30 June 2016

China should close up shop in the South China Sea


If you are ready to haggle over the price of something without knowing what it could really fetch for, the trick is to have your potential customer open his mouth first: “I will pay 2 pounds for your coconut”. In that moment you are in control of the bargain, because you know what the other has in mind. So the trick is to keep your mouth shut and get the other to show his cards first, uttering only, if you really must: “it is very expensive”.

At least, this is what many Chinese, raised in a culture that values business skills, learn from childhood. The impression from the outside is that the whole mess of South China Sea stems also from this intuition. The problem is, this only works when dealing with a single, individual “customer”. When you have to cope with a crowd of customers, all with adversarial attitudes towards you, this behaviour may backfire.

Saying “it is very expensive” can easily sound like a rip-off in the rounds of talks with the customers and amongst themselves. It can become something from which I, as a customer, want to walk away, shun you and do no business with you – leaving you penniless and perhaps even without the coconut. In fact, while tiny individual vendors may profit from this murky “you speak first” practice, established shops and large supermarkets thrive on clearly marked, well-lit, cheap prices.

Now China has to decide what kind of shop it wants to be in the South China Sea.

But it is unclear what Beijing really wants there. It does NOT want the American navy moving around, it does NOT want other countries to set military installations in the islands they control, but what does it want? Suggestions welcome. China claims the space included in the nine-dash line, but what about the countries that have islands and fish boats and navy within those islands? It is not clear, yet again.

A small country, like a small vendor, can afford and even thrive in the confusion, getting more than it had in mind. But can a large country go about the world in the same way? Can you imagine the lines in supermarkets when cashiers have to haggle with each single customer over the price of a coconut, while other customers, awaiting their turn, try to eavesdrop the discussion? Maybe then a customer – or the cashier – leaks a word or two to another customer or back to the cashier? Surely no matter how beautiful the supermarket, in a few days or even in a few hours, it would be deserted and thus soon bankrupt, for coconuts and everything else.

The problem as Feng Zhang neatly put it  is that Beijing is unclear about what it really wants in the South China Sea. Sure, it all sparked when some of the neighbours and the US began claiming that the South China Sea was there for free, and China which had no intention of “selling” it cheaply went on shouting louder and louder “it is very expensive”, without ever naming a price.

The internal confusion in China is contributing to the mess at the moment. People want different prices. As Mr Zhang put it, there are the radicals who want to claim sovereignty on everything and expand their claim; the realists who want to strengthen their clout but would refrain from expansion; and the moderates who are ready for discounts, i.e. concessions. Nobody wants to give it away for free, and why should they as The South China Sea is theirs. Or so the internal party logic believes in a self-congratulatory rhetoric.

Yet the problem really is: is China in the situation where customers are leaving the supermarket?

From the outside it is increasingly clear that the issue is not just the South China Sea (the coconut) but the whole reliability of China. Beijing also has problems with Japan on the Senkaku Islands, and its old “vassal” North Korea is more out of control than ever. China’s economic performance is declining and reform of the inefficient State Owned Enterprises is sputtering; reins on money flows have been reintroduced and the RMB now is less of an international currency than a year ago. Even foreign firms in China, once the greatest advocates of the Beijing miracle, are complaining louder about a less friendly business atmosphere. Dissent about Beijing is also growing in Hong Kong and Taiwan and it could move to a boiling point in the near future, creating havoc in the region and in Mainland China itself. Here two large regions, Tibet and Xinjiang, are virtually shut out from the rest of the country.

Many things in this picture are still very fuzzy and could go in different ways. It all may turn positive. But one thing is clear, and it is giving a picture of the future: China says the South China Sea is hers. It is saying it not to businessmen, prepared to haggle, but to military people, who by profession have to consider worst-case scenarios. Then the overall message is: China is preparing to take on the world, then the world must prepare to take on China.

There may be also vested interests, propagandists’ dirty tricks in this message. But this, after all, is only part of international affairs where military, business, information, disinformation, influence, propaganda, ambitions are all slices in the dangerous old broil.

Part of this is also the desire of some Chinese people, who feel threatened by president Xi Jinping’s anti-corruption campaign, to see Xi caught in a quagmire and blatantly fail. Plots and counterplots are after all the bread and butter of politics, only the naïve can blame the plotters. The problem is how China got there and how it can get out of it. The answer would be complex, but certainly it has to start by admitting that the “sale” of the South China Sea for Beijing has been spoiled. Its costs are far higher than its benefits, and Beijing would be better off giving it away for free, rather than being sucked in. On the market when you start losing and you are in an untenable position, you have to cut your losses. If you don’t, you end up losing your shirt.

On the eve of the Opium War, in 1840, China was much richer and stronger than now, with almost 50% of the global GDP and 70% of the global silver (the monetary reserves of the time) and yet it refused minor concessions to England thinking simply there was no reason to give in. We all know what happened after that: China crashed. China now is far weaker than in 1840 and a large array of nations are a firmly opposing its “price” for its “coconut”.

Francesco Sisci is a Senior Research Associate of China Renmin University. The author of Asia Times’ Sinograph column, he was also Asia Editor for the Italian daily La Stampa and Beijing correspondent for Il Sole di 24 Ore, and has written for numerous Italian and international publications.