The Chinese Regime’s Biggest Export? Tyranny
In a recent op-ed for the South China Morning Post, the researcher, S. George Marano, writes, “Predictions of the Communist Party’s impending doom have come to nothing as its form of political governance has not only endured but thrived. The party has created a system that has rewritten China’s economic and social record in a short period of time.” Now, according to Marano, other countries around the world are eager to emulate the Chinese Communist Party’s (CCP’s) “mode of political governance.”
Today, with an increasing number of countries adopting this tyrannical style of “political governance,” the Free World is starting to feel a little less free. Within the next decade, according to Bloomberg Economics, China looks likely to become the world’s leading economy. The recipe for Beijing’s success is simple: lots of investments, both at home and abroad, lots of lies, and a staunch commitment to ruling with an iron fist. As the aforementioned Marano writes, “China’s economic and social success is inseparable from the effectiveness of its mode of political governance.”
Around the world, “beneficiaries” of the Chinese model can be found all around the world, from Latin America to the entire continent of Africa, where the Chinese regime’s influence is most definitely on the rise. Take Ethiopia, for example, the fastest-growing economy in Africa. As Marano notes, the country’s leaders are only too happy to adopt a “Chinese-style political governance.” What does this style of governance look like, exactly? Not pretty.
Ever since the Chinese regime involved itself in Ethiopian politics, Abiy Ahmed, the prime minister of the country, has gone from being a champion of human rights to a literal authoritarian. Coincidence? I think not.
With authoritarianism on the rise—not just in Africa, but all around the world—the CCP-endorsed style of governance places great emphasis on limiting people’s freedoms, from policing language to the actual policing of people. In Cuba, where the Chinese regime exerts a nefarious influence, some of the biggest protests in decades have just taken place. As Joseph Humire, the executive director of the Center for a Secure Free Society, recently told Newsweek, “China uses Cuba as a platform for many of its regional intelligence and security operations,” even using signals intelligence stations to “intercept communications in the United States.” Wherever the Chinese regime’s influence is felt, chaos quickly follows. Sadly, this particular style of chaotic influence can be detected in a growing number of countries, from Uganda to Uruguay.
What we are witnessing now is authoritarian learning in its purest form, which is similar to the psychological phenomenon known as “social mirroring,” where an individual imitates the gestures, speech pattern, or attitude of an influential person. With authoritarian learning, leaders around the world are mirroring the CCP’s rigid, highly tyrannical style of governance.
The Great Mall of China
Forget the Great Wall of China, let’s discuss the Great Mall of China. Accounting for almost 30 percent of global manufacturing output, a country run by despots has become the world’s mall. How did it come to this? Well, that is an essay—no, a dissertation—in and of itself. Of all the country’s exports, from steel to sneakers, its surveillance systems are by far the most worrying. As Caitlin Dearing Scott and Adam George, two authors with a background in authoritarianism, write, the Chinese regime has sold this invasive technology to “governments accused of human rights violations (Egypt, Serbia, Cambodia, for instance).” Not only this, but the regime sends representatives to train “the recipients on how to use the technology for social and political control.” Furthermore, according to the authors, “it extols the virtues of authoritarian rule to political parties” in South Africa (which has recently witnessed mass riots), Kenya, Vietnam, and aforementioned Cuba. The Chinese regime’s “internet and social media regulation, which really amounts to censorship, even spurred Nigeria’s minister of information and culture to call for replicating CCP practices.” Not long after the duo’s piece was published, the Nigerian government banned Twitter and threatened to “rein in” the press.
Is This Really the Future?
Why are so many countries so intimately involved with the Chinese regime? Why are so many countries employing Chinese public security and purchasing surveillance technology platforms from the Chinese regime? There are no simple answers. However, researchers at the Brookings Institution, the nonprofit public policy organization based in Washington, argue that the drivers of this trend stem “from expansion of China’s geopolitical interests, increasing market power of its technology companies, and conditions in recipient states that make Chinese technology an attractive choice despite security and privacy concerns” (emphasis mine). In other words, although the price of getting “intimate” with the Chinese regime is extremely high both literally and figuratively, Beijing’s model of governance is far too tempting to ignore. This, of course, is deeply worrying. Surveillance systems everywhere, mandatory masks, limits on speech, vaccine passports, inevitable lockdowns in the fall, etc. The world is starting to look a lot more like mainland China.
John Mac Ghlionn is a researcher and essayist. His work has been published by the likes of The New York Post, Sydney Morning Herald, The American Conservative, National Review, The Public Discourse, and other respectable outlets. He’s also a columnist at Cointelegraph.
All of the problems that the Chinese Communist Party (CCP) is facing today come from fundamental structural factors that can’t be resolved. This is its biggest crisis.
Western countries also encounter issues, but under their democratic form of government, there are solutions. Whether it is fast or slow, deep or shallow, democracies can mitigate conflicts and ultimately redress the balance. However, the CCP’s problems require rectification to bring order out of chaos.
Rigidly adhering to communism is the CCP’s major structural problem. As proven by history, communism is wishful thinking. The disintegration of the Soviet Union and Eastern Europe in the communist bloc is an outstanding example of the failure of communism. Deng Xiaoping salvaging a failing system with a capitalist market economy through reform and openness is another. But the CCP continues to seek opportunities to rise while holding fast to communism.
Forty years of reform and openness have transformed the CCP from being strictly communist into crony capitalist, showing that communism is a big sham. However, it still ensures that Red elite families reap public wealth under the cover of a long-term brainwashing mechanism. Will the CCP completely relinquish communism? If they dare to do so, the tyranny will collapse.
Another fundamental problem of the CCP is leader Xi Jinping positioning himself as the “ultimate arbiter” in having the authority to give the final say. Among all the leaders of the CCP, I think only Mao Zedong had absolute authority. That’s until Xi began emulating Mao’s dictatorship.
However, Xi falls far behind Mao in many aspects. Regarding an evil nature and political astuteness, Mao enjoyed supreme power in personnel arrangements and left specific affairs such as government operations to Zhou Enlai, vice chairman of the CCP. However, Xi cannot even compare with Zhou’s high prestige as a Party veteran.
Xi’s absolute authority is tottering. It is not established by personal achievements of long-term political struggles, but by people around Xi providing unquestionable praise after he took office. Xi simply lacks personal charisma in the party.
He has repeatedly misjudged domestic and foreign situations. His absolute authority leads the regime to miss opportunities and frequently make mistakes in handling domestic and foreign affairs. The regime’s recent clampdown on the Chinese ride-hailing giant Didi Chuxing, right after it went public on the U.S. stock market, caused China Concepts Stock to plunge in the United States and damaged the regime’s global image. In addition, a third-generation Red, Zhang Tao, who assaulted two academicians of the International Academy of Astronautics, was only “suspended from his duties to cooperate with the investigation” a month after the incident. The regime slowly responded to both incidents because they were of great importance that called for Xi’s opinion.
Since Xi took office, he has made many severe misjudgments based on his personal political insights. These misjudgments have bred ill effects that have not been remedied in time. The regime is digging itself into a hole that only gets deeper.
Xi’s Seven Misjudgments:
1. China Is Strong Enough to Confront Democracies
The CCP has made great progress in gaining strength and accumulating a great amount of wealth for itself, while leaving a number of Chinese citizens poor, with 600 million people having a monthly income of about $140, according to state-run Global Times. It costs a fortune to achieve external expansion and maintain domestic stability, but the CCP demands more than it can afford.
According to a report by Radio Free Asia, “in 2013, the [regime’s] $124 billion domestic security bill outstripped the military budget. But since then, it has stopped publishing a total spending figure for its nationwide ‘stability maintenance’ system, which refers to a plethora of law enforcement agencies, including state security police who target rights activists, political dissidents, religious believers and ethnic minority groups as potential ‘threats’ to social stability.” Considering there are 1.3 billion people inside China, the regime only looks nice on the outside but is virtually rotten beneath the surface.
2. China Has Enjoyed Substantial Wealth From a Strong and Sustained Economy
The fact is that the national economy is crisis-ridden and seriously unbalanced in various categories such as local government debt, property bubbles, obscure and unhealthy bank systems, serious corruption, and many others. It will shake China to its foundations if any of these situations go wrong.
Nowadays, problems arise frequently and the regime is robbing Peter to pay Paul. A prominent example is local governments being forced to rely on new loans to repay debt and fund ongoing construction projects with central authorities struggling to honor their existing financing, according to the South China Morning Post.
China had $2.8 trillion worth of local government debts at the end of 2018. Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology projected that China’s outstanding local government bond issuances may exceed $4.6 trillion at the end of 2021, reports state-run Global Times.
“Yields on many of the projects invested in by local governments are not optimal, adding to the pressure of debt repayments, especially with the approach of the peak of local government bonds that are due in 2021,” according to Xi Junyang, a professor at the Shanghai University of Finance and Economics told the Global Times. The worst scenario is looming on the horizon.
3. The West Is Declining
The CCP’s united front seems to work well for the communists to infiltrate and create chaos in Western democracies. Take the United States as an example: the financial crisis has dragged down the U.S. economy, the Republican and Democratic Parties have been fighting hard, and many Western media have been more and more left-leaning. Authoritarianism seems to defeat democracy. The West is easy to manipulate.
In fact, domestic issues are not only common in every nation, but also open for debate and improvement in democratic countries. However, Xi fails to realize that a consensus against the push of communist coercion in the international arena has been formed and is getting stronger than ever.
For instance, just this year, three major summits in the Western world—those of the G-7 (Group of Seven), NATO, and the U.S.–EU—highlighted a significant strategic shift to confront the systemic threats posed by the CCP.
In addition, “the United States is also promoting the Indo-Pacific Strategy, or the Quad, and strengthening the U.S.–Japan and U.S.–South Korea military alliance. This indicates that the military coalition among democratic countries is deepening,” according to Wang He, a commentator on Chinese current affairs.
4. European Countries Can Be Easily Manipulated
Xi believed the EU did not care about human rights issues as much as the United States, and would remain silent about the CCP’s human rights violations in exchange for economic benefits. He thought this would be the perfect time for the CCP to manipulate and control Europe.
On Dec. 7 last year, the EU adopted a decision and a regulation establishing a “global human rights sanctions regime.” The EU announced in a statement: “For the first time, the EU is equipping itself with a framework that would allow it to target individuals, entities, and bodies—including state and non-state actors—responsible for, involved in, or associated with serious human rights violations and abuses worldwide, no matter where they occurred.”
The EU imposed sanctions on the CCP in March this year over the Xinjiang human rights violations. The CCP counter-sanctioned 10 people and 4 entities of the EU, including European lawmakers. The sanctions imposed by the CCP on the EU have caused serious consequences. The EU on May 20 passed a resolution to freeze ratification of the EU–China Comprehensive Agreement on Investment (CAI), in response to China’s sanctions on EU politicians. This is the most recent consequence of Xi’s misjudgment toward the EU.
5. China’s Market and Supply Chains Have Become Indispensable to Western Nations
Xi believes Western countries will bear bitter consequences of worsened relationships with China. Governments will be forced to make concessions under the pressure of business groups and professionals.
The reality is, however, opposite to Xi’s judgment. The CCP’s geopolitical tensions, aggression on neighbors and in the South China Sea, high tariffs, use of forced ethnic minority labor, misusing WTO (World Trade Organization) rules are all coming together to move the world’s factories away from China, according to Financial Express. The pace of this is increasing since the CCP virus has destroyed much of what people knew as a way of life in 2020 and beyond.
The pandemic has brought medical supplies into the group of industries traditionally sensitive to national security concerns such as defense, telecom, and technology. From the United States to Japan to Europe to Australia, governments are pondering how to bring the production of crucial items such as personal protective equipment and pharmaceuticals back home. In November 2020, the American Chamber of Commerce in Shanghai (AmCham) released its annual China Business Report (pdf) showing that 29 percent, nearly one-third of manufacturers polled by AmCham, were thinking about or already planning to exit China.
6. Pervasive High-Tech Control Has Inhibited the Development of Civil Disobedience
In fact, the prerequisite for effective social control lies in the gradual improvement of people’s living standards. In other words, civil unrest breaks out once the economy declines, people’s livelihoods are at stake, property prices plummet, and unemployment surges.
A 2012 report by the European Union-funded Europe China Research and Advice Network (ECRAN) noted that incidents of social unrest rose from 8,700 in 1993 to 87,000 in 2005. The Ministry of Public Security of the CCP stopped issuing such data altogether after 2005. Unofficial data estimated by a researcher at Tsinghua University suggested that there were 180,000 incidents in 2010.
According to the report, the immediate reasons for such unrest include land disputes, environmental degradation, labor conflicts, and ethnic strife rooted in the institutional structures of central-local relations and the authoritarian nature of Chinese politics. To control society but lose sight of people’s well-being turns society upside down.
7. Hong Kong is Easy to Settle, Taiwan Can Be Taken by Force, and Xinjiang Will Be Conquered Behind Closed Doors
But things did not go as planned. The oppression of Hong Kong has sparked international backlash, Taiwan has become an indispensable ally of the United States and Japan, and the Xinjiang suppression has become the regime’s weak point. The three issues exacerbate an already difficult situation for the regime.
Nevertheless, the CCP will neither abandon the communist sham, nor will it lessen Xi Jinping’s absolute authority. Many of Xi’s misjudgments have wreaked irreparable harm that comes one after another.
Take Hong Kong for example. Since the Hong Kong National Security Law ended the “one country, two systems” model on June 30, 2020, the ongoing political turmoil and tensions between China and the West have increased sharply. On July 14, 2020, the United States United States revoked Hong Kong’s special trading status, which may expose Hong Kong exports to higher U.S. tariffs as applied to mainland China. The Washington-based Heritage Foundation removed Hong Kong from the 2021 Index of Economic Freedom, where Hong Kong topped for 25 years up to 2019, partly as a result of Beijing’s growing control over the city’s economy.
In recent weeks, the regime has initiated wholesale jailing of opposition leaders and disempowered Hong Kong’s elected assemblies. The territory is even less stable. Hong Kong’s future as an international financial center is now in grave peril.
Xi recently made a remark about “staying fearless in the face of death … in the face of even greater difficulty,” referring to its guerrilla warfare in the early years when the Red army was trying to escape from the purge of the Nationalist army of the government Republic of China. He touted, “the revolutionary ideals soar above the clouds,” however, he cannot salvage the situation this time.
Some netizens said that Xi’s recent gaffe at the CPC and World Political Parties Summit—“Have I finished talking?”—signaled an ominous sign. The last emperor of the Qing Dynasty, Puyi, ascended the throne at the age of three, sitting on the throne and crying. His biological father comforted him by saying, “It’s nearly finished!” The casual remark came true. Sure enough, the Qing Dynasty was finished shortly after.
Signs of downfall often appear in inconspicuous places. Xi is mentally and physically exhausted. The turmoil-stricken regime is destined to collapse when a critical crisis strikes.
Ngan Shunkau is a writer and a publisher who has lived in Hong Kong since 1978. He is the author of “Blood Rain in My Youth,” a story about opposing factions among the Red Guards during China’s Cultural Revolution.
Reggie Littlejohn, president of Women’s Rights Without Frontiers, says a full boycott of the 2022 Olympic Games in Beijing is necessary because of the CCP is committing human rights atrocities and genocide. She likens the 2022 Games to the 1936 Games in Nazi Germany, and poses the question: “Do we mean ‘never again’? Or do we mean never again, unless it’s China?”
In this special episode, we sat down with Milton Ezrati, chief economist at Vested, and Steven Shaerer, China policy expert and author of “Surviving Chinese Communist Detention.” They gave their insights into the dangers of doing business with a communist regime. Ezrati said, “If China gains the upper hand, it is going to be effectively a, forgive me for being blunt, almost a situation with an empire where China runs the show, and everyone else pays tribute or, and gets what they can. But everything is done out of Beijing. And now a lot of people might say the United States did that. And I’m not saying the United States is always equitable in its dealings with people. But the United States primarily was pushing for free trade until recently.” Schaerer said, “The biggest kind of problem right now is that we’re funding our own demise through these kinds of channels that go back into the Chinese coffers. And that money is then used to attack us through all the different mediums that were originally written about and discussed in books like ‘Unrestricted Warfare’ that were written by the PLA [ People’s Liberation Army] to literally destroy and replicate the United States … And also being kind of well-read on the subject, whether that’s my book, but that’s other books, that are kind of written about the issues that are happening with China, the ongoing relations with the United States and China. But really kind of curbing that investment and putting that money into other free countries, democratic countries that value human rights, like India, like Japan, like South Korea, like Singapore, or other countries outside of Asia, that kind of mirror the same philosophy—that’s a huge thing that we could be doing right now. We have to all advocate for that.”
Law of the Sea Court Ruling Continues to Challenge Chinese Aggression
On July 12, 2016, The Hague’s Permanent Court of Arbitration ruled that China had systematically violated essential provisions of the United Nations Convention on the Law of the Sea, or the UNCLOS, at the expense of the Philippines. China’s violations included stealing resources from Manila’s maritime Exclusive Economic Zone, or EEZ, and illegally encroaching on Filipino territory in the South China Sea, or SCS.
UNCLOS codifies the geophysical conditions and legal precedents establishing sovereign control of territorial waters and rights in EEZs. It is dedicated to preventing and peacefully resolving disputes involving billions of dollars of maritime resources.
In blunt language, the Court concluded China’s communist government had robbed the Philippines and launched a slow, calculated and highly illegal invasion of the SCS. The ruling dismissed Beijing’s ridiculous “Nine-Dash Line” claim to own roughly 85 percent of the SCS’ 2.2 million square miles.
Between 2013, when Manila filed the complaint, and the 2016 Court decision, I wrote three columns addressing the complaint’s strategic implications. Since 2016, the decision has figured in 11 columns, including several on Hong Kong.
Why? Because the Court’s ruling exposes the Chinese Communist Party’s multidimensional imperialist expansion strategy and aggression as it occurred from the late 1990s through 2016.
The ruling documented the CCP’s utter disregard for international treaties and civilized diplomacy when they challenge CCP policy actions. China signed and then broke the UNCLOS treaty. China signed and then broke the Sino-British Treaty of 1984, which guaranteed Hong Kong’s democratic autonomy through 2049.
The ruling illustrated how China targets and bullies its smaller neighbors. Beijing insists on “bilateral” one-on-one negotiation, betting Chinese military and economic muscle will dominate. The Philippines internationalized its dispute by going to the Court. Vietnam and Indonesia are reportedly considering similar UNCLOS lawsuits to address Chinese theft.
The ruling documented the fascist criminality of China’s slow SCS invasion. China employs construction barges and fishing boats as weapons. The barges pour concrete on reefs and sand bars, creating artificial islands. CCP propagandists then claim the fakes are Chinese territory, sovereign as Shanghai.
In the Filipino case, China turned three sea features, Mischief Reef, Subi Reef, and Fiery Cross Reef, into fake islands. The Court stated clearly China’s concrete knobs are not legally islands. Since the ruling, the U.S. military has started calling them fortified sea features.
China used its “sea militia” to invade Filipino territory. Here’s how that worked and continues to work in the EEZs of several Southeast Asian nations. Hundreds of Chinese fishing boats enter the smaller nation’s EEZ. Acting as a gray-zone warfare armada, they drive off local fishermen. China Coast Guard vessels arrive to protect the Chinese boats.
China’s response to the Court’s censure vacillates. It attempts to ignore it; it flaunts new violations. Chinese diplomats have criticized the ruling so fiercely their vehemence suggests someone in Beijing fears the decision. China has a face culture. Did the ruling deal the CCP and its president, Xi Jinping, a severe loss of face?
The ruling did not halt Chinese expansion and aggression strategy. China continues to claim the Nine-Dash Line boundary and has doubled down on weapons. The Subi and Mischief fortified sea features sport naval facilities, military airfields, and air defenses. Their anti-aircraft and anti-ship missiles create an air-sea crossfire.
However, exposing the regime’s abuse of weaker neighbors has cost China diplomatically. The Filipino theft operation demolishes two key CCP propaganda narratives: that China is the leader of the developing world and is the champion of plurality by ending Western/American hegemony. I think the decision impeaches the CCP dictatorship’s claim to world leadership and its very legitimacy as a responsible governing body. Perhaps that’s what Xi fears.
Alas, the ruling also reveals the weakness of international law. Ultimately, navies enforce maritime law, not courts. The only navy in the western Pacific capable of deterring Chinese aggression flies the Stars and Stripes.
The Philippines recently reaffirmed its alliance with the Unites States. Apparently, superpower backup has value.
Austin Bay is a colonel (ret.) in the U.S. Army Reserve, author, syndicated columnist, and teacher of strategy and strategic theory at the University of Texas–Austin. His latest book is “Cocktails from Hell: Five Wars Shaping the 21st Century.”
In boxing there’s something called a one-two punch.
You might deflect or evade the “one” but if you forget about the “two” you could end up face down on the mat.
So it is with the Chinese regime. Most of the attention is on how to take on the People’s Liberation Army (PLA) and its rapid build-up of ships, aircraft, and capabilities that pose a serious threat—even to the Americans.
Solve that and you’ve ducked the blow and can breathe easy. Or it’s thought.
But in fact, China’s economic power is the “two” in the one-two punch—and that’s how Beijing intends it.
The Chinese even have a doctrine for this—”civil-military fusion.” It means civil activities such as commercial and economic activities (the second punch) tie into military activities (the first punch) as mutually reinforcing elements of national power.
The Second Punch
Chinese economic power equals political power—but it also feeds China’s military power.
How so? China earns money to fund the Chinese defense build-up—and the Chinese Communist Party (CCP) is not forced to choose between “guns and butter.” Indeed, it can have both.
The so-called Belt and Road Initiative (BRI) plays a prominent role in the CCP’s effort to gain economic, political (and military) dominance. The BRI’s principal feature is Chinese funding of infrastructure and commercial projects throughout much of the Indo-Pacific—and in Latin America, Africa, Central Asia, and Europe as well.
BRI has both financial and strategic angles. If projects can make some money and put otherwise idle Chinese labor to work, that’s good. But if China can gain access, political influence, and create dependency in BRI nations—that’s priceless, and financial results don’t matter much.
To that end, many of the BRI projects—ports and airfields, for example—have a “dual-use” aspect. They work just as well for commercial purposes as for military purposes. Look at where the CCP has developed port and airfield access around the globe and the military “power projection” usefulness is obvious. Chinese officials and military officers regularly talk about it—it’s not hidden.
A good example of the Chinese regime successfully using the promise of BRI investment to gain strategic advantage was seen in the Solomon Islands and Kiribati. In 2019, as a result of opaque promises from Beijing, both nations de-recognized Taiwan. Now there is talk of China refurbishing an old American airfield in Kiribati and rumors of military facilities in the Solomons. That’s worth any price to Beijing—and has gotten attention in Washington and Canberra.
China’s BRI is often criticized as predatory—or so-called “debt-trap diplomacy.” And indeed the deals usually are opaque, stacked in China’s favor, way overpriced beyond what is fair or affordable, and rife with bribery of local officials and politicians.
But get closer and the locals will often tell you: “What else are we supposed to do?” The president of a Central Pacific nation was overheard several years back commenting: “We don’t do this by choice, but by necessity.”
And China takes time to lay the groundwork. Since long before BRI, Chinese commercial activity was literally everywhere out to the far ends of the Indo-Pacific region—even down to the corner shop level. For example, 80 percent of retail businesses in Tonga are run by recent Chinese arrivals.
The economic to political to strategic progression creates dependency and influence, and also no little resentment. But by then it’s too late, the second punch has landed.
There is an aggregate effect as well, as neighbors see what is going on and perceptions are shaped. China’s economic clout not only reinforces its defense buildup, but it also helps feed the perception that China is a powerful country on the rise—the country that’s destined to dominate (while America declines). This spurs some other nations to want to get closer—either to attach themselves to the future winner—or for self-preservation. Meanwhile, adversaries are worried and even intimidated.
Perception or Delusion?
In the Indo-Pacific and elsewhere, many nations are hooked on the perception of the necessity of China’s market and money. Even countries that are wary of China have convinced themselves—or at least their businesses and political classes have—that their prosperity depends on plugging into Chinese demand and/or attracting Chinese money via investment, aid, tourism, etc.
This is a bit of a delusion. One needs only to look back 30 years when the China market didn’t matter and the world was still prosperous.
China is indeed successfully using its economic power to expand its presence and influence, and bulking up military might and expanding potential military positioning. But will it continue going from strength to strength? It also faces some serious challenges.
One of the biggest is that the Chinese currency, the yuan or RMB, is not freely convertible. Meanwhile, China must have convertible currency for anything it wants to do overseas or buy from overseas, for example, to pay for overseas construction projects, or to buy companies (some with defense or dual-use technologies), or to buy up or into properties such as ports and airfields, and to purchase political influence to gain control over territory.
It needs convertible currency to fuel its expansion. And nobody accepts Chinese yuan. But not to worry, much of Beijing’s overseas activity is funded by American, Western, and Japanese financial institutions and companies pouring huge amounts (say a few hundred billion U.S. dollars) of convertible currency into China each year.
This allows the CCP not only to expand its reach but to paper over many internal problems and to look more successful than it really is. As a bonus, the foreign investors also apply pressure on their home governments to not “upset” China.
But you see the vulnerability for Beijing: Given that the U.S. military advantage over China is diminishing, the U.S. dollar (and the threat of cutting off Beijing from it) is Washington’s last major “counterpunch” to use against the regime.
Beijing is keen to eliminate this American advantage and is trying a number of ways to do so, including digital currencies, swap arrangements, and “talking up” the yuan and “talking down” the U.S. dollar. This is all intended to present the yuan as a desirable currency and to weaken confidence in the U.S. dollar.
Washington’s response to COVID—spending astronomical amounts that debase the American currency—is nicely helping Beijing’s attempts to dethrone the U.S. dollar.
Will Beijing’s one-two punch work? Will it increasingly dominate industries and markets worldwide, while extending its political and military reach in the process?
Possibly. But the CCP has domestic weaknesses that belie its message of inexorable upward economic growth and expansion. Beijing faces problems with bad debt, inflation, loss of confidence (at home and abroad) in the economy and financial system, lack of foreign exchange, and all exacerbated by potential sanctions. And there is also the fact that China’s “markets” are subject to the capricious orders of the Chinese Communist Party. The CCP hasn’t figured out new laws of economics that nobody else has in the last 5,000 years.
Also, consider that the most successful people in the Chinese system—including at the very top of the CCP—have been trying for decades to get their wealth out of China and to put it somewhere safe—like America, Canada, Australia, and the UK. That suggests that those benefiting most from the system have great doubts about its reliability, if not survival.
Just remove export controls on the yuan for a few weeks and you’ll see it flooding out of China to “safe havens.”
There is also talk of foreigners “decoupling” from the China market—and some very nascent attempts to do so, not least to mitigate supply chain dependencies.
But for now, it seems that Western and Japanese commercial and financial interests—and the politicians they fund—aren’t interested in pulling back from the China market.
And statements by groups such as the U.S.-China Business Council, Japan’s Keidanren, and major companies such as Boeing and Nike bear this out. Instead, they are “all in” on China, while turning a blind eye to the CCP’s opaque financial management, mafia-like regulatory enforcement, and human rights atrocities.
As noted earlier, to their credit, the Chinese are willing to go “out there” and do the hard work of commerce the way the “Yankee trader” of old used to—these days U.S. businesses (and most others) seem uninterested in places where the living isn’t so easy and returns aren’t guaranteed or big enough.
To change the current trajectory, the United States and its friends need to provide real alternatives to Chinese economic offerings, and increase proscriptions on investing in or taking investment from China. And shareholders (and their lawyers) should start asking company CEOs why they are investing in a rigged market that aims to destroy the foreign competition? But this had better be done fast.
There’s a common expression in the Indo-Pacific and beyond that—“The U.S. provides security, China provides our business. We don’t want to choose.”
At some point, if the CCP keeps landing enough one-two punches, the United States will be on the mat. Then China will be making the security and business decisions for everybody—and nobody will be able to raise a glove.
Grant Newsham is a retired U.S. Marine officer and a former U.S. diplomat and business executive who lived and worked for many years in the Asia/Pacific region. He served as a reserve head of intelligence for Marine Forces Pacific, and was the U.S. Marine attaché, U.S. Embassy Tokyo on two occasions. He is a senior fellow with the Center for Security Policy.
“This is the China Communist Party versus the free world, including the Chinese people that are at peace with the free world,” warned Stephen Yates, former deputy National Security Adviser at the White House, about the dangers of the communist regime. In this special episode, we sat down with Stephen Yates, former president of Radio Free Asia, to get his take on the so-called Cold War between the United States and China, the dwindling free press in Hong Kong, and the dangers of the digital world. Yates warned about the dangers of #SocialMedia. He said, “social media, in a way, has been a cancer that has eaten away at manners, at the sense of community.” He also warned that “there is very effective and unhealthy science behind the social media networks that has monetized anger. They exist to make you uncomfortable because you’re more likely to take action on their advertising after you’ve been made uncovered because you will be engaged. If you realize that and you deliberately step out of that universe to try to get other forms of unbiased, unfiltered conversation and thought, I think people will be better off.”
The U.S. is strengthening sanctions on China over its genocide against ethnic minorities. A new bill from the Senate bans imports from China’s Xinjiang region. An American military aircraft, stopped briefly in Taiwan. The move angers Beijing —while a Taiwanese lawmaker fights back. Biden’s new Navy secretary nominee says if confirmed, he’ll ‘exclusively focus on the China threat,’ and defend Taiwan ‘as much as humanly possible.’ China is becoming an ‘evil empire,’ and the U.S. may be enabling it. That’s according to former Vice-President Mike Pence. And China sells 550-million vaccine doses to the W.H.O.’s global vaccine program. But a U.S. agency is criticizing Beijing for not donating them instead.
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Kyle Bass likens China’s digital yuan to a ‘trojan horse,’ saying that because it is a centralized currency controlled by an authoritarian regime, it can be used to influence important people. He also says that while the CCP is unlikely to succeed in making the digital yuan the global reserve currency, he believes that even if a small amount of people use it, it will become a big problem.