https://www.afr.com/world/asia/china-is-decoupling-the-global-train-20200904-p55sf2 China is undermining globalisation with policies to take control of supply chains so that others can be locked out of them. John Lee Contributor Sep 4, 2020 – 1.57pm What are we to make of the growing global conversation about decoupling and economic distancing from China? Sure, there have long been complaints about the hazards of dealing with China: its intellectual property theft and the massive subsidies it gives to its state-owned enterprises and national champions. But isn't "decoupling" a recent Trumpian thing, a vainglorious attempt to maintain American economic primacy while trashing the globalisation consensus. Or just a flailing superpower responding to a fast-rising challenger? Not exactly. China had implemented a decoupling approach to the US long before Donald Trump assumed power, even if Beijing has never used that word to describe what it is trying to do. President Xi Jinping and Greek Prime Minister Kyriakos Mitsotakis visit the Chinese-run container port in the Greek city of Piraeus last November. EPA The point matters because we need to be sure about what is causing economic globalisation to unravel, and who is significantly to blame. It is the Communist Party’s prior determination to decouple on Chinese terms – to game the global system and lock out competitors such as the United States – which is the trigger. Incidentally, it is also largely these same self-regarding Chinese economic policies – in addition to Beijing’s willingness to use trade as a coercive tool - which is giving rise to serious thought about partial decoupling from China from Western Europe to the UK, Canada and India to parts of south-east Asia, and Australia. Take the Belt and Road Initiative, which is not generally conceived as part of a Chinese decoupling grand strategy. There are understandable economic benefits for China to advance the BRI, not least to create projects and external markets for its large and lumbering capital-intensive infrastructure and construction companies. But consider what else it is designed to achieve. One is to build regional Sino-centric infrastructure, platforms and institutions which will facilitate trade, investment and other beneficial economic exchanges between China and countries along the BRI. All six main "economic corridors" are designed to connect them to China so that the latter emerges as the central hub. If this sounds all quite innocent, we need to look at what the Sino-centric model looks like in practice. The immediate goal might have been to create external capital investment opportunities for Chinese companies. But the greater and grander purpose is to ensure that roads, rail, ports, cables, digital networks and infrastructure begin and end in Chinese provinces – and operate on terms favourable to Chinese interests. Typical is the takeover of the Greek port of Piraeus in 2016 by Chinese state-owned COSCO, which received billions from state-owned China Development Bank to complete the transaction. Shortly after, the Chinese-controlled entity signed agreements with Shanghai International Port Group which were highly beneficial to the latter. And as part of the Piraeus deal, Chinese state banks are now providing loans to Greek shipping companies to build their cargo ships exclusively in Chinese shipyards. BRI economies become captive to China while outsiders such as America are in a much weaker position. Bear in mind that using state resources to build the vast Sino-centric economic system within which Chinese companies and entities dominate puts these companies in an insurmountable position of strength to negotiate the conditions for any deal. Disputes and disagreements will not be resolved by pre-existing laws and rules, but through a negotiation where Chinese political and economic leverage is brought to bear, or according to BRI rules and processes drafted by Beijing. Additionally, and with a greatly reduced commercial presence in East Asia and Eurasia, the capacity for American companies and authorities to set and/or revise commercial and quality standards in all sectors is greatly diminished. These can be simple such as the sizes of rail gauges, or complex such as the interoperability of technologies such as 5G networks. Once such standards are set, it is expensive and usually prohibitive for companies and economies to operate in a different economic ecosystem. Combined with Sino-centric infrastructure, institutions, and logistical networks, BRI economies become captive to China while outsiders such as America are in a much weaker position from which to enter. More evidence that China's policies were pulling apart globalisation long before Trump is clear in complementary plans such as Made in China 2025. This foresees control and dominance of entire manufacturing processes, supply chains, and services supporting a dozen advanced industry sectors. Against World Trade Organisation rules, it specifies targets for the domestic content of core components and materials: 40 per cent this year and 70 per cent by 2025.
Interesting report. Certainly China's economic development model is aligned and mostly integrated with its political agenda. It's the basis of dirigiste systems of far left and far right dictatorships. At least the Chinese are consistent and coherent, unlike our US system which makes painfully obvious its fundamental limitations. Democratic consensus is slow and littered with compromises. But, like the Chinese, we strongly believe that our way in the only true way to bring prosperity to our nation. I hate to be a relativist but America is in a chaotic spiral of anarchy that benefits the fringes on the right and the left while the oblivious market rewards speculative income over labor and our government is reduced to projecting its strength through exorbitantly expensive military might. We are at our weakness point of our modern era while China is at its strongest. China's flaws are deep and too numerous to detail here. But I lived there for a bit and experienced enough of the culture and its representative system to know how different they are and how challenging it would be for the common people of our countries to respect our differences. The future is indeed dangerous and I hope all can appreciate the devastating consequences of a armed conflict between our nations.
Political climate is just too bad for investing now. I'll wait after election and until dust are settled.
It is possible perhaps your media drum up contention by sensationalizing violence. It's my impression the media love violence and it's one reason I've turned off the TV, murder is entertainment, it's a huge national sickness. So guns become an obsession (with Americans) and then the media stoke the flames further by highlighting the bad while ignoring the good. Trump in a way is correct when he continually mentions fake news. The media is controlled by powerful barons who distort reality. American politics needs to deal with the media, its not free speach, its not democracy, its bs which is controlling USA.
True that. The best evidence for that thesis is the election which is not based on arguments but a huge show, the topics they discuss in the election phase are influenced so heavily, the working poor are even manipulated to vote for a "winner takes it all" policy hunting candidate
China has merely identified and persued those areas that enhance their self interest, just like the United States does. China has less internal debates when in comes to defining self interest than the US political system. In response to the Chinese threat of competition in the world market place and eventual qualitative and quantitative military suppority, the US has created a policy of “Containment”. Good luck with that. We are not going to “Contain” the Chinese with their massive manufacturing base, 1.3 billion people, more focused leadership, and increasing expertise in areas we have been long dominant in. The US needs to face reality that China will soon supplant the US and EU, for that matter, as the leading economy and create effective policy that addresses that reality. Effective policy probably runs along the lines of competitive cooperation that is inclusive of each of our trading partners. This includes cooperation with countries such Russia and North Korea. We may not like some the things their leaders do, but they are sovereign countries that have strong leaders with increasing economic power while our leadership is embattled within along with seemingly increasing financial constraints. Just as the saying goes, “Don’t get in between a bear and its food source”, it is counterproductive or worse to interfere with the primary and reasonable goals of our largest competitors. The days the of US being the World policeman are numbered. Very numbered. Let’s consider turning in our badge sooner, rather than later, and take care of our domestic priorities. I definately agree we are living in dangerous times, because should a major war break out, the US would have serious manpower constraints, given our current domestic situation, making a polarized decision more likely. It is notable that copper, a conventional wartime metal, is rising. Some of the reduction in Western inventories may be speculative due to monetary concerns and low costs of carry and you mentioned in another post there was a seasonal consideration, but isn’t a few months early for that? As a trucker who has visted quite a few facilities in his career, it is safe to say that our food and energy distribution is somewhat hardened. By hardened, I mean restricted access with procedures in place that address various security risks. There are a suprising number of remote manufacturing facilities in the US that includes food, pharmaceuticals, and manufacturing products that would serve to maintain some capability should our cities get bombed out. However, there are a tremendous number of vulnerabilities that would soon make even a conventional war with major power or even with a fully committed medium power that would make our lives hell. Bottom line, we need to be more tolerant of other countries persuing their own reasonable self interest while we work on taking care of own basic domestic problems.
It's the beauty of a totalitarian state. They can clamp down a whole city in response to a pandemic and can direct their bully their companies how they do business to protect nat. sec. interests. We on the other hand have legalized corruption so the companies dictate policy and how leveraged we want to be to cheap labor in rival countries.
IP theft in China is a myth that was sensationalized when Trump drummed up his trade whore them. Harvard Business Review China’s IP regime is actually more optimal for IP-intensive businesses – including foreign ones – than the IP regimes in prominent rich nations. For example, in terms of law, Non-Compete Agreements are allowed in China but not in some US states (e.g., California). In terms of IP regulations and administration, business methods are easier to patent in China than in the US and Europe, and certain biotechnology and software are patentable in China but not in the US. There is faster invention patent pendency (time to grant patents) in China than at the European Patent Office (EPO) and US Patent & Trademark Office (USPTO), and invention patent examination appears to be of higher quality in China than at some national offices in Europe. In terms of IP enforcement, there are lower attorney and court costs for IP litigation in China than the US and various other major jurisdictions, there are faster IP trials in China than other major markets, the “local administrative enforcement” route in China offers potentially more efficient enforcement options than available in rich nations, and there is arguably less risk of patent trolls in China than in the US due to the design of Chinese legal institutions. At the same time, foreigners win most of the IP infringement cases they bring in China. https://hbr.org/2019/10/3-myths-about-chinas-ip-regime
A simple google search will cite many news articles providing specific examples of Chinese IP theft against the United States, even including the Chicago Tribune. During Workd War II, US “Ally”, Russia received plane loads of US military and industrial documents, including atomic bomb design. Reference: Richard Rhodes, Dark Sun - The making of the Hydrogen Bomb. There is a fundamental reason why Communist countries need to steal intellectual property from free Capitalist countries. Creativity, initiative, and the natural development of efficient processes flourish when one has the ability to make their own decisions, whether good or bad, who suffer from bad decisions, but benefit from making good decisions. Over time, ones decision making evolves and wealth accumulates, increasing confidence to take risks and more efficiently employ assets, benefitting most in society. It seems to me China has spent considerable effort into studing and understanding our system. Although Asians tend to be smarter than Americans and have favorable aspects of their culture that emphasize quality education, there are also counterproductive cultural aspects that reduce Chinese competiveness against the US. Unfortunately for the US, Chinese culture is on the way “Up”, while the US culture is seemingly on the way down, other than some groups of Millennials, along with some old timers.
There is no question that China steals western trade and technological know-how. To suggest western powers don't do the same among themselves or towards countries with greater knowledge in one field or another is living with nationalist blinders on. Nations will do what is necessary to maintain advantage or catch up to those with greater skills when they can. America glory days came right after WW2, in large part because of the brain drain of foreign scientists from Germany and Eastern European nations before communist Russia invaded them and locked up that part of the world. America's seeming superstar status continued to bring in the bright minds from around the world in the 60s through 2k's. We had the money, they had the brains. Our secondary education system never had to develop great numbers of STEM skills because most came from India, China, Korea, Russia, Ukraine, etc. where STEM was always the key to a successful career. Our PhD programs were the world's best, and candidates had mostly foreign sounding names. But Asia has been able to attract many Western Universities from Europe and the States, giving students the ability to stay home and turn their skills to the development of their countries, China and India in particular, now flush with research money. China files many more patents than the US or Europe. Suggesting their expertise is primarily due to theft is simply not knowing China. Trump's efforts to decouple and enclose China is as sophisticated as the man, boisterous racist bully going nowhere.