18 September, 2021

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Uncertain Sino-US relations In The Biden Era

By Kumar David

Prof. Kumar David

A US State Department release said on 12 May 2021: “Strategic competition is the frame through which we view our relationship with the PRC.  We will address it from a position of strength in which we work with our allies to defend our interests and values. We will advance our economic interests, counter Beijing’s aggressive and coercive actions, sustain key military advantages and vital security partnerships, re-engage robustly in the UN system, and stand up when China violates human and fundamental freedoms. When it is in our interest, we will conduct results-oriented diplomacy with China on shared challenges such as climate change and global public health”; (abbreviated). So, America will strengthen its economic and strategic position and place emphasis on human rights but also collaborate on common interests such as climate change. It’s different from the Trump Era more in posture and signals than in words. Trade sanctions are off the table or will be used infrequently, belligerence is no longer in vogue and there is a well-articulated shift to concern with human-rights, a term Trump treated with derision. You will hear more about Xinjiang than trade deficits in the Bidden years.

Donald Trump was an aberration, a malignant abnormality and a dangerous one. Dangerous because political conditions in the US are scary, to say the least because the ultra-right, white-supremacists and primeval cultures, in a word the zeitgeist of potentially fascist-like threats consume the country. The information released last month by the Defence and Justice Departments that Trump was on the verge of attempting a coup after his election defeat shows how close America came to civil war. To give readers a rough measure I would stick my neck out and say that a quarter to a third of all Americans are Neanderthal in outlook; but it’s very uneven across states. To best see primitives look in states with the most anti-vaccination populace. The seven Jim Crow states are the pits – Mississippi, Louisiana, Alabama, Arkansas, Tennessee, West Virginia and South Carolina. I needed to sound this warning about America’s rumbustious unevenness as opposed China’s dull uniformity and superficial linearity before moving on.

Mixed signals

The remainder of this article will focus on a five-game match; (1) BRI vs B3W, (2) Digital Yuan or DY, (3) competing corporate governance models, (4) cyber-espionage and (5) human rights. The BRI vs B3W battle will be a walkover for China. BRI has had a head start of over a decade, has commitments in hard cash and is a state-to-state undertaking between China and about 50 countries. The Americans and G7 partners hope the private sector will join as a big stakeholder to catalyse hundreds of billions of dollars in infrastructure investment in low- and middle-income countries. A senior official gambled: “We believe we will beat the BRI by offering a higher-quality choice and we’ll offer that choice with self-confidence about our model that reflects our shared values.” The shared values the West envisions are free-markets, commitment to democracy and respect for human rights. Wake up Joe from visions of honeymooning with dictators and goons! The Chinese have a better cruder measure of the likes of the Paksas; they will win the first-set of the BRI vs B3W match 6-0.

The second set will be harder fought. Beijing makes BRI investments and grants loans to countries that cautious investors will not touch with a bargepole. It is hard to quantify the BRI investment quantum since a part is Central Government loans, much investment by Chinese SOEs and maybe a fifth of the total costs are carried in cash or kind (land, labour) by recipient countries. In the final analysis total BRI investment from all sources may be in the $3 trillion to $4 trillion range. Handouts to bankrupt or brain-dead regimes (Lanka exemplifies both disorders) are used to gain political mileage or acquire assets when non-creditworthy projects go belly-up as with no-ships Hambantota Harbour, no-fly Mattala and no-games Hambantota stadium. I do not need to amplify that many recipient countries are sinking ever deeper into the mire of debt (for no fault of Beijing you may say if you are tough), and crucially, will never escape from debt. They will pawn or give away national assets for 99-years. The criticism of perpetual indebtedness to China is gaining ground, nevertheless China will still win the second-set of the BRI vs. B3W game largely because many third world political leaders are scoundrels.

The internationalisation of the DY, game (2), is unstoppable and desirable. It is important to distinguish between China’s Digital Yuan and bitcoin and other crypto-currencies. China is expanding domestic and international digital transactions through the central bank (People’s Bank of China); DY is supported by block-chain technology making it tamper-proof and it is issued by a central bank as a national currency. As it gains acceptance it will become an international alongside the Dollar, Euro and Yen but with technical differences. The motives for internationalising the Yuan are countering US dollar dominance of global finance and curbing the clout of China’s own “fintech” giants like Ant Group and Tencent. The hegemony of the US dollar is anchored in the petrodollar. In 1971 when stagflation prompted a run on the dollar and it plummeted; other countries wanted to redeem their dollars for gold, but to protect US gold reserves Nixon removed it from the gold standard where it was convertible to gold at a fixed rate of $35 per ounce. Currently the gold price is about $1800 per ounce.

In 1973 when the US provided military aid to Israel for the Yom Kippur War OPEC was outraged and raised oil prices. But in 1979 the US and Saudi Arabia agreed to use dollars for oil contracts and recycle dollars back to America through contracts with US companies. The petrodollar, an arrangement by which oil is globally priced in dollars was born. Everybody including Iran, Russia and China are caught in this trap. The petrodollar is the mechanism by which the US dominants global finance and enforces its foreign policy. Sometime this decade the US economy will fall behind China’s in size. It is not possible for the currency of Number Two to indefinitely remain the global monetary hegemon. It is going to be a complicated and drawn out process and there is no sign of an immediate collapse of dollar global hegemony though DY will join the select club of global currencies.

China is the place with entrepreneurs and computer wizards were “mining” 65% of the world’s new digital currencies (bitcoins for short). The authorities have suddenly imposed a harsh crackdown allegedly for a vast overconsumption of electricity but more likely for two other reasons as well; to impose tighter control on a part of the economy that was running out of view of the central authorities and second to protect the launch of DY by providing it with a more monopoly-like status in the Chinese digital currency domain.

The distinction between the state-directed or guided capitalist sector and free-market capitalism needs no elaboration. Experience supports the view that in developing countries the former has invariably been more successful in encouraging growth and improving mass standards of living. My comment here is about something quite recent – the state is muscling in on private companies. E-marketing and ‘fintech’ (finance-technology) giants like Alibaba, Ant-Group and ride-hailing (Uber like) companies like Didi are being tethered and put under much tighter control. Listing in foreign markets (New York and Hong Kong), tighter scrutiny of corporate data, are desired and illegal collection and use of personal data has been alleged. The truth in my view is that it is a two pronged strategy; the regime’s obsession with political monopoly-control and an enhanced anti-trust policy intervention. At this time when anti-trust policies are falling by the wayside in America the latter this is a good forward step.

Item (4) is a long and ongoing controversy. The US accuses China of state-sponsored cyber hacking led or encouraged by the Ministry of State Security. Direct state espionage is allegedly for military and research secrets and stealing economic know-how. Allegations of encouraging felons to engage in ransomware attacks seems farfetched and military espionage obviously is a thriving two-way game. The world of espionage and counter-espionage is more spooky than an elaborate spy novel. It is shrouded in darkness but gathers everything, spies on everyone, violates every norm of privacy and decency. We can safely assume that the network of agencies that proliferate in both sides are into it to the hilt of their technical abilities. 

The game China will lose hands down is game (5), human rights; alleged forced labour and political oppression of the Uyghurs of Xinjiang Province. Humanitarian groups assert that Beijing has transferred Uyghurs elsewhere and forced them to work under harsh conditions in factories across the country. I have travelled a bit in China and believe that Islam is repressed and it is apparent Uyghurs are sullen and angry but I have not seen evidence that they are transported to “labour camps” in other provinces. The Chinese CP is ideologically totalitarian: “Total” in the sense that it will not share space and air with other ideologies (Fulan Gong, the Christian Churches, competing political views or ‘heretical’ Marxist interpretations). This is because it is insecure and alarmed by competition in “belief space”. My Hong Kong friends hedge their bets on whether the Uyghurs are more sullen about oppression or more pleased by improving economic conditions.

A more interesting rationale for Western criticism may lie elsewhere. These factories are in the supply chains of many global brands. “We believe these practices are an affront to human dignity and an egregious example of China’s unfair, economic competition” Western critics say. A Uyghur Forced Labour Prevention bill is pending in the U.S. House of Representatives. The legislation requires disclosures from businesses about engagement with Chinese companies engaged in human rights abuses in Xinjiang. The meat of the matter may be more to do with commercial competition than love of human rights. Nevertheless the first few decades of the Twenty-first Century are panning out as the decades of human-rights and the Chinese are engaging in a match that they will eventually lose 0-6.

Tracking the evolution of Sino-American developments is best done along the five dimensions I have selected for this essay plus a few others. However, the context in which medium-term Sino-American can be better appreciated is Biden’s economic strategy which Republicans are attempting to scuttle at any cost because its success on even a modest scale will bury Trump and the GOP for a generation. Biden’s methodology is to repeat FDR’s New Deal strategy mutatis mutandis. Infrastructure building on a multi-trillion dollar scale, large universal cash handouts, enhanced unemployment support and an eviction moratorium for delays in rent payment are intended to ease conditions for the poorer half of society and at the same time create demand to spur the economy. The jury is still out on effectiveness but time is no Biden’s side.   

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Latest comments

  • 3
    7

    Biden’s regime is already very unpopular in USA. He has not introduced any new anti-China policies. Just continues with some of Trump’s policies.

  • 2
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    What matters to any country is its interests. Therefore the relationships, whether certain or uncertain depends on the interests of the respective countries wishing to secure. Like politics, there are no permanent friends or permanent foes but the interests which may change from time to time. Prof. Kum, I believe he is or was a Hongkese and he knows that China in late 1970’s was basically a push cycling nation and never dreamt of building artificial land masses in the pacific ocean at that time. Now the story is different. An intelligent guesstimate of interests of respective countries varying with time would enable one, especially Prof Kum, to assess what the relationships between countries would be as time passes on.

    • 1
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      Dr KD,
      .
      Thanks for the article.

      I have added the following link for those who are interested in reading from POV of Germany.
      :
      https://www.swp-berlin.org/publications/products/research_papers/2020RP03_rdf_Web.pdf
      :
      Not just Biden-Harris Administration, but also SINO-EU is no better. The chinese target anywhere the stupid highly corrupted leaders emerge. Srilanka is the best example, we dont need to search more.

      SINO-AFRO and SINO-SOUTH ASIAN relationships are becoming the life line for the future china.
      https://www.youtube.com/watch?v=Kkkg7PFr6RU

    • 0
      0

      US- China relations have little to do with ideology or human rights. If HR is a problem, it is because current US governments made it so. In the past, the US cooperated with many dictators (Ayub Khan, Marcos, etc in the cause of saving democracy, and overthrew an elected Iranian government , in the name of energy security.
      It was the US which used China to balance the Soviets. But then, the Chinese have gotten too big for their boots and are aspiring to be a super-power. China isn’t the first Asian country to follow that road. The US helped Japan to go from feudalism to superpower status in a generation. And got a bloody nose for its pains. The things that are said about China today are reminiscent of what was said about Japan in the past. “Shoddy products”, “cheap copies”, ” illiberal culture” etc. It’s interesting to speculate who might be the whipping boy in , say, 50 years? India?

      • 0
        0

        OC
        Yours is a very sobering thought.
        However, are you sure that the US helped Japan to become an industrial power in the Meiji period?
        Relations were warm for a long time despite disputes over Hawaii & the Philippines. But Japanese imperial ambitions in China (on which the US had an eye) and trade conflicts in the 1930s owing to Japan’s increasing textiles export to the US. (I doubt our ever knowing exactly what prompted Japan to attack Pearl Harbour.)
        *
        The US did immensely help Japanese revival post-WWWII (to prevent a revolution and hence Soviet influence), and Japan as you remind caught up with the US in the automobile industry by the 1970s and Japanese exports in the 1980s was a problem.
        Japan gave in to US bullying, but China seems unwilling.

        • 0
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          S.J,
          Perhaps not strictly ” helped”.
          Wasn’t it the US that sent Commodore Perry’s fleet to Japan with various goodies like steam engines to force trade on the hitherto isolationist nation?
          The Japanese took to trade quite well, outdoing their mentors soon enough, like China in the 90’s.

      • 0
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        “If HR is a problem, it is because current US governments made it so. “
        There is threshold for every thing.

        It is China that publish and accept dramatic fall of birth rate and natural population growth rate in Xinjiang.

        So, what is happening?

        What can be reasoned out.

        1) People in Xinjiang are not mating that much. If so, then why?

        2) May be they are mating, but sperm concentration among males and /or ability to conceive among females has suddenly dropped in Xinjiang. How come?

        These are just two hypothetical questions and there can be many more .

        Although it is published by VOA, can you deny the statistics graph?

        https://www.voanews.com/east-asia-pacific/voa-news-china/chinese-statistics-reveal-plummeting-births-xinjiang-during

        People like SJ will defend China to the hilt.

        I agree, the US or the West do not treat every HR issue with same or deserved respect.

  • 0
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    How the US Dollar rose to the dominance in international finance is much more complicated than by becoming petro-Dollar.
    One question is how come those oil States willingly accepted crude oil to be priced in the US Dollars in the first place.
    This is a very brief history.
    The US dollar rose to the most trusted and relied upon currency mainly by the conduct of the US in relation to financial commitments and the ability of the US to provide and protect the value of US dollar, even by the use of force.
    In the history of the States and super powers, it is the US that has never defaulted (so far) in its financial commitments.
    So much US was trusted so that most States agreed to officially give up Gold Standard, though Gold Standard lurked in the background until late 1970s. Even the 1971 removal fixed price of Gold by the US did not affect this trust.
    The Eurodollar in 1960s and the subsequent development of US Dollar capital markets (in Europe) based on Eurodollar made the US Dollar spread into the Europe financial system.
    Eurodollar is the US dollar deposit accounts outside US federal reserves jurisdiction mainly without the insurance and reserve requirements imposed by US federal reserve. It enabled the banks to provide more interest to Euro Dollar deposit accounts
than prevailing interest in the US.

    • 1
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      “So much US was trusted so that most States agreed to officially give up Gold Standard”
      Seriously?
      Nixon may hold the real answer.

      • 0
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        “So much US was trusted so that most States agreed to officially give up Gold Standard”

        I said officially.

        On the other hand, if US was not trusted, Eurodollar would not have taken off, whilst US was against the idea, though the banks and governments (in Europe) were very keen.

        Even in 1971 -1972, there was more grounds for ditching US dollars.

        Yet, when the Futures for agricultural commodities were introduced in 1972, it was picked up in US dollars. Then, the Futures was adopted in other financial instruments (like bonds, swaps, currency, derivatives etc.) for future pricing, which actually compounded US dollar longevity by minimum of 10 years at that time, and currently minimum of 30 years. CT has cut off this section from my comment.

        One thing is most of these are market led and not the US led.

        So, you can come to your own conclusion about trustworthiness of US dollars in those times.

  • 2
    1

    “Humanitarian groups assert that Beijing has transferred Uyghurs elsewhere and forced them to work under harsh conditions in factories across the country. I have travelled a bit in China and believe that Islam is repressed and it is apparent Uyghurs are sullen and angry but I have not seen evidence that they are transported to “labour camps” in other provinces.”
    *
    Did you meet the angry Uighurs in Xinjiang or elsewhere in China?
    Your evidence on Uighurs being transported to “labour camps” in other provinces blows the lid off the lies of ‘humanitarian’ groups .
    These groups are now cornered as claims about ‘labour camps’ in Xinjiang are steadily falling apart (despite satellite image ‘evidence’ of such camps). And no recent visitor to Xinjiang has reported, first hand, maltreatment of Uighur people. “Humanitarian” falsehoods are still recycled and fed back as fresh evidence.
    One need not believe Chinese claims. But refutation of false claims will offer insight into the motives of ‘human rights’ activists.
    *
    Tibet was used as an issue to wreck Beijing Olympics. It fell apart.
    Boycott of Xinjiang cotton and PV products have nothing to do with human rights or religious freedom. It is beginning to unravel.

    • 0
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      Author,
      I will recommend listening to (or reading) Vijay Prashad on international affairs. He writes for The Hindu, Frontline, Newsclick, BirGün and Alternet among others and is a major contributor to peoplesdispatch.org.
      *
      “Warning”: He has strong leanings towards the Left in India, especially CPI(M).

  • 0
    0

    Another Pro-China piece by the self described “Unrepentant Marxist”. What a surprise.
    *
    Shameful that an obviously intelligent man can be so incredibly misguided and wilfully blind. There’s plenty of videos showing what is really going on in China – suggest you watch a few.

    China is one of the most repressive, brutal Dictatorships in human history. They’ve murdered millions of their own citizens. Tiananmen Square Massacre?

    • 0
      0

      Coming from UK, one should know how the Brits are blinded by the state and the media.
      One needs an open mind to separate fact from fiction.

  • 0
    0

    Another Pro-China piece by the self described “Unrepentant Marxist”. What a surprise.
    *
    Shameful that an obviously intelligent man can be so incredibly misguided and wilfully blind. There’s plenty of videos showing what is really going on in China – suggest you watch a few.

    China is one of the most repressive, brutal Dictatorships in human history. They’ve murdered millions of their own citizens. Tiananmen Square Massacre? Or do you believe this never happened?

    Your second paragraph shows a complete lack of understanding of Americans and their society and culture – you obviously bought into the fantasy world that the media has created.

    Still suffering from TDS? Trump’s not going anywhere – in fact the truth about the last election is slowly coming out despite a complete lack of media coverage and frantic efforts by the left to stop any election audit.

    Here’s some American History the media will not discuss:-

    – There were Black slave owners in America.
    – KKK is an extension of the Democrats.
    – Jim Crow laws enacted by Democrats
    – Civil Right opposed by the Democrats.

    All of the above is documented historical fact – look it up.

  • 0
    0

    The new deal of President Franklin Roosevelt was in response to the great depression of the 30s.

    It was in line with Keynesian economics of increased government expenditure and lower taxes to stimulate demand and pull the global economy out of the depression.

    But FDR did not lower the taxes, but increased taxes. However, US recovered from the depression. This is contrary to the classical free market theory.

    The massive Marcel plan of President Truman to Western Europe including Germany had facilitated reconstruction of war ravaged Western Europe after the second world war .

    The aim of Chinese president XI was different, The Belt and Road initiative BRI Project envisaged an ambitious plan for economic integration on global scale. It was an infrastructure project.

    Build Back Better World or B3W is an initiative undertaken by G7 countries. It was launched in June 2021 for the infrastructure development of the low and middle income countries.

    It is doomed to failure as it focus on low income countries like Sri Lanka.

    US capitalism is facing her waterloo in China.

  • 0
    0

    Dr.KD, you highlight the frame of strategic competition when viewing relationship with China and how China treats various religious people groups. Xi acted as dictator only a few years ago when he got all votes but one. But he was forced off from education in childhood to labor on land, and got chemical engineering degree later. He is land bound and divorced wife Ke Lingling who wanted to live in UK. Later married singer Pen Liyuan and their daughter Xi Mingze completed Harvard uni. degree under a false name. He travelled extensively in USA and met Obama. Drawn to land with judeo-christian value system, but belief that he is god is due to atheistic communism. His dealings reflect this mixed life history of hidden debt trap deception

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