In a recent
visit to South Africa, a good friend was asked by a business associate there if one should fear China. Apparently, this South African gentleman had read many negative media reports on China.
Upon his return, my friend took pain to compose the following to help explain the truth to his associate. He has shared the composition with
me. The concerns are very well explained and I have obtained his greenlight to share it with readers as well.
* * * * *
This question requires more than a
simple answer of "you need not fear" or "you
should fear".
This is because we live at a time when a massive
information war is being waged on China, conducted principally by the USA and some
of her allies.
As a start, we need to have a clear understanding
of how the world we live in is organised and the sources of
information which influence our views, thinking and perspectives.
I believe you are aware that worldwide
only about half a dozen news agencies in the US and Europe are the primary
supplier of news/information to most of the world's English media. (Reuters,
Associated Press, Bloomberg, AgreeFrance-Presse, UPI, and BBC, etc). However
increasingly the monopoly power of these news agencies is being challenged by
social media.
One interesting example. If you follow the western
English media, how many countries do you think have sanctioned Russia over
its invasion of Ukraine? You would be forgiven if you think most countries have
sanctioned Russia.
This is the actual answer: No African country,
No country from the Middle East, No South American country. In the whole of
Asia only three countries (Japan, S. Korea, and Singapore). So only the USA,
most (not all) European countries, Canada and three from Asia.
Beyond official and commercial sources, the
American CIA is a major and very powerful player in spreading information
and influence, directly and indirectly. It was recently reported that the CIA
has a budget of USD1.6 billion to "manage news and information" on
China. Among others this money is used to support media organisations and
reporters around the world on their reporting on China. To put
it mildly, to spread disinformation about China.
The world is now at an inflection point. American
hegemony and dominance is giving way to a multi-polar world, with
emerging powers ranging from China to Russia to Brazil and India. However,
this is a development America is unwilling to accept and therefore the risk
that America will go to war to protect its hegemony is real.
China due to the size of its population and economy
(which is already larger than the US based on purchasing power parity), is
therefore viewed by American leaders as its most serious rival and even enemy.
This is despite China's protests that it has no intention to displace America.
China's per capita income is still not even a quarter of that of the
American's. However, the US still feels threatened and continues to take
actions to retard China's progress or growth. It has stopped the exports of
advanced semiconductor chips to China and also prevented other countries
from doing so. It also does not allow The Netherlands, a sovereign nation,
to export advanced chip making machines to China. And also sanctions many
Chinese companies in the name of national security.
The Information War.
Based on the English mainstream media, these
are some of the recurring themes when they report about China. It would take
many pages to discuss each of these topics. But I will briefly touch on each.
If you are still interested after reading this email, the rest you need to read
by yourself:
1. China wants to disrupt the existing global
order.
But what is this "existing global order"
which is being threatened? It is, of course, one in which America (and her
allies) dominates and controls. Most international institutions set up
after WWII were and still are dominated by the US and
European countries. The UN, IMF, World Bank etc. No head of any of them can
be appointed without the approval of America. The World Bank head is always an
American and the head of the IMF is always from France. Even the Asian
Development Bank (ADB) is dominated by the US which always appointed
a citizen of its close ally, Japan. No Chinese has ever been President of
the ADB, even though the Chinese economy has long surpassed Japan's and is a
few times larger than that of France.
However, when any of these institutions
are no longer considered useful or no longer follow the
wishes of the US, the US starts to abandon them. For example, the US has
withdrawn from the WHO and stopped appointment of members to the Dispute
Settlement Panel to WTO to prevent hearing of cases brought against the US.
2. China bullies its neighbours in the South China
Sea and threatens freedom of navigation.
There are real territorial
disputes over areas of the South China Sea, not just involving China but
also between Vietnam and Philippines or Vietnam and Malaysia. Most of
these disputes resulted from former colonial powers arbitrarily drawing
boundaries or territory seized during war e.g., the Diaoyutai islands were
seized by the Japanese and supposed to be returned to China after WWII,
but it did not happen.
There are also constant accusations that China will
threaten freedom of navigation in the South China Sea. This is very strange.
China is the world's largest trading nation. Virtually all her trade is by
sea via the South China Sea. Why would China want to restrict navigation in the
South China sea when it would be the first to suffer if there is any disruption?
3. China subsidizes research and development of its
industries which give them an unfair competitive advantage.
Every country subsidizes research and development,
but they go under different names and labels. In America, the government
gives all kinds of research grants to universities
and industries. Many American innovations came from military
research.
Boeing is probably one of the most
subsidised companies in the USA. Likewise, Airbus is heavily subsidized by
European governments.
4. Chinese companies sell their products overseas
at below costs (" dumping").
Every time an American industry cannot compete, the
easiest thing to do is accuse the foreign competitor of dumping. It
used to be Japan but now the focus is on China.
Many complaints against China of dumping to
the WTO have proven to be not true under proper scrutiny.
As you know, in manufacturing, you should continue
to produce so long as your marginal revenue is higher than your marginal costs, even
though your marginal revenue is below total costs. This is because
your fixed costs are sunk costs. This we learn in our introductory
economics course.
One huge advantage Chinese companies enjoy is
their massive market and scale. Economies of scale which no other country can
match. In the 1950s and 1960s America was in this position.
But later American companies decided to
outsource production to other countries because it was more
profitable to do so. And most moved their production to China, with her well
educated and disciplined labour force. Now American politicians accuse
China of stealing American jobs!
China's new energy vehicles are one such
example which enjoys economies of scale. Few countries will be
able to compete. Of course, China is also way ahead in new energy vehicles
technology. Other examples are solar panels and cellular technology.
If all the accusations of dumping (selling
below costs) by Chinese industries are true, China should be bankrupt
by now!
5. Unfair Trade Balance.
For the last 30 - 40 years or so, companies in many
developed countries decided it was more profitable to have their products
manufactured in China while they concentrate on designs, marketing and
promoting their brands. China's lower labour costs, disciplined & better
educated workers were able to produce at much lower costs.
Brands like Apple totally outsource their
production overseas. It is estimated that if Apple were to make phones in
the US, it would have to be sold at about USD3,500 compared with about
USD1,500 based on production in China. China did not force Apple and
others to manufacture in China. They went voluntarily.
The outsourcing of production over the decades
has resulted in the hollowing out of manufacturing in the US and parts of
Europe. There were negative consequences. Partly because of this and
inequitable income distribution, the American middle class have not done
well in the last 20-30 years. This is the main reason they voted for Trump.
However, one should note that the US and Europe had
increasingly focussed on export of services instead of goods. America
and the UK enjoy huge service export surpluses.
6. China lends money to developing countries which
they cannot afford to pay back and thus place them in debt traps.
In any report in the western mainstream media,
it is obligatory to accuse China of "debt trap" whenever there
is a report that China is involved in funding some infrastructural projects
in Africa, Southeast Asia, or South America.
The term "debt trap" was first used by an
India writer and now used repeatedly by the media, even though several
studies by American think tanks have confirmed there is no truth
in this.
It is of course true that some of the countries
which borrowed from China to build infrastructures were unable to service
their debt but the same is true of those who borrow from the World Bank or
commercial banks. Much of the infrastructure, such as roads, ports or railway
lines are economically beneficial but may not provide near term financial
returns. This is not unusual.
One point of difference is that most loans granted
by China are to finance infrastructure projects. Much of the loans from
the US are reportedly to buy American military wares.
A report by Bloomberg on 18 March 2022 stated:
Over the past two decades, China has built large
infrastructure projects in Africa, making Western powers
uncomfortable amid wider concerns about Beijing's investments across the
continent. However, a deeper look shows that accusations of so-called debt trap
diplomacy turned out to be unfounded.
7. China is ruled by a communist dictatorship and
its population has no rights or freedom.
Politically China is definitely ruled by the
Chinese communist party but economically it is as capitalist as you can get.
There are no western "liberal democracy"
type elections, but political leaders are selected through a meritocratic
system which has been in operation for thousands of
years, interrupted only during wars and civil unrest.
There may be no elections, but leaders go through a
tough selection process based primarily on merit, performance, and
accountability. More than half of the top dozen Chinese leaders are highly
trained engineers.
For most of its over 2,000 years history China has
been ruled by emperors who are held accountable by the Chinese people to
meet basic needs; availability of food, peace, and security. The
concept of western style "democracy" is alien to Chinese culture
whose dominant influence comes from the teaching of Confucius (respect for
authority which in turn must take care of the needs of the people, centrality
of the family, importance of education, filial piety, etc). Soldiers are
among the lowest ranked in Confucian culture. Chinese do not like wars and
have low respect for soldiers.
As one leading political scientist likes to
point out, pre Covid, each year 150 million Chinese citizens travel
overseas for vacations, and they all return to China. If China is such a
terrible, repressed society you would have expected many not to
return.
America and some European countries have always
claimed their form of governments, "liberal democracy" is what the
rest of the world must follow because only their form of government will result
in economic growth and development. China's economic success is not
supposed to have happened because it is ruled by a communist party. Thus, China
is a threat for offering a different path for development.
8. China is destroying the culture of the Tibetans and
violating the human rights of the Uyghurs (Muslims) and use child labour in
Xinjiang.
For a very long time the US and some of her allies
have made every effort to stir up the Tibetans (province of Tibet) and Uyghurs (province of Xinjiang). Why so? Is America so
concerned about these people?
There are constant claims China is committing
genocide in these two provinces.
To date, no evidence has been provided to support
those accusations.
Tibet and Xinjiang are sparsely
populated provinces with minority citizens. Combined they cover
30 % of China's land area. They are also rich in mineral resources. Xinjiang is
a major producer of cotton and the centre of China's solar panel industries.
The Uyghurs are Sunni Muslims, and some were influenced by extremist groups
from central Asia. There used to be terrorist attacks but has since been
curbed. Numerous leaders of Muslim countries have visited Xinjiang and not a
single Muslim country has supported accusations of genocide.
An important fact. When China had its one child
policy, the minority races, like Uyghurs were exempted. And in fact, the Uyghurs
are the fastest growing race in China. How could this be if the Chinese govt is
carrying out genocide against them?
China believes America hopes to cause some Chinese
provinces such as Tibet and Xinjiang to separate and cause China to collapse
like the former Soviet Union.
9. China's economy is going to collapse soon.
Every few months a segment of the western
English media will predict the imminent collapse of China's economy. The
Economist magazine is most famous for this.
I read The Economist magazine from
high school until about 5 years ago. What often are passed as
analysis are nothing more than wishful thinking or simply a desire to
demonise.
I am still waiting for the collapse of China's
economy.
10. China Intellectual property
("IP") 's theft.
Since my generation's school days, we were taught
that if a country has no freedom (wrong to begin with, as it is always a matter
of degree) and democracy, its citizens will not be creative and cannot innovate
or invent new things. So, this fits very neatly into the narrative that China,
a communist country, with no freedom, will have to steal intellectual
properties because it is not able to create them. This does make one think from
whom China steals its 5G or her EV technologies, where it is way ahead of
everybody else?
What is true is that at times in return for market
access China had required technology transfer from foreign companies or
set up factories in China. Many developing countries do so. It is not
theft but part of a bargain, an agreement. This is a practice of even the
US, requiring TSMC to set up factories in the US to be allowed to
continue exports from Taiwan.
Based on many reports, China now in fact is ahead
in several new technologies. New energy vehicles, solar energy, 5G cellar
technology, quantum computing, etc. You cannot be ahead by stealing.
It has been widely acknowledged that Chinese
scientists are ahead in several areas of scientific research and
publications. How is this possible? China, with 1.4 billion people has a huge
talent pool, supported by relentless emphasis on education. Many reports
suggest that China produces 8 to 10 times more engineering graduates than the
USA each year and more than 50% of the World's.
11. China is aggressive and could cause
wars.
Since 1949, China has been involved in
two brief border wars. By the way, China has a land border with 14
countries.
The first war was with India over territorial
disputes due to the arbitrary border line drawn along the
Himalaya mountains by the British (India has a similar dispute with
Pakistan over Kashmir). This border dispute is still not settled.
And then in 1979, the Chinese army moved about
20 kilometres into the northern part of Vietnam (but completely withdrew after
only one month) to punish Vietnam for invading Cambodia, a close ally of
China. I have no time to go into the details but please read up if you are
interested.
Chinese people do not like wars. This is not
to say there were no wars in China, which usually took place when an
emperor lost his legitimacy because his citizens' needs were not met.
China, however, very rarely invades neighbouring countries despite her immense
power compared with neighbours for many centuries. As mentioned earlier
Confucian culture abhors wars.
12. Risk of WWIII.
America became the dominant economic and military
power after WWII, with the Soviet Union as a potential competitor. However, the
economy of the Soviet Union was nowhere close to that of the US. The
Soviet Union went into an unsustainable arms race with the US resulting in
its collapse. Thereafter the US became the undisputed sole superpower.
However, since the turn of the millennium (2000)
China's rapid economic growth has inadvertently led it to
challenge American economic leadership. Economic power underpins military
powers, even though China spends not even half of the US in defence.
Increasingly the US views China as a rival and an enemy and therefore must
be contained or defeated. Its development must be stopped or slowed down.
America does not want another country which can challenge its
supremacy, even though China has consistently made clear that it has
no interest to challenge US supremacy. Nonetheless America took actions to
slow or retard China's progress. A blatant hostile action was to make Canada
arrest the daughter of the founder of Huawei, Meng Wanzhou, in 2021 based on
some spurious charges. Since then, there had been a string of sanctions on
Chinese companies under the cover of “national security”.
To China, recent American/ European containment
attacks are a painful reminder of its "Century of
Humiliation" in the hands of foreigners. In1839, the first opium
war started when China tried to stop British imports of opium into China.
The British declared war and with their superior weapons China was easily
defeated and had to agree to massive war reparations as well as cede over the
control of Hong Kong.
A second opium war started in 1856, this time
involving the British and French which again led to China's defeat and further
concessions and unequal treaties. Thereafter China was reduced to a
semi-colony, with many parts of China under foreign control. For example, Macau
under the Portuguese and Shandong area under Germans. China's government
was forced to legalize opium in China.
Given this history, it is quite impossible for the
Chinese government to give in to American unreasonable demands. This is
clearly demonstrated in the way China reacted to Trump's tariffs.
Trump demanded the Chinese President to call him or
China to contact the US to initiate negotiations. It did not happen. In the end
it was the Americans who had to reach out to China first. Not a surprise to me
at all.
I expect America to continue to treat China as a
rival and an enemy. Moreover, if the US is unable to resolve the country's
economic problems and control the growth of huge debt (USD 36
trillions), in desperation it may see war as a means to wipe the books
clean. A war between America and China is likely to be the end of mankind.
This is my greatest fear, and it should be yours
too.
Should South Africa fear China?
Let’s now turn to your country, South Africa.
1. Militarily, I do not think South Africa should
fear China.
2. Economically, in terms of manufacturing, I think
it will be very tough for South Africa to compete with China. However, it would
make a lot of sense for South Africa to encourage Chinese companies to set up
factories in South Africa to manufacture for the markets in Africa or
elsewhere.
3. China is also potentially a huge market for
South Africa's tourism as well as agricultural products, including wines.
4. China also has been very successful in bringing
800 million people out of poverty in a few decades; perhaps with some
lessons to be learnt.
5. China's infrastructures development is probably
second to none, a number of Asian countries are trying to emulate.
This is how I see China. Some are opinions. Many
are not and can be substantiated.
Sorry, rather lengthy but not easy to give a
short answer.
