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The current financial regulation in China

Giancarlo Elia Valori

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The power of a newly established Chinese public organization, namely the Financial Stability and Development Committee, is growing. Said organization was created precisely on November 8, 2017.

It is an important organization under the State Council’s direct control. Indeed, it is an office of the Council itself which will deal mainly with China’s financial stability and with all matters concerning economic development and monetary and capital stability.

More specifically, the Committee will be tasked with deliberating major national programs for regulating the financial system, for organizing monetary policy with the Central Bank and for defining tax policies and the related fiscal and industrial actions.

This Committee will also be responsible for analysing  international and domestic financial situations, identifying the greatest global financial systemic risks, as well as studying the related conditions and finally defining the ways for reaching  financial stability.

The important choice made in relation to this Committee is that it will be chaired by the Chinese Vice Premier, Ma Kai.

The idea of ​​creating this organization had been suggested directly by President Xi Jinping during the National Financial Work Conference held on July 14-15, 2017.

The Committee will also strengthen the macro-systemic policies of China’s Central Bank. In fact, it is a matter of regulating and stabilizing the Chinese financial market, which is worth 40trillion US dollars and is one of the largest in the world.

The Chairman of the Committee and Vice Premier, Ma Kai,was born in Jinshan, a district of Shanghai, in 1946.

In the mid-1990s he was elected Vice-President of the National Planning Commission.

He was Deputy-Head of the State Council from 1998 to 2003 and also Minister for National Development from 2003 to 2008. He was appointed President of the National School of Administration and later Head of the Office for the development of small and medium-sized enterprises.

In fact, the Committee will also be tasked with coordinating tax and financial policies and tuning them with the long time schedules of the industrial system, while the collaboration between the Committee and the People’s Bank of China will allow the regulation of the 15 trillions currently invested in financial products throughout China.

With the creation of this Committee, high-risk investment or massive bank loans to buy securities will no longer be allowed, while it will be mandatory to set 10% of managers’ profits aside.

China is currently turning its old role as “world factory” into that of a modern consumer-driven economy.

Hence the need to regulate corporate and retail finance.

There are three issues underlying the new Chinese financial regulation: a) booming loans, the majority of which are requested by businesses and local governments; b) complexity, considering that risky creditors have moved away from banks, due to the complexity of rules, towards less structured products, while Chinese banks currently offer mainly financial products for the long-term management of household and business savings.

The third issue is c) guarantees. With a view to preserving their reputation, Chinese banks often offer even compensation to their clients who have lost money as a result of certain investment,  which leads them to miscalculate their risk share.

Hence an extremely fragmented banking system which is hard to control.

The Chinese systemic risk must be kept well under control:  financial assets have grown four foldover the last decade, from 310% up to 510% of the GDP, which, however, has grown by 2.5 times over the same period.

The expansion of credit has been led by the public sector and by its very poor regulation, with the expansion of shadow banks, non-orthodox credit and particularly risky – but attractive – financial products for private investors.

Credit growth has already declined, while corporate access to capital has also decreased considerably.

For the Party, however, the fragility of the financial system arises from the excess of leverage and debt investment and from the excessive debt in many sectors of the real economy, while credit has expanded too rapidly in the financial sector.

In late 2016 the average national leverage amounted to 247%,   while companies’ leverage was 165% in the same period.

Definitely too much debt for companies and individuals, far beyond the international standard.

As President Xi Jinping has pointed out, the control of aggregate money supply has been severely lacking.

President Xi Jinping has also noted that the financial institutions’ general control has been missing and the State has focused only on the individual links of the chain of financial audits.

President Xi Jinping has also maintained that the State has been unable to control major financial companies.

Moreover, the Chinese government’s interest in financial matters has never been negligible.

The National Financial Work Conference had been created as early as 1997.

Later, based on the analysis of that select group, the first Chinese sovereign fund, namely China Investment Corporation, was created in 2007.

A structure that can currently boast to have capital to the tune of 813.5 billion US dollars.

The fifth National Financial Work Conference was held in July 2017, simultaneously with the creation of the Committee.

As the CPC noted, all this was designed to reach “national financial security”, mainly with a view to backing the aims of the  13th Five-Year Plan.

President Xi Jinping also thinks that the new Committee shall a) deal with the real economy and b) combine and harmonize social development with economic development.

According to President Xi Jinping, finance is never disconnected from the social context in which it operates; c) financial regulation is always aimed at eliminating the systemic risk and d) reaching national financial stability.

Stability first and then development – this is President Xi Jinping’s belief.

Furthermore, local governments shall follow the central government’s rules. Any failure to report the financial risk will be regarded as an administrative irregularity.

This will be very useful, considering the ongoing trade war between the United States and China.

In fact, China has resorted to the WTO dispute settlement mechanism against the duties levied by President Trump.

It is worth recalling that the United States has levied duties equal to 25% on imported Chinese goods, for a total value of 50 billion US dollars.

So far these duties have been levied only in the aluminium and steel sectors.

China has responded immediately by levying equal duties on US products such as soy, pork and vegetables.

The immediate US countermove has been the doubling of duties on aluminium and steel up to 100 billion dollars.

One of the reasons for the current clash is certainly the forthcoming mid-term elections for which President Trump wants to keep on winning the support of the Rust Belt protectionist voters who enabled him to rise to the White House.

Moreover, according to the universal supply chain system, many of the Chinese products taxed by the United States come from South Korea, Taiwan and even from the European Union.

Hence the Chinese pressure could harm US farmers and the whole US middle class, as well as some of US best allies.

Therefore, while China’s recourse to the WTO has not slowed  down the aggressive posture of the Chinese economy towards the United States and the European Union, the aim of the current duties is to force China to revalue its currency, so as to rebalance the deficit between China and the United States, with the latter already recording a trade deficit with China to the tune of over 375 billion dollars.

Reading between the lines, President Trump wants a decrease of Chinese duties on US cars, so that there is an increase in China’s purchase of US semiconductors and, in any case, a greater share of the huge Chinese market for US companies.

Furthermore, China undermines intellectual property in the advanced sectors of computer science and Artificial Intelligence.

Finally, for the United States, the issue lies in hitting Chinese innovation and the “Made in China 2025” project, which is supposed to ensure China’s global strategic superiority in cutting-edge products, robotics and advanced infrastructure.

If everything goes well, at the end of this trade war, China will impose on the United States a network of joint ventures and selective openings for US products on the Chinese market.

That is what the new Chinese financial authority is for: to raise capital for the State’s primary projects and to protect China’s finance from the turmoil that could be caused by the monetary and economic imbalances resulting from the entry of foreign liquidity into the Chinese market.

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 “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. 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 “Honorable” of the Académie des Sciences de l’Institut de France. “

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East Asia

Deeper meanings of the Hong Kong protests: Is China a gamechanger or yet another winner?

Anis H. Bajrektarevic

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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.

Post Scriptum:

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.

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East Asia

Uyghur asylum seeker puts international community on the spot

Dr. James M. Dorsey

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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.

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China’s risky bets

Dr. James M. Dorsey

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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.

If popular revolts in Algeria and Sudan as well as smaller, issues-oriented protests elsewhere in the Middle East and North Africa are anything to go by, China appears to be betting against the odds.

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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