What's happening in China





Dealing with problems of the China trade that lay dormant for the duration of the coronavirus pandemic crisis

Once the coronavirus crisis is firmly behind us, conflicts that have been held in abeyance for the duration will emerge in the here and now and have to be faced again.

Approaches taken to these questions in weeks to come will determine the outcome of matters that loomed so large before the pandemic struck, and upon which, hinges the fate of the China trade the foreseeable future.

Before the coronavirus brought an unexpected time of peace to an active trade war, raging protests in Hong Kong and the advent of Big Brother politics in China with Xi Jinping making himself president until further notice, the world faced multiple crises.

Beijing had hoped its Orwellian world would be introduced smoothly and accepted as the new normal with Communist Party agents assigned to micro-monitor activities in businesses large and small throughout the land assisted by a computerised "social credit" system to surveil the lives of citizens in detail, denying them rail or train travel if their behaviour was not up to standard.

There are three major contending elements involved at this juncture - China, the United States and Europe. It is their relation with each other, but more seriously with China, demands resolution today. Concern has been expressed about the fate of world trade by both the American Chamber of Commerce in Hong Kong and the European Chamber of Commerce Hong Kong.

Ideally, the US and Europe would like to return to the good old pre days when China contentedly became the workshop of the world, under the philosophic governance of the late and much lamented Chinese leader Deng Xiaoping. This would gradually bring freedom and justice to all as production gradually moved up the value chain, and became increasingly capitalist in the process.

True, there were strong voices, whose strength showed itself in the election of Donald Trump in the US and Boris Johnson in the UK. They sought to staunch the flow of export of jobs to China and the developing world. But with a tweak here and a mitigation there, enough could be done to quell the clamour as long as there in enough economic growth to sustain rising western domestic demand. What is wanted, is a China progressing in a way to become part of a world with a modicum of democracy, rule of law and an end to the assumption that the citizen existed to serve the state in a never-ending class war.

But back to the present. Concern is being expressed nervously by the hands-on-experts and represented by the American Chamber of Commerce in Hong Kong (AmCham), which worries that a head-strong US administration is overreacting and is likely to more good than harm. Specifically, they fear the negative day-to-day impact of the US Hong Kong Human Rights and Democracy Act will cause, as it has already been blasted by Beijing as an American attempt to interfere in Chinese domestic affairs.

AmCham said it supported the motivations and objectives of the US Act, saying it aims to reinforce the values of freedom and openness upon which the city’s success depends, and the fundamental principle of “one country, two systems”.

However, it warned that some sanctions the bill stipulates, those targeting officials deemed to be acting against those values, could harm both the US and Hong Kong.

 “We fear it could have unintended, counterproductive consequences, including on American business and its ability to continue exercising a strong positive influence in favour of Hong Kong’s traditional core values,” AmCham said.

 “We hope that parties to the debate will not lose sight of Hong Kong’s unique circumstances and its extraordinary, continuing achievements as a bastion of free expression, free flow of information, free markets, individual liberty, rule of law and judicial independence.”

The European Chamber of Commerce also worries that China’s social credit system could be used against companies in international trade disputes. Data collected under the system could be used to compile a blacklist of companies, with one contributor to the research adding that companies should not “be naive” about its possible uses, said the EU Chamber's report.

"The technology will be used to monitor and assess the behaviour of both businesses and individuals using a system of rewards and punishments to incentivise them," it said.

The report also warned the corporate social credit system would cover all aspects of a company’s business in China. Their behaviour in a number of fields – such as tax, customs, environmental protection and product quality – will be rated as will their compliance with the government’s requirements.

The Ministry of Commerce has said it will publish a list of “unreliable foreign entities” deemed to have damaged Chinese interests – a move that is likely to further ratchet up tensions in the country’s intensifying trade conflict with the US.

The State Administration for Market Regulation has prepared a list of “heavily distrusted” organisations, a draft version of which has been sent to companies for comment ahead of publication.

One is convinced that China may well not know how much westerners - both European and North American - prize their freedom and loathe state surveillance and will deal with regimes that conduct their affairs in this manner only as long as circumstances dictate they must. What's more such companies are being scrutinised by consumer, environmental and rights lobbies in their home countries, which can and will organise boycotts against their products if their sensibilities are offended.

It must be understood - even if it eludes state-controlled media - that Chinese growth, while spectacular in the last 30 years, depends on the West's willingness to buy what China sells. There has been much talk about domestic growth generation from internal sources, but such expectations have been disappointing in what stubbornly remains an export-led economy - still dependent on the West from preventing a decline in GDP numbers.

Well before the influence of Communist Party became as prominent as it is today, the opinion of the world was largely positive towards China. Until recently, the treatment of Hong Kong was reassuringly even handed after the 1997 Handover.

Even so there was an ongoing movement to re-shore manufacturing. Mexico's labour law became more accommodating to foreign direct investment so new factory owners were no longer obliged to provide jobs of life to the workers they employed. Vietnam, Cambodia and Laos became a good deal less communist than advertised and more accommodating to FDI as well. India, Indonesia and the Philippines were open for business more than ever before.

China's big advantage is that it is efficient and had modern infrastructure to do the job better than its new rivals. What makes this less than a slam dunk for China is its increasingly negative reputation and fostered by its new imperial, not to say imperious, bearing. Which will do China and the West no good.

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How do you see events proceeding when the coronavirus crisis has passed? Will it be time to heal and deal with issues that have been kept in abeyance by the crisis? What should that approach be?

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