Garvan Walshe: Democracies need to pull together to stop Chinese subversion of the open global economy

3 Dec

Garvan Walshe is a former National and International Security Policy Adviser to the Conservative Party. He runs TRD Policy.

Chinese aggression hit the headlines after Beijing imposed punitive tariffs on Australian wine. But resisting Beijing’s exploitation of the international economy to build up its own power needs democracies to do far more than buy the odd bottle (or case) of Cab-Sauv.

On Tuesday, the China Research Group, led by Tom Tugendhat and Neil O’Brien, released a hard hitting report, Defending Democracy in a New World, describing a toolkit of things democracies can do to limit China’s abuse of the international system (I was involved in drafting the report).

Quite rightly, the report emphasises the importance of engaging with China, and welcomes Chinese economic progress, which, since Deng Xiaoping began to open the Chinese economy in 1979, has brought huge gains in the standard of living of billions of Chinese people, and indirectly, to the rest of the world.

Yet that international economic system is based on fundamental principles that China has been systematically violating. Human rights abuses have intensified since Xi Jinping consolidated power, from the concentration camps into which Uighurs have been crammed, to the destruction of civil liberties and democratic rights in Hong Kong, and the totalitarian oppression to which all Chinese citizens are subjected. China is bullying its neighbours, even to the point of preventing Taiwan helping fight the Covid–19 pandemic through the World Health Organisation, and has been rearming to back that intimidation with force.

Defending Democracy’s most important contribution however, is that it identifies the core source of Chinese Communist Party power and presents a set of practical measures democracies can take to blunt this expansionism. Today’s China is capable of reaching into the open economies of the West and pressing the undoubted economic achievements of Chinese industry and technology into the service of the Chinese state.

When globalisation brought barriers between states down, it did so on the implicit assumption that in market economies, the purpose of business was to make money – not serve the home states of the companies’ owners.

This created a world where it’s possible for all of us who can afford it, no matter where we are from, to own parts of foreign companies by buying shares in them, and have that ownership protected by the foreign country’s legal system. Instead of competing politically-like nineteenth century powers, we invest in each others’ economies and reap the benefits of companies competing with each other across a massive international market.

This ideal, however, is based on governments’ understanding that their job isn’t to promote “our own” companies at the expense of “theirs”, but to create an economic environment where a market economy could meet people’s needs and create jobs. Notwithstanding occasional outbursts of protectionism like France’s declaring dairy producer Danone a “strategic” industry, or outright state capture in some of the smaller ex-Communist European states, this ideal has mostly been upheld in the advanced economies of the world.

Xi Jinping’s China has seen that it is possible to apply the subversion of open Western economies, pioneered by the KGB, at industrial scale. When Western countries began to open up to each other after World War II, we did so on the condition that foreign trade and investment would not be used as a crude tool of political influence.

Perhaps seduced by the size of the Chinese market, and deceiving ourselves into thinking that as the Chinese grew richer, their political system would automatically grow democratic, we neglected to apply the same condition to Beijing. China is now going further, and using its power not only to enrich itself at the expense of a naive international economic and political system, but to start shaping the system’s rules in its own favour, and against liberal democracy.

This report is the start of a line of thinking that democracies, including of course the incoming Biden administration, need to join forces to impose costs on China for as long as its abuse of the international system continues. It contains some powerful measures that we can take to limit proposes some powerful measures that can be used to limit the extent of Beijing’s exploitation of our openness to further entrench its totalitarian rule.

As well as innovative specific measures to support the people of Hong Kong, and British National Overseas passport holders, to which the UK has a special responsibility, the report develops policies that can be applied by other democracies.

These include the systematic extension of Magnitsky Act-style sanctions to individuals responsible for human rights violations in China, including those in leadership positions.

Another key proposal is a “know your supplier” obligation to hold companies responsible for goods they sell that have been produced in supply chains where slave labour has been used.  Companies that fail to adequately investigate their own supply chains could be fined, and their directors be subject to personal liability and asset forfeiture if it is found that their wealth resulted from forced labour.

Chinese state-owned enterprises could be excluded from national-security sensitive infrastructure projects. Indeed, given the control the Chinese government exerts over even non-state owned enterprises such as Huawei, through its own national security legislation, the report could perhaps have gone further here, though considerable work is needed to make such restrictions compatible with WTO rules.

China’s participation in the open global economy has been good for China, and good for the rest of us,  but it has become clear that China is actively undermining the separation of politics and business upon which economic openness depends. Until Beijing changes its behaviour, democracies need to work together to ensure that China can no longer use its economic power to to bend the international system out of shape.

Hugo de Burgh: We owe it to future generations of Brits to work with China

6 Jul

Professor Hugo de Burgh is Director of the China Media Centre. He is the author of China’s Media in the Emerging World Order, has held office in three Conservative associations, and stood in unwinnable seats several times.

China is our third largest market and the one with the greatest potential. China is the country with which we must work if we are to have any impact on the resolution of global problems from environment to nuclear proliferation. China can accelerate the development of African and Central Asian economies, mitigating the risks to Europe that come from population explosion there without adequate economic growth. China is the largest economy in the world and already influential in a majority of countries.

For all these reasons, it is patriotic and reasonable for British leaders to find a way to work with China, which they will only do if they understand China as it is. Among other eminent Brits who started with a morbid suspicion of China, I have accompanied Boris Johnson and Jeremy Paxman on extended visits, and watched the scales fall from their eyes as they understood the enormity of the challenges facing Chinese government and the absurdity of imagining that its leaders wasted a moment thinking about conquering the world.

The reverse is the case. They are determined not to be conquered by the world. In the past, China built a Great Wall to keep out foreigners; today China is initiating the Belt and Road initiative to secure their back as they restore their civilisation, threatened from the east.

Fantasising about regime change in China, some US politicians make outlandish accusations. Had they talked to a few Chinese punters, followed social media or watched chat shows on TV, they could not possibly claim that China is a totalitarian country. Had they read Pew’s surveys of public opinion they would realise that the Chinese are, overall, more satisfied with their governance than European citizens, to say nothing of the USA. And are you surprised? While Europe and the USA are beset by economic and political troubles, Chinese people see ahead of them only more wealth, health and social mobility.

We need to recognise that demonisation of China is a weapon with which some US politicians deflect attention from their own failings and reflect their commercial jealousy. Both our National Cyber Security Centre and GCHQ have maintained until now that Huawei’s involvement in the UK poses no security risk that cannot be managed. Otherwise why would the US trade Department last week reauthorize US companies to work with Huawei, even as Donald Trump bullies other countries not to?

Robert Zoellick, a US former Deputy Secretary of State, is among the calmer heads to remind us just how positive a collaborator China is: that it recognises climate change issues, is in the forefront of environment innovation and has worked hard on endangered species; cooperates with the IMF over stimulation; provides more UN peacekeepers than the other members of the Security Council combined.

He points out that between 2000 and 2018 China supported 182 of the 190 Security Council resolutions imposing sanctions on nations which violated international rules or norms; China collaborated on the Iran and North Korea proliferation treaties.

Zoellick is not given to dire warnings about how dysfunctional it will be if the West really manages to ‘cut China off’, but they are implied in his general remarks about China, restated at a recent Henry Jackson webinar. China, he reminds us, is the biggest contributor to global growth; the fastest growing market for United States products; no longer manipulates the exchange rate; and, in response to our pleas, has improved its legal system. All in all, Zoellick tells us that cooperation with China “does produce results” but we should not take China’s cooperation for granted, “it could be very different”.

At home in Blighty, those calling for “a reckoning with China”, demanding a COBRA-like committee to mull over retaliation, wanting to “hold China to account” should ask themselves whether our businesses, for many of whom China is their most important market, want matters to become “very different”.

As to Hong Kong, the whole world must be astounded at the descendants of nineteenth century imperialists sending out paper gunboats commanding that China order its affairs according to our desires. A long time ago as a student, I demonstrated against colonial rule and police corruption in Hong Kong, and can still feel the truncheon on my back. In the face of much more vicious violence than anything we democracy activists attempted, Beijing has been restrained. In Northern Ireland, when security deteriorated, the UK imposed direct rule and fiercely rejected US interference on the IRA side. Over Hong Kong, we should try to see how interfering former imperialists look to most Asians, let alone to Chinese.

There are aspects of Chinese policies that we do not like, just as there are aspects of US policies that we abhor. The China Research Group is right to be concerned about cyber security and human rights. The way forward is to deal with China as a partner in the solution of common issues, such as terrorism in Xinjiang and Afghanistan. We have always worked with regimes with different standards when it suits our national interest. And respecting and being respected by China is in our national interest.

In the words of Kevin Rudd, the former Australian Prime Minister: Over 30 years China has pulled off the ‘the English industrial revolution and the global information revolution combusting simultaneously and compressed into not 300 years but 30’. There is a lot to learn and if we are to develop and prosper in the world ahead, we must be part of this. We should also celebrate that China’s rise is bringing better nourishment, greater life expectancy, education and security to hundreds of millions around the world.

Fulminating at China’s internal affairs and rejecting Chinese investment in order to please its commercial rivals will have no effect beyond signalling our impotence and arrogance; they are of no benefit to Britain and have no place in a long-term plan for Britain to prosper in the Asian century. Our government must develop a strategic approach to China. We owe it to future generations of Brits to work with China.