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The Chinese success at the G20 Summit of Hangzhou

Giancarlo Elia Valori

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In a letter written in December 2015, Xi Jinping proposed some national and global objectives for the G20 Summit of September 4-5, 2016. For the CCP Secretary the aim of the G20 system – which he recalls was born at the beginning of the 2008 financial crisis – would be to develop concrete goals leading to a multipolar and shared global economy.

In that letter Xi Jinping said that, if said goals were reached, China would provide its decisive contribution, even partially changing its production system.

The win-win strategy is the declared goal of the Chinese Secretary. Over and above the wording of this concept, this has a very specific meaning.

As shown by statistics, 77% of all the goals set at the previous G20 Summit held in Antalya have been achieved.

Furthermore, considering that data shows that the G20 countries account for approximately 90% of the world GDP, we can realize that, over and above declarations of principle and set phrases, for China the Hangzou Summit was the ideal forum to start redesigning its place in the world.

In his opening speech at the G20 Summit in China, Xi Jinping clarified – in modern terms – a concept of the old Maoist tradition, whereby each country must take its own specific path to development.

In other words, there are no models to be imported in an already globalized world, possibly after a long and ruinous war for “democracy”.

Each country has its own vocation, its system, its shih, namely its natural form, just to use a term of Taoist philosophy.

While recalling the effort – a true “Great Leap Forward”, unlike Mao’s autarkic line of the 1950s – which has led China to be the second largest economy, Xi Jinping clarified – always between the lines – another important point.

According to the CPC Secretary, China will not slow down the pace of its reforms, which means that today it will still tend to strengthen its internal market and its fight against corruption.

According to the latest data, the Party has sanctioned as many has 300,000 officials this year only.

Xi Jinping’s fight against corruption wants to convey the message that the Party is resuming the central role it has always played in Communist China and intends to open itself to foreign markets in the best possible way.

Hence without foreign entrepreneurs’ actions manipulated by the corruption of State’s and Party’s cadres, executives and leaders.

In addition, Xi Jinping wants to change the old equation of China’s development, with a view to increasing competitiveness on an equal footing with the most technologically advanced Western economies.

In other words, so far China has made social and industrial dumping towards the West’s “mature” productions, characterized by low growth rate and average value added.

Thanks to this system, China is overcoming underdevelopment and is “standing up” – to use again Mao Zedong’s terminology.

Currently the strategy is changing: China will play on equal terms in the global technology and capital market.

In that way, over the years, China had become what some US economists called “the global sweatshop”, thus using for the Chinese factories a terminology reminding us of Charles Dickens’ novels.

According to the CPC Secretary, Xi Jinping, now the Chinese capital will be used, on the one hand, to create a supply-side economy within the country and, on the other hand, to enter the new labour-saving technological sectors, which will be the majority in future productive systems.

Hence, with a view to avoiding the huge Chinese population creating problems of internal political stability which could not be solved, even by force, Xi Jinping is enlarging the Chinese domestic market.

This is the reason why, however, he wants the West to keep on contributing to the upgrade of the Chinese economy.

Globalization is still one of China’s primary goals.

Hence the reference made by Xi Jinping to the renewal of the technological drivers of this global production phase is particularly significant.

And this is the reason why China still requires an open and competitive global market.

Instead of absorbing “old” productions, as in the days of the “Four Modernizations”, China wants to participate in the creation of the new technologies – not only the digital ones – which will characterize the economy in the coming years.

Initially Deng Xiaoping wanted to compete with Hong Kong in attracting foreign companies.

Now Xi Jinping will participate, on an equal footing with the West, in the definition of the next economic growth cycle.

A cycle in which, incidentally, Italy will participate only marginally.

Its current leadership has not even the faintest idea of the issues raised by Xi Jinping in his speech delivered to the G20 Summit.

Therefore the Chinese leader’s line is even clearer: in the near future, development will be based on a range of tax, monetary and geopolitical tools, of which Xi Jinping’s China is fully aware.

Hence it will maintain a flexible fiscal policy and it will support some tax cuts. It will also increase government spending, in contrast to the private capital crisis, while it will maintain and increase the yuan-denominated funds deposited abroad.

This project is reminiscent of the Eurasian project to be undertaken jointly with Russia.

The project consists in replacing the US dollar, or at least being side by side with it, as world exchange currency.

Again between the lines Xi Jinping conveys the message that globalization is perfect because it helps us to manage the still substantial Chinese overproduction.

In addition, China needs to cut production costs – and here the Western advanced management counts – as well as   change its costly and unproductive real estate market.

Finally, China must improve the distribution network efficiency and avoid financial asymmetric shocks.

All this can be read between the lines in the speech delivered by Xi Jinping.

And it is also worth recalling the attention paid by the Chinese CPC Secretary to the “green” economy because it improves the whole economic performance and avoids the parallel health and infrastructure costs and even the cost of adapting the Chinese production to the world market.

According to Xi Jinping, who is still a serious expert of Marxism, it is the new climate of global collaboration which generates the new economic growth drivers, not vice versa.

Without a political decision on the new production formula there will be no transformation of the global economy.

Hence the issue lies in enhancing international cooperation and involving also the marginal countries we must rescue from the jihad or from the long fratricidal wars, as well as particularly ensuring a level playing field in the international system.

China has not appreciated the US policies of vast “ocean” alliance for trade globalization – the TTIP for the European Union and the TTP for Asia, namely the strategies put in place by President Obama.

Types of trade policies that – while speaking of the British economic growth – Carl Schmitt called “thalassocratic”.

In fact, China is both land and ocean.

It has not accepted the North American TTP because it suspects there is a US desire of leadership in global trade.

China wants to take advantage of the void of the US global policy – which has been blocked by the EU for the TTIP and has seen only 13 countries advocating the Asian TTP, clearly targeted against China – and fit in it, also to avoid becoming a regular purchaser of US goods and distorting its monetary policy, which is designed to promote the yuan internationalization.

Furthermore, so far neither Hillary Clinton nor Donald Trump have fully clarified their projects towards China.

Using again Taoist concepts, the “emptiness” of US policy must be replaced by the “fullness” of the new Chinese geoeconomy.

Moreover, the current European leaders attended the Huangzou G20 Summit having in mind the next EU Summit of Bratislava, which shall deal with the Brexit issue.

Currently no EU Head of State or Government has the ability, the culture and the strength to evaluate operations longer than six months.

Conversely the British Prime Minister, Theresa May, has already had confidential contacts with Xi Jinping and has spoken of a “golden age” in bilateral relations between Great Britain and China.

At the G20 Summit, Prime Minister May also met five other European countries to negotiate the new trade system after the Brexit.

The British Prime Minister wants to ward off the danger of a new US approach vis-à-vis Great Britain and is opening to China with a view to becoming a global hub, not only at financial but also at productive level.

China is expected to invest approximately 40 billion pounds in Great Britain, not to mention the building of the nuclear power plant Hinkley Point C and later of Sizewell in Sussex.

Great Britain wants to use China with a view to positively stepping up Brexit, thus decreasing its economic risks. Great Britain will replace the tired old Europe, with the rich, powerful and vibrant China.

This means applying to the European economy – that Great Britain is leaving – the “Four Is”, the four key priorities which provided the slogan of the Huangzou G20 Summit, in the most genuine and authentic Chinese tradition.

The future economy shall be “Innovative, Invigorated, Interconnected and Inclusive”.

In other words, China does no longer intend to support global growth only with financial means, as happened during the US-led globalization.

In fact, China founded the Asian Infrastructure Investment Bank (AIIB) in December 2015 and aims at including the nations marginalized from the first wave of globalization. The AIIB has already 57 members.

Indeed China aims at a global economy which will implement new value creation mechanisms, especially manufacturing and non-financial ones.

And here the link between the Russian Federation and China will be strengthened permanently.

The starting point will be the joint initiative for the Russian Far East and the Chinese North-East.

The G20 spoke about the new Russian-Chinese Eurasia and the Chinese leaders said to the leaders gathered for the Summit that this would lead to “big surprises.”

The systems and organizations on the basis of which the Chinese and Russian project will be implemented are the Shanghai Cooperation Organization and ASEAN, through the Eastern Economic Forum.

Hence, in this regard, we can say that, for Xi Jinping, the G20 held in China was a great success.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs "La Centrale Finanziaria Generale Spa", he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group and member of the Ayan-Holding Board. In 1992 he was appointed Officier de la Légion d'Honneur de la République Francaise, with this motivation: "A man who can see across borders to understand the world” and in 2002 he received the title of "Honorable" of the Académie des Sciences de l'Institut de France

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Freedom, Sovereign Debt, Generational Accounting and other Myths

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“How to draw the line between the recent and still unsettled EU/EURO crisis and Asia’s success story? Well, it might be easier than it seems: Neither Europe nor Asia has any alternative. The difference is that Europe well knows there is no alternative – and therefore is multilateral. Asia thinks it has an alternative – and therefore is strikingly bilateral, while stubbornly residing enveloped in economic egoisms. No wonder that Europe is/will be able to manage its decline, while Asia is (still) unable to capitalize its successes. Asia clearly does not accept any more the lead of the post-industrial and post-Christian Europe, but is not ready for the post-West world.” – professor Anis H. Bajrektarevic diagnosed in his well-read ‘No Asian century’ policy paper. Sino-Indian rift is not new. It only takes new forms in Asia, which – in absence of a true multilateralism – is entrenched in confrontational competition and amplifying antagonisms.  The following lines are referencing one such a rift.

At the end of 2017, Brahma Chellaney, a professor with the New Delhi-based Center for Policy Research, wrote an article titled “China’s Creditor Imperialism” in which he accused China of creating a “debt trap” from Argentina, to Namibia and Laos, mentioning its acquisition of, or investment in the construction of several port hubs, including Hambantota in Sri Lanka, Piraeus in Greece, Djibouti, and Mombasa in Kenya in recent years.

These countries are forced to avoid default by painfully choosing to let China control their resources and thus have forfeited their sovereignty, he wrote. The article described China as a “new imperial giant” with a velvet glove hiding iron fists with which it was pressing small countries. The Belt and Road Initiative, he concluded, is essentially an ambitious plan to realize “Chinese imperialism”. The article was later widely quoted by newspapers, websites and think tanks around the world.

When then United States Secretary of State Rex Tillerson visited Africa in March, he also said that although Chinese investment may help improve Africa’s infrastructure, it would lead to increased debt on the continent, without creating many jobs.

It is no accident that this idea of China’s creditor imperialism theory originates from India. New Delhi has openly opposed China’s Belt and Road Initiative, especially the China-Pakistan Economic Corridor as it runs through Pakistan-administered Kashmir, which India regards as an integral part of its territory. India is also worried that the construction of China’s Maritime Silk Road will challenge its dominance in South Asia and the Indian Ocean. Based on such a judgment, the Indian government has worked out its own regional cooperation initiatives, and taken moves, such as the declaration of cooperation with Vietnam in oil exploration in the South China Sea and its investment in the renovation of Chabahar port in Iran, as countermeasures against the Chinese initiative.

Since January, India, the United States, Japan and Australia have actively built a “quasi-alliance system” for a “free and open Indo-Pacific order” as an alternative to the Belt and Road Initiative. In April, a senior Indian official attending the fifth China-India Strategic Economic Dialogue reiterated the Indian government’s refusal to participate in the initiative.

The “creditor imperialism” fallacy is in essence a deliberate attempt by India and Western countries to denigrate the Belt and Road Initiative, which exhibits their envy of the initial fruits the initiative has produced. Such an argument stems from their own experiences of colonialism and imperialism. It is exactly the US-led Western countries that attached their political and strategic interests to the debt relationship with debtor countries and forced them to sign unequal treaties. China’s Belt and Road Initiative is proposed and implemented in the context of national equality, globalization and deepening international interdependence, and based on voluntary participation from relevant countries, which is totally different from the mandatory debt relationship of the West’s colonialism.

It is an important “Chinese experience” to use foreign debts to solve its transportation and energy bottlenecks that restrict its economic and social development at the time of its accelerated industrialization and urbanization. By making use of borrowed foreign debts, China once built thousands of large and medium-sized projects, greatly easing the transportation and energy “bottlenecks” that long restrained its social and economic development. Such an experience is of reference significance for other developing countries in their initial stage of industrialization and urbanization along the Belt and Road routes.

In the early stage of China’s reform and opening-up, US dollar-denominated foreign debt accounted for nearly 50 percent of China’s total foreign debts, and Japanese yen close to 30 percent. Why didn’t Western countries think the US and Japan were pushing their “creditor imperialism” on China?

Some foreign media have repeatedly mentioned that Sri Lanka is trapped in a “debt trap” due to its excessive money borrowing from China. But the fact is that there are multiple reasons for Sri Lanka’s heavy foreign debt and its debt predicament should not be attributed to China. For most of the years since 1985, foreign debt has remained above 70 percent of its GDP due to its continuous fiscal deficits caused by low tax revenues and massive welfare spending. As of 2017, Sri Lanka owed China $2.87 billion, accounting for only 10 percent of its total foreign debt, compared with $3.44 billion it owed to Japan, 12 percent of its total foreign debt. Japan has been Sri Lanka’s largest creditor since 2006, but why does no foreign media disseminate the idea of “Japan’s creditor imperialism”?

In response to the accusation that China is pursuing creditor imperialism made by India and some Western countries, even former Sri Lankan president Mahinda Rajapaksa wrote an article in July using data to refute it.

Most of the time, the overseas large-scale infrastructure construction projects related to the Belt and Road Initiative are the ones operated by the Chinese government and Chinese enterprises under the request of the governments of involved countries along the Belt and Road routes or the ones undertaken by Chinese enterprises through bidding.

It is expected that with the construction of large-scale infrastructure projects and industrial parks under the Chinese initiative, which will cause the host country’s self-development and debt repayment ability to constantly increase, the China’s creditor imperialism nonsense will collapse.

An early version of this text appeared in China Daily

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Arrogance of force and hostages in US-China trade war

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Even before the ink on the comments made by those who (just like the author of these lines) saw the recent meeting between US President Donald Trump and his Chinese counterpart Xi Jinping in Buenos Aires as a sign of a temporary truce in the trade war between the two countries had time to dry, something like a hostage-taking and the opening of a second front happened. The recent arrest in Canada under US pressure of Meng Wanzhou, the chief financial officer of China’s telecommunications giant Huawei, is unfolding into a full-blown international scandal with far-reaching consequences.

Meng Wanzhou faces extradition to the United States where she is suspected of violating US sanctions against Iran, namely by making payments to Tehran via the UK branch of the US bank HSBC. The question is, however, how come someone is trying to indict a Chinese citizen according to the norms of American law, and not even on US territory to boot?

China’s reaction was extremely tough with Deputy Foreign Minister Le Yucheng summoning the Canadian and US ambassadors in Beijing and demanding the immediate release of the detainee, calling her detention “an extremely bad act.” First of all, because this is yet another arrogant attempt at extraterritorial use of American laws.

Other countries, above all Russia, have already experienced this arrogance more than once; suffice it to mention the cases of Viktor Bout and Konstantin Yaroshenko, or of the alleged “Russian hackers,” who, by hook or crook, were taken out to the United States to face US “justice”.

Enough is enough, as they say. Russia’s Foreign Minister Sergei Lavrov, who is usually careful in his choice of words, said that while Russia is not involved in the US-China trade war, it still regards Meng’s arrest as “another manifestation of the line that inspires a rejection among the overwhelming majority of normal countries, normal people, the line of extraterritorial application of their [US] national laws.”

“This is a very arrogant great-power policy that no one accepts, it already causes rejection even among the closest allies of the US,” Lavrov said. “It is necessary to put an end to it,” he added.

One couldn’t agree with this more. But first, I would like to know who really is behind this provocation, even though China’s reaction would have been much anticipated. The arrest of Meng Wanzhou sent US markets into a tailspin and scared investors, who now expect an escalation of the trade war between the United States and China.

The point here, of course, is Washington’s displeasure about Huawei’s activities, with The Wall Street Journal reporting that the US Justice Department has long been conducting a probe into the Chinese company’s alleged violation of US sanctions against Iran.

There is more to this whole story than just sanctions though. The US accuses Huawei (as it earlier did the Chinese ZTE) of the potential threats the company’s attempts to use tracking devices could pose to the security of America’s telecommunications networks. The United States has demanded that its closest allies (primarily Canada, the UK, Australia and New Zealand, with whom it has set up a system for jointly collecting and using Five Eyes intelligence) exclude 5G Huawei products from their state procurement tenders.

I still believe, however, that the true reason for this is not so much security concerns as it is a desire to beat a competitor. Huawei has become a world-renowned leader in the development and application of 5G communications technology, which looks to the future (“Internet of Things”, “Smart Cities”, unmanned vehicles and much more.)

Since technology and equipment are supplied along with standards for their use, there is a behind-the-scenes struggle going on to phase out the 5G standard developed by Huawei from global markets.

As for the need “to put an end to this,” the big question is how. Formally, detainees are extradited to the United States in line with national legislation, but at Washington’s request (which often comes with boorish and humiliating pressure from the US authorities and is usually never mentioned in public).

Add to this the US Congress’ longstanding practice of changing, unilaterally and at its own discretion, already signed international treaties and agreements as they are being ratified – another example of “arrogance of power” as mentioned before.

The question could well be raised at the UN Security Council, but its discussion is most likely to be blocked by the US representative. However, there is also a moral side to the assessment of any political practice the work on international legal norms usually starts with.

If China and Russia, as well as other countries equally fed up with the “arrogance of power” submit a draft resolution “On the inadmissibility of attempts at extraterritorial use of national legislation by UN member states” to the UN General Assembly, it would most likely enjoy the overwhelming support by most of the countries of the UNGA, maybe save for just a dozen or so of the most diehard advocates of Washington’s policy…

First published in our partner International Affairs

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Will China Save the Planet? Book Review

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Barbara Finamore has been involved in environmental policy in China for decades.  Her new book, Will China Save the Planet?,is a succinct report (120 pg.) on the short, yet promising history of China’s actions to address climate change and pollution.

Chapter 1 is about the recent global leadership role that China has taken in the fight against climate change.  At first, the PRC was hesitant to commit to specific pollution-reduction benchmarks.  After experiencing increasingly devastating bouts of industrial smog in the 1990s however, China began to take its environmental commitments more seriously.  It has set out to become the de facto leader in combatting climate change through ambitious domestic action and sponsoring international conferences.  The Trump Administration’s withdrawal from the Paris Climate Agreement has only furthered China’s dominance.

Chapters 2-4 give in-depth analysis on China’s efforts to wean itself off of coal, develop its renewable energy capacity and become a global leader in electric vehicle production.  China has long used coal to fuel its unprecedented rate of industrialization.  In recent years, it has pledged to wean itself off of coal dependency by enforcing coal plant efficiency standards, enacting a cap-and-trade program, managing grid output, promoting local politicians based on their success in implementing green policies and supporting green energy developments.  China is now home to many of the world’s top manufacturers of solar panels, wind turbines and commercial & private electric vehicles.

There is much to applaud China for in its efforts.  Finamore writes that, “After growing by an average of 10% annually from 2002-2012, China’s coal consumption leveled off in 2013 & decreased in each of the following three years… Largely because of the dip in China’s coal consumption, global CO2 emissions growth was basically flat between 2014-2016.”  By moving away from coal, China has been able to, “Every hour… erects a new wind turbine & installs enough solar panels to cover a soccer field.” As of last year, “Chinese solar manufacturers accounted for about 68% of global solar cell production & more than 70% of the world’s production of solar panels.”

Chapter 5 focuses on China’s mission to export its green initiatives around the world, particularly through its Belt and Road Initiative (BRI).  The BRI is shaping up to be the largest international infrastructure plan in history, investing trillions of dollars in 65 countries in Asia, Europe, Africa and the Middle East.  China thus has a golden chance to help much of the developing world to adopt clean energy goals and foster economic growth.  The Chinese government is encouraging its citizens to invest in renewable energy initiatives in the BRI countries by implementing a “green finance” system.  Through its pivotal role in the G20, China can also help to lead the developed world by spearheading reports and policies among the 20 member nations.

Barbara Finamore has written a highly readable and informative overview of China’s role in the global climate change battle.  She lists the Chinese government policies that have led the world’s largest nation to meet and exceed many of the green benchmarks that it set for itself.  It would have been helpful if Finamore had written more about China’s water instability and how that ties to the Tibetan occupation, as access to drinking water is one of the top environmental issues in the world today.  As a whole, Will China Save the Planet?is a good primer for environmental policy analysts and anyone else interested in studying feasible solutions to climate change, humanity’s greatest threat.

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