A key choice awaits China – money or principles


Five-star red flags line Nanjing Road pedestrian street in Shanghai, China on June 22, 2021. This year marks the 100th anniversary of the Chinese Communist Party.

Costphoto | Barcroft Media | Getty Images

China is at a crucial moment in its political and economic evolution. The political boom that tries to become a dominant roar comes up against unexpected economic hurdles. As China aspires to become a global superpower, it’s fascinating that it faces the very test it assumed the Western world would fail: money or principle.

Deng Xiaoping, Chinese leader from 1978 to 1989, recognized as “the architect of modern China”, once told his nation to “hide its abilities and bide its time.” Current Chinese President Xi Jinping boldly declares, through his policies and rhetoric, that the time to hide and wait is over.

Under Xi, China’s Machiavellian approach to international relations is now completely transparent. The chimera of diplomacy and overtures to do business fails to disguise raw ambition and a brash seizure of power and influence.

China cannot continue to tout our economic ties when technology is shamelessly stolen, copyrights are ignored, Hong Kong is subdued, Uyghurs are persecuted, and Taiwan is threatened. Nor can we ignore the way Xi seeks to reshape China itself, as entrepreneurs are silenced, businesses come under increased government scrutiny, and technology and big data are released for control. Orwellian social.

Sun Tzu’s “The Art of War” postulates that understanding your opponent is fundamental to a successful strategy. China’s understanding of the West in general, and the United States in particular, is arrogant, hedonistic, and money-loving. This assumes that Western countries will sacrifice principles in search of profit. The greedy Western paradigm has served China well from Tiananmen Square, but recent experience with Australia suggests that China may have misjudged.

An article in Foreign Affairs magazine by former US deputy national security adviser Matt Pottinger states: “The CCP leaders made a bet that Australian companies, suffering from a targeted trade embargo, would put pressure on their government to make political concessions to Beijing. But the Australian people – including business leaders and exporters – understood that accepting China’s ultimatum would mean submitting to a dangerous new order. Australian companies absorbed the losses, resisted the embargo and found new markets. Australians decided their sovereignty was more important than lobster sales – no doubt baffling those in Beijing who thought Canberra would put Australia’s economic interests ahead of its core values. “

While putting pressure on our allies abroad at home, Xi and his cohorts seek to reshape the Chinese economy and society into a state-run techno-authoritarian market. Regulatory measures cover large parts of the private sector and personal activity. The state is now telling companies how to write their algorithms, cracking down on social media accounts that publish financial information, specifying the number of hours of video games children have to spend, and enforcing opaque national security regulations on safety. commerce and technology.

Hong Kong is constitutionally described as “one country, two systems”. In July 2020, China imposed a “national security law” that effectively returned Hong Kong, a global trading center with one of the most important stock markets, to “one system.” The assumption that global market participants would continue to conduct the same volume of business through a newly restricted and more opaque Hong Kong affects economic growth and national income. Jack Ma, founder of online giant Alibaba, has been forced to leave the public eye with his charismatic voice silenced. Alibaba shares which traded as high as $ 319.32 on October 27, 2020, closed at $ 170 last week, and the technical chart remains negative.

Here’s the catch: China’s reach for power and domination comes up with economic costs. It seems ironic that the world can now know whether China will pursue its principles or its money. Years ago, Sister Irene Kraus, a Roman Catholic nun in charge of a large hospital system, said, “No margin, no mission. This gospel for health care managers across the country is also good advice for government leaders. Democratic strategist James Carville once told American voters, “It’s the economy, stupid.”

In short, it is difficult to govern effectively without an economy capable of supporting the population, maintaining domestic tranquility and respectability on the world stage. How long can we continue to view China as a quiet and respectable trading partner?

If Beijing eases enough to revitalize economic activity, global markets will benefit. Yet Xi’s long-term course is clear. Whatever the outcome of the current test for China, the United States and other world powers can never forget Beijing’s ambition to reshape the world.

Already, US politicians are responding to this challenge, as the Trump and Biden administrations have been tough on China, while Congress is investing in US R&D and considering proposals for investing in China and its influence on Chinese boards. administration of American companies. Yet Beijing will pressure our private sector leaders in areas such as technology, finance and entertainment as it seeks to decouple and reshape the economy and global institutions for its purposes. Ours is a nation founded on principle, and on the strength of our friendship and our trade with our allies and partners. Let us understand the magnitude of this threat and let us be vigilant to preserve, protect and defend our principles, our values ​​and our treasure.

Michael K. Farr is a CNBC contributor and Chairman and CEO of Farr, Miller & Washington.

Dan Mahaffee is senior vice president and director of policy at the Center for the Study of President and Congress in Washington.


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