Offence is defence and other China links

The Democratic National Committee has decided to sue the Trump campaign, Russia, etc. for the 2016 Presidential campaign gone wrong. Most extraordinary.

The Congress Party and its allies decided to move to impeach the Chief Justice of India. Most extraordinary. When was the last time it happened?

The reason why the US and the UK have targeted ZTE is not a matter of protectionism. Check this out.

Chinese students studying to be diplomats taught ‘us’ and ‘them’ brand of diplomacy

This tweet shows the people that make up the Confucius Institute in the University of Queensland

The Chinese Communist Party is setting up sleeper cells across Universities in America

China’s GDP growth numbers have not varied by more than 0.1% since 2015.

Prof. Hal Brands on the axis of autocracy versus America

Hong Kong dollar currency peg is not ending anytime soon. But, if interest rates in Hong Kong rise, it is a threat to their hypervalued property prices.

Quitting Finance to invest responsibly

China firms more reliant on foreign source revenues – well, only 13% from about 11% earlier

US weighs emergency powers to restrict China tech investments. The US is not doing this in a scatterbrained manner as is being widely perceived.

This article by Prof. Keith Burnett of the University of Sheffield in the UK is one reason why you should read this Mercator Institute report. I have read both. Notice what the former British PM David Cameron is doing.

27 of 28 EU ambassadors have compiled a report that criticises China’s Silk Road project. Only Hungary has not signed.

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Stuff that happened

I was at the MINT Asia-HT Leadership Summit held in Singapore on Friday, 13th April. Found Chandrababu Naidu impressive in terms of presenting his views. Of course, he was selling too hard. Nitin Gadkari was disarming and had a smiling disposition. Wish the Indian Prime Minister copied some of that. Tony Blair delivered the keynote speech after lunch. He was impressive. Had a self-deprecating humour. He is partially responsible for the mess that Iraq still is. But, one has to admit that he did come across as a thoughtful guy.

He said that politicians enter office most popular and least capable and leave office least popular and most capable!

He also recalled how Bill Clinton deftly dodged a reporter’s question on whether he was speaking to the next British Prime Minister when he was meeting with Tony Blair, then the leader of the Opposition. Either a YES or a NO would have been bad answers. Clinton was facing his own re-election in 1996 in a few months when this incident happened. He deftly said that he hoped that Tony Blair was speaking to the next President of the United States! That is really on-the-feet thinking and diplomacy.

India’s former foreign secretary Dr. S. Jaishankar made some pertinent observations on the state of play between Asia and West. He said that if Asian nations favoured a multipolar world, they should work towards multipolarity in Asia, to begin with. Second, he said that it might be premature to write off the West. I quite agree with both.

That said, writing this on Saturday, after the ‘surprise’ America-led missile attack again on Syria, one year after the last attack and the last charge that Assad used chemical weapons on his own people, I find myself nodding in appreciation that China has opposed the Western air strikes. As the British MP George Galloway told a reporter, there is no due process. In any case, how can the Western media that criticses Trump at every opportunity suddenly finds something to appove of? In their eyes, how does this one become right? The response of the journalist in this interview to the former British General is simply stunning.

Tucker Carlson of Fox News is worth watching in these two videos.

MarkGB, in his blog, has this explanation as to the real motivation behind the missile attack on Syria:

Of course your government would lie to you, they are lying to you right now. This has nothing to do with saving lives – bombing kills people. This is about preventing the Syrian government regaining total control of the country. It’s about what it’s always been about – breaking the country up, taking the oil, putting the Qatari pipeline through Syria to rival Russia’s dominance of the European oil market. It’s about keeping the region de-stabilsed so that the Apartheid regime in Tel-Aviv can take more of the energy resources in the Golan Heights…and sooner or later…take the water resources in southern Lebanon. [Link]

The real bully in the America-China trade war – part 2

Earlier in the day, I read Professor Joe Stiglitz’ piece in ‘Project Syndicate’ on Trump and the tariff threat. Predictably, he has criticised President Trump heavily so much so that the ‘darling’ of the World Social Forum now bats for free trade – which is the pet project of his nemesis, the Fund! This is the comment I posted under his piece in ‘Project Syndicate’:

Ash Carter, in an interview to ‘Politico’ in February had said that economists had not provided real answers for dealing with China. William Galston, he served in Clinton’s first term in office, says that China is yet to ratify the Government Procurement Agreement that it agreed to do so when it joined WTO in 2001. it is about non-discriminatory opportunity in government procurement.

Joseph Stiglitz, who discovered a niche for himself, opposing free trade and all the other nice things for the Fund and for Wall Street, suddenly discovers virtue in free trade because Trump is now considering imposing tariffs on China.

One thing is clear: whether or not Trump wins, economists have both lost it are still losing it.

Later in the afternoon, I read Larry Summers in FT where he says that the world is rallying behind China and not behind Trump. My response to his piece was as follows:

Mr. Summers should worry that he is on the same page as Joe Stiglitz. He can then reflect on what binds them. Is it rationality or an irrational bias against whatever Trump does.  He should read up on what Ash Carter told the interviewer from Politico on how useful (or not) economists had been to America in dealing with China.  Here is the link.

Two, he can read papers by economists Peter Schott (Yale University) and Justin Pierce (Federal Reserve) on how much the conferring of ‘Permanent Normal Trade Relations’ (PNTR) status to China mattered, for the worse, for American manufacturing employment.

Three, he might do well to have a word with William Galston who served in the first Bill Clinton term. He wrote in WSJ in August 2017 that China agreed to sign the Government Procurement Agreement – a non-discriminatory government procurement regime – when it signed up to the WTO in 2001. Sixteen years later, it had not done so. Referring cases to WTO takes years for adjudication. China knows that. That is why it now pretends to have faith in the multilateral system when it had shown very little respect for its own commitments to the WTO.

Far from calling out the real bully and asking that country to make concessions such that the threat of a trade war is averted, American economists are busy running down their own President.  That is evidence, if it were needed, that elite interest are divergent from national interests.

If proof were needed for my last satement above,  he should check out the pages 108, 161-162 and 169-175 of the monthly Harvard-Harris poll for the month of March released late March.  Here is the link.

In a pre-Trump world when no one threatened tariffs on China, inequality rose, Brexit happened, 2008 crisis happened and Trump himself got elected.

After Trump but where Trump is not in office, in Italy, Austria, France, the Netherlands, Poland and Hungary swung Right and Catalonia voted to separate from Spain.

Summers and his ilk must find answers as to why their world of free trade had no answers for these people (including for Ash Carter!) that they decided to show their helplessness, anger and frustration in the above manner.

Postscript: Indian readers might be interested to check out pages 108 and 110 of the Harvard-Harris poll. Link given above.

The real bully in the America-China trade war

My interest in this story – always high – was heightened by the series of tweets issued by Prof. Richard Baldwin against Michael Pettis for saying that trade surplus countries have more to lose from trade wars than trade deficit countries. Frankly, as a matter of principle, it is no different from the statement that expanded trade is win-win for all trading partners. But, as always, the devil is in the details. I thought Richard Baldwin protested too much, making it sound almost personal.

For Prof. Baldwin, these were the offensive remarks:

“For political reasons, China has to respond,” said Michael Pettis, professor of finance at Peking University. “But China risks an escalation. There’s an asymmetry here: trade war is extremely dangerous for surplus countries.” [Link]

Of course, a cursory glance at his tweets suggests that he is like many commentators – viewing things through the prism of Donald Trump rather than through the prism of efficacy or desirability or, preferably, both.  In his tweets, Richard Baldwin drew attention to a NBER paper of his from 2013 on global supply chains and I have dutifully downloaded it. Not read it yet.

But, just as I had not read Baldwin’s paper and hence, reacting to his tweets, it is equally possible that Baldwin had not read Pettis’ previous works and been reacting to a one-line quote in a newspaper article.

In a long paper he wrote for Carnegie Endowment in 2017, Michael Pettis wrote thus:

Some economists argue that even if there are short-term benefits to American producers and workers, over the longer-term trade intervention is harmful for U.S. productivity growth. This argument, which seems more ideological than empirical, is based on standard trade theory in which there is an implicit assumption that any intervention will drive trade performance away from its optimum, so that the United States always gains from the further opening up of its own market, even if trade partners don’t reciprocate. There are at least two problems with this argument.

First, it doesn’t seem to conform to historical precedents, most especially American historical precedents, that suggest trade intervention has indeed been a successful part of many countries’ growth strategies. In fact, with the exception of a few, small trading entrepôts whose needs are radically different from those of larger economies, it is hard to think of a single advanced economy whose period of most rapid growth has not benefitted from, or at least coincided with, trade and industrial policies.

Second, the idea that any U.S. intervention necessarily pushes the U.S. economy from an optimum in which productivity is maximized simply does not make sense. It is easy to design models that show how mercantilist policies in one country, whether intended to be mercantilist or not, can push another country away from its previous equilibrium, so that if the second equilibrium is closer than the first to the optimum, trade policies can clearly improve productivity. And if the second equilibrium is not closer, trade policies just as clearly can improve productivity if they force a return to the first equilibrium. This is just logic.

The claim that trade intervention is always value-destroying or always value-enhancing cannot be other than ideological. We must develop a framework in trade theory that recognizes the conditions under which specific interventionist policies can enhance or undermine long-term growth prospects, after which we must apply that framework to current circumstances. – Link; emphasis mine

The senence above bold-faced, is a reasonable one. Ultimately, answers to predictions derived from eonomic theories have to be empirical/evidence-based.

Before we turn to that, there are two additional observations:

(1) It is true that the United States has undertaken unilateral trade liberalisation because other interests superceded impact on employment in industries affected by imports. Pettis cites this paper and the highlighted sentence is right there in the first page:

Freer trade has its costs. The record suggests that for diplomatic and national security reasons the U.S. government sacrificed thousands of domestic jobs to create employment and prosperity elsewhere in the noncommunist world. [Link]

(2) I seem to have forgotten what I wanted to write as the second point!

In reality, whether the policies help or hurt the nations practising trade restrictions is a tough one to answer. Take this delightful article on the ‘chicken tax’. America imposed tariffs on European trucks. That benefited Detroit. But, did it really benefit America? It is impossible to make out who won and who lost and over what time frame, whether we are evaluating trade liberalisation or trade protection. Further, what is the criteria? No one is sure. Each one sets up a criteria that would help them arrive at a conclusion validating their priors.

More importantly, even if one reached the conclusion, for example, that there was net employment gain to an economy arising out of trade liberalisation, there are doubtless winners and losers. Unless winners can compensate the losers, losers will become implacably opposed to trade liberalisation. That is what is happening to America.

In fact, Pettis makes that insightful point. America has probably grown tired of exporting dollars. Its debt to foreigners is rising. Two, American households have probably reached the end of their limits on borrowing to consume. Third, the losers from free trade in America are now probably more numerically than the winners and winners have not either been able to or willing to compensate the losers. The ‘inequality’ fact is too powerful now to be ignored by politicians.

So, who will win the trade war? Many have said that China is now co-opting the messy American democratic politics in its favour by targeting the products that are made in States that voted Trump. Two calculations here: one is that the American President will be forced to pay heed to electoral calculations since the November mid-term Congressional elections are at play and the second is that his constituencies would pile up pressure on him to withdraw.

But, there are dangers to this strategy. It makes an economic issue overtly political and the other side (American) can become ‘irrational’.

Also, notice two important facts mentioned in the Bloomberg Gadfly article linked just above:

Seven of the trade categories affected relate to beef, which China resumed importing from the U.S. only last year — in minute quantities — after a 14-year ban due to fears of mad cow disease. New 25 percent duties on wheat and corn won’t do much additional damage to a trade that’s minimal given the 65 percent import tariffs that China already charges on those crops. [Link] – Emphasis mine

So, did Trump start the trade war? The answer is a clear NO. John Pomfret thinks that China has lost America:

They noted that, in negotiations with then-President Barack Obama, China’s president Xi had agreed not to turn a series of manmade islands that China had created in the South China Sea into military installations. But then China did just that.

When it came to trade, they pointed out that for decades, China had been forcing American companies to hand over technology to China in exchange for access to the Chinese market. Massive Chinese espionage directly benefited the development of China’s automotive, aircraft, information technology and defense industries. For decades, Shirk noted in an interview, the American business community served as the ballast in the U.S. relationship with China. But after years of such treatment in China, she said, many American firms are “frustrated and disaffected.” [Link]

Note the comment by James Lewis that John Pomfret  cites:

China will not change its behavior absent external pressure, and pushing back against the constant drain from Chinese IP theft is long overdue. [Link]

But, of course, China betrays no nervousness on account of external pressure. A Reuter story is explicitly headlined, “China says it never backs down in the face of threats after trade salvos with U.S.” Clearly, the bully here is China and not America.

A NYT article from 5th April that is headlined, ‘Why China is confident that it can beat Trump in a trade war?’ concedes the following:

Missing in the bluster and the propaganda are the questionable methods that China has adopted to squeeze foreign companies out of key technology markets — and the fact that in the cold-eyed calculus of economics, China is more vulnerable to a trade war than officials admit.

Exports account for a big share of Chinese economic growth. Because the United States buys so much from China, Washington has many more ways to hit Chinese manufacturers. By contrast, the retaliatory tariffs Beijing has proposed already cover more than one-third of what China buys from the United States, leaving it fewer options to strike back. [Link]

Many in America, it seems, would rather see their country lose than see Trump triumph in his confrontation with China on an issue, in which the latter has been the overwhelming culprit for a long time. Just sample some of the headlines in ‘New York Times’, or ‘Financial Times’, for example: ‘America sends mixed signals’; ‘Threat to American jobs’, etc. It is a pity.

Such headlnes dominate notwithstanding this mildly worded FT Edit that calls up on China to do the right thing first.

Ironically, this attitude of the Western elite is one sign that China has understood well and exploited. That they are now more inclined to disregard larger interests for their narrow, ego-driven goals and interests. Surely, a sign of decaying society and civilisation.

They consistently fault Trump for not building an alliance against China. Well, the United States and Europe joined hands to deny China ‘market economy’ status. With respect to trade, Germany is a worse culprit these days than China with its massive trade surplus. In any case, we must remember that the issue is not so much about trade as it is about IP theft and non-compliance with WTO membership conditions on technology transfer, etc.

James Lewis anticipates the argument that Western nations routinely stole technology from each other and so why single out China?

Sometimes you hear the arguments that the United States stole technology in the nineteenth century when it was growing and that China is only doing the same. But these arguments are feeble, and those who make them are feebleminded. In the nineteenth century, it was possible to steal a book, but with digital technologies, you can steal the entire library.

The United States was a net contributor to the world stock of knowledge in the nineteenth century, and its innovations spread to other countries, given the absence of international IP protections.

In the nineteenth century, countries recognized that inadequate protection for IP hurt global economic growth and disincentivized innovation (people invest less in innovation when their work can simply be stolen). In response, they created a series of agreements to protect IP and trade in the international market. China routinely ignores these agreements, subsidizing its own growth at the cost of global innovation. China has become a country that can innovate, but it is unwilling to give up the crutch of economic espionage and will never do so unless it is pressed. [Link]

John Pomfret, in his column in WaPo, had cited the report of the Asia Society on US policy towards China, published last March (March 2017).  From the portions devoted to trade matters:

Since 2008, the business environment in China has become increasingly challenging for foreign enterprises, deeply frustrating executives with the slow pace of economic reform and official favoritism for Chinese stateowned companies and homegrown private-sector companies. As a result, China is consistently ranked far below its peers in terms of regulatory impediments and the ease of doing business.

While there have been some successes in US-China trade talks and enforcement, too many key US objectives remain unmet….

… What is more, WTO cases take years to adjudicate, resulting in critical and unfair competitive lead times for fast-growing (and often government-supported) firms. The end result is lost market opportunities for US companies. [Link]

Now, we know why China wants to go back to WTO. It would eat up precious time. In any case, if China respected WTO, it would have honoured the commitments made to the world trade body when it joined WTO.

In the final analysis, people like Richard Baldwin and the media in America and elsewhere that is happy to take potshots at President Trump and revel in his troubles – political or otherwise do not have any alternatives to offer.

Just sample what Ash Carter has to say in the interview that ‘Politico’ had with him. He was the U.S. Defence Secretary in the Obama administration:

I believe that we have no adequate economic playbook for competition with China. Last time we competed with or had a long difficult strategic relationship with a large communist country was during the Cold War, and our approach to that was simply not to trade with them. Now, one of our largest trading partners is in fact a communist country, and I don’t think that the economists have given us much of a playbook to protect our companies and our people. [Link]

Indeed, the interview itself is proof, if it were needed, that America and President Trump have to battle their own internal adversaries in their battle versus China. More than half the interview was dedicated to Russia, another 20% to 25% was dedicated to somehow getting Ash Carter to saying something negative about his successor, about the new administration and another 20% to 25% about North Korea. The comment on China was, kind of a suo moto comment by Ash Carter himself! So much for the priorities of the elites in America.

It is really Trump vs. China with Western elites on its side.

[postscript: We should remember that American tariffs do not take effect until June and China’s countermeasures will kick in only after that.]

Some recent very good reads on China

(1) On Thursday, U.S. time, the Trump administration raised tariffs on China goods. Whether the tariffs amount to USD50.0bn or that they were being levied on USD50bn worth of Chinese imports is not yet clear.

An investment bank wrote the following, this morning, in its daily missive:

Our economists note that news reports differ on whether the tariffs would apply to $50bn of Chinese imports, or whether they aim to raise $50bn in revenue. If it is the latter then they would apply to $200bn, or about 40%, of Chinese good imports. The only thing the USTR (US Trade Representative) mentions is that the unfair Chinese trading practices are estimated to cost the US economy at least $50bn / year. The extent of the tariffs is one uncertainty, another is the extent of the response by the Chinese.

The same research note made the remarks below:

Although the US decision elicited consternation abroad and calls from allies not to escalate to a trade war, Trump’s decision received cross-party support in the US from Senate Democrat Leader Chuck Schumer, who said Trump is “exactly right” and “I’m very pleased that this administration is taking strong action to get a better deal on China.” White House trade adviser Peter Navarro meanwhile told reporters the measures are a “seismic shift from an era dating back to Nixon and Kissinger, where we had as a government viewed China in terms of economic engagement… That process has failed”. This suggests that the decision has the weight of the US policy / geopolitical strategy establishment behind it, especially after Trump purged his advisors of pro-free trade voices and replaced them uniformly with China hawks, and is not simply a political tactic ahead of midterms or a Trump-specific impulse.

In a way, it made me think of how much Trump, the outsider, has managed to thumb his nose at conventional wisdom that binds both the major political parties in the United States. He is governing, for better or worse, as a true outsider. In India, in some respects, that is still missing despite the election of Mr. Modi in 2014 who, in a way, overcame the established leadership in his own Party to become its national leader but yet, he has not stamped his authority on policy.

(2) Only this morning, I managed to read the ‘Executive Summary’ of the report of the US Trade Representative on China’s WTO compliance. Of course, the media had featured this comment prominently. But, it is worth putting it out all over again:

Given these facts, it seems clear that the United States erred in supporting China’s entry into the WTO on terms that have proven to be ineffective in securing China’s embrace of an open, market-oriented trade regime. [Link]

Again, this is in line with what many sensible observers have written in the last two to three years.

(3) Notwithstanding the cop-out/finessing in the last paragraph of their article, Kurt Campbell and Ely Ratner, pretty much, vindicate Trump and they are also extremely consistent with the message of John Pomfret in his wonderful book, ‘The Beautiful Country and the Middle Kingdom’. The article could be behind a paywall.

Very brief extracts:

Nearly half a century since Nixon’s first steps toward rapprochement, the record is increasingly clear that Washington once again put too much faith in its power to shape China’s trajectory. All sides of the policy debate erred: free traders and financiers who foresaw inevitable and increasing openness in China, integrationists who argued that Beijing’s ambitions would be tamed by greater interaction with the international community, and hawks who believed that China’s power would be abated by perpetual American primacy. ……..

…….. Washington now faces its most dynamic and formidable competitor in modern history. Getting this challenge right will require doing away with the hopeful thinking that has long characterized the United States’ approach to China.

(4) A good friend had sent a speech delivered by Kevin Rudd, former Australian Prime Minister to the students at the U.S. military academy at West Point, earlier in March. It is worth the investment of time going through that speech. My reactions are as follows:

(1) Clearly, it is a Master class that the Indian political establishment needs to hear.

(2) Do Indian political leaders know the kind of intellectual concepts or are they capable of the intellectual thinking that Kevin Rudd attributes to Xi Jinping?

(3) Why has NITI-Aayog idea of inviting international experts to address Indian parliamentarians stopped? Was there anyone after DPM Tharman and Bill Gates? (Yes, there was Michael Porter on competitiveness of nations and states in May 2017)

(4) I was struck by his penchant for numerically layered arguments: Three characteristics, three aspects of the economic transformation post-2013 (or lack thereof) esp. with respect to private sector and then seven concentric circles.

(5) His explanation of how China chose to pursue the path that it is currently pursuing after deliberating upon alternative models is fascinating but equally it is silent on the contradictions and vulnerabilities of the model chosen eventually – single party dominance and encroachment.

(6) He has completely underplayed any discussion of China’s vulnerabilities or weaknesses or limitations. I would not say that it is due to a certain veneration or that he is in awe of China but, may be, because he believes that it is good to over-estimate an adversary rather than do the opposite.

(7) His discussion on the method that Xi has chosen to accommodate (or, suppress or ignore) the demand for political freedom after economic freedom is too thin or weak or almost non-existent. He says that Xi’s answer to that is ‘ideology’. Does not elaborate as much as he could have or should have.

(8) In the same breath, I can also add that his discussion of China’s economic limitations is too weak. May be, that is not his forte. He assumes that China will overtake American GDP and also mentions a time frame. But, risks to such a facile view are not mentioned, let alone discussed.

(9) What is clear to India is that there are no easy ways with China. In fact, I might even say that, in a sense, Xi’s ‘Presidency without limit’ makes many things clear. There is no equality or parity with China. They do not want India to have its own sphere of influence. They scoff at it. They may, at one stage, come to that understanding with the U.S. and that too, on their terms, later. But, they could rather have India as a supplicant and not as a strategic adversary or a partner.

India, proud of its civilisational past, now should know what its path is. It has to be prepared to confront and be prepared for confrontations through many flanks – economic, diplomatic and military and not be squeamish about its alliances with other democracies in the region and the USA – ‘the dance of the democracies’.

(5) Separately, I went through the testimony given by John Garnaut, former journalist and advisor to Prime Minister Malcolm Turnbull to the U.S House Armed Services Committee on March 21, 2018 although the document puts the date wrongly as March 21, 2008 (I wonder). That speech which comes with his article in ‘Foreign Affairs’ attached is, in some ways, a good counterpoint to the somewhat relatively benign way in which Kevin Rudd has painted the developments in China.

I told you so

Well, not me. Minxin Pei could say that. He predicted China’s return to a totalitarian state a decade+ ago.

David Frum interviews him for ‘The Atlantic’ (ht: Andy Mukherjee):

It could use the growing economic resources to strengthen its repressive capacity to defend its political monopoly. It does not want to reform the economy further because doing so would also risk losing control over the economy and all the benefits it can generate for the party. So there is a hard limit to how far the party would push economic reform.

This is a chilling comment:

It is not your garden-variety dictatorship, but a successor to a totalitarian regime. It is both far more ruthless and determined to protect its power than an average dictatorship and far more capable of doing so.

Economically, China is far less open than it ever was, after the Cultural Revolution:

Economically, the door is much less open, probably the least open since the reform era began nearly four decades ago.  There is a growing consensus that China today is the least open since the end of the Cultural Revolution. That is a very devastating comment on the political conditions there.

This question and the response are very important:

Frum: What if anything would you revise, amend, or enlarge in your 2006 statement from the vantage point of 2018?

Pei: I would revise one of the scenarios for change in the conclusion. Although one of the scenarios—depicting the rise of a hard authoritarian leader vowing to save the regime with more conservative policies—unfortunately turns out to be true, I also constructed a more optimistic scenario in which provinces led the way of reform in a “middle-up” model. The changes in the last five years, during which provinces quickly fell in line with Beijing, show that the potential for generating systemic changes in China provinces is much less than expected.

Why it is all sticks and no carrot now internally (externally too, except disguised, perhaps)

In the short to medium term, the Communist Party’s real strategy is to strengthen the security state, including the building of a powerful surveillance state. The strategic thinking behind it is that, since we can no longer deliver carrots, we will have to rely on sticks more. This explains the rising degree of repression in China, and things could get a lot worse if the economy performs more poorly.

 

What does OBOR stand for? and the ‘Movement method’

From James Kynge’s Twitter handle:

(O)dious (B)orrowing (O)nerous (R)ates [Link]

This from a long-form article by Mohan Malik in ‘The American Interest:

China’s strategy of fusing its maritime expansion with regional economic development and multilateral integration is yielding rich dividends. Having acquired on lease Pakistan’s Gwadar port for 40 years, Greece’s Piraeus port for 35 years, Djibouti port for ten years, Sri Lanka’s Hambantota port for 99 years, 20 percent of Cambodia’s total coastline for 99 years, and the Maldivian island of Feydhoo Finolhu for 50 years, Beijing is now pressuring Myanmar to raise China’s stake from 50 percent to 75–85 percent in the Kyaukpyu port on the Bay of Bengal, and to lease it for 99 years as well if Myanmar does not want to pay penalty for reneging on the $3 billion Myitsone energy dam deal. A military base in Djibouti, along with major port development projects in Kenya, Pakistan, Sri Lanka, the Maldives, Bangladesh, Myanmar, Malaysia, and Cambodia define the contours of China’s Maritime Silk Road—an oceanic connectivity project centered on the Indian Ocean. [Link]

Former Maldivian President Nasheed had this to say – from the Asia Nikkei review:

“Without firing a single shot, China has grabbed more land than the East India Company at the height of the 19th century,” Nasheed said, alleging that the Asian economic powerhouse has taken over “16 islands already” under the Maldives’ current president, Abdulla Yameen. “This land grab exercise hollows out our sovereignty,” he argued. Nasheed did not provide any names of the islands he alleged China had taken. [Link]

Andrew Small has a short piece in ‘Theprint.in’ and a longer (more meaningful) piece in Foreign Affairs on China’s presence in the Maldives. If you have access, it is worth reading the piece in ‘Foreign Affairs’.

Sample this from his piece in ‘Foreign Affairs’:

At the crux of this contest is the Sino-Indian relationship, which has deteriorated sharply in the last few years. In other regions, Beijing offered careful reassurances to countries that might try to frustrate Chinese investments in their backyards. With Russia, for example, China noted that OBOR would complement and reinforce Moscow’s own connectivity plans. Beijing made no such efforts with India. New Delhi had been willing to join earlier Chinese-led initiatives, such as the Asia Infrastructure Investment Bank (AIIB), when Chinese diplomacy displayed deftness and a multilateral spirit. China’s conduct around OBOR in South Asia took a clumsier and more unilateral form. Its quasi-official maps of the initiative included Indian ports, despite the lack of any consultations between the two sides. The economic corridor linking Bangladesh, China, India, and Myanmar was likewise folded into the scheme without Indian agreement. [Link]

Finally, David Bandurski’s article in ‘China Media Project’ is very fascinating. It features another article by Sun Liping, Professor at Tsinghua University on the ‘Movement method’. Fascinating. The Professor’s article was asked to be pulled down.

What is the ‘Movement Method’?:

Not all societies have the capacity for social mobilization or for the creation of movements. For the movement method to be possible, the first requirement is a certain kind of system. In this system, there must be a center (中枢) [or central administration] that is capable of mobilizing the populace, or that can efficiently direct the system of administration, or that can achieve both simultaneously. At the same time, the entire society must have a high degree of integration, or [a high degree of] linkage (联动性), so that in the process of social mobilization the whole of society can be spurred into action — and the condition necessary for action is entails all different sorts of organization, or administrative methods of organization, or some other form of organization.

The combination of the above-mentioned institutional factors amounts to a nationwide system (举国体制), [or “whole-nation system”], so that whatever task is concerned the mobilization happens on a national scale, and the entire population is mobilized. Thereupon, a single word reverberates (一声令下), and the entire society acts together. But in this process, expert division of labor is smashed, and every department and unit has its own targets and quotas.

For example, a number of years ago when many locales [throughout China] were promoting investment, offices including [chapters of] the Chinese Communist Youth League, the All-China Women’s Federation and the Department of Family Planning all had investment promotion targets, and if those targets were not met then the leaders responsible for those offices would be removed. Land reclamation and demolition is also achieved through this process of mobilization of [responsible] units (单位动员) — and even primary and middle schools employ mobilization, making primary and middle school students return home to engage their parent in ideological work. Some places even have rules about penalization by association (连坐的惩罚办法) [for example with offending parents or relatives, in order to force compliance with overall objectives]. When social tensions arise as a result of demolition and land requisition, the task of stability preservation (维稳) falls to a number of different departments. I have a friend who labors free of charge and without real authority for the China Association for Science and Technology, and even he has been issued quotas for house visitations to offer sympathy and comfort [in complaint cases]. During these visits, he must offer a bit of money as a means of placation, or if there is no money must draw upon his meager research funds.

The result of this is the chaos of social functions throughout the society. In the midst of a movement, various offices and departments have no choice but to set aside the [normal] functions of their office and to engage in matters outside their own familiarity and expertise. In order to complete these tasks, and in order that the boss isn’t punished, these offices and departments must do whatever they can, by means fair or foul. [Link]

This metaphor explains the risks in the ‘Movement method’ too well:

This calls to mind a metaphor that emerged during the stock market crisis of 2015. Imagine that someone who fears you and is by nature a bit hesitant is serving as your driver. You tell them how they should drive. You tell them to go just a bit faster, or that they should slow down. OK, so you want to go a bit faster? Well, let’s just push the accelerator to the floor. But all at once this is too fast for you, so you ask to slow down — we don’t want an accident after all. OK, so you’re scared, right? You want to slow down? Their foot goes off the accelerator and slams hard on the brakes.

When I read the paragraph (above) about how all divisions and all members of the society, including school children, are pressed into service, I recalled these sentences from the harrowing piece by Peter Humphrey who was put behind bars for nearly two years in China:

The prison was a business, doing manufacturing jobs for companies. Mornings, afternoons and often during the after-lunch nap, prisoners “laboured” in the common room. Our men made packaging parts. I recognised well-known brands — 3M, C&A, H&M. So much for corporate social responsibility, though the companies may well have been unaware that prison labour was part of their supply chain. Prisoners from Chinese cell blocks worked in our factory making textiles and components.

He was the frauds investigator hired by Glaxo Smith-Kline when the company got into trouble with Chinese authorities who accused them of bribing Chinese officials.  Unfortunately, Peter Humphrey’s piece is most likely behind a paywall.

He added:

One day, they brought me a copy of the United Nations treaties on imprisonment and torture that I had requested. These confirmed to me that China failed to comply with most of the standards of treatment (on nutrition, sleep, labour, health, contact with family, etc) required by international laws that China had signed, and I urged my consul to complain.

Now, go back and re-read my previous blog post featuring tweets by Chris Balding as to why the NYC/DC crowd does not get it. It is hard to find words to describe their motivations and logic. I shall leave it at that.

All these links are thanks to the Twitter handle of James Kynge.

This short WSJ Editorial sums up OBOR well:

Xi Jinping’s Belt and Road Initiative puts the expansion of Chinese power and influence above all else, and the Maldives is an example of the collateral damage. U.S. Secretary of State Rex Tillerson has called China’s practices “predatory economics,” and too often that’s right. [Link]