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East Asia

The Asian Gee Gee

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Authors: Audrey Beaulieu and Eugene Matos

The Gee-Gee is the first horse out of the race gate; it’s an eyecatcher for gamblers. Usual to the racing scene, for those with little chance of success, the dark horse became a target of doping accusations. These allegations were disproportionately more common than the doping itself, especially when thousands were at stake. As a first-of-its-type economic tank, China is the 21st century Gee-Gee. To illustrate, in terms of GDP, China is the largest economy, with a GDP (PPP) of $25.27 trillion. Furthermore, hosting 129 headquarters out of the 500 biggest companies, China has the world’s largest foreign-exchange reserves worth $3.1 trillion. Its success has been largely due to liberal economic, social, legal and political reforms instituted since 1980. Yet, naysayers believe that China’s success is based on a unique third-way political and economic paradigm that occupies a space somewhere in between capitalism and socialism. Nonetheless, China’s economic prowess is not due to the state’s active interventionism in the Chinese economy. Difficult to understand the direction of Chinese economic policies due to the overshadowed politicized narratives by the current trade war with the US. Those who are interested in forecasting the reception of the China model in the global market, should distance themselves from the volatile political rhetoric. A rational legal approach abstained from political bias could dismantle the sino skepticism, confirm that China’s economic success is linked directly to the Chinese style neoliberal reforms put in place by CPC and simply unveil the arrival of a new player in a competitive liberal economy.

It is the type of policies we choose to apply that defines our market and its compatibility with others. We cannot contest that the international market follows neoliberalist economic principles, and alternative markets are pressured to reconsider their approach and reform. What concerns normative western economies are the principles that applaud free markets efficiency, growth and innovation, and discourage interventionism. Neoliberalists seek to transfer the control of the market from the public to the private sector, steering away from government spending, regulations and public enterprises. Based on the proposition above, we can find policies such as; the deregulation of industry and the elimination of government oversight on competition control and regulation; the privatization of state-owned organizations and enterprises to provide goods and services; the reduction of trade barriers to gain productivity and benefit from market accessibility; the reduction of government spending, as a mechanism to influence a market economy, and finally; monetarism, emphasizing on the government control of money supply in circulation which influences the price levels in the market.

Before 1978, China’s private sector was virtually non-existent. China’s desire to expand its economy was expressed with gradual contained experiments mirroring liberal economies, and gradual policy efforts to give greater protection and freedom to private enterprises. Contrary to popular thought, the first changes were not exclusively party-led but also spearheaded by peasant-led initiatives which resulted in the abolishment of the private farming ban in 1982. Subsequently, the ripple effect of the success of grassroot initiatives drove a spiked increase of small-scale businesses in different sectors. This wave of entrepreneurship influenced a system where business only thrived under the patronage of the state. In reality, the first formalized liberal experiments were the entry of the Special Economic Zones (SEZs) created in 1980 in the southeastern Chinese cities of Shenzhen, Zhuhai, Shantou and Xiamen. In these cities, opening-up and reform were carried out. The relaxation and deregulation have attracted millions, subsequently boosting the SEZs. Case in point, Shenzhen’s population went from 30,000 in 1980 to over 12.5 million by 2018.

 By 1992, the Communist Party of China claimed, in their 14th congress, the acceptance of the market economy and the relaxation of several foreign direct investment (FDI) restrictions. Notably, the switching from an approval business list based to a strictly denied based system allowing for most investments to proceed without the government’s mandatory approval. FDI deregulation coincided with the early 2000s thriving global economy with investment opportunities enjoying the global surplus in investment capital, increased competitiveness, lowered transaction costs, reduced red tape, and letting investors earn increased returns.

More recently, encouraged by their market results, China’s ambitions for better market access, and interest in trading partners with the WTO repositioned the country higher in the globalized world. By ratifying the WTO agreement in 2001, trade facilitation increased with blanket reforms and standardized the Pan-China liberal future. The entry to the WTO was a check and balance for China. Case in point, the Foreign Investment Law adopted by the National People’s Congress in 2019 assigned the Ministry of Commerce, National Development and Reform Commission to protect and promote foreign investments, and the abolishment of FDI expropriation, except under special circumstances and with reasonable compensation.

To summarize, China has encouraged voluntary exchanges with less intervention, allowing the law of supply and demand to take a greater role in their market economy. They ensured that FDI policies promote the investment of entrepreneurial activities by giving subsidies, grants, tax breaks, and loans, to increase greater profitability. Without a doubt, China’s openness through export-friendly policies, such as regional and international trade agreements encourage the feasibility of the market for both internal and foreign consumers. Law expert from Chinese Embassy in the Hague points out that the 19th CPC National Congress has been an occasion to insist on the importance of giving “full play to the decisive role of the market in resource allocation, [optimizing] the role of the government, fully implement the new development concept, focus on the supply-side structural reform, and accelerate the construction of a modern economic system”. He also specifies that the institutional obstacles obstructing the way to a high-quality development “require further liberated thinking, deepening market-oriented reforms [and] high-level opening up”. From 1980 when China owned less than 1% of the global share to 12% or $4.6 trillion by 2018 in global trade. The Chinese economy grew eighth fold, and over 400 million people in China were relieved out of absolute poverty of less than $1.90 per day. Trade with the US increases from $8 billion to $578 billion in 2016 alone. Needless to say, FDI policies have an upscale battle to dismantle years of failed manufacturing investors who have hit walls of high startup costs, heavy legal exposure, and compliance issues.

The recent adoption of the first Chinese civil code, was a long-awaited deal China had with its investors. In March 2017 the General Provisions were adopted, in August 2018, six drafts went under review, in December 2019, following public solicitations, and appraisal activities, a complete 84-chapter draft civil code was unveiled, and it will come into force on January 1, 2021. The code is a significant legal reform delivered in China. Composed of 1260 articles and divided into seven chapters, the latter will cover several legal aspects, some of which are largely related to the management of private companies, such as contracts and property rights. China gathered public wisdom in the course of compiling the draft civil code, 1.02 million pieces of advice had been solicited from around 425,000 people, it reflected the needs of a contemporary economy. According to Chinese Embassy, “the [new] Civil Code [will show] more respect to the basic principles of private law autonomy, restrict public sector’s improper interference in the field of private rights of natural and legal persons [and] strengthen the protection of private rights of natural and legal persons by public authority”. For example, the new Code will establish a “ special legal person” which reflects the freedom of transaction, emphasizes the spirit of contract, and creates a legalized environment favorable to business”.

The first codification of the law in a country is synonymous to several changes. Initially, this will allow easier access to the law for the population, resulting in greater respect and trust in the legal system, but also in political decisions and organization. Moreover, due to its concise and intelligible form and its ease of access, the Civil Code will allow greater efficiency and better coherence within the judicial branch. Indeed, especially in the case of China, bringing together various legislations under a single law will help avoiding contradictions, from stand-alone regulations and increasing the speed of judicial processes since all professionals can rely on the same steady legal basis. Finally, the adoption of a civil code offers the needed stability for private investment reflects a modern China and the will of Chinese public institutions to comply with the rule of law, a well-acknowledged principle on the international scene.

The demand for greater democracy, justice and protection of private property has to coincide with an era of diversified incomes, fast technological changes, and innovation. In doing so, the code applies groundbreaking modern ICT legal approach protects online information, email addresses, and virtual assets. It handles cyberspace tort in response to the demand of big data researchers and other AI ICT advancements, with new rules on protection of personal information. This also includes regulations on property protection, business secrets on scientific studies, and rules on handling patenting.

Private investments in China have dramatically slowed during the 2019-2020. To the worry of Chinese officials went from more than 20% growth to single digits in 2020. Private investments fell another 13% during the coronavirus-battered first four month of this year, compared with a 7% decline for SOE. This April in a meeting chaired by Xi, declared that the Civil Code ahead would increase the support to the private economy and development of small and medium-sized firms and restore confidence of private business owners and to help prop up economic growth. That said, the intensification of the protection of entrepreneurs and local and foreign investors’ rights is undoubtedly an incentive to further develop the private sector. On that matter, Chinese Embassy mentions that the new code will “further [improve] the basic legal system and rules of conduct in domestic civil and commercial fields, [provide] basic guidance for various civil and commercial activities [and give] a more specific legal basis for foreign investors to invest and establish enterprises in China, which [will encourage] their enthusiasm and creativity, [safeguard] transaction security, and [maintain] market order”. In the same vein, the new code will also clarify the boundary between public and private institutions. For example, the new code plans to tighten property rights by restricting the concept of public interest so that it will now be more difficult to expropriate usufructuaries without justification. Consequently, the application of the new code will result in the submission of the state to a system of law, thereby reducing its place in the economic sphere as liberalists would suggest.

 the civil code is, without a doubt, the “third-way theory’s” last straw. In fact, as we have demonstrated, the reforms taken show that the gradual liberalization provides evidence of a liberalized market and reduced Chinese state intervention. Indeed, the state is still present, yet it is clear that the trend of controlled, gradual and experimental decline in the state’s role in the market has been a continuance of a transformation which began in the 1980s. China underwent unique great social changes and moved away from the hammer and sickle limitation of their agricultural, and production of staples towards a more dynamic manufacturing activities. With the implementation of SEZ, FDI regulations and the new Civil Code, foreign investments became a stakeholder to Chinese infrastructure needs. Moreover, the rising curve of the accumulation of capital and entrepreneurial spirit, uncontestably correlates with the advancement of human wellbeing, search for happiness, prosperity. The maximization of capacity in China will soon be completed with the ascension of greater property and individual rights. As suggested the Civil Code and laws on FDI have led to a more law-based and effective and market-friendly governance atmosphere in China. Therefore, we should not believe that China has discovered a third paradigm by simply mixing capitalism with substantial influence of the state, China’s success was due to a discovery of development route that best suited to its national conditions through practice and reform, with the state and market both playing a more coordinated, efficient and balanced role,

Audrey Beaulieu of the University of Ottawa (Globalization and International Development Department), specialised in public and private International law, international development and global politics.

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East Asia

U.S.- China Strategic Competition in The East Asia

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East Asia has been the most dynamic region where development has been internationally recognized. The regional politics of the region has developed a paradox that has flamed up the economic environment of the region. The trends have shown the increased intensifying security issues along with the strategic completion that has spread the security and economic tensions across the East Asian Region. In a global circle, China is known as the revisionist state. The historical manners suggest the reclaim of East Asia by the Chinese. This claim has intensified the relations between the US and China in East Asian Region.  The main challenge for China is to shift the US intervention from the East Asian region for the balanced equation at the strategic level. This might provoke the US and its allies in East Asia such as Japan that will help the US to jeopardize the Chinese rule from the region. The challenge for the US and its allies in the East Asian Region is more complicated because of the economic stability of China at the International Level. This might be a proxy war for both the superpowers in the East Asian region where the conflict may rise compromising the strategic stability of the region. The strategic location of the US lies in the actual form of ability and project power over great sustainable intervals. The strategic behavior increases the policies and shapes the allies.

One prevalent belief in the United States about China’s long-term policy goals in Asia is that Beijing aspires to be the regional hegemon and wants to restore a Sino-centric order in the region.

First, Beijing favors unipolar ties at both the global and regional levels and believes that with ongoing economic growth, this trend will continue intra-regional political consultation in Asia, influence on regional affairs is going to be more diversified and more evenly distributed. Secondly, although China expects some relative increase in its influence in Asia, it understands that thanks to the boundaries of its hard power and particularly its soft power, China can never achieve a grip cherish its role within the ancient past or to the U.S. role within the region at the present.

Beijing’s perspective:

From Beijing’s perspective, the US is an East Asia power, although not an Asian power, and its political, economic, and security interests within the region are deep-rooted, as are its commitments to regional stability and prosperity. Beijing has always welcomed a constructive U.S. role in regional affairs. At the identical time, however, Beijing also feels uneasy with certain aspects of U.S. policy. As a superpower, The US has been too dominant and intrusive in managing regional affairs. It fails to pay due regard to the voices of other regional players and sometimes gets too involved within the internal affairs of other states, lacking an understanding of their culture, history, and values.

The US and European aspects towards the South China Sea and East Asia should involve long-term perspectives of engaging ASEAN states. Such impacts will create room for the US to tackle China in the East Asian region. The development of any comprehensive strategic security policy is the need of the hour that assures one’s interest in the region. Both the states perceive a threat from each other and try to further advance their capabilities for the sake of safety and security. The US is not in a position to deal with the other power far away from its homeland, sustaining its military and protecting allies. Aggressive behavior in strategic competition can lead to unwanted results. The US would have to accept the strategic realities of China to normalize the relations. China on the other hand should rethink its policies in East Asia and Indo Pacific. However, as yet, deterrence has played its part by keeping states from a large-scale action. States running in the race of acquiring arms conventionally due to uprising strategic competitions are worsening any likely condition of conflict.

Key points for US:

In terms of identifying specific actions for a U.S. strategy for competing strategically with China in East Asia, a key element would be to possess a transparent understanding of which actions are intended to support which U.S. goals, and to take care of an alignment of actions with policy goals. Cost-imposing actions are actions intended to impose political/reputational, institutional, economic, or other costs on China for conducting certain activities within the East Asian Region, with the aim of persuading China to prevent or reverse those activities. Such cost-imposing actions need not be limited to the East Asian Region only. 

Conclusion:

The development of any comprehensive strategic security policy is the need of the hour that should involve joint military maritime exercises. The US and China have set their limits in coordinating military to military joint cooperation due to their desired interests and competition. Both the states perceive a threat from each other and try to further advance their capabilities for the sake of safety and security.  

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East Asia

Summit for Democracy Attempts to Turn Multicolor Modern World into Black and White Divisions

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One of the most important takeaways from the recent sixth plenary session of 19th CPC Central Committee is that Beijing flatly rejects Westernization as the path to modernize the Chinese society and the national economy. Instead, as it was underscored in the plenary Communiqué, the country will continue to stick to “socialism with Chinese characteristics in the new era.” The leadership will preserve and further develop the system that served the people so well over last more than 70 years.

This statement did not come as a surprise to numerous China watchers all over the world. In fact, the critical choice between socialism and Western-type liberalism was not made in November of 2021, but decades ago.

One can argue that the outcomes of the sixth plenary session are yet another manifestation of a more general global trend: The world has been and will continue to be very diverse in terms of political systems, social models and economic patterns of individual nation states. Moreover, the odds are that this diversity will increase further literally in front of our eyes. Instead of the “end of history,” we will observe more intense multifaceted competition between different types of social development.

One way to react to this emerging reality is to accept it as a positive trend that enhances the overall stability of the global social system. The more diverse and complex the system is, the more resistant it is to various shocks and disturbances. To make a rough analogy with biology, a natural forest, which is a very diverse and complex ecosystem, is much more resistant to whims of the weather and natural disasters than a man-cultivated monocultural field. Accepting the trend, we should focus on how to manage competition within the increasingly diverse and complex world so that this competition will ultimately benefit all of us.

The other way to deal with this reality would be to start fighting against social, political and economic diversity by trying to advance one single model over all others. This is exactly what the Joe Biden administration is committed to doing by launching an ideological crusade against China, Russia and other nations that dare to deviate from the fundamentals of the Western development model. To make its case, the White House has announced a virtual Summit for Democracy to be hosted by the US on December 9–10 with the goal “to renew democracy at home and confront autocracies abroad.”

This vision reduces the multi-color palette of the modern world to a minimalist black and white graphics of a global fight between “democracies” and “autocracies.” It divides the international system into “us” and “them,” into “good” and “bad,” into “legitimate” and “illegitimate.” Such a reductionist system, if constructed, cannot be stable and shock-resistant by definition: Any major international crisis or a regional conflict could spark high risks of implosion.

It goes without saying that the nations of the world should firmly oppose corruption, abuses of power by state authorities and gross violations of human rights. If the goal of the Summit for Democracy were to confront these evils on a global scale, there would be no need to make the event exclusive by inviting mostly US friends and allies. If the goal is to advertise the US political, social and economic model, Washington should probably delay the summit and put its house in order first. If the goal is to isolate Beijing and Moscow in the world of politics, this is not likely to work well for the US.

Nations of the world have a right and even a duty to experiment with their political and social development paths. This experimenting contributes to the overall social experience of the humankind. Only history is in a position to judge what models turn out to be efficient, productive and fair and what models will find their place at the dump of human delusions. And history has a lot of means at its disposal to punish leaders, who believe that they possess a “one size fits all” model, which could successfully replace the existing diversity with an imposed universalism.

From our partner RIAC

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The Chinese diplomatic force in the IAEA to confront Western leadership

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At the level of international relations, through China’s presence in all the relevant international organizations, and its membership in all of the United Nations organizations, specifically in the International Atomic Energy Agency “IAEA”, China aims to play the role of the (international balancer),  in light of its quest to maintain a certain level of competition with the United States of America politically and economically, this is in line with its desires to constantly play the role of the pole calling for (multipolarity and multilateral international pluralism through the Chinese political speeches of Chinese President “Xi Jinping”), in order to oppose American hegemony over the world and Washington’s policies to maintain its position as a single pole in the international community. China’s increase in its foreign investments, in order to enhance its economic hegemony over the world through its political and diplomatic tools with countries that have equal economic power with it in a number of (trade, scientific and technological issues, in addition to military and intelligence tools, as a reference for China’s new foreign political center).

  We note that the patterns of Chinese foreign policy is (the pattern of dependence, which is based on the high level of foreign participation in all current global issues), to restrict the attempts of the United States of America to pass its decisions internationally, and therefore China is trying to enter the membership of all international organizations so that China’s foreign policies remain more comprehensive, broader and more effective in the global change, and to change all directions of these issues and control them in the United States, and this is one of its new political tools that serve its global expansion through the (Chinese Belt and Road Initiative).

   In the same context, China focuses its external and competitive strength on its presence in effective international organizations, and rapprochement with the European Union, especially (France, Germany), despite not denying their relations with Washington, because of their strong influence in the global economy.  In addition to China’s reliance on the plan of foreign and foreign investments in countries that influence American influence through the Belt and Road projects, as well as China’s resort to the import policy of many resources necessary to develop its economic capabilities from certain European countries to open influential relations with them, leading to (the Chinese strategy to obtain  political support through the policies of alliances, consulates, representations, and its membership of international organizations), with the aim of influencing countries’ policies economically to pass important international decisions regarding the US challenge to China, such as: (the Iranian nuclear file, North Korea, Myanmar, Afghanistan, Syria, Venezuela, etc.), to increase with this  The level of external penetration of China economically and politically).

    China is mainly aiming to increase its membership in international organizations and the International Atomic Energy Agency, to (create a new balance of power and get rid of unipolarity restrictions through the medium powers and small states that the international system prevails with real pluralism, instead of the current state of American unipolarity).

   In my personal opinion, the countries of the Middle East may find in the rise of China and Russia, and perhaps other international powers to re-compete the United States,  as a (real opportunity to advance the effects of the pluralism of the international system at the regional level, and this would create more space for movement and opposition or bargaining and flexibility of movement for all to confront the policies of American hegemony, according to Chinese planning with Russia), and this also works to alleviate those restrictions and American dictates, and perhaps the sanctions and pressures it imposes on opponents of its approach internationally.

  The strategy of competition between China and the United States has become China’s long-term strategy, which is based on (the necessity of a heavy Chinese presence in all international organizations and forums, which allows China to communicate with various global powers and balance its relations with them compared to Washington), as well as diversifying the People’s Republic of China for its relations and distribution of its power among the competing countries, which allows China to show wide options on all important issues, and the most dangerous is that this Chinese presence, which (allows Beijing to prejudice the foundations of its relationship with the United States of America and the other various powers around the world).

  China and Russia also aim to form an alliance into all international and regional organizations to change the current provocative approach of the American policies in their confrontation, especially those related to mobilization policies and American alliances against them around the world. The Chinese alliance with Russia was so clear with the (Russian Foreign Minister “Sergey Lavrov’s visit” to Saudi Arabia, the UAE and Qatar, while on the other hand, both Kuwait and Qatar have received a member of the Political Bureau of the CPC Central Committee and Director of the Office of the Foreign Affairs Committee of the CPC Central Committee “Yang Jiechi”).

    On the other hand, China is among the Security Council countries that have the largest number of (Chinese peacekeeping forces around the world), and China is at the forefront of the (most contributing countries to the international peacekeeping budget, in addition to sending naval fleets to carry out maritime guard missions according to according to the UN Security Council resolutions), and therefore China may play an important role in establishing security in many countries in the world, and this is perhaps what China plans to ensure its use, in the event of a decline in American interest in the security of many regions in the world, within the framework of (the strategy of pressure of the American expenditures, retreat and withdrawal from many places around the world and devote its concern to the American interior issues and its worsening economic crises).

  The point is worthy to be considered here, is the report issued in July 2021 by the (International Atomic Energy Agency), entitled “Nuclear reactors around the world”, in which he analyzed China’s plan to (establish the dream of nuclear sovereignty around the world by starting to build and establish about 11 reactors). There are other Chinese nuclear reactors under construction, as well as the (new Chinese planning to build other 29 nuclear reactors), while the International Atomic Energy Agency’s work report on the other hand indicated that the known total number of reactors that are actually in service, other than those planned for construction, and other reactors under construction, is up to  About 50 Chinese nuclear reactors, a step that confirms that “China is clearly shifting towards nuclear energy in the production of electricity, and depends on it directly in its industrial renaissance during the coming period, especially as it is the number one country in the world that is expanding in the establishment of nuclear plants, followed by Russia, which plans to build other 20 new nuclear reactors, while it has 38 nuclear reactors in active service”. Some leaks indicate the presence of Chinese nuclear reactors, exercises and tests in the “Doklam Desert” region on the borders of “Xinjiang” province in northwest China.

   It also notes that, from the reality of the report issued by the International Atomic Energy Agency “IAEA”, its confirmation regarding (Chinese planning to become the first country in the world in the production of nuclear energy during the next ten years, in return for the decline in the share of the United States of America in nuclear reactors, which continues to the continuous decrease with the exit of new American numbers of reactors annually), as the future plan of the United States of America does not include the establishment of new reactors, which indicates that (the expansion of this type of energy tends towards China and Russia during the coming period, and these countries will have accumulated experiences, enabling them to dominate and control this new nuclear industry in various countries of the world, and this is what is actually common happening in the region).  Knowing that its uses will be mainly peaceful and to serve the interests of peoples and countries, so we may witness the coming period intensifying the role of the International Atomic Energy Agency in many files around the world to study them, inspect different regions and various other areas to ensure (their peaceful uses of nuclear energy in many development projects around the world).

   Hence, we almost understand (the importance of the Chinese presence and presence and its membership in the International Atomic Energy Agency in the first place), given that it actually owns 50 nuclear reactors in service, and its contribution to the production of electricity and providing energy to one and a half billion citizens, and China also has new nuclear reactors under construction, so (China seeks to be near the International Atomic Energy Agency, to embarrass, restrict and limit the American influence on the one hand against Beijing’s allies, led by Iran and then North Korea. Therefore, China has developed a strategic plan in the coming years, which is based on the intensity of the Chinese international presence and passing its foreign policies and decisions with the help of its Russian ally internationally).

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