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Chinese Game: U.S. Losing Asia and Africa

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As the US sanction pressure on Russia intensifies, the US economic and political competition with their most important economic partner, China, is noticeably getting more fierce. Simultaneously, Washington has been exchanging direct and indirect economic strikes with Turkey and the EU. (In the case of the European Union, an exchange of blows occurs in connection with Washington’s threat to punish European companies that are set to ignore the US ban on cooperation with Iran.)

Two Lines of Confrontation

The aggravation of the US-Chinese rivalry proceeds along two lines: first, the rates in the “tariff war” between the two countries are rising; second, the struggle between Washington and Beijing for lucrative markets in Asia and Africa is intensifying. Both these processes are interrelated, but in the current circumstances the main focus of the second line  is the fight for markets.

In the first place, I would like to talk briefly about the “tariff war” between the US and China as an important element in relations between the two countries, without which it is impossible to understand all the subtleties of competition between these two countries in Asia and Africa. As is known, the “tariff war” worsened after the US president first introduced a 25-percent duty on the import of 818 products from China, the total value of which was estimated at 34 billion dollars a year. Then came the even more threatening statement of the US Trade Representative Robert Lighthizer: “On July 18, the President instructed me to compile the list of Chinese goods worth 200 billion dollars for imposing additional duties of 10 percent … The President ordered me to consider an increase in the proposed level from 10 to 25 percent “. After China responded with a 25-percent duty on 34 billion dollars’ worth of American goods, Trump did not rule out the possibility of raising duties on all Chinese imports in the US. The total value of Chinese commodities in the US is currently estimated at about $ 500 billion.

Simultaneously, the United States has loudly announced its intention to compete with China in influencing countries that participate in the Chinese transport project “One Belt, One Road”, which is designed to revive the Great Silk Road, which ran throughout the whole of Eurasia in the Middle Ages. As he set off for  the Regional Cooperation Forum in Singapore in July this year, US Secretary of State Mike Pompeo announced his intention to counteract China’s so-called “silk” influence. According to Pompeo’s plans, the appropriate measures should cost the US budget a trifling $ 113 million against China’s hundreds of billions which is exactly the amount Beijing is planning to allocate for the implementation of “One Belt, One Road” project.

Influence at Low Cost

If the United States intends to squeeze China out of Asia at such miniscule costs, they obviously underestimate the rival. At least two factors work for Beijing: first of all, China is one of the region’s oldest “aborigines”; besides, Washington, waging a “tariff” war against Beijing, can thus deprive itself of a part of the Chinese oil market, making China even more attractive for oil traders from Iran and Russia – the key players in the project “One Belt, One Road”.

The American Oil Price news site has described the impact of the US-China “tariff war” on the Asian oil players as follows: “China has threatened to impose a 25- percent import tariff on crude oil and oil products from the United States. If this threat comes into effect, crude oil from the US can become non-competitive in terms of value. Such a tariff from China will not only reduce the income of oil exporters from the US, forcing them to look for new markets … it can become a source of additional revenues for the OPEC countries. And the OPEC countries are the suppliers that the US has pushed into the background in recent years”, says Oil Price researcher Irina Slav. oilprice.com

Considering that for the American oil industry China is the largest export market after Canada, it becomes clear that this matter is fraught with so huge losses, billions in fact, that Secretary of State Mike Pompeo with his 113 million dollars sounds ridiculous.

Psychological Error

Judging by Pompeo’s statements, Americans are committing a psychological mistake in Asia. This is the mistake that led to China pushing the US to the sidelines in many countries of Africa. The matter is that the US is trying to replace genuine assistance by self-praise, flaunting any of its measures as valuable and corruption-free, alleging that whatever it does is a good example to follow. “The world knows that with American companies you get what you see. Honest contracts, honest conditions, there is no need for behind-the-scenes machinations. Decency in business is the pillar of our economic vision in the Indo-Pacific Region”, the Secretary of State told CNN.

Meanwhile, South-East Asian nations know only too well about the US policy in this region. Alas, it is simply impossible to describe this policy as ever humanistic, open and devoid of corruption – it would mean contradicting the historical truth. The brutal war in Vietnam in the 1960s and 1970s, the support of the dictatorial and corrupt regime of Ferdinand Marcos in the Philippines (1965-1986), the “secret wars” of the CIA in Laos and Cambodia during military operations in Vietnam – the memory of all these is still fresh in the region. All the countries affected (Vietnam, the Philippines, Laos, Cambodia) are members of ASEAN. In such circumstances, the self-praising speeches by American officials at ASEAN forums trigger a skeptical attitude, to say the least. And although many ASEAN countries may feel wary of China and are unlikely to have cloudless relations with Beijing in the near future, the US’ psychologically wrong tactics have already antagonized many of these states pushing them toward Russia and China. This is proved by the recent attempts by Filipino President Rodrigo Duterte to diversify the traditionally pro-American policy of his country, enlisting the support of Russia and even China, a long-term rival. Duterte’s historic visit to China in 2016 showed who had actually won the fight for the “heart and mind” of the Philippine leader – a struggle in which the United States initially had very strong positions. aljazeera.com

The anti-Duterte media campaign, which was launched in the US and the EU soon afterwards, has no direct consequences so far. American accusations against Duterte in connection with an excessively fierce fight against the drug mafia sounded hypocritical amid the “war on drugs” which was imposed by the United States on Mexico and Colombia in the 2000s and in which at least 45,000 people were killed.

Lost In Asia – Will Lose In Africa

As far as Africa is concerned, in recent years China has outplayed not only the Americans, but the seemingly familiar with the local specifics former colonial masters of this region – the French and the British.

After the first Forum on China-Africa Cooperation (FOCAC) in 2000, the Chinese side found the right approach to its African partners – without instruction, without interference in internal affairs, with investment proposals supported by the banking sector of the Middle Kingdom. The first ministerial meeting of FOCAC attracted representatives of 44 countries from 53 states of the African continent. Fairly soon, China made these forums pan-African by removing Taiwan. Until the middle of the 2000s Taiwan had its diplomatic missions in several African countries (including Chad and Senegal), which excluded the possibility of communication between these countries and the PRC.

Orientation – Bandung

The African-Chinese “union of values” began with the Bandung Conference of 1955, during which 29 countries of Asia and Africa proclaimed the principles of non-interference, respect for each other’s sovereignty and comprehensive economic cooperation. The figures of the Indian Jewaharlal Nehru, the Egyptian Gamal-Abdel Nasser and the Chinese Zhou Enlai, which live in the memory of many in connection with their participation in the Bandung Conference, have ‘sanctified’ a new approach to China’s cooperation with Africa. All three became heroes in their countries, and the Chinese leadership, headed by the then Secretary-General Hu Jintao, was not mistaken in the choice of a model: in the coming years China will most likely gain an economic foothold in Angola, South Africa and the Congo-Brazzaville state. According to the long-term president of this country Denis Sassou Nguesso, “Africans for the first time do not expect foul play from people with a different skin color who build their roads and power lines.” (Source: the book by French journalists Serge Michel, Michel Beuret “Cinafrica, Pechino qalla conquista del continente nero” – “Beijing in the process of conquering the black continent.” Milano, 2009, p. 23)

At present, Africa’s trade with China amounts to 220 billion dollars, with the US – 37 billion. Foreign direct investment from China to African countries is estimated at $ 50 billion, although many experts claim that the real figure is higher: too much infrastructure, new plants and modern services have appeared in Africa for such “modest” Chinese money. (Source: book by French journalists Serge Michel, Michel Beuret “Cinafrica, Pechino qalla conquista del continente nero” – “Beijing in the process of conquering the black continent.” Milano, 2009, p. 22).

It should be noted that Africa did its best to repay all their benefactors with loyalty: together with China, leaders of the African Union reacted negatively to the armed, violent overthrow of the leader of the African Union – Libyan Muammar Gaddafi. China knows that it can count on the majority of African votes in the UN. But the main thing is gratitude, which in the case of Africa-China relations is absolutely sincere.

First published in our partner International Affairs

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East Asia

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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