China Watch

It is worth taking a moment to reflect on the thirty years since Tiananmen Square – the symbolic event which represents the crushing of opposition factions in China – to reflect on that country’s evolving economic position in the world.

How best to sum it up? Strategic planning and implementation at its best would perhaps be China’s own assessment. Long term world economic domination at its worst might be another analysis.

What has happened over these three decades to put China in such a strong pivotal position?

  • The Communist Party established firm control of China (that was the assertion at Tiananmen Square) and can use subsidies, trade discrimination and all relevant means to ensure the “Made in China 2025” policy can be ruthlessly pursued;
  • Free trade and open market rules apply to others, not China, ditto to its use of fossil fuels
  • Chinese firms are more or less free to operate wherever they like, but in China itself, any foreign firms must take on local partners and transfer technology to them
  • China’s autocratic leadership decides which industries to grow – with the aim of dominating world markets (steel production is a significant example)
  • China uses its territorial ambition to support trade and vice versa – for example in the South China Sea (through which one third of international shipping passes) and the goal of regaining control of Taiwan; through its Belt and Road initiative to control trade routes throughout Asia and into the West; and in its use its trade terms (usually including inter-governmental loans) to acquire ports and infrastructure throughout the world, for example in Africa
  • China controls certain resources like the rare earth elements used in so much IT hardware and uses this as a bargaining chip (pun intended)
  • China benefits from the easy access afforded to Chinese students to study abroad and gather valuable information on key technologies for use when they return home
  • China is subtle about use of enterprises such as Huawei that are ‘close’ to the State and not simply commercial organisations competing on the world stage.

What should be our sophisticated response to this? To do nothing and flounder in the face of ruthless ambition?

Of course not. Open market countries – where free markets decide the allocation of resources – should really wake up. China is playing the game differently and, economically, the rest of the world is paying the price.

Democracy and freedom, wiped out at Tiananmen Square, needs to be defended vigorously by a more canny economic strategy than our leaders currently are following, otherwise China will be completely dominant in world markets, able to grow continuously and see other countries shrink and decline. I’m not even sure that that is ultimately good for China and its citizens, never mind the rest of us.

image by chuttersnap

Published on Jul 01, 2019 by Neil Thomas