GOOD MORNING FROM LONDON
#1 CHINA’S CRITICS – FOREIGN AFFAIRS
#2 CHINA’S CRITICS – SUNDAY TIMES
#3 SEMICONDUCTORS – FINANCIAL TIMES
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CRITICS OF CHINA
OHN MUELLER – PROFESSOR EMERITUS OF POLITICAL SCIENCE AT OHIO STATE UNIVERSITY
Professor Mueller writes critically of China in the current issue of Foreign Affairs in an article headed The Containment of China. In a summary of China’s negatives he states;-
“The list of resulting problems is nearly endless: endemic corruption, environmental degradation, slowing growth, capricious shifts in government policies (including the abruptly cancelled “zero COVID” policy), inefficient enterprises, fraudulent statistical reporting, a rapidly aging population, enormous overproduction, huge youth unemployment, increasing debt, a housing bubble, restive minorities, protectionist policies, the alienation of Western investors, and a clampdown on civil liberties. There also seems to be something of a decline in confidence in, and in the credibility of, the Communist Party’s dictates, a change that could have dire long-term consequences for the regime.”
GRAHAM PERRY COMMENTS;-
The purpose of this Column – now on its 502nd issue – is to provide balance on the question of China. We know there are arguments For China and arguments Against China. The Western media is basically anti-China. It views the country as a totalitarian, genocidal, repressive dictatorship which is making a fundamental challenge to the political norms that have prevailed in the US and Europe. China is a threat, they contend, and as with all threats it needs to be confronted. It is, therefore, important that those in the West – that find much to commend in China – are able to address the negatives that critics of China regularly express. That is not to say China is 100% success story. That is not the case. China has many issues to address and they will feature in #503 but China is showing the Global South there is a valid workable alternative model of development to that promoted by the US/UK/EU/JAPAN/AUSTRALIA/NZ
Back to the critics of China and Professor Mueller summarises the negatives in the article in the current issues of the widely read US Foreign Affairs publication. Let’s address them.
- Endemic Corruption.
Corruption? Yes. Endemic? No.
Xi Jinping from Day One of his Presidency has focused on beating corruption and making China clean. He knows that if corruption is tolerated the people of China will turn away from the Communist Party. The Party has delivered remarkable progress with 1 bn people being raised out of poverty and more than 1 trillion dollars loaned to developing countries to finance their infrastructure development. Some in the 98m Communist Party are corrupt and Xi is not afraid to call them out. Xi’s campaign is a sign of strength not weakness. And the campaign will remain a priority because to reduce the exposure of bad practice wherever it flourishes in China is to allow corruption to fester.
- “Environmental degradation”.
Again in a casual phrase Mueller disregards the considerable evidence of the adoption of green policies. China will be carbon neutral by 2060 if not earlier. The former US Climate Supremo, John Kirby, has worked closely with China and has recorded his positive impressions of China’s progress with the environment. Why does Mueller disregard Kirby’s endorsements of China’s environmental policies?
- “Slowing growth”
How many countries in the West would be pleased to report a 5.2% growth figure for 2023. Growth has slowed for two main reasons;- first, the economy has grown in size and is about to become the largest economy in the world – and it is inevitable that as size increases that growth figures will become smaller. Second, the property sector has experienced a big setback. No question – this is a negative and will be a drag on growth. Mistakes have been made and China has been up front about them. Mueller hopes China will flounder and fail but China’s surge in Electric Vehicles, Huawei Mobile Phones and fashion sales in London’s top shops show there is a positive reaction which Mueller overlooks.
Why does he overlook? Because he is keen to convey a doom-laden scenario. For Mueller and many others, the China model must be undermined in order to allow the Western US-led model of development to survive
- “Capricious shifts in government policy”.
Odd choice of words – “capricious” Covid commenced in China but China took decisive and immediate action to limit health damage. Covid restrictions – more strict in China than any other country – came to an end. There are reports from Western agencies that the end of controls was handled clumsily but they are reports not factual conclusions. That said it is the case that China’s Covid Shutdown was firm and unrelenting and people must have been frustrated and some complaints were witnessed by the media. But, again, Western reporters are faced with a widespread positive atmosphere on the streets of China’s cities. If the atmosphere was negative, angry, even seditious Sky, Reuters, Agence France Presse would have featured it prominently in their daily reports.
- “Fraudulent statistical reporting”.
Mueller gives the impression that this is rampant, widespread and very damaging. But isn’t this clutching at straws to do down China? Sure, some organisations to curry favour with higher placed officials may have exaggerated figures. It happens in China and it happens in most other countries of the world. But Mueller gives the impression that such exaggeration are rampant. He assumes that the majority of Chinese companies and organisations will give glowing reports to ingratiate themselves with the bosses higher up the scale. That happened in the old USSR and no question there would have been an inclination by some in China to do the same. Interestingly no Western agencies query the 5.2% growth rate in 2023.
- “A rapidly ageing population”.
China was over-populated and had to reduce population growth and it succeeded. Young people now form a smaller percentage of the population – a fact known, predicted and expected by the Government for the last 20 years. Looking ahead China’s challenge is to raise the technical quality of its employed workers and it is very relevant to note that China has the largest volume of STEM (Scientific, Technological, Engineering and Mathematics) graduates of any country in the world. China’s problem going forward is to prevent the non-educated population from falling behind the increasingly technical requirements for employment. They can become unemployable and discontented – something quite overlooked by Western commentators – but well appreciated by China’s planners. See next issue #503
- “Huge youth unemployment”
Youth unemployment has increased – no question and if that pool of unemployed was to become permanent, and not just temporary, China would have a problem. But there is a sense that Prof Mueller is wishing for this to occur in order to justify his negative views on China. There have been no reports of strife or protest on the streets of China’s cities although there must be dissatisfaction. Students who have completed their quest for degrees and qualifications want work not unemployment. Mueller hopes China’s youth unemployment rate will remain stubbornly high and become the basis for protest not to say revolt. The reports emanating from Beijing show a full awareness of the problem – a precursor to action to reduce the high figure. Watch this space.
- “Restive minorities”
Where? and Whom? This is a throwaway line used to portray China as a country in crisis. China is full of foreign journalists keen to find evidence of discontent at any level of Chinese society but none of the news agencies have reported any street protests by China’s national minorities.
China’s critics always like to portray a situation where seething national minorities are up in arms against Beijing as the Han majority with alleged racial intent close down places of worship, prevent teaching of local languages and restrict birth rates in an attempt to reduce the number of national minorities. Just one figure in response – at the height of allegation of the supposed Han genocidal assault on the Uyghurs in Xinjiang, the population of the Uyghurs increased from 10m to 12m.
- “Clampdown of civil liberties”.
What is the clampdown? Has there been a surge in the arrest of dissidents? Are more Chinese being locked up? Has there been an increase in the number of “troublemakers” being sacked or dismissed from their jobs? What civil liberties are under attack?
Again these are the throwaway lines coming from the pen of those academics who want to convey the impression that generally the Chinese languish under a harsh and oppressive regime which forever interferes with, and restricts, the individual rights of the Chinese.
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#2 CHINA “ONE STEP AHEAD IN TRADE WAR”
IRWIN STELZER OF UK’s SUNDAY TIMES
In an article in the UK’s Sunday Times, Irwin Stetzer – their international trade writer – recalls the praise heaped on President Clinton for “piloting China into the World Trade Organisation where the communist nation would become a rules obeying member of the international community. It was not to be. China ignored WTO rules and used its membership to hollow out portions of America’s manufacturing sector, and its new found riches to finance a system that was regressive at home and aggressive abroad”. Donald Trump emerged to forge a response, resulting in close to a bipartisan trade policy based on tariffs, revamping of supply chains and subsidies for US firms…
Facing off against an America that has adopted managed trade are Russia, Iran, scores of Belt and Road countries dependant on China and assorted fellow travellers such as Brazil. Members of this emerging trade bloc seek to liberate themselves from subservience to King Dollar and thereby diminish American power to impose sanctions. None share America’s aversion to goods using Uighur slave labour in Xinjiang.
China has responded to US tariffs by increasing exports to countries such as Mexico and other countries where their goods are “finalised” and shipped into the US duty free.
“Mexico recently displaced China as the leading source of American exports. The value of goods imported by the US from Mexico increased by 5% to $475bn while the imports from China fell by 20% as the value of products made in Chins ended up in Mexico’s column. And Elton Musk will begin construction this week of a plant in Santa Catarina, Mexico, 150 miles from the US border as the truck drives. It will turn out Tesla’s next generation, lower cost vehicles and the Cybertruck using parts made by Chinese manufacturers he has invited to locate nearby to replicate the supply chain at Tesla’s Shanghai plant.
Biden has a problem. As Stelzer continues “Increasing tariffs would put upward pressure on consumer prices that are so high that American voters are more than a little annoyed. Keeping foreign products out would reduce the competition Biden’s antitrust policy aims to increase”.
GRAHAM PERRY COMMENTS;-
The US intention was to bring China into the WTO and to offer China the benefits of membership in the hope that China would jettison its basic policies of Socialist construction and become a welcome and ‘co-operative’ member of the Western controlled international trade system. Capitalism in China would flourish; Chinese businessmen would acquire increased rights of ownership over property that would lead to a demand for political rights and begin the process of dismantling the Socialist edifice that China had been constructing since Deng Hsiaoping introduced his policy of Reform in 1979.
The Western intention was that China would become “mature”, “sensible”, and “open-minded”. Previously closed doors would be opened. US businessmen would be welcome and would use their presence to cultivate links with the Chinese political and economic leadership leading eventually to a downplaying by China of its commitment to political development; to the growth of a non-socialist commercial class that would, in time, acquire political power as the role of the Communist Party diminished.
That was the hope. That was the plan. After all, the Russians had been bought off and had jettisoned their commitment to the founding ideals of the 1917 Bolshevik Revolution. In the same way China would be bought off and would jettison the founding ideals of Mao Tsetung’s 1949 People’s Republic of China.
It was not to be. China remained committed to building Socialism in China with Chinese Characteristics and those “characteristics” maintained the leading role of the Communist Party – and not its marginalisation. China’s Socialism included a role for capitalists even billionaires but not to the relegation of its political priorities. China refused to play the Western game.
Increasingly the US is finding it difficult to get a measure of China. Why is the Party still in power? Why haven’t the Billionaires taken over? Why won’t China play ball with the US? These are the questions that plague Irwin Stelzer. Basically Stelzer and the academic and political hierarchy do not understand China. They have jettisoned the fundamental requirement of every political power “Know your Opponent. Understand where he is coming from, what is his priority, what is he trying to achieve.” The US gets this wrong – repeatedly. They fail to see things from the mindset of the party on the other side of the table and make mistake, after mistake after mistake.
China is patient. It is also committed. It watches while the US flounders and for the US, read the West and Japan and Australia too. They assume that China wants to dominate the world and become the new Imperialism. They are wrong. China is rewriting history. We have seen the rise and fall of Charlemagne, the Dutch, the Spanish, the Ottoman and now the US empire. It will not be replaced by a Chinese Empire.
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#3 US EFFORTS TO CURB CHINA SEMICONDUCTOR PROGRESS
FINANCIAL TIMES
“The US is pushing Japan and the Netherlands to tighten restrictions on exports of chipmaking equipment to China, following a series of advances by blacklisted Chinese tech companies Huawei and SMIC. Washington imposed unilateral export controls in October 2022 in an effort to slow Chinese efforts to build or obtain high-performance semiconductors that can be used for military purposes. The Netherlands and Japan, where companies specialise in the production of advanced chipmaking equipment, joined the US last year by enforcing export curbs on sophisticated machines and components.
But despite the controls, Chinese mobile phone maker Huawei and Shanghai-based Semiconductor Manufacturing International Corporation — both of which are on a US trade blacklist — revealed in August they had produced an advanced chip used in Huawei’s Mate 60 series phone.
The Biden administration wants Tokyo and The Hague to go further to close gaps in the existing regime, said people close to the talks. The countries remained divided over where the loopholes were, said one person. Possible measures include restricting exports of less sophisticated machines, as well as introducing restrictions on servicing and repairs offered for machines already purchased by Chinese clients before the controls took force.
Bloomberg first reported the talks. A European official confirmed Washington was applying pressure but did not give more details. The Dutch ministry of trade declined to comment. A Japanese trade ministry official said Tokyo was having talks with various countries but declined to comment further. The Hague is pressing Brussels to co-ordinate export controls after being isolated last year. In a proposal sent to other governments, seen by the FT, it stressed the need to “avoid fragmentation of national controls within the EU”. Such controls are a national competence but Brussels in January put forward proposals to play a bigger role.
Three people familiar with the US government effort told the Financial Times that Washington was also trying to persuade South Korea to join the Netherlands and Japan by imposing similar controls. South Korea has not replicated the Dutch and Japanese controls because its companies do not manufacture chipmaking equipment as sophisticated as the machines produced by the Netherlands’ ASML or Japan’s Tokyo Electron.
But a person familiar with the US-South Korea talks said that China’s heavily-subsidised chipmakers, including SMIC, had been using less sophisticated equipment to produce advanced chips at a loss. “The Chinese don’t have to worry about the efficiency of the process — they can use trailing edge equipment to produce leading edge chips because they can afford to bleed money in a way no one else can,” the person said. “This is making the Americans nervous, so they want to expand the scope of controls to include more non state of the art machines.”
The person added the South Korean government would be reluctant to introduce the curbs, which would affect smaller producers of tools and components. “These medium-sized companies, most of which are relatively unknown, are regarded as the backbone of the Korean economy.” The South Korean government declined to comment.
Chinese imports of foreign semiconductor equipment surged to record highs last summer just before the Dutch and Japanese controls, as chipmakers in the country prepared for the curbs. On Thursday, Chinese Foreign Minister Wang Yi condemned US efforts to deny China access to advanced technologies. “The US has been devising various tactics to suppress China and keeps lengthening its unilateral sanctions list, reaching bewildering levels of unfathomable absurdity,” Wang told a press briefing in Beijing. “If the United States insists on suppressing China, it will ultimately harm itself.”
GRAHAM PERRY COMMENTS’-
This Column has regularly reported on the ongoing US efforts to stifle China’s production of semiconductors. You remember the narrative – The US is about to be displaced from its #1 position as the biggest economy in the world. It is desperate to put in place obstacles that will impede China’s progress. In this context semiconductors are of crucial importance and the US priority is to interfere, upset, reduce, restrict China’s production of semi-conductors and its imports of semiconductors.
The issue of semiconductors is right at the heart of the US-China struggle and Biden and Commerce Secretary Raimondo are pulling out all the stops in an effort to stem China’s access to the product. The object of US focus is the Netherlands. The US wants the Netherlands and Japan to tighten restrictions on exports of chipmaking equipment to China. But despite these controls, Huawei and SMIC – both on the US trade blacklist – have produced an advanced chip used in Huawei’s Mate 60 series phone.
NEXT ISSUE – CHINA #503 – WILL FOCUS ON TWO CHALLENGES FACING CHINA GOING FORWARD
GRAHAM PERRY
