Monthly Archives: January 2021

China, Great Power Dynamics, Strategic Studies, USA and Canada

From Xi with love: A New Year greeting to the new POTUS

Among the more memorable lines from Albert Camus’ haunting novel, The Plague, possibly the most read and quoted book in the Year of the Pandemic, is a starkly stated fact: “Stupidity has a knack of getting its way.”

If “You are on mute” was the most common interjection during COVID-19-enforced digital conversations in the conference circuit, a close second would be the assertion, “We have to work with a rising China to make it a responsible actor.” You could voice this assertion, or a similar variant, at a think-tank discussion or official consultation in Western Europe or America and be appreciated for possessing a wise and rational mind. If you were to say it many times over with panache and flair, you could bag a serious policy job in that part of the world. Money talks; the profundity of banal wordsmiths runs marathons.

The Old World cannot ‘make’ China act in any way it tells it to.

For there are two fatal flaws in this line of thought. The first flaw has to do with “the rise of China.” This is the last decade’s conversation; outdated and irrelevant. China has already risen, and it is everything many did not wish it to be, even as they were investing in its emergence. Deal with it now by accepting this reality. The second flaw pertains to the rather misplaced assessment of Western power embedded in these seemingly highfalutin but inane assertions. The Old World cannot ‘make’ China act in any way it tells it to. In fact, the West does not even know what it wants from China besides trade and investment. A popular refrain of yesteryears was that while all countries have an army, in Pakistan, the army has a country. Today’s refrain is reflected in what someone recently said, without exaggerating: In Germany the auto industry has its own union, the European Union.

2020 was a crucial year for China. Its claim to global leadership was severely tested by its role in, and early mismanagement of, the COVID-19 pandemic. It faced pushback, including from unexpected quarters, on its deluge of misinformation and its subversion of international institutions to divert attention from its malfeasance. The pandemic was to be the moment of reckoning, when the old and new powers would come together and hold Beijing to account. Predictions that the pandemic would prove to be China’s ‘Chernobyl moment,’ however, have turned out to be hollow. China was among the few countries that weathered the public health crisis with a modicum of control. A year later, it is leveraging trade, technology and international development to capitalise on this and further consolidate its influence and power. As a new American President prepares to assume office, China has sent him a greeting card with three messages conveying the terms of Beijing’s engagement with Washington and other world capitals.

What else could explain why the EU enthusiastically rushed to conclude the EU-China Comprehensive Agreement on Investment?

The first message is that China is too big to be ignored and too wealthy to displease. This is the obvious subtext of the EU-China Comprehensive Agreement on Investment (CAI). What else could explain why the EU enthusiastically rushed to conclude this agreement? Brussels ignored the Biden transition team’s pleas to delay the agreement. It ignored China’s rogue behaviour in 2020 — a massive human rights crackdown in Hong Kong and Xinjiang, a destabilising escalation of tensions in the Himalayas, its aggressive ‘wolf warrior’ diplomacy, and the economic coercion of Australia, among others. The EU even ignored its own evolving assessments of China, with expressions like “European values,” “systematic rival,” and “strategic autonomy” proving to be meaningless phrases that are no more than an anodyne dressing for a toxic salad. The EU has not only handed Beijing a victory ahead of the transition in Washington, but it has also bolstered China’s belief that its centrality to global value chains provides it with clout beyond its own imagination.

year of the pandemic, COVID-19, pandemic, prophetic prediction, US, turbulent change, political strains, irrationality
Among the more memorable lines from Albert Camus’ haunting novel, The Plague, possibly the most read and quoted book in the Year of the Pandemic, is a starkly stated fact: “Stupidity has a knack of getting its way.” Photo illustration: Anton Petrus — Getty

The second message is that China is too big to punish. Under President Donald Trump, the US attempted to systematically choke China’s access to global technology supply chains through sanctions, export controls, and coercive diplomacy. While those efforts have had some success, China has doubled down on its efforts to indigenise the development of breakthrough technologies — an effort that has seen remarkable success during the past two decades. Now it plans to return the favour. In early January, China’s Ministry of Commerce published rules encouraging firms incorporated in China to defy sanctions and export controls, and threatened to punish those that do not. When, and not if, these rules are implemented, technology and financial firms in particular will find themselves caught between a rock and a hard place. These rules are a clear warning to the Biden Administration and to its supporters and funders from Wall Street and Silicon Valley. The Chinese Communist Party (CCP) is betting that America Inc. will prefer to devote resources to lobby Washington for a rapprochement with Beijing rather than contend with fragmentation and the attendant loss of profits.

The pandemic has accorded China the chance to offer developing nations not just infrastructure finance, but a multifaceted development opportunity — one that further entrenches China’s norms, standards and preferences.

The final message is that China is simply too big to fail. Media pundits are reading a slowdown in Belt and Road (BRI) investments as a sign that China is reconsidering the project’s utility. This is way off the mark. The institutions and mechanisms of the BRI are rapidly turning into conduits for China to deliver global public goods and will remain so even as project-funding is rationalised. State Councillor Wang Yi made three priorities explicit for 2021 in his speech at December’s Belt and Road Forum: The Heath Silk Route, the Digital Silk Route and the Green Silk Route. Each plays to China’s strengths and are crucial components of its 2021 white paper on international development cooperation. The pandemic has accorded China the chance to offer developing nations not just infrastructure finance, but a multifaceted development opportunity — one that further entrenches China’s norms, standards and preferences.

These messages should not come as a surprise to those who track Beijing. As we argued in our book Pax Sinica, these recent developments represent China’s continuing efforts to recast globalisation and international governance in its own image. The year 2021 is an important milestone for the CCP and for Chairman Xi Jinping. It marks the 100th anniversary of the founding of the CCP, the first of two centenaries central to the realisation of the ‘China Dream.’ Leading up to this point, ‘Core Leader’ Xi has consolidated his hold over the CCP, and the party has, in turn, consolidated its control over society, industry, military and every aspect of policy. Xi has already acknowledged that the path towards global leadership by 2049 — the centenary of the founding of the People’s Republic of China — will be defined by “turbulent change.” While he did not explicitly say so, external risk fuelled by geopolitical rivalry with the US and a more wary international community were likely on his mind.

China’s messages should not be interpreted as a prophetic prediction of its continued and unchallenged rise or that it is immune from political strains and irrationality.

These three messages to the world in early-2021 indicate how China is anticipating and responding to emerging realities. Yet, China’s messages should not be interpreted as a prophetic prediction of its continued and unchallenged rise or that it is immune from political strains and irrationality.

The pandemic has bookended an international order living out its last days, much like King Lear. Contrary to popular expectation, a Biden White House will not — or, cannot, if you prefer — reverse this trend. The world will still be driven by populism and fragmentation. Communities across geographies are anxious about change. Information disorder, technological and industrial developments, and ecological crises are demanding new ideas and leadership. China is the first power to have a dark but coherent proposition — one defined by techno-authoritarianism and state control.

Is there any other alternative on the table? Or will the decline of the incumbents be scripted by Beijing and its growing global constituency of cheerleaders

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China, European Union, Multilareism, Strategic Studies

The European Union, CAI, and the abyss

On 30 December 2020, an EU Press Release proudly declared “Leaders concluded in principle the negotiations on the EU-China Comprehensive Agreement on Investment (CAI).” The conclusion — at least of this stage of the negotiations (the agreement will still have to withstand the scrutiny of the European Parliament) — has already spawned a cottage industry of commentaries.

The great and the good, particularly from the fields of Economics and Law, are having quite a time pondering and speculating over the (rather limited) detail that is available. Academic chatter is bubbling away on a range of issues: On what the agreement could mean for issues of Level Playing Field; how the terms that the EU has secured for itself compare with the US-China Phase 1 agreement (note that even though the EU-China deal is on investment while the US-China was on trade, there are some overlaps on issues like Forced Technology Transfer); how enforceable would social and environmental clauses turn out to be that the EU is touting as a major win; and so on and so forth? But much of this punditry, while tantalisingly delicious in the technocratic safety bubble that it lives in, reminds us of Nero fiddling as Rome burns. This is not the time to be bean-counting economic gains and losses. The abyss, which the EU has been gazing so greedily into, is staring back its Medusa stare.

The abyss

There is much that is wrong with the deal, which we could point to, in both process and implications.

We could look askance upon the remarkable haste with which the European Union — normally a lumbering, complicated, and bureaucratic machine — has pushed this deal through. Or we could suggest that the Zaubertrank at work now be made the official beverage for the bureaucracy in Brussels.

We could raise an eyebrow at the fact that the final negotiations took place at what is usually expected to be the quietest time of the year: Holiday closures, understaffed newspaper offices, and tired citizens desperately trying to catch a breath or two in the period that is so sweetly described in German as “zwischen den Jahren” (the quiet time in between the years). Our raised eyebrows could perhaps rise further still if we turned our attention to the fact that people across Europe are caught in a surging second wave of the coronavirus pandemic (on the day that the deal was signed, Germany reached a new and depressing record of daily deaths due to COVID-19). And we could applaud that neither the pandemic nor the holiday despair could prevent this ‘systemic rivalry’ from being recast.

We could question not only the timing of the EU-China party, but also the choice of protagonists: In what capacity was President Macron present at this meeting? The impression that screenshots of the meeting give is that the two largest economies of Europe — Germany and France — are in the driver’s seat; all the attention that the union claims to give to representation and accountability for its remaining 25 members (to be reduced to 24 with Britain exiting on 31 December) is little more than lip-service.

We could even — if we were thus inclined — point out politely that we are not convinced by the European Commission President, Ursula von der Leyen’s, claim that the “Agreement will uphold our interests and promotes our core values. It provides us a lever to eradicate forced labour.” The clauses, at least as they are reported in the EU’s Press release, are weak. They are, in fact, so weak, that one might almost want to graffiti LOLOL (Laugh Out Loud On Labour standards) all over it, were it not for the tragic and horrendous human rights violations that are reported in Xinjiang.

We could raise all these issues, and more along such lines. But they still would not get us to the crux of a matter that is deeply political.

The abyss stares back

International trade and investment — for all the conceits that many economists and lawyers seem to have about these issues — are inherently political. And they have become even more political in the context of China’s rise: Not only because of the use and abuse of multilateral rules by non-market economies (which is what defenders of CAI tend to focus on), but also because of the fundamental difference in values that should define the goals of multilateral cooperation. Contra the inclination of technocrats to reduce values to labour and environmental standards, values include first-order principles of democracy, liberalism, pluralism, and more. And international trade and investment, especially in a world where interdependence can be weaponised, have become just too important to be left in disciplinary silos or technocratic bubbles. CAI is not “just” a matter of investment, or even standards; it is a matter that has potentially serious security implications. It begins to dramatically alter who we are as a society, community and people.

China has, perhaps, more than ever in 2020, given Europe ample evidence of these differences. It has threatened and bullied democratic Australia for having the gumption to push for an enquiry on the origins of the pandemic. Its new security law has all but abolished the promise of “one country two systems” for Hong Kong. Its adventurism in the neighbouring seas has increased. Its border conflict with India has escalated to a new level. Its increasing use of “wolf-warrior diplomacy” has even given up the pretence of sweet talk on many issues that most democracies hold dear.

Despite all these clear provocations, the EU has done little to update its strategy. It has — almost religiously — continued to repeat its mantra of 2019: It sees China as its partner, competitor, and rival. This, in fact, was nothing but fence-setting — and with the conclusion of the CAI negotiation, the EU has signalled to its own people, its allies, and indeed to China, which side of the fence it prefers.

The CAI — despite von der Leyen’s claim that it will help the EU defend multilateralism — is not multilateral at all. It is a bilateral deal with an authoritarian power that seems to have a very different understanding of multilateralism. It comes at an especially ill-opportune time. It signals to China that the EU now, not only turns a blind eye to, but actually rewards its increasingly aggressive behaviour. It suggests that the EU has scarce regard for its closest ally — the United States — which, under the incoming Biden administration, had clearly revealed that it would like to work together on China. It does not reassure other democracies — such as Australia, Japan, and India — and it also undermines the potential for alliances with like-minded players. And the deal is a slap in the face of multilateralism: It shows how, for all its talk in favour of reforming multilateralism, the EU actually attaches greater worth to a bilateral deal with a country that has contributed significantly to the breaking of the system.

In the 1990s, many were determined to embrace the “middle kingdom” and integrate it with the multilateral trading arrangement. The argument was that this would make China more like ‘us’. Tragically, many in the EU today are more like China instead. This agreement marks the move of the Union from ‘values’ to “valuations” and from ideals to trade.

Importantly, these are all choices that the EU has made. They cannot be fobbed off on China. China has simply gamed a round of Realpolitik rather effectively. Europe, in contrast, has weakened its own hand, given short shrift to its own values, and undermined the position of its friends and allies.

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