspora in China numbering approximately 600000.
There has been a considerable flow of highly qualified and entrepreneurial migrants from India to the US and the Indian diaspora amounts to 2.5 million people and this number is expected to double in the next ten years. Indians are thus the most important group of Asian immigrants in the US. The 75 000 Indian students in the US are the largest foreign group registered in colleges and universities. Indian immigrants have been, on the whole, an extremely educated and successful group with total assets estimated to total $76 billion.
There are in the US over 3 million Americans of Russian descent.
There is a contentious issue between China and India regarding the latter’s water diversion plan which will shift 50 billion cubic meters of water from the Yarlung-Tsangpo, an affluent of the Brahmaputra originating on the Tibetan plateau, to the Yellow River so as to harness hydroelectric energy. This would severely restrict the flow of water to India.
As mentioned in the first part of this article, China and India, but also China and Japan, are competing to secure energy sources.
While the competition between China and India lies in securing energy sources in other countries, that with Japan is not only centred around Russian supplies, but also on the presumed hydrocarbon deposits around two rocky uninhabited islands in the East China Sea that the Japanese government purchased from a private owner and which China claims as its own.
China is uncomfortable with the long shipping route oil takes from the Middle East to its ports. The area is populated by pirates and other revolutionary or semi-revolutionary movements that could be allowed, if not encouraged, to target Chinese vessels. Ensuring the safety of the shipping routes is the official reason for China’s investments in naval power.
Russia fears the political influence that China may exert on the Central Asian republics, in particular through the SCO – the Shanghai Cooperation Organization – set up by China but pf which Russia is also a member. India is, incidentally, an observer, and Russia would like to invite the country to full membership status. Intriguingly, however, while Russia sees to remain the determining factor in influencing policy in Central Asia, China’s position is that these states are free to develop relations with countries not members of the SCO and that the organization is not, and should not, become an anti-Western club.
Russia opposes China’s wish of extending the SCO agreement to cover trade in the form of a free trade agreement, as Russian corporations would be unable to compete on price. It would also open the area to Chinese investments, including in energy projects. China is successful in the region due to the aid it brings, diplomatic pressure and large investments. Russia’s policy has been to prevent Central Asian countries to supply European markets by bypassing the Russian pipeline system and ensuring it has a monopsony. However, in view of the decreased quantities purchased by Russia affected by the reduced demand in Europe, these countries have looked for alternative markets, and China is the obvious one.
Russia would like to see a coordination of pricing policy on energy exports between the member countries that are energy exporters.
Another Chinese advantage is that it is perceived by Central Asian governments as a trading partner and a door to Europe and the Middle East, and not as a competitor as Russia is for gas supplies to Europe. Russia’s role as a supplier of finished goods disappeared with the downfall of communism.
China sees the pipelines for hydrocarbons from Central Asia as a hedge against possible disruptions of shipping lanes from the Middle East. However, just as it is beefing up its Navy to protect those lanes, and to rely less on US maritime power, it will have to beef up its security along the pipelines to protect them from possible attacks.
Russia sees China as a good partner in its policy of containing the US in Central Asia and elsewhere. In fact one can say that Russia sees China as a partner only when its relations with the West are less than perfect – which is the situation at present.
China has been able, so far, to restrain any influence the US could have on Central Asia thus enabling China to secure energy resources for itself and to prevent the infiltration of democratic ideas.
The US has key interests in the region: to support its military adventure in Afghanistan, to have access to energy – without relying on the Russian logistical infrastructure – and to wield political influence in the entire Central Asian area. The US also sees an opportunity to lessen Russia’s position as a gas supplier – should the Central Asian republics find alternative routes for their gas shipments, Gazprom will no longer be in a position to export as domestic demand is rising from an already important base.
China’s strategy has been, and will continue to be in the foreseeable future, to encircle India both through its own forces and through those of its allies who neighbour India, Pakistan in in particular. China, nevertheless, contrary to the US, is not part of any defence organization and thus does not have the burden of having to defend the territories of other nations.
China’s military budget for 2015 has been increased by 10%, reaching $145 billion, a rather steep figure in regard to the slowing of the country’s economy. China has installed missile systems pointing to India’s major cities while China’s industrial heartland is very far removed from their common border.
China’s nuclear strategy is to use their missiles only for a second strike and not to use them for a first strike on any state. It may, however, rapidly change this policy if it so decided.
India is also worried with the building of a port, by China, on the coast of Myanmar, that would give China direct access to the Bay of Bengal. It is also worried by the increasing presence of Chinese submarines in the Indian Ocean. The submarines use Colombo as a refuelling port, leading India to fear that China was building alliances with countries surrounding India – the so-called ‘string of pearls.’ China has called this project the 21st Century Maritime Silk Road, a project financed by China to the tune of $40 billion.
Indian military hardware purchases, the world’s largest with a budget of $250 billion over 10 years, are an important source of cash for the ailing Russian military manufacturers.
The two countries will be jointly developing a fighter plane of the fifth generation. India has also served Russia as a basis to enter the South East Asian markets for military hardware by servicing and training users of Russian equipment sold to those countries.
Russia has been very supportive of India in its conflict with Pakistan over Kashmir, among other things committing not to supply weapons to Pakistan, an embargo it lifted in 2014.
The US has also been a major provider of mostly defensive weapons to the Indian army and this may lead to a licensing agreement for India to manufacture American weapons.
India and Japan have reached an agreement regarding military cooperation. Japan is about to review its constitution to enable it to expand its military which is already considered as one of the world’s best and China would have problems measuring themselves to Japanese firing power in case of a conflict. It is also backed up by the US military that have bases in Japan.
The main discussions between the two countries centred on the supply of nuclear technology and fuel to India by the US. This is an important step considering the fear of nuclear proliferation pervasive in the world today and particularly considering the fact that India will be adding to an already existing nuclear capability while it has never signed the Nuclear Non Proliferation Treaty (NPT). This allows the US to put pressure on New Delhi to reduce its energy purchases from Tehran. Further, India’s rivalry with Pakistan might lead the latter to accelerate its own weapons programs should India proceed with its own purchases.
For India this is an important development as its supplies of uranium are drying out. The treaty also allows it to remain a nuclear player without signing the NPT, although the country has entered negotiations with the International Atomic Energy Agency to negotiate an agreement that would have clauses specific to its situation.
The US has insisted on certain clauses in the treaty such as India accepting not to undertake further nuclear testing, not reprocessing the spent fuel and accepting that the President of the United States certifies, annually, that the country is respecting these clauses.
For the US this is a major step in containing China and relations between China and India took a turn for the worse, with China supplying nuclear power plants to Pakistan, after this agreement was signed.
Another main motivation of the US has been to prevent India making up for its energy shortcomings by purchasing Iranian gas that would be routed through an Indian-Pakistani pipeline. Financial motives are not left too hard behind, considering the deal would generate close to $100 billion in sales for US corporations to which must be added large sales of defence equipment which presently India purchases from France and Russia.
India is also the country with which the US has conducted the largest number of military exercises in recent years.
Following President Obama’s visit to India in 2015, a Joint Strategic Vision for the region was agreed upon. Its objective is to support sustainable development and address poverty. However, the main objective is to ensure India’s Navy plays a dominant role in the Indian Ocean.
Japan is now allowing its military to have an activity outside the country’s territory.
China’s increased militarization worries Japan, particularly the installation of missile launching ramps, China’s declaration of an exclusive maritime and air space, and the highly vocal Chinese media constantly threatening of war with Japan.
China, in turn, fears a reunified Korea with nuclear weapons.
Russia continues to be China’s main weapons supplier as it wants the money from these exports which are of the order of $2 billion per year. Since 2006, the two countries have conducted joint manoeuvres, and intensified their military cooperation.
China, however, no longer represents an overwhelming share of Russia’s weapons exports – a mere 20% today from a high of 70% ten years ago, while the value of total exports has risen considerably, thus decreasing even more the importance of Chinese purchases. Further, with the new cold war, Russia itself is becoming its own major customer.
Russia is eager to maintain this monopoly on Chinese weapons purchases, and the EU and US embargo assist them in achieving this objective. However, inevitably, China will want to be involved in weapons development and testing rather than simply acquiring technology entirely developed in Russia. It has already indicated it does not want to buy finished weapons or assembly kits but want to build the planes in China.
On a longer term basis, it is obvious that China will develop its own military platforms and it is already successfully copying several weapons systems thus severely reducing its imports from Russia. This worries Russia as on a conventional army basis, China would have the upper hand in case of conflict, and Russia would have to rely on tactical nuclear weapons where it has the upper hand. While the INF treaty constrains Russia’s capability of deploying intermediate range nuclear missiles, Russia would probably opt out of the treaty should it feel threatened by China.
North Korea is actively developing its nuclear program and at least one estimate is that it may possess 100 nuclear heads by 2020.
On the other side of the demilitarized zone, there are US forces on the ground. The US keeps 40 000 troops in South Korea.
China and India have fought several border wars and in November 2006 China declared one of the Indian provinces, Arunachal Pradesh, to be part of China, calling it South Tibet. India also claims China is occupying illegally an Indian province in the Himalaya.
In fact, China and India are in a constant military confrontation along their mountainous border.
China is also in a confrontation with several countries regarding their maritime borders, and particularly Japan.
The Diaoyu / Senkaku (Chinese and Japanese names, respectively) islands have been a bone of contention for 120 years but China has lately become assertive on their claims particularly as it is believed that the waters surrounding them are rich in hydrocarbons and fishing grounds.
China’s attitude is also fed by the fact that it is using Japan as a useful scapegoat that helps it maintain strong nationalist feelings of its population, an important cement in a country in which social pressures between different groups, such as rural and urban, are increasing and threatening the country’s stability. China also believes that Japan is on a long-term decline and will not be able to adequately respond to China’ bullying presence.
China’s claim that the entire South China Sea belongs to it has opened the door for the US to pose as the protector of the South East Asian countries.
The South China Sea is an important point of convergence between the interests of the two countries as well as the countries of Southeast Asia. The rise of Chinese naval power – which could become larger than that of the US in the next 5 years – could threaten the US’ dominance in the area.
The South China Sea sees the flow of half of the world’s trade and the conflictual situation could disturb the globalization process which explains why China is becoming interested in continental routes and goods are shipped by train through a new train link which is the worlds longest and reaches all the way to Madrid.
The interest in the area, however, does not stop there. China believes that it contains massive quantities of oil – approximately the same as those in the Arab Gulf.
China’s development and purchase of high-powered microwave weapons, 1500 missiles, submarines and amphibious ships seem targeted at resisting, or keeping at bay, the US Navy in case of a conflict with Taiwan. As a response, the US moved 20 vessels from the Atlantic to the Pacific fleet in 2007 and more such moves are forecasted. The South China Sea is considered by the US as a natural border China should not cross. It is a strategic passage point between the Indian Ocean and Japan and Korea.
China also has a border issue with Russia. The two countries share a 4300 km border and an important historical confrontational past.
Inside those two borders the major issues about the autonomy of certain regions and peoples – Taiwan, Tibet and Xinjiang for China and a considerably large number of areas in Russia and the adjoining countries in Central Asia that were once part of the Soviet Union. If China has a clear position on this issue – i.e. a total aversion to any such move including with the use of force and population movements – Russia has a more opportunistic stance. It has fought an internal war to prevent the Chechen aspirations to an independent state but intervened military outside its borders in Georgia and is the only country to recognize Abkhazia and South Ossetia as independent states.
Russia fears that its under-populated and vast expanse of territory rich in natural resources, Siberia and the Far East, yields in the face of China’s demography while Russia is in a state of demographic collapse. These two areas have large deposits of hydrocarbons, diamonds, gold and other metals as well as large tracts of forests that provide raw materials to the Chinese paper industry.
Some of the lands forming the region of the Russian Pacific were Chinese until the eighteenth century, and while China has not made any recent claims for their return, Russians fear they may do so.
Russia and China are intent in developing their relations but simultaneously competing for domination of Central Asia and attracting Japanese and South Korean capital to develop the Far East so as not to be exclusively bound to China.
Simultaneously, Russia will redevelop China’s and North Korea’s moribund industry in the adjoining North Eastern parts of the country so as to economically integrate these areas.
Russia also has a contentious issue with Japan that has prevented the signing of a peace agreement between the two countries since the end of the Second World War. It concerns what the Russians call the Southern Kuril Islands, and the Japanese the Northern Territories.
Russia carried out military drills on the islands and announced it would spend over $1 billion between 2016 and 2025 to develop these islands. Japan would like to invest in these islands, particularly in energy projects.
While for many years neither country appeared to think, in spite of speeches to the contrary, that dealing with the other was a priority, Primer Minister Abe’s visit to Moscow in August 2013 seems to have started a different process. One thing Japan needs to avoid at all costs is a coalition between China and Russia.
A dialogue process was started between the defence and foreign ministers of the two countries to discuss measures to combat piracy and terrorism.
Russia’s strengthening of its military presence in the Arctic should also be considered as part of its Asian play, the Arctic being a possible base for ventures in Europe, the American continent and Asia.
Japan also has a territorial issue with South Korea centred around the Takeshima or Tokdo islands, as called respectively by the Japanese and Koreans, that each country claims to be a part of their territory.
These are very small volcanic islands. They are, however, of interest economically as their waters are good fishing grounds and the surrounding waters are believed to contain gas, although none has so far been found. Further, if an international arbiter would rule in favour of Korea, Japan’s case for the Kurile Islands and the Senkaku Islands would be severely affected as the country’s claims in all three cases stems from the San Francisco Peace Treaty that remained vague on this issue.
Deeper meanings of the Hong Kong protests: Is China a gamechanger or yet another winner?
Does our history only appear overheated, while it is essentially calmly predetermined? Is it directional or conceivable, dialectic and eclectic or cyclical, and therefore cynical? Surely, our history warns. Does it also provide for a hope? Hence, what is in front of us: destiny or future?
Theory loves to teach us that extensive debates on what kind of economic system is most conductive to human wellbeing is what consumed most of our civilizational vertical. However, our history has a different say: It seems that the manipulation of the global political economy – far more than the introduction of ideologies – is the dominant and arguably more durable way that human elites usually conspired to build or break civilizations, as planned projects. Somewhere down the process, it deceived us, becoming the self-entrapment. How?
One of the biggest (nearly schizophrenic) dilemmas of liberalism, ever since David Hume and Adam Smith, was an insight into reality: Whether the world is essentially Hobbesian or Kantian. As postulated, the main task of any liberal state is to enable and maintain wealth of its nation, which of course rests upon wealthy individuals inhabiting the particular state. That imperative brought about another dilemma: if wealthy individual, the state will rob you, but in absence of it, the pauperized masses will mob you.
The invisible hand of Smith’s followers have found the satisfactory answer – sovereign debt. That ‘invention’ meant: relatively strong central government of the state. Instead of popular control through the democratic checks-&-balance mechanism, such a state should be rather heavily indebted. Debt – firstly to local merchants, than to foreigners – is a far more powerful deterrent, as it resides outside the popular check domain.
With such a mixed blessing, no empire can easily demonetize its legitimacy, and abandon its hierarchical but invisible and unconstitutional controls. This is how a debtor empire was born. A blessing or totalitarian curse? Let us briefly examine it.
The Soviet Union – much as (the pre-Deng’s) China itself – was far more of a classic continental military empire (overtly brutal; rigid, authoritative, anti-individual, apparent, secretive), while the US was more a financial-trading empire (covertly coercive; hierarchical, yet asocial, exploitive, pervasive, polarizing). On opposite sides of the globe and cognition, to each other they remained enigmatic, mysterious and incalculable: Bear of permafrost vs. Fish of the warm seas. Sparta vs. Athens. Rome vs. Phoenicia… However, common for the both was a super-appetite for omnipresence. Along with the price to pay for it.
Consequently, the Soviets went bankrupt by mid 1980s – they cracked under its own weight, imperially overstretched. So did the Americans – the ‘white man burden’ fractured them already by the Vietnam war, with the Nixon shock only officializing it. However, the US imperium managed to survive and to outlive the Soviets. How?
The United States, with its financial capital (or an outfoxing illusion of it), evolved into a debtor empire through the Wall Street guaranties. Titanium-made Sputnik vs. gold mine of printed-paper… Nothing epitomizes this better than the words of the longest serving US Federal Reserve’s boss, Alan Greenspan, who famously quoted J.B. Connally to then French President Jacques Chirac: “True, the dollar is our currency, but your problem”. Hegemony vs. hegemoney.
House of Cards
Conventional economic theory teaches us that money is a universal equivalent to all goods. Historically, currencies were a space and time-related, to say locality-dependent. However, like no currency ever before, the US dollar became – past the WWII – the universal equivalent to all other moneys of the world. According to history of currencies, the core component of the non-precious metals’ money is a so-called promissory note – intangible belief that,by any given point in future, a particular shiny paper (self-styled as money) will be smoothly exchanged for real goods.
Thus, roughly speaking, money is nothing else but a civilizational construct about imagined/projected tomorrow – that the next day (which nobody has ever seen in the history of humankind, but everybody operates with) definitely comes (i), and that this tomorrow will certainly be a better day then our yesterday or even our today (ii).
This and similar types of collective constructs (horizontal and vertical) over our social contracts hold society together as much as its economy keeps it alive and evolving. Hence, it is money that powers economy, but our blind faith in constructed (imagined) tomorrows and its alleged certainty is what empowers money.
Clearly, the universal equivalent of all equivalents – the US dollar – follows the same pattern: Bold and widely accepted promise. What does the US dollar promise when there is no gold cover attached to it ever since the time of Nixon shock of 1971?
Pentagon promises that the oceanic sea-lanes will remain opened (read: controlled by the US Navy), pathways unhindered, and that the most traded world’s commodity – oil, will be delivered. So, it is not a crude or its delivery what is a cover to the US dollar – it is a promise that oil of tomorrow will be deliverable. That is a real might of the US dollar, which in return finances Pentagon’s massive expenditures and shoulders its supremacy.
Admired and feared, Pentagon further fans our planetary belief in tomorrow’s deliverability – if we only keep our faith in dollar (and hydrocarbons’ energized economy), and so on and on in perpetuated circle of mutual reinforcements.
These two pillars of the US might from the East coast (the US Treasury/Wall Street and Pentagon) together with the two pillars of the West coast – both financed and amplified by the US dollar, and spread through the open sea-routs (Silicone Valley and Hollywood), are an essence of the US posture.
This very nature of power explains why the Americans have missed to take the mankind into completely other direction; towards the non-confrontational, decarbonized, de-monetized/de-financialized and de-psychologized, the self-realizing and green humankind. In short, to turn history into a moral success story. They had such a chance when, past the Gorbachev’s unconditional surrender of the Soviet bloc, and the Deng’s Copernicus-shift of China, the US – unconstrained as a lonely superpower – solely dictated terms of reference; our common destiny and direction/s to our future/s.
Winner is rarely a game-changer
Sadly enough, that was not the first missed opportunity for the US to soften and delay its forthcoming, imminent multidimensional imperial retreat. The very epilogue of the WWII meant a full security guaranty for the US: Geo-economically – 54% of anything manufactured in the world was carrying the Made in USA label, and geostrategically – the US had uninterruptedly enjoyed nearly a decade of the ‘nuclear monopoly’. Up to this very day, the US scores the biggest number of N-tests conducted, the largest stockpile of nuclear weaponry, and it represents the only power ever deploying this ‘ultimate weapon’ on other nation. To complete the irony, Americans enjoy geographic advantage like no other empire before. Save the US, as Ikenberry notes: “…every major power in the world lives in a crowded geopolitical neighborhood where shifts in power routinely provoke counterbalancing”. Look the map, at Russia or China and their packed surroundings. The US is blessed with its insular position, by neighboring oceans. All that should harbor tranquility, peace and prosperity, foresightedness.
Why the lonely might, an empire by invitation did not evolve into empire of relaxation, a generator of harmony? Why does it hold (extra-judicially) captive more political prisoners on Cuban soil than the badmouthed Cuban regime has ever had? Why does it remain obsessed with armament for at home and abroad? Why existential anxieties for at home and security challenges for abroad ? (Eg. 78% of all weaponry at disposal in the wider MENA theater is manufactured in the US, while domestically Americans – only for their civilian purpose – have 1,2 small arms pieces per capita.)
Why the fall of Berlin Wall 30 years ago marked a beginning of decades of stagnant or failing incomes in the US (and elsewhere in the OECD world) coupled with alarming inequalities. What are we talking about here; the inadequate intensity of our tireless confrontational push or about the false course of our civilizational direction?
Indeed, no successful and enduring empire does merely rely on coercion, be it abroad or at home. The grand design of every empire in past rested on a skillful calibration between obedience and initiative – at home, and between bandwagoning and engagement – abroad. In XXI century, one wins when one convinces not when one coerces. Hence, if unable to escape its inner logics and deeply-rooted appeal of confrontational nostalgia, the prevailing archrival is only a winner, rarely a game-changer.
To sum up; After the collapse of the Soviet Union, Americans accelerated expansion while waiting for (real or imagined) adversaries to further decline, ‘liberalize’ and bandwagon behind the US. Expansion is the path to security dictatum only exacerbated the problems afflicting the Pax Americana. That is how the capability of the US to maintain its order started to erode faster than the capacity of its opponents to challenge it. A classical imperial self-entrapment!!
The repeated failure to notice and recalibrate its imperial retreat brought the painful hangovers to Washington by the last presidential elections. Inability to manage the rising costs of sustaining the imperial order only increased the domestic popular revolt and political pressure to abandon its ‘mission’ altogether. Perfectly hitting the target to miss everything else …
Hence, Americans are not fixing the world any more. They are only managing its decline. Look at their (winner) footprint in former Yugoslavia, Afghanistan, Iraq, Libya and Syria – to mention but a few.
When the Soviets lost their own indigenous ideological matrix and maverick confrontational stance, and when the US dominated West missed to triumph although winning the Cold War, how to expect from the imitator to score the lasting moral or even amomentary economic victory?
Neither more confrontation and more carbons nor more weaponized trade and traded weapons will save our day. It failed in past, it will fail again any given day.
Interestingly, China opposed the I World, left the II in rift, and ever since Bandung of 1955 it neither won over nor (truly) joined the III Way. Today, many see it as a main contestant. But, where is a lasting success?
(The Belt and Road Initiative (BRI) is what the most attribute as an instrument of the Chinese planetary posture. Chinese leaders promised massive infrastructure projects all around by burning trillions of dollars. Still, numbers are more moderate. As the recent The II BRI Summit has shown, so far, Chinese companies had invested $90 worldwide. Seems, neither People’s Republic is as rich as many (wish to) think nor it will be able to finance its promised projects without seeking for a global private capital. Such a capital –if ever – will not flow without conditionalities. The Asian Infrastructure Investment Bank (AIIB) and the BRICS or ‘New Development’ – Bank have some $150 billion at hand, and the Silk Road Infrastructure Fund (SRIF) has up to $40 billion. Chinese state and semi-private companies can access – according to the OECD estimates – just another $600 billion (much of it tight) from the home, state-controlled financial sector. That means that China runs short on the BRI deliveries worldwide. Ergo, either bad news to the (BRI) world or the conditionalities’ constrained China.)
Greening international relations along with a greening of economy – geopolitical and environmental understanding, de-acidification and relaxation is the only way out.
That necessitates both at once: less confrontation over the art-of-day technology and their monopolies’ redistribution (as preached by the Sino-American high priests of globalization) as well as the resolute work on the so-called Tesla-ian implosive/fusion-holistic systems(including free-energy technologies; carbon-sequestration; antigravity and self-navigational solutions; bioinformatics and nanorobotics). More of initiative than of obedience (including more public control over data hoovering). More effort to excellence (creation) than struggle for preeminence (partition).
Finally, no global leader has ever in history emerged from a shaky and distrustful neighborhood, or by offering a little bit more of the same in lieu of an innovative technological advancement. (Eg. many see the Chinese 5G as an illiberal innovation, which may end up servicing authoritarianism, anywhere. And indeed, the AI deep learning inspired by biological neurons (neural science) including its three methods: supervised, unsupervised and reinforced learning can end up used for the digital authoritarianism, predictive policing and manufactured social governance based on the bonus-malus behavioral social credits.)
Ergo, it all starts from within, from at home. Without support from a home base (including that of Hong Kong, Xinjiang and Tibet), there is no game changer. China’s home is Asia. Its size and its centrality along with its impressive output is constraining it enough.
Hence, it is not only a new, non-imitative, turn of technology what is needed. Without truly and sincerely embracing mechanisms such as the NaM, ASEAN and SAARC (eventually even the OSCE) and the main champions of multilateralism in Asia, those being India Indonesia and Japan first of all, China has no future of what is planetary awaited – the third force, a game-changer, lasting visionary and trusted global leader.
To varying degrees, but all throughout a premodern and modern history, nearly every world’s major foreign policy originator was dependent (and still depends) on what happens in, and to, Russia. It is not only a size, but also centrality of Russia that matters. It is as much (if not even more), as it is an omnipresence of the US and as it is a hyper production of the PR China.
Ergo, it is an uninterrupted flow of manufactured goods to the whole world, it is balancing of the oversized and centrally positioned one, and it is the ability to controllably destruct the way in and insert itself of the peripheral one. The oscillatory interplay of these three is what characterizes our days.
Uyghur asylum seeker puts international community on the spot
Ablikim Yusuf, a 53-year old Uyghur Muslim seeking a safe haven from potential Chinese persecution, landed this week in the United States, his new home.
But Mr. Yusuf’s perilous search that took him from Pakistan to Qatar to Bosnia Herzegovina where was refused entry and back to Qatar highlighted China’s inability to enforce its depiction of the brutal clampdown on Turkic Muslims in its troubled, north-western province of Xinjiang as a purely domestic matter.
Mr. Yusuf’s case also spotlighted the risk of increased mass migration in a world in which ethnic and religious minorities increasingly feel existentially threatened by civilizationalist policies pursued by illiberal and authoritarian leaders as well as supremacists, racists and far-right nationalist groups.
By choosing Qatar Airways and making Doha his first point of landing after leaving his residence in Pakistan, Mr. Yusuf further underscored the fragility of Muslim acquiescence in the Chinese clampdown and called into question application of Qatar’s asylum law. With the adoption of the law, Qatar last year became the first Arab state to legalize asylum.
While Mr. Yusuf is fortunate to have ended his ordeal with his arrival in the United States, his case accentuated the hypocrisy of the Trump administration that has demonized migrants and refugees and “weaponized” US human rights policy.
Mr. Yusuf’s plight serves the United States as it fights an escalating trade war with China and has made the clampdown in Xinjiang one of the opportunistically selected cases of human rights violations it is willing to emphasize.
Mr Yusuf put Qatar and the international community on the spot when he last weekend posted online a mobile phone video pleading for help hours before he was slated to be deported from Doha’s Hamad International Airport to Beijing.
The plea generated thousands of retweets by Uyghur activists and won him assistance from an American human rights lawyer and ultimately asylum in the US.
If deported to China, Mr. Yusuf would have risked being incarcerated in a re-education camp which has been an involuntary home for an estimated one million Uyghurs in China as part of what amounts to the worst assault on a faith in recent history.
China said last month that the majority of the detainees in what it describes as vocational training facilities had been released and “returned to society” but independent observers say there is no evidence that the camps are being emptied.
Mr. Yusuf decided to leave his home in Pakistan for safer pastures after Pakistan became one of up to 50 countries that signed a letter in support of the clampdown.
Concerned that Pakistan, the largest beneficiary of Chinese Belt and Road-related investment, could deport its Uyghur residents, Mr. Yusuf travelled on a Chinese travel document rather than a passport that was valid only for travel to China. China’s issuance of such documents is designed to force Uyghurs to return.
The travel document provided cover for Qatar’s initial decision to return him to China rather than potentially spark Chinese ire by granting him asylum. International pressure persuaded Qatar to give Mr. Yusuf the opportunity to find a country that would accept him.
China’s clampdown in Xinjiang is but the sharp edge of a global trend fuelled by the rise of leaders across the globe in countries ranging from the United States to China, Russia, India, Hungary, Turkey and Myanmar who think in civilizational terms, undermine minority rights, wittingly or unwittingly legitimize violence, and risk persuading large population groups to migrate in search of safer pastures.
Hate crimes have gripped the United States with critics of President Donald J. Trump charging, despite his explicit condemnation this week of white supremacism, that his hardline attitude and language when it comes to migrants and refugees has created an enabling environment.
Violence against Muslims in India, home to the world’s second largest Muslim community, has increased dramatically with 90 percent of religious hate crimes in the last decade having occurred since Narendra Modi became prime minister.
Some 750,000 Rohingya linger in Bangladeshi refugee camps after fleeing persecution in Myanmar while Islamophobia has become part of US, European and Chinese discourse and Jews in Europe fear a new wave of anti-Semitism.
Italy took efforts to counter migration that are likely to aggravate rather than alleviate a crisis a step further by adopting a law that would slap fines of up to US$1.12 million on those seeking to rescue migrants adrift at sea.
The Chinese clampdown that bars most Uyghurs from travel and seeks to force those abroad to return has so far spared the world yet another stream of people desperate to find a secure and safe home. The risk of an eventual Uyghur exodus remains with the fallout of the Chinese re-education effort yet to be seen.
Mr. Yusuf could well prove to be not only the tip of the Uyghur iceberg but of a future global crisis as a result of an international community that not only increasingly has turned its back on those in need but also pursues exclusionary rather than inclusionary policies.
China’s risky bets
China’s infrastructure and energy driven US$1 trillion Belt and Road initiative involves risky bets across a swath of land populated by often illiberal or autocratic governments exercising power without independent checks and balances.
Seeking to reduce risk, China is bumping up against the limits of its own long-standing foreign and defence policy principles, foremost among which its insistence on non-interference in the domestic affairs of others, the equivalent of the United States’ preference for stability rather than political change.
Anti-corruption sentiment fuelled the 2011 popular Arab revolts that toppled the leaders of Tunisia, Egypt, Libya and Yemen and are at the root of current anti-government protests across the globe in countries as far flung as Brazil, Haiti, Jamaica, Puerto Rico, Russia, Zambia, the Czech Republic, Albania and Romania
China’s risks were evident in the wake of the fall in 2011 of Col. Moammar Gaddafi when the post-revolt Libyan authorities advised China that it would be low on the totem pole as a result of its support of the ancien regime.
The risks are also evident with Baloch militants targeting Chinese assets and personnel in Pakistan.
To minimize the risk and expand its aggressive domestic anti-graft campaign, China’s top anti-corruption body, the Communist party’s Central Commission for Discipline Inspection (CCDI), is embedding inspectors in Belt and Road projects, who will be based in recipient countries.
The move helps China counter allegations that it exploits corruption in recipient Belt and Road countries to further its objectives.
Anti-corruption is a signature policy of president Xi Jinping and has allowed him to purge senior Chinese leaders as well as tens of thousands of low-level bureaucrats.
The CCDI is building on the success of a pilot project in Laos where it embedded in late 2017 inspectors in a US$6 billion railway project being built by state-owned China Railway Group. The anti-graft officials, working with the Chinese company, established a joint inspection team with their Laotian counterpart.
The question is whether the anti-corruption effort in countries like Laos or Central Asian nations that consistently rank in the bottom half of Transparency International’s corruption index will bump up against China’s non-interference principle.
Or in other words, can China successfully guard against corruption in Belt and Road projects without pressuring recipient countries to adopt broader transparency and anti-corruption measures?
“How can you strike hard on corruption here at home and give a free hand to Chinese people and business groups [that are] reckless abroad?” CCDI’s director-general for international co-operation La Yifan asked in a Financial Times interview.
Mr. La said China had organized seminars with more than 30 countries to link up anti-corruption regulators. “That is my dream, that we create a network of law enforcement of all these Belt and Road countries,” he said.
Imposing transparency and anti-corruption in Belt and Road partners would be the equivalent of all kinds of environmental, safety and human rights criteria that the United States haphazardly and opportunistically maintains in dealings with foreign countries that have been severely criticized by China.
China has long prided itself on what it terms win-win economic situations in which it imposes commercial terms that often primarily benefit the People’s Republic.
The terms, coupled with the clampdown on Turkic Muslims in China’s province of Xinjiang, has fuelled anti-Chinese sentiment in Turkey and Central Asia with their close ethnic and cultural ties to the troubled Chinese region.
Turkish officials highlighted these sensitivities by denying Chinese media reports that president Recep Tayyip Erdogan had praised the success of Beijing’s brutal approach in Xinjiang during a recent visit to China.
Muslim nations have largely remained silent about the clampdown that amounts to the most frontal assault on a faith in recent history or in some instances even tacitly endorsed it.
In the absence of democracy, “governments can manage their pro-Beijing stance without informing their public, but a pro-Beijing policy over the Uyghur issue can barely be sustained in Turkey. Turkey is still a functioning democracy and total control of the public is not possible. Besides, there is a very strong Uyghur lobby and public sentiment towards the Uyghurs in Turkey,” said Turkish Centre for Asia-Pacific Studies director Selcuk Colakoglu.
Taking its anti-corruption campaign global, raises the broader question of whether it would threaten a pillar of autocracy that China’s non-interference principle has de facto sought to perpetuate.
Political scientists Alexander Cooley and John Heathershaw argue that what they call the instruments of global authoritarianism — an army of largely Western bankers, lawyers, brokers and intermediaries that park illicitly gained monies in off-shore accounts and manage the investment of those funds – help keep autocrats in power.
The success of the globalization of China’s anti-corruption effort as well as its campaign to significantly reduce graft at home, would establish autocrats’ ability to satisfactorily deliver public goods and services alongside brute power as the cornerstone of their sustainability.
In doing so, it would give greater meaning to China’s assertion that it does not want to fundamentally alter the established multi-lateral world order but rather make it more equitable and more a reflection of a world that is multi- not unipolar.
It would also cement China’s model of economic reform and state capitalism without political liberalization as the example autocratic and authoritarian regimes want to emulate even if the jury is out on whether autocrats can remain relatively clean without a system of independent checks and balances.
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