The Biggest Player in the History of the World
John Mauldin gives us a highly pertinent anecdote about China:
“Back in the 1990s, Robert Rubin, a Secretary of the Treasury under Bill Clinton, was negotiating the terms under which China would be allowed into the World Trade Organization. My sources say he was basically asking for many of the exact same things Trump wants now … But in 1998, in the middle of the Monica Lewinsky scandal, Clinton wanted a “win” (Not unlike the current president.) And Rubin wasn’t delivering, holding firm on his demands for market access and guarantees on intellectual property, etc. Clinton then took the Chinese negotiations away from Rubin and gave it to Secretary of State Madeleine Albright with the instructions to get it done.
Not being a trade expert, Albright didn’t understand the underlying issues. The Chinese recognized she was playing a weak hand and held firm. To make a long story short, my sources say she effectively caved. Clinton got his “win” and we got stuck with a lousy trade deal. When Trump alleges that we got snookered in a bad trade deal, he is correct—although I wonder if he understands the history. Maybe somebody gave him the background, but it never came out in any of his speeches. That WTO access, which finally happened in 2001, let China begin capturing markets through legal means, and access US intellectual property without paying for it …
Does this make a difference now? Probably not … But it gets to the rivalry we discussed above. Is it possible for both the US and China to stay in an organization like WTO? Trump seems to doubt it, as he’s threatened to withdraw from WTO. We may someday look back at this period of a single body governing international trade as an aberration — a nice dream that was never realistic. If so, prepare for some big changes.”
This goes to the crux of one of the biggest geo-political issues facing Europe and America. Mauldin then gives us what very much the consensus view that, “despite some of his rhetoric, I don’t believe [Trump] is ideologically against trade. I think he just wants a US “win” and is flexible on what that means”. Yes, Trump quite possibly will end up doing ‘a Clinton’, but does America have a realistic alternative but to accommodate a rising China? The world has changed since the Clinton era: this no longer is just a matter of tussling over the terms of trade.
Xi Jinping lies at the apex of the Chinese political system. His influence now permeates at every level. He is the most powerful leader since Chairman Mao. Kevin Rudd (former PM of Australia and longtime student of China) notes, “none of this is for the faint-hearted … Xi has grown up in Chinese party politics as conducted at the highest levels. Through his father, Xi Zhongxun … he has been through a “masterclass” of not only how to survive it, but also on how to prevail within it. For these reasons, he has proven himself to be the most formidable politician of his age. He has succeeded in pre-empting, outflanking, outmanoeuvring, and then removing each of his political adversaries. The polite term for this is power consolidation. In that, he has certainly succeeded”.
And here is the rub: the world which Xi envisions is wholly incompatible with Washington’s priorities. Xi is not only more powerful than any predecessor other than Mao, he knows it, and intends to make his mark on world history. One that equates, or even surpasses, that of Mao.
Lee Kuan Yew, who before his death in 2015, was the world’s premier China-watcher, had a pointed answer about China’s stunning trajectory over the past 40 years: “The size of China’s displacement of the world balance is such that the world must find a new balance. It is not possible to pretend that this is just another big player. This is the biggest player in the history of the world.”
The year 2021, marks the centenary of the Chinese Communist Party’s founding, and Xi clearly intends that in 2021 China will showcase the achievements of its first centenary goals. By then, China expects to be the most powerful economy in the world (it is already there – on a purchasing power parity basis), and an emerging world class power – both in political and military terms. According to Richard Haas, the President of the US Council for Foreign Relations, “[China’s] long-term ambition is to dismantle the U.S. alliance system in Asia, replacing it with a more benign (from Beijing’s perspective) regional security order in which it enjoys pride of place, and ideally a sphere of influence commensurate with its power”. (If anything, Haas may be understating things).
To achieve the first of the two centenary goals (the second concludes in 2049), China has one major economic, one economic/political strand, and one political/military strand of policy to the achievement of its goals.
Made in China 2025 is a broad industrial policy that is receiving massive state R & D funding ($232 billion in 2016), including an explicit potential dual-use integration into military innovation. Its main aim, besides improving productivity, is to make China the world’s ‘tech leader’, and for China to become 70% self-sufficient in key materials and components. This may be well-known in theory, but perhaps the move towards self-sufficiency by both China and Russia suggests something more stark. These states are moving away from the classic liberal trade model to an economic model based on autonomy, and a state-led economy (such as advocated by economists like Friedrich List, before becoming eclipsed by the prevalence of Adam Smith-ian thinking).
The second prong to policy is the famous ‘Belt and Road’ initiative linking China to Europe. The economic element however, is often deprecated in the West as ‘mere infrastructure’ – albeit on a grand scale. Its conception, rather, represents a direct swipe at the western, hyper-financialised economic model. In a famous critical remark directed at China’s heavy reliance on western-style, debt-led growth – an anonymous author (thought to be Xi or close colleague), noted (sarcastically) the notion that big trees could be grown ‘in the air’. Which is to say: that trees need to have roots, and to grow in the ground. Instead of the ‘virtual’, financialised ‘activity’ of the West, real economic activity stems from the real economy, with roots planted in the earth. The ‘Belt and Road’ is just this: intended as a major catalyst to real economics.
Its political aspect, of course, is evident: It will create an immense (Remimbi) trading and influence block, and being land-based, will shift strategic power away from the western domination over sea-power to land routes over which western conventional military power is limited – just as, in the same way, it will transfer financial power away from the reserve dollar system, to the Remimbi and other currencies.
The other aspect, which has received much less notice, is how Xi has been able to mesh his objectives with those of Russia. Initially cautious towards the ‘Belt and Road’ project when Xi launched it in 2013, the Kremlin, warmed to the notion in the wake of the western coup against its interests in Ukraine, and with America’s joint project with Saudi Arabia to crash the price of oil (Saudi wanted to put pressure on Russia to abandon Assad, and the US to weaken President Putin, by weakening the rouble and government finances).
Thus, by 2015, President Putin had pledged a linkup between Russia’s Eurasian Economic Union and China’s Silk Road Economic Belt, and two years later, Putin was the main guest of honor at the ‘One Belt, One Road’ summit, held in Beijing.
What is interesting is how Russia has integrated Xi’s vision into its own ‘Greater Eurasia’ thinking, conceived as the core antithesis to an American-led, financialised, world order. The Kremlin, of course, well understands that in the trade and finance realm, Russia’s position in Eurasia is much weaker than that of China. (China’s economy being eight to ten times the size of that of Russia).
Russia’s crucial strengths traditionally lie in the political-military and diplomatic domains. Hence, leaving economic initiatives to China, Moscow strives for the role of the chief architect of a Eurasian political and security architecture, a concert of major Asian powers, and energy producers.
President Putin has, in a sense, found the Russian symmetry and complementarity to Xi’s ‘road and corridor’ politics (an asymmetrical Russian balance, if you like, to Xi’s raw economic strength) in its ‘One Map; Three Regions’ politics. Bruno Maçães has written:
In October 2017, Rosneft Chief Executive Officer Igor Sechin took the unusual step of presenting a geopolitical report on the “ideals of Eurasian integration” to an audience in Verona, Italy. One of the maps projected on the screen during the presentation showed the supercontinent—what Russian circles call “Greater Eurasia”—as divided between three main regions. For Sechin, the crucial division is not between Europe and Asia, but between regions of energy consumption and regions of energy production. The former are organized on the western and eastern edges of the supercontinent: Europe, including Turkey, and the Asia Pacific, including India.
Between them we find three regions of energy production: Russia and the Arctic, the Caspian, and the Middle East. Interestingly, the map does not break these three regions apart, preferring to draw a delimitation line around all three. They are contiguous, thus forming a single bloc, at least from a purely geographic perspective.
The map, Maçães notes, “illustrates an important point about Russia’s new self-image. From the point of view of energy geopolitics, Europe and the Asia Pacific are perfectly equivalent, providing alternative sources of demand for energy resources … And, as you consider the three areas [which the map] delimits, it becomes apparent that two of them are already led and organized by a leading actor: Germany in the case of Europe; and China for the Asia Pacific”.
It is from this perspective, that Russia’s renewed interest and intervention in the Middle East must be understood. By consolidating all three energy-producing regions under its leadership, Russia can be a true equal to China in shaping the new Eurasian system. Its interests lie now more decisively in organizing a common political will for the core energy production region, than in recovering ‘old yearnings’ about being a part of Europe.
And ‘political will’ is Xi’s project too: Whereas once Mao’s Cultural Revolution tried to wipe out China’s ancient past and replace it with communism’s “new socialist man”, Xi has increasingly portrayed the party as the inheritor and successor to a 5,000-year-old Chinese empire brought low only by the marauding West, writes Graham Allison, author of Destined for War: Can America and China Escape Thucydides’s Trap? Thus the Party has evoked past humiliations at the hands of Japan and the West “to create a sense of unity that had been fracturing, and to define a Chinese identity fundamentally at odds with American modernity”.
Finally, Xi has pledged to make China strong again. He believes that a military that is “able to fight and win wars” is essential to realizing every other component of China’s “rejuvenation”. America has more military ‘structure’ than China, but Moscow has technologically better weapons – but China too is catching up in this respect with the West fast. The direct strategic military co-operation between China and Russia (China stood behind Russia militarily as well as politically) was evident in the recent US and UK infowar thrust – Skripal and chemical weapons in Syria – against Russia. It acts as a deterrent against US military action undertaken against either state.
In Washington there are – in contrast to Beijing – multiple voices attempting to define how America should interact with China. Trump has been the loudest, but ideologues are there too, calling for a fundamental re-set of the terms of trade, and of intellectual property rights. But the US military also are adamant that the US must remain the military hegemon in the Asia-Pacific region and that China cannot be allowed to push America out. There is, though, rare unity in Washington – amongst ‘think-tankers’ and between the two main political parties – on one point, and one point alone: that China constitutes the ‘Number One’ threat to the American-led ‘rules-based’ global order … and should be cut down to size.
But what – amongst China’s objectives outlined above – is it that that the US thinks it can somehow ‘roll back’ and more substantially cut China ‘down to size’ – without going to war?
Realistically, Xi may grant Trump enough minor concessions (i.e. on ownership and intellectual property issues) to enable Trump to claim a ‘win’ (i.e. to do ‘a Clinton’ again), and buy a few years of chilly economic peace, whilst the US continues to rack up trade and budget deficits. But ultimately, America will have to decide to accommodate to reality, or risk recession at best, or war at worst.
It will be fraught both economically and geo-politically, especially since those who claim to know Xi, seem to be convinced that aside from wanting to return China to being the ‘biggest player in the history of the world’, that Xi also aspires to the one who, finally, reunites China: including not just Xinjiang and Tibet on the mainland, but also Hong Kong and Taiwan. Can America culturally absorb the thought of ‘democratic’ Taiwan being militarily unified into China? Could it trade that for a North Korean solution? It seems improbable.