Lecture in Kaunas
February 25, 2020
The Rise of China as a Global Power - the Second Cold War or not?
An analyst of Washington-based strategic institute recently stated that Xi has not been able to manage problems after problems, like popular unrest in Hong Kong, disruptive trade war with the United States and finally Coronavirus in the early 2020.
The geopolitical significance of key digital technologies now takes a central stage in new global conflict between the US and China. The dispute over the Chinese technology group Huawei exemplifies this situation. The US government perceives the Chinese telecom equipment provider as the Trojan horse of a hostile regime that stands for fundamentally different values. The second big factor is that America’s traditional allies are much less eager to align themselves with Washington and against Beijing. The US government is warning others not to buy Huawei kit. In 2019 China is the longest living communist state in history.
Are we facing a turning point in 2019-2020? The economic interdependence between China and the United Sates is irreversible. The entanglement is not just about trade and investment: it is also cultural. In 2019 there are close to 370,000 Chinese students at American universities. Both countries speak rhetoric of either decoupling or self-reliance, which is easier said than done. However, there are serious and deep-seated adversarial politics that will be around for the foreseeable future.
To quote historian Niall Ferguson: ”As the Second Cold War intensifies, the role that Russia can play is quite small. It is not a serious player in either hardware or software. And it is financially marginal: nobody wants roubles, because US sanctions have so effectively isolated the Russian economy”.
In his 2016 book The Perfect Dictatorship: China in the 21st Century, Norwegian political scientist Stein Ringen describes contemporary China as a “controlocracy”, arguing that its system of government has been transformed into a new regime radically harder and more ideological than what came before. Norway as well as Sweden have confronted the Chinese authoritarianism. Yesterday, a Chinese court sentenced Swedish bookseller Gui Minhai to 10 years in prison for “providing intelligence” overseas, in a case that has highlighted China’s far-reaching crackdown on critics.
There is already a quite warfare-like situation between the US and China. The US universities are purging Chinese students as security risks. The Chinese government has ordered state ministries to remove foreign made computer equipment within three years. Huawei is a case in point. Xi wants to create a Han China, an example of which is the education centers in Xinjiang against the Uighur minority population.
The Belt and Road Initiative - An Arctic Silk Road and the "Talsinki” Tunnel Project
China is carving out its own economic and geostrategic sphere through bilateral partnerships and aid, trade, and investment packages under her transnational Belt and Road Initiative (BRI). The BRI has been described as "China’s Marshall Plan". It was announced by president Xi Jinping in Astana on September 7, 2013. The price of the BRI has been estimated about 1,3 trillion. Xi spoke about ”the economic zone of the Silk Road which would benefit all countries involved”. In practical terms, the BRI is about harbours, high-speed railways, sealines and major communication networks. There is also an arctic silk road which would connect China via Finland to the Baltic states as one of the options. This plan was published in 2018. At the moment, China and Russia have 150 joint projects related to the BRI.
Russia is an important partner in the BRI and the countries signed a joint declaration on the partnership between the Eurasian Economic Union and BRI about the strategic cooperation. In 2017, China established a military base in Djibouti related to the BRI. In 2019, the EU defined China as a systemic challenger in its White Book. In 2014, Germany promoted China to be its strategic partner but recently withdrawn from the goal. The German business leaders have recognized to loose its hightech competitiveness to China as a result of partnership.
The ”Talsinki” project has often been linked with the BRI. For decades, different plans of the bridges or tunnels which would connect Helsinki and Tallinn have been drafted. However, it took until a Finnish businessman Peter Vesterbacka and his company Finest Bay Area Development (FBAD) launched a plan of ”Talsinki”, a tunnel 100 kilometers long and 200 meters under the seabed. The aim is to connect two capitals before the end of 2024. The tunnel should be linked to the Rail Baltica but also to the Railway line to the Ice Sea. Without the latter one the tunnel is not profitable.
The budget is about 15 billion and the main finance would be provided by Touchstone Capital Partners, which is located in London and owned by the Chinese Fund. The company serves approximately 50 Chinese companies, among them the biggest construction company of the world CREC, but also China International Railway Group. The latter one would be in charge of the construction of the tunnel. Basically, ”Talsinki” would be run and owned by the Chinese companies and the state of China. It is estimated that at least 7,5 billion would be funded by the European institutional investors.
The ”Talsinki” plan is a problem in terms of security. It will create a concentration of sensitive infrastructures close to Helsinki-Vantaa International airport. The North Stream gas pipeline divides the Gulf of Finland and the construction of the tunnel is a very demanding task as such. However, role of China as the main investor the major problem. China has been considered as a security threat by a number of security and intelligence organizations. ”Talsinki” as planned would provide China capacities to improve cyber espionage. The plan could also strengthen the military presence of Russia and China in the Baltic sea, as the joint navy drill of Russia and China indicated in 2017.
The construction of ”Talsinki” tunnel is an ecological risk too. The governments of Finland and Estonia have not objected the planning but not without strict preconditions. The political crisis in Russia, Coronavirus and economic problems in China raise a number of additional questions.
The Geopolitical Consequences of the Coronavirus Outbreak
Let us think about the possible geopolitical and geoeconomic consequences of the COVID-19. The Coronavirus outbreak coincided with an economic slowdown as China contends with rising debt, cooling domestic demand, and aggressive U.S. tariffs. The 6.1 percent GDP growth rate for 2019 was near the bottom of Beijing’s target range, and sharply down on last year’s 6.6 percent. The geopolitical as well as economic consequences could be huge in the near future if Beijing determines that temporary seclusion is the best measure.
Wuhan, the capital of Hubei province, is at the center of the Chinese industrial heartland. Whereas the national economy of China saw a growth slowdown in 2019, Wuhan saw higher growth at 7.8 percent. Wuhan’s prospects looked bright for 2020 as well. “Over 300 of the world’s top 500 companies have settled in Wuhan. The number of newly-added high-tech companies hit a record high with a net increase of about 900.” Hubei province with a population of 58 million of people has essentially been cut off from the entire country. Compare Wuhan to California or, more precisely, to Silicon Valley and imagine the harm done to the national and global economy if the state was effectively shut down for weeks on end.
The U.S. was about to emerge as the biggest beneficiary of the crisis. Not anymore. “The view in the White House is that this is one of those classic black swan events, and all we can do is control the health issues in the U.S.,” said Stephen Moore, an informal economic advisor to the President Donald Trump's team. Among policy aides, there‘s widespread concern that the spread of the Coronavirus will hit a slew of industries including manufacturers, airlines, automakers and tech companies, slowing down both the U.S. and Chinese economies. Aides fear the White House has few economic tricks it can deploy to lessen the impact.
The Chinese economic slowdown will continue and it is still unclear how large the impact of the crises will be. The balance of power might temporarily shift back in favor of the USA. The Times’ analysis found that at least 150 million people in China — over 10 percent of the country’s population — are facing government restrictions about how often they can leave their homes.
Too little, too late. In 2011, a train collision on the country’s much-vaunted new high-speed railway killed 38 people and was accompanied by a media blackout and allegations of a cover-up. Yaqiu Wang, a China researcher with Human Rights Watch, told HuffPost UK: "We haven’t learned from the Sars outbreak, the 2008 earthquake or the 2011 train crash. Almost in every case they try to cover up the death toll or the way the government responded. It’s an authoritarian impulse – they’re not accountable to the people because they not elected."
Some White House officials also remain frustrated by the Chinese government’s handling of the outbreak, but Trump has been hesitant to publicly criticize President Xi Jinping. Democrats have seized on Trump’s wariness, with Senate Minority Leader Chuck Schumer on Monday calling on Trump to demand that Xi “end the secrecy and suppression of facts around Coronavirus.” China spent more than three weeks rebuffing U.S. offers to send health officials to help with its outbreak and delayed reporting key details of the epidemy.
There is potential for the outbreak to seriously harm the Chinese economy, and consequently, the global economy. According to Andrew Milligan, the Head of Global Strategy at Aberdeen Standard Investments: “Even on the assumption that the authorities do get on top of this outbreak, there will be some short-term economic shock.”
The first economic victims were air carriers and travel companies; the travel and tourism industries will be hit hard. However, some sectors like pharmaceuticals, e-commerce and automotive could benefit. Yesterday stock markets tumbled around the world. The number of Coronavirus cases mushroomed in advanced nations like Italy, Japan and South Korea.
One more speculation. In case Iran, China, Russia and now Turkey are sure that when they join in one “axis,” all members will be capable of resisting the Americans and the West in general. But if one country is pushed out, especially from the tripartite China-Russia-Iran axis, the global balance of power would tilt in favor of the West.
"The more you understand the world, the higher your chance of shaping it".
Don't walk behind me; I may not lead. Don't walk in front of me; I may not follow. Just walk beside me and be my friend.
Valtiotieteen tohtori, suurlähettiläs, tasavallan presidentin entinen neuvonantaja, professori ja kirjailija.
Kirjoituksia saa lainata. Lähde on mainittava.