Xi's desperate roll of the dice
Wall Street and the big international corporations have suddenly awakened to the threat China poses. And no, it has nothing to do with the danger China poses to American national security, the massive theft of U.S. intellectual property, the release of the Wuhan virus on the world, or even its use of Uighur Muslims in forced labor. Rather, it has to do with the threat to Wall Street profits. This is what had George Soros criticizing BlackRock's recent investments in China and the Wall Street Journal clutching its pearls. Here's the backdrop to the story.
As the WSJ put it, Xi is trying to forcibly get the country back to the vision of Mao Zedong, who saw capitalism as a mere transition phase on the road to socialism. Accordingly, Xi's plans call for more government intervention in the economy. Since he has consolidated power, the Chinese president is putting the entire state apparatus behind making private companies serve the state. Also, private businesses and the wealthy are now being "encouraged" to donate more of their wealth and profits toward Xi's "common prosperity" goals. Alibaba alone has pledged the equivalent of $15.5 billion. And Western investments in China are not being ignored by Xi.
For foreign businesses, the campaign likely means more turbulence ahead. Western companies always had to toe the party line in China, but they are increasingly asked to do more, including sharing personal user data and accepting party members as employees. They could be pressed to sacrifice more profits to help Beijing achieve its goals.
Xi is quoted as saying, "Socialism with Chinese characters is socialism, not any other 'ism.'" Some might argue that Xi is actually going full fascist. Whether you call Xi's China socialistic or fascist, what has the Wall Street crowd atwitter is that it puts the West's massive investments in China in jeopardy.
According to Kevin Rudd, former prime minister of Australia, Xi feels compelled to act at this time by three forces: ideology, demographics, and decoupling. As for the first, Xi is much more ideologically driven than previous Chinese leaders, except for Chairman Mao, whom Xi wishes to imitate. Xi has told party members that China's hybrid model of capitalism mixed with socialism (communism) has passed its use-by date. It's time to go full socialist (fascist). Xi is a true believer.
Rudd says demographics figure large in Xi's thinking. The May 2021 census revealed that birth rates have fallen sharply, to 1.3, which is even lower than Japan's. Worse yet, China's demographic profile is upside-down — it has fewer and fewer young people with a rapidly aging population. Xi sees this as a major impediment to China's goal of becoming a major world power by the centenary of the founding of the People's Republic in 2049.
Rudd goes on the say Xi wants China to selectively decouple from the West and formally present itself as a strategic rival to America on the world stage. The Chinese president talks about this being a protracted struggle lasting to the mid-century. In his mind, Xi sees all this leading to a "dual circulation economy," where reliance on exports is diminished while Chinese consumer domestic demand becomes the main driver of economic growth.
All this smells like desperation. China grew to its present condition mainly by 1) Western companies setting up shop in China and 2) stealing Western technology and intellectual property with abandon. Clamping down on foreign firms will not only cause some to move out of China; more importantly, it will put a damper on future investments. And does Xi think other countries will sit still as China squeezes their companies? The same goes for Xi's selectively decoupling on his terms. For example, in 2019–2020, there were nearly 400,000 Chinese students in U.S. universities. And although college administrators would yelp at losing this cash cow, that number could be cut or even eliminated.
As for U.S. technology, for so long, China has been used to American officials turning a blind eye to Chinese theft that Xi seems to assume that's just the way things have to be. Not so. Without fresh technological inputs from the West and America in particular, China will stagnate. The height of Xi's delusional thinking is believing that China can develop a domestic consumer demand economy to take the place of exports. With China's terrible demographics, its population can never support its current industrial base. Exports — massive amounts of exports — are the air needed to keep the Chinese economy alive. And just as vital are imports, which feed China's population and provide the raw material for its industry.
Xi has a losing hand. He's banking on the rest of the world continuing to allow China to have its cake and eat it, too. He's desperate yet arrogant.
America can do well in any rivalry with China. The U.S. can even withstand incompetent leadership. What we can't afford, however, are traitors in high positions. Chinese money has turned many a head.
Image via Wikimedia Commons, Public Domain.
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