Lesson 4 – China’s Strategy for Resource Security, Internal Stability and Global Trade

China has adopted a State directed development strategy in the expectation that rapid development will enable China to protect its national interests; and at the same time dampen democratic urges at home.

We observed previously that China is the middle kingdom that sits between the far East, Russia, and the 20/40 window. China’s colonial experience profoundly shaped the Chinese outlook leading to Mao’s dictum that “power comes from the barrel of a gun.” Mao’s Communists unified the country but suppressed many aspects of traditional Chinese culture which was subsumed under a totalitarian regime.

After the dissolution of the USSR and the Tiananmen square protests in 1989, the ruling party abandoned Marx in favour of State capitalism. As noted in the ‘Democracy and Freedom’ course, this approach fits the classical definition of fascism meaning the unity of State and corporate power. The grand bargain with the Chinese people is that the party guarantees to lift living standards and develop the country. In exchange the party retains its power and the Chinese people do not enjoy a free press, or freedom of association and religion. However, the Communists did not abandon Marx when it came to understanding capitalism. They understand that capital has no national loyalties and will gravitate to the cheapest source of labour and materials.

The Chinese economic strategy is predatory to the broader interests of Western society but has been highly profitable to some Western business interests. The Chinese strategy is this:

  1. Entice industry from developed nations to China with cheap labour and lax regulation
  2. Export cheap manufactured goods
  3. Build up a financial surplus
  4. Use this to make strategic purchases of infrastructure (e.g. the Port of Darwin), resources, water, arable land, and high tech companies through front companies registered in the host country
  5. Encourage national savings
  6. Buy and store gold
  7. Reduce exposure to American dollars
  8. Develop Chinese currency (renminbi or yaun) as a world trading currency
  9. Engage in a centrally coordinated systematic global theft of intellectual property
  10. Use this theft to help modernise Chinese indigenous industry and military
  11. Develop modern military capabilities, particularly a blue water navy to protect sea lanes and guard energy imports
  12. Develop influence in host nations by purchasing or funding media and educational institutions and by using locally registered companies
  13. In developing countries, notably Africa, exchange weapons and infrastructure projects in exchange for resources.

Chinese military, economic, and cultural activities are thus directed to the same purpose and in a long term strategic and coordinated manner.

This strategy has de-industrialised the West which in turn is one of the underlying reasons for the election of the ‘unelectable’ Donald Trump as President. In response Western Banks expanded cheap credit to stimulate what is left of local economies. The result has been unsustainable economic bubbles and unproductive speculation together with unsustainable debt. There is now a long term structural economic and social crisis in the West. This is the background to Donald Trump’s desire to start a trade war with China in order to re-industrialise America.

China’s strategy has been to use ‘soft power’ – investment and trade, rather than the ‘hard power’ of military action and international sanctions. The Chinese strategy has been highly successful and highly profitable. This profit has allowed China to become one of the biggest creditors to the US through purchase of US Government bonds. The Chinese ‘soft power’ contrasts with the ‘hard power’ approach of the United States which has cost trillions of dollars and created an unsustainable war debt for questionable results.

China, perhaps more than any other country, profits from global free trade since its size and centrally coordinated approach allow it to compete on favourable terms. It is unsurprising therefore that China is seeking to remove all global trade restrictions and has used the most recent G20 summit to lay out a global free trade agenda. At the 2016 G20 summit China also laid out an agenda for an ambitious program of transport infrastructure development. This is a vast road, rail, and pipeline network to integrate trade from Europe to South East Asia with China sitting at the center.[1] If successful, this program could in time make China the pre-eminent power in the Easter hemisphere. It is a multi-billion multi decade intergenerational agenda from a country that is accustomed to thinking in time frames of centuries. The world may experience Wolfowicz’s ‘American Century’ for a few decades but China clearly intends for there to be a real ‘Chinese Century’ thereafter.[i] However, between Europe and China sits Russia, the other great land power. Russia has consistently leaned towards Europe rather than China. What will Russia do?

Strategic Partnership with Russia

In late 2014 and early 2015 the United States and others proposed blocking Russian access to the SWIFT exchange system that clears credit card and other banking transactions. This was proposed as part of the sanctions regime on Russia for refusing to accept the annexation of Crimea and intervening in Ukraine. Iran had already been blocked from the SWIFT exchange. However, the proposal to block Russia put the world on notice that the United States is willing to try and economically sabotage any power that does not conform to their will.

This, perhaps more than any other event, pushed Russia and China into a strategic partnership. China and Russia promptly established an alternative global exchange.  Both countries had for some years been developing bi-lateral and multi-lateral trade in their own currencies rather than in US dollars. Following Russia’s ban from the SWIFT exchange co-operation went up a notch and both countries in effect agreed to make their economies mutually inter-dependent. While Eurasian integration has been studiously ignored in the West, billions of dollars worth of energy and infrastructure projects linking Beijing to Moscow have been agreed. This is a long-term alliance with intergenerational ambitions.

Specifically, a raft of cultural and economic exchanges, forums and links have been developed including for example an Eastern Economic Forum held annually at Vladivostok. A target of $100 billion annual exchange of goods and services has been set and largely achieved.[ii]

This critical physical and social infrastructure lays the foundation for decades of economic growth and is immune to Western sanctions or naval blockade. Most if it will be too far inland and too well defended to be threatened by conventional air power. China and Russia are thus quietly building a defensible economic core that binds together the heart of the Eurasian continent.

To protect this core Russia and China have entered into a strategic military partnership which includes significant technology transfer as both militaries are undergoing a deep modernisation aimed at countering the US in their respective spheres of interest.

Both countries have conducted major joint exercises involving a deep level of cooperation in which the two countries militaries can familiarise themselves with their respective command structures and data transmission processes. It likely also includes intelligence sharing.

The symbolic culmination of this relationship between countries and leaders occurred when they were each other’s guest of honour at their respective 70th Anniversary of Victory over Fascism celebrations. These occurred in Moscow on 9 May and Beijing on 3 September 2015. India, China and Russia each paraded and Moscow experienced a march of half a million citizens remembering and honouring family members who died fighting fascism in World War II. In what is perhaps the most mean spirited diplomatic face slap in history, every Western leader boycotted these events.

[1] This goes by the acronym OBOR – One Belt One Road, also known as the New Silk Roads

Materials

[i] Source: https://sputniknews.com/columnists/20160831/1044816377/g20-geopolitical-juncture.html

The Ultimate 21st Century Choice; OBOR or War

 

By Pepe Escobar

 

The G20 meets in tech hub Hangzhou, China, at an extremely tense geopolitical juncture. China has invested immense political/economic capital to prepare this summit. The debates will revolve around the main theme of seeking solutions “towards an innovative, invigorated, interconnected and inclusive world economy.” G20 Trade Ministers have already agreed to lay down nine core principles for global investment. At the summit, China will keep pressing for emerging markets to have a bigger say in the Bretton Woods system. But most of all China will seek greater G20 backing for the New Silk Roads – or One Belt, One Road (OBOR), as they are officially known – as well as the new Asian Infrastructure Investment Bank (AIIB). So at the heart of the G20 we will have the two projects which are competing head on to geopolitically shape the young 21st century. China has proposed OBOR; a pan-Eurasian connectivity spectacular designed to configure a hypermarket at least 10 times the size of the US market within the next two decades.

The US hyperpower – not the Atlanticist West, because Europe is mired in fear and stagnation — “proposes” the current neocon/neoliberalcon status quo; the usual Divide and Rule tactics; and the primacy of fear, enshrined in the Pentagon array of “threats” that must be fought, from Russia and China to Iran. The geopolitical rumble in the background high-tech jungle is all about the “containment” of top G20 members Russia and China. It doesn’t take an oracle to divine which project is intriguing — and in many ways seducing — the Global South, as well as an array of G20 member-nations.

That connectivity frenzy Shuttling between the West and Asia, one can glimpse, in myriad forms, the graphic contrast between paralysis and paranoia and an immensely ambitious $1.4 trillion project potentially touching 64 nations, no less than 4.4 billion people and around 40 per cent of the global economy which will, among other features, create new “innovative, invigorated, interconnected and inclusive” trade horizons and arguably install a post-geopolitics win-win era. An array of financial mechanisms is already in place. The AIIB (which will fund way beyond the initial commitment of $100 billion); the Silk Road Fund ($40 billion already committed); the BRICS’s New Development Bank (NDB), initially committing $100 billion; plus assorted players such as the China Development Bank and the Hong Kong-based China Merchants Holdings International.

Chinese state companies and funds are relentlessly buying up ports and tech companies in Western Europe – from Greece to the UK. Cargo trains are now plying the route from Zhejiang to Tehran in 14 days, through Kazakhstan and Turkmenistan; soon this will be all part of a trans-Eurasia high-speed rail network, including a high-speed Transiberian. The $46 billion China-Pakistan Economic Corridor (CPEC) has the potential to unblock vast swathes of South Asia, with Gwadar, operated by China Overseas Port Holdings, slated to become a key naval hub of the New Silk Roads. Deep-sea ports will be built in Kyaukphyu in Myanmar, Sonadia island in Bangladesh, Hambantota in Sri Lanka. Add to them the China-Belarus Industrial Park and 33 deals in Kazakhstan covering everything from mining and engineering to oil and gas. Back in February, PwC was already detailing $250 billion in OBOR projects that had been built, recently started or agreed on and signed.

An array of Silk Road projects now crisscross Eurasia, progressively networking east-west and north-south corridors through many an economic zone; an expanding connectivity and infrastructure development frenzy involving Russia, China, India, Pakistan, Iran, Southeast and Central Asia. Connectivity, now more than geography, is destiny. It’s not by accident that a lot of the action happens in member-states or observers of the Shanghai Cooperation Organization (SCO). The New Silk Roads are about to be totally intertwined with the reprogramming of the SCO as a security-economic cooperation umbrella. In parallel Russia, with the progressive coordination of the Eurasia Economic Union (EEU) with the New Silk Roads, projects the Russia-China strategic partnership much further than just New Silk Road connectivity to Europe. Follow those CUES Southeast Asia – via the Maritime Silk Road — is a key hub in the New Connectivity Game in Eurasia.

Which brings us to the alleged illegality of the “nine-dash line” Chinese claim of indisputable sovereignty as recently ruled in The Hague. The US and the Philippines have a mutual defense treaty since 1951, according to which “island territories under [Manila’s] jurisdiction” must also be defended. Washington under a potential neoliberalcon Hillary Clinton presidency – and Kurt Campbell, who conceptualized the “pivot to Asia” as possible Secretary of State — might be tempted to declare the treaty applies to offshore islands, atolls, “rocks” and even underwater features such as Scarborough Shoal. Beijing won’t wait to fall into this possible trap. Following a recent meeting in Inner Mongolia, China and ASEAN are set to launch an emergency diplomatic hotline and eventually adopt a Code for Unplanned Encounters at Sea (CUES). ASEAN and East Asian powers, meanwhile, keep weighing the merits of the Regional Comprehensive Economic Partnership (RCEP) — 16 nations, 29% of global trade – as an alternative to the US corporate-pushed TPP, a sort of NATO-on-trade that excludes China.

China is hyperactive on all fronts. It will boost the use of Singapore know how to advance New Silk Road projects. Singapore, with a population nearly 75% ethnic Chinese, is China’s largest foreign investor and a major overseas hub for yuan trade. More than 20% of Singapore’s GDP is linked to China. Chinese State Councilor Yang Jiechi speaks at the first 2016 G20 Sherpa Meeting in Beijing on January 14, 2016. The Sherpa Meeting is taking place ahead of the G20 Summit, which will be held in Hangzhou in eastern China’s Zhejiang province in September 2016. At the same time, planning for a post-war Syria, Beijing is committed to boost trade and economic cooperation with Damascus, another future OBOR hub.

It does not hurt this is also asymmetrical payback for Pentagon interference in the South China Sea and the deployment of THAAD in South Korea. Beijing has made it clear that the South China Sea won’t be discussed at the G20. Philippine President Rodrigo Duterte for his part has insisted, “We’re not in a hurry to wage war, we’re in a hurry to talk.” The heart of the matter in the OBOR-linked South China Sea is not sovereignty over “rocks” or even unexploited reserves of oil and gas; it hinges on the capacity of the Chinese Navy to regulate and eventually deny “access” to the Pentagon and the US Navy. What’s certain is that the US Navy will take no prisoners to prevent China from strategically dominating the Western Pacific, as much as Washington will go no holds barred to ram TPP to prevent China from economically reign over the Asia-Pacific. Deng Xiaoping’s maxim – “never take the lead, never reveal your true potential, never overstretch your abilities” – now belongs to the past. At the G20 China once again is announcing it is taking the lead. And not only taking the lead – but also planning to overstretch its abilities to make the hyper-ambitious OBOR Eurasia integration masterplan work. Call it a monster PR exercise or a soft power win-win; the fact that humanitarian imperialism as embodied by the Pentagon considers China a major “threat” is all the Global South – and the G20 for that matter — needs to know. The views expressed in this article are solely those of the author and do not necessarily reflect the official position of Sputnik.

Read more: https://sputniknews.com/columnists/20160831/1044816377/g20-geopolitical-juncture.html

Russia Today Silk Roads

Source:  https://www.rt.com/op-edge/358326-g20-hangzhou-china-xi/

What has just taken place in Hangzhou, China, is of immense geoeconomic importance. Beijing from the start treated the G20 very seriously; this was designed as China’s party, not the declining West’s. And much less Washington’s.

Outlining the agenda for the discussions, President Xi Jinping went straight to the point also geopolitically, as he set the tone: “The outdated Cold War mentality should be discarded. We urgently need to develop an inclusive, comprehensive, cooperative and sustainable new security concept.”

Compare it with Xi’s so-called “four prescriptions” – “innovative, invigorated, interconnected and inclusive” – necessary to re-boost the world economy. Acting like the de facto World Statesman-in-Chief, Xi then proceeded at the summit opening to introduce a quite ambitious package – the result of excruciating planning for months in the run-up to Hangzhou.

The package is designed to propel the global economy back to growth and at the same time install more made in China-friendly rules for global economic architecture and governance.

The target could not be more ambitious: to smash mounting anti-trade and anti-globalization sentiment, especially across the West (from Brexit to Trump), simultaneously pleasing his select audience – arguably the most significant gathering of world leaders in China’s history – yet at the same time, in the long run, aiming at prevailing over US-led Western dominance for good.

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[ii] The following excerpt from an interview with Bloomberg (http://en.kremlin.ru/events/president/news/52830) provides a sense of the Russian perspective:

John Micklethwait: Can I ask you about the Chinese again. Back in 2013 you said you set $100 billion of trade with China as a target for 2015. But it was about $67 billion-$70 billion a year. What went wrong? I know the problems to the ruble and problems to the oil. Do you still think that target of $200 billion in 2020 is achievable?

Vladimir Putin: Yes, I find it absolutely attainable. You have just listed the causes of this fall in bilateral trade yourself. At the first stage, we set the target at about 100 billion US dollars, and we almost got there – it reached 90 billion. So we are almost there. But we also know the reasons for the fall. These include a decline in the prices of our traditional export goods and the exchange rate difference. These are objective reasons. And you know that very well.

John Micklethwait: Did sanctions make a difference?

Vladimir Putin: The sanctions have nothing to do with our relations with China, because our relations with the People’s Republic of China are at an unprecedented high both in terms of their level and substance. They are what we call ”a comprehensive partnership and strategic cooperation“. Sanctions have nothing to do with this. The decline in our mutual trade has objective causes, which are the energy prices and the exchange rate difference. But the physical volumes have not decreased, quite the opposite actually. They are growing.

As to our trade and economic relations with China, they are growing more and more diverse each day, something we have worked on for a long time with our partners from China. I would like to draw your attention to the fact that we have gone from pure trade in traditional goods (energy resources, such as hydrocarbons, oil and now natural gas, petrochemicals on the one hand and textiles and footwear on the other) to a whole new level of economic cooperation. For example, we are working together on space programmes. Moreover, we are developing and soon will begin the production of a heavy helicopter. We are now tracing the plan for the creation of a wide-body long-range aircraft.

Russia and China also cooperate in mechanical engineering, high-speed railway transportation, lumber processing, nuclear energy production and so on.

We have built the Tianwan Nuclear Power Plant. Two units are already operational and are showing good results. There are two more to go. So, the goal we have set for ourselves, which is to diversify our cooperation with China, is making progress.