20 November 2020

Has Covid helped or hindered the inevitable rise of China?

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For some the pandemic has accelerated China’s shift towards being the dominant superpower, Yet, other note that it has triggered resistance to what the Communist Party call China’s ‘inevitable rise’. So how should we think about this?

Economically, China is doing relatively well. A stringent lockdown has suppressed Covid, limiting it to periodic and random cases. In a frontal assault on irony, the Ministry of Education recently added The coronavirus experience to the school curriculum to teach pupils the Party’s dedication to putting the life and safety of its people above all else.

Economic recovery was evident in the recent Golden Week holiday at the start of last month, when the transport and hospitality sectors reported high volumes of traffic. THE economy is back on a roughly 5% growth path. In 2021, when the Communist Party will celebrate with fanfare its centenary, the economy will probably grow by 8% or more – though this would largely reflect the statistical comparison with a weak 2020. Set against the persistent economic travails of the US and EU this winter, it is hardly surprising that China has adopted a nationalistic narrative WITH claims that Western countries have failed to control the pandemic while China has succeeded because of its superior system.

Several countries have started to complain about so called ‘wolf warrior’ diplomacy. While the US is regularly in Beijing’s cross-hairs, many other countries have fallen out of favour with China. The UK has been warned of “consequences” because of its decisions to freeze out Huawei and offer a route to citizenship to eligible Hong Kong residents. Australia in particular has been targeted by a barrage of trade restrictions, and this week received a list of 14 grievances, including the call for an independent inquiry into the pandemic. This action illustrates precisely why countries are becoming restive about China’s interference and intrusion into matters of national sovereignty.

China’s behaviour has not gone down well. A recent and now widely quoted Pew survey of 14 advanced nations found a record 60% had an unfavourable view of China, and a marked distrust of Xi Jinping. Corruption scandals and political controversies have also sown distrust in countries at the heart of Xi’s signature foreign policy – the Belt and Road Initiative – including Bangladesh, the Czech Republic, Italy, Kazakhstan, Kenya, Malaysia, Myanmar, Pakistan, and Sri Lanka. If China’s success in dealing with the pandemic was supposed to energise its soft power, it has so far been a disappointment.

And China’s return to growth masks numerous fault lines. Although the economy is ‘normalising’, it is not normal. The production side of the economy is doing better than the consumer sector, where wage and employment gains remain subdued. Deep income, wealth and rural-urban inequalities abound. There is angst about job creation, with graduates being encouraged to go to the countryside to ‘learn from the masses’ in an echo of the Cultural Revolution. Defaults among state enterprises and debt difficulties in local governments are becoming more problematic.

The government recently started to deliberate its 14th Five Year Plan for 2021-25, and a Vision 2035 mission statement. These will embed ambitious economic goals, and a strong focus on technology and innovation, as well as on food and energy security, jobs, and a pledge to be carbon neutral by 2060. Whether these goals are achievable is a moot point – given China faces structural headwinds in the form of over-indebtedness and resource misallocation, rapid ageing, weak productivity and poor institutional governance.

In Washington, Joe Biden’s China inbox is already pretty full. His strategy may not be hugely different from Trump’s, though perhaps less volatile and unilateralist. There is near unanimous agreement that US-China relations are in a state of structural decay having spread from disagreements over trade and technology to a fundamental clash of values and beliefs.

Biden knows Xi Jinping from two-way visits in 2011-12. Much has changed since then, and Biden will be presented immediately with a series of potential flashpoints. Foremost among these is Taiwan, which will be a bone of contention for the foreseeable future. Others include freedom of navigation and Chinese militarisation of islands in the South China Sea, and human rights issues in Xinjiang Province and Hong Kong.

A common refrain among international relations experts is that America must work more closely with allies in Asia, now including India, and in Europe. This could certainly pay dividends if like-minded countries join forces to confront China more effectively. Biden has already indicated he would rejoin the Paris Agreement on climate change, as well as re-engage with the World Health Organisation and World Trade Organisation.

Biden’s trade team is unlikely to persist with the slavish fixing of bilateral trade imbalances using tariffs. Instead the focus may turn to  to non-tariff barriers and other domestic policies that are contentious in trade. The new administration might also seek collaboration with China in areas where mutual interests align, such as climate change, global health and financial stability, nuclear proliferation and peacekeeping, sustainable development goals, and cybersecurity.

The focus on Biden is understandable, but US-China relations are also down to Xi Jinping. His unashamed insistence that the Communist Party’s mission is to prevail in the struggle between socialism and capitalism is giving rise to a truculent pattern of behaviour in geopolitics to which pushback is growing. To repair US-China relations he must accept his share of responsibility for their decay.

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George Magnus is a former Chief Economist at UBS, a Research Associate at Oxford University’s China Centre and at SOAS, and author of Red Flags: Why Xi’s China is in Jeopardy. He is also a member of the China Foresight Forum at LSE IDEAS (The London School of Economics’ foreign policy think tank).

Columns are the author's own opinion and do not necessarily reflect the views of CapX.