COVID-19 Threatens "Chinese Dream"
Updated: May 8, 2020
As the COVID-19 pandemic strikes and China's credibility concerning its origin and initial spread come into question, countries are discussing decoupling from the communist regime. Such talk is exposing Xi Jinping's carefully cultivated plans to dominate the world stage by controlling international economics, infrastructure, and information.
Since rising to head the Chinese Communist Party (CCP) in 2012, Xi Jinping has been guiding a lofty mission to elevate China's strength, civilization, harmony, and beauty. Under his "Chinese Dream," Xi aims for his country to become a "moderately well-off society" by the early 2020s and a fully developed nation by 2050.
Experts speculate that Xi now hopes that as the United States struggles to recover from the COVID-19 pandemic, China can surpass it to become the number one economy in the world.
In his opening address to Chinese citizens as their President in 2013, Xi stated that China's people would reach this collective dream through their persistent efforts, an indomitable will to rejuvenate the nation, and the promotion of Chinese socialism.
When speaking with President Barack Obama in California in 2013, the newly appointed Chinese President's message was more inclusive.
"By the Chinese dream, we seek to have economic prosperity, national renewal and people's well-being," Xi said. "The Chinese dream is about cooperation, development, peace and win-win, and it is connected to the American dream and the beautiful dreams people in other countries may have."
Skip ahead to 2018, and China's Communist Party has severely clamped down on previously emerging freedoms. It has increased its state surveillance and censorship programs. Critics say Chairman Xi has also used a massive anti-corruption campaign to purge or sideline his political rivals.
Since the '80s, China had imposed a two-term limit on its President, meaning Xi was due to step down after ten years by 2023. Evidently, Xi didn't believe his dreams would be complete by then, though.
Instead of presenting a potential successor during the 2018 pen-annual Communist Party Congress, Xi consolidated his power. Members voted to change the party's constitution to include his name and his own political ideology. The BBC reported that this elevated his status to the level of the party's founder, Chairman Mao.
Workers at state factories, college students and schoolchildren alike are now required to study the, "Xi Jinping Thought on Socialism with Chinese Characteristics for the New Era," in what the party is branding as a new chapter in modern communist political ideology.
Under Xi's direction, party delegates also removed the term limits on the presidency. In theory, Xi can now remain president for the rest of his life.
China's borders do not confine Xi's ambitions. Since his rise to power, the CCP has promoted initiatives to purchase foreign companies and develop international infrastructures while investing heavily in various media outlets to quietly increase its influence on the world's economy and flow of information.
The pandemic put a spotlight on how dependent many countries are on China for critical supplies like Personal Protection Equipment and medications.
"Just years after the United States granted China special trade privileges in 2000, the last penicillin plant in America closed down. American factories that made aspirin, vitamin C and other essential medicine closed after that, put out of business by China's predatory pricing." Senator Tom Cotton and Representative Mike Gallagher pointed out in a recent op-ed. "The United States is dangerously dependent for pharmaceuticals on the very regime whose failures and coverups caused this deadly pandemic to spiral out of control."
They and other lawmakers believe this needs to change, and they say they "have a plan to end America's dependence on Chinese drugs and take back our ability to make pharmaceuticals and medical devices right here in America."
The pair advocates for decoupling America's medical supply chain from China, "We can begin to undo the damage now. The antidote to our dependence on Chinese drugs is to stop buying them and take back our ability to make basic medicine here in America."
Chinese dependence was a source of debate in places like Great Britain, too, even before the coronavirus emerged. Earlier this year, Prime Minister Boris Johnson gave the Chinese telecom giant Huawei permission to build part of Britain's 5G network. Now, however, the pandemic has reignited concerns that this will make British technologically too dependent on China and pose an intelligence risk. In light of the pandemic, some senior lawmakers are again urging the U.K. government to reconsider its position.
Other countries, including India, Germany, and Australia, have already tightened foreign investment rules to try and move away from China. These governments hope to increase their domestic capacity to produce essential materials without fear that local companies might be bought out by foreign investors.
India's new restrictions didn't name China explicitly. Still, a spokesperson at the Chinese embassy in New Delhi said in a recent statement that "the impact of the policy on Chinese investors is clear."
The Chinese embassy's statement concluded with, "We hope India would revise relevant discriminatory practices, treat investments from different countries equally, and foster an open, fair and equitable business environment."
Decoupling is not always straight forward, though. You need to look no further than the U.S. to see just how difficult these kinds of efforts might prove to be. China was the United States' largest supplier of imported goods in 2018 at over half a trillion dollars, a number that is 60 percent higher than it was in 2018.
"The world is dependent on China for manufacturing," Willy Shih, a professor at Harvard Business School who has written on U.S.-China supply-chain issues, recently told the Atlantic. Decoupling wouldn't just impact medical supplies. It would also affect electronics, machinery, furniture, toys, and more. More than 21 percent of all items the United States imported in 2018 came from China.
"So I'm in the school that talk is cheap," Shih said. "And if you really want to go down that path, then you have to be prepared for the consequences."
American Companies Owned by China
It's true. China is deeply embedded in the United States, not just by what we import, but even through things we think we are making for ourselves. Since Xi took power, Chinese companies have aggressively been buying American companies.
When COVID-19 infections forced Smithfield Foods to close one of its meatpacking plants that provides about five percent of the U.S. pork supply, many were surprised to learn that the Virginia based American food industry icon is now Chinese owned. It was purchased by a company belonging to a member of the CCP's elite in 2013 for almost 5-billion dollars.
After more than 100 years of making stoves, refrigerators, washers, and dryers as an American company, General Electric's appliance division is now Chinese owned. It sold to Qingdao Haier for $5.4 billion in 2016.
If you like to stay in luxury hotels like Waldorf, Ritz, Four Seasons, or Starwood, your stay likely supports China since at least parts of these brands are now owned by Chinese companies that are, in turn, controlled by the communist government.
You are in the same position if you like going to the movies. AMC and Carmike Cinemas are both owned by a Chinese company, the same one that owns Legendary studios. Legendary has financed films like the Jurassic World and Godzilla franchises.
Ingram Micro's name may not necessarily be familiar to consumers, but the company distributes everything from Apple's iPhone to Cisco's network equipment. Last year China's HNA Group bought the company for $6 billion.
The Rise and Fall of NHA
Speaking of HNA, once touted as China's boldest independent conglomerate, in the wake of COVID-19 shutdowns, it is now being taken over by the Chinese government.
HNA Group, which Chen Feng started as an airline, rapidly diversified through investments in real estate, finance, and overseas acquisitions. Notable early investors included George Soros. Then in 2015, it began a $40 billion shopping spree that included not only Ingram Micro but shares in Hilton, Deutsche Bank, and a myriad of other companies.
By the end of 2017, HNA's international assets peaked above $170 billion. Its tentacles are sticky, twisted, and trace back to obfuscated backers, but its massive borrowing was catching up to it even before the COVID plague hit Wuhan.
In April, government officials in Hainan province, where the company is based, have reportedly established a "working group" that includes new corporate officers to help HNA Group solve its financial woes.
Industry week says that through strategic purchases, China is also trying to influence America's energy supplies. "Since 2009, Chinese companies have invested billions of dollars acquiring significant percentages of shares of energy companies, such as The AES Corp., Chesapeake Energy, and Oil & Gas Assets. In 2010, China Communications Construction Co. bought 100% of Friede Goldman United, and in 2012, A-Tech Wind Power (Jiangxi) bought 100% of Cirrus Wind Energy."
Unlike many other countries, the United States allows 100 percent foreign ownership of its businesses. This is something rarely reciprocated, but foreign purchases are only blocked when there are strictly defined national security issues. In contrast, the Chinese government allows foreign ownership in only a few annually selected industry sectors and usually requires joint ventures with Chinese corporations.
Trump's Election Marked Shift in Attitude
but in 2018 the Securities and Exchange Commission rejected the acquisition. Before its halt, the proposed deal had sparked an uproar on Capitol Hill and was criticized by Donald Trump during the presidential campaign.
President Trump's election marked a shift in American attitudes towards China. Six days after Trump took office in 2017, the U.S.-China Economic and Security Review Commission held a hearing on Chinese investment.
"For many years, China has recycled the earnings from its large and sustained trade deficit with the United States into U.S. Treasury bills. But the last few years have seen a marked increase in the amount of inward foreign direct investment (FDI) from China to the United States, across a range of industries," Robert D. Atkinson, President of the Information Technology and Innovation Foundation, testified.
"While the underlying motivation for some of this investment is commercial, at least one-third is from Chinese state-owned enterprises, and it is likely that considerably more is guided and supported by the Chinese government, specifically targeting sectors that are strategically important for U.S. national security or economic leadership," he said.
Later that year, legislation was introduced to modernize the national security review of potential foreign investments in the United States.
"Chinese investment in the United States increased more than 900 percent between 2010 and 2016. Much of this investment was part of a strategic, coordinated, Chinese government effort to target critical American infrastructure … China is buying American companies at a breathtaking pace. While some are legitimate business investments, many others are part of a backdoor effort to compromise U.S. national security," stated Congressman Robert Pittenger, R-N.C. in the press release about the bill. "For example, China recently attempted to purchase a U.S. missile defense supplier using a shell company to evade detection. The global economy presents new security risks, and so our bipartisan legislation provides Washington the necessary tools to better track and evaluate Chinese investment…"
The Foreign Investment Risk Review Modernization Act (FIRRMA) passed into law with overwhelming bipartisan support, in August of 2018.
"These regulations strengthen our national security and modernize the investment review process," said Treasury Secretary Steven Mnuchin. "They also maintain our nation's open investment policy by encouraging investment in American businesses and workers, and by providing clarity and certainty regarding the types of transactions that are covered."
China's Belt and Road Initiative
In countries with fewer business assets, the push to obtain Xi's "Chinese Dream" has taken a different tack. The Chinese government adopted the Belt and Road Initiative (BRI) global development strategy in 2015. It involves infrastructure development and investments in some 70 countries and international organizations throughout Asia, Europe, Africa, and the Caribbean.
The Chinese government calls the initiative "a bid to enhance regional connectivity and embrace a brighter future."
Many observers, however, see it as a push to achieve Chinese dominance in global affairs utilizing a China-centered trading network. They accuse the communist government of luring poor countries into debt-trap diplomacy by providing overly burdensome loans for much-needed infrastructure projects and then taking control of the assets when nations fail to pay off the debt.
The conditions of these loans often remain private, and the loaned money routinely goes to pay contractors from the creditor country. Meaning, while some individuals may make money, the country as a whole may not benefit.
Mark Green is the administrator of the U.S. Agency for International Development and has also held the post of United States Ambassador to Tanzania. A year ago, he wrote about how China's Belt and Road Initiative threatens the ability of developing countries to achieve self-reliance.
"The fact that poorer countries struggle with debt is nothing new," Mark Green wrote in an op-ed for foreignpolicy.com, "but after years of successful efforts to reduce their debt burden—they are once again going into the red. Unlike before, developing countries' strategic assets, such as their resources, mineral deposits, port access rights, and the like, are now targeted by creditors as collateral in many of these predatory deals."
China holds most of these overly burdensome debts. The International Monetary Fund shows that China's contribution nearly doubled between 2013 and 2016. The public debt these impoverished countries owed China jumped from just over six to more than 11 and a half percent, and Bejing's lending continues to expand through its BRI initiative.
Green added, "Noting a lack of economic feasibility of some BRI projects, many observers suspect that the initiative is partly motivated by China's desire to stimulate its own economy, obtain strategic assets, and convert its economic access into political and strategic influence in recipient nations."
As COVID-19 continues to lock down nation after nation, China's debt-trap diplomacy is now coming under increased fire. In April, Tanzania's President, John Magufuli canceled a $10 billion Chinese loan saying, "Only a drunkard would accept these terms."
Local media reports say his predecessor signed the agreement to let Chinese investors build a port on the condition that they would get 30 years to guarantee the loan and a 99 years uninterrupted lease to use it.
Another shocking demand accepted by the former President's administration was that the Tanzanian government would have absolutely no power to raise concerns over how the Chinese used the port during the lease.
The Kenyan government has also raised issues with China's plans to take over one of its critical seaports after the African nation failed to clear its debts. Meanwhile, Bejing already took control of Sri Lanka's Hambantota port after the island nation was unable to pay part of its massive Belt and Road loan.
The CCP's growing presence in Africa is just one of the numerous areas of concern for Western policymakers as the battle for political and economic influence between the U.S. and China plays out across the globe.
How people react to the communist regime's next steps, both in China and the rest of the world, will prove vital to the CCP's position and tactics going forward. This is not something Bejing is leaving to chance.
That is why the next Gist Say'n will focus on China's use of media and propaganda, especially how it plays now, against the backdrop of COVID-19.