China winner, China loser

Mark O'Neill March 09, 2021 08:20

At the annual meeting of the National People’s Congress, China has much to boast about – the fastest growth of any major economy, surging exports, control of the Covid pandemic and foreigners eager to invest and buy its stocks and bonds.

Externally, however, it is a different story. Relations with major countries, including the U.S., Japan, UK, India and the European Union, are deteriorating. The Taiwan government and its people are increasingly hostile and there are calls to boycott the Winter Olympics in Beijing in February 2022.

First, the good news. China’s economy last year grew by 2.3 per cent and will rise in 2021 by six-eight per cent. Exports last year rose 3.6 per cent over 2019 to US$2.6 trillion, while imports fell 1.1 per cent to just over US$2 trillion.

Key to this success was control of the epidemic. The official death toll was 4,829 – even if under-reported, as many suspect, increasing that four- to five-fold would leave a figure far below those in countries in Europe and the Americas.

This control enabled the economy to resume and take advantage of the many shortages in other countries. In 2020, China exported 220 billion surgical masks, 2.3 billion protection uniforms and one billion test kits. Other items in strong demand were televisions, computers, tablets and mobiles – items needed by people living at home under lockdown.

The control was made possible by technology and digital systems on mobile telephones that enabled the government to know who was infected, where they had gone and with whom they were in contact. Western countries have been unable to create a similarly effective system.

This rapid recovery persuaded foreign companies to pour money into China. Foreign direct investment in 2020 rose 4.5 per cent over a year earlier to a record US$144.37 billion. Foreign financial institutions eagerly bought Chinese stocks and bonds that offer a better return than what they can earn at home.

But, if we leave the mainland, the picture looks quite different. China’s relations with major partners are deteriorating.

While grateful for Chinese supplies of medical supplies and vaccine, many foreigners hold the country responsible for the pandemic. The visit of the WHO delegation in January to research the cause of the virus did not go smoothly and did not resolve suspicions of China’s role.

Beijing hoped the new administration of US President Joe Biden would adopt a more friendly policy than that of Donald Trump. It has been disappointed.

In a 24-page document outlining Biden’s national security policies published last week, the President singled out a “growing rivalry with China” as a key challenge facing the United States. His Secretary of State Antony Blinken described China as “the biggest geopolitical test” of this century.

“It (China) is the only competitor potentially capable of combining its economic, diplomatic, military, and technological power to mount a sustained challenge to a stable and open international system,” the document said.

Relations with Canada, Australia and the UK have deteriorated sharply over commercial, business and human rights issues. More than 24 Indian and Chinese soldiers have died in a nine-month Himalayan border conflict that has locked down tens of thousands of troops in one of the world’s coldest places.

In his news conference on Sunday, Foreign Minister Wang Yi focussed on China’s improving relations with Africa, Latin America and Southeast Asia, as well as the Regional Comprehensive Economic Partnership with 14 Asian-Pacific economies. China has sent vaccines to more than 35 African and 12 Latin American nations, he said. It has improving relations with Iran, Saudi Arabia and other Arab countries.

The NPC announced an increase of 6.8 per cent in military spending, the largest in Asia, to 1.355 trillion yuan. This news was received with alarm in India, Vietnam, Philippines and Taiwan, possible targets of an attack by the People’s Liberation Army.

Beijing insists that the ‘one country, two systems’ formula is the only future for Taiwan. But this is unacceptable to the vast majority of Taiwan people, even more so after the passage of the national security law and a new governance system of Hong Kong the NPC will approve this week.

We can expect another year of “Wolf Warriors” and rising tensions.

-- Contact us at [email protected]

Mark O'Neill

A Hong Kong-based writer, teacher and speaker.