José Ramón Barros Cabalar —— The new Cold War: China, systemic rival of the West

The resurgence of China is a well-known fact. Three facts are enough to illustrate this: the Asian giant accounts for 16.5% of the world economy, it is the recipient of 35% of the European Union’s exports and in terms of purchasing power parity it is already the world’s leading economy. However, China is not just another State on the international stage; this is not just due to its number of inhabitants – with 1.4 billion, it is the most populous nation on the planet – but also to the specifics of its political and economic model; China is also the largest dictatorship on the planet. There is no such thing as political freedom. Since 1949, the Chinese Communist Party (CCP) has established a single-party regime where the CCP is fully integrated with the State to exercise its domination over the entire social sphere. And although it is true that China has adopted liberalizing measures in the economic field since 1978, a very important caveat must be emphasized: China is not, nor does it want to be, a full free market system; it only uses limited amounts of free market to achieve its own political ends.

Record growth, with no known historical precedent

The economic expansion – and concomitant prosperity – that the former Central Empire has experienced in recent decades has been dazzling; in the first decade of the 21st century it maintained sustained annual growth rates of over 10 per cent – a record of which there is no world historical precedent. In 2018 it grew at only 6.6 per cent. For the time being, this success, far from weakening the one-party model, has served to legitimize it. Few things justify a government more than economic triumph, especially in a country that in its 5,000 years of history -another record: it is possibly the longest-lived nation on the planet today- has always been ruled autocratically, except for a brief -and disastrous- republican period (from 1912 to 1949).

In China, most of the international norms, commonly used in the West, do not apply; we are referring to the lack of implementation of laws that ensure human rights or social security systems that guarantee the working conditions of its workers. Nor does it show respect for intellectual property; it copies the West without any qualms when it offers greater value to its products, whether at the technological, business, financial or military level.

Less well known is the fact that in China there really are no private companies. In one way or another, they are all controlled or intervened in by the Party-State. The firms often lack shareholders, beyond the fact that this condition is nominally attributed to their employees -such is the case of Huawei. The Chinese system also establishes by law that a company with three or more workers must have a CCP cell. Therefore, 73% of Chinese companies have at least one such cell. Alibaba, for example, houses around 200 such cells and 7,000 of its workers are CCP militants. There is one final factor to take into account: the opacity of its corporate financing; quite the opposite of Western companies, which are obliged to comply with standards of transparency.

Outlining the Chinese economic model, it is worth asking what are the strategic interests that drive Beijing in its relations with foreign countries? They do not include, of course, the coordinates used by a Western state. China seeks, above all, to strengthen the competitiveness of its national production and, at the same time, wants to penetrate Western economic structures, including, but not only, its markets.

In order to achieve these two objectives – which are different from each other – the Beijing government is developing a double pattern of foreign investment. In those countries that are not integrated into the OECD, the relationship is extractive; that is, it captures the energy resources and raw materials that are key to their national industrial development. In contrast, with the more developed countries the link is one of exchange and absorption; in this case Chinese companies invest capital and establish relations with the more developed areas to acquire technology, brands, management capacity and influence in key strategic sectors. In this way, in addition to opening markets, the Chinese economy tends to have a greater ascendancy over the West.

 

Geopolitical design with global reach

In order to meet the two objectives mentioned above, China has launched a global geopolitical programme over the last ten years whose ambition has few precedents; we are referring to the New Silk Road (NRS), a project that connects the Asian giant with the rest of the world through a huge network of ports, roads, airports and railways; of course, also through 5G networks and the future 6G. The total budget of the NRS exceeds 800 billion euros.

It is a global project, led by the Chinese Government and the CCP; the NRS Progress and Development Board is headed by the Chinese vice-president, the whole project is financed by state banks and its investment parameter is not, as we have pointed out, based on free trade criteria but on national interests. Let’s see what they are.

Firstly, Beijing is looking for an infrastructure network that guarantees the connectivity of the whole of Eurasia and Africa with China and that, at the same time, allows for a better projection towards the Americas. Secondly, it will do everything in its power to guarantee the supply of energy and raw materials as efficiently as possible, that is to say, by controlling the supply routes. Facilitating its exports of capital, services and goods as much as possible would be its third objective. Fourthly and finally, the Chinese Government is trying to influence international law in order to create customs and foreign trade rules that are more favourable to it.

The system consists of two geographical routes, plus a projection into cyberspace. On the land level, it advances from China through Central Asia and Eurasia to Spain; and on the maritime level, it opens up to both the Pacific Ocean and the South China Sea. On the digital front, the expansion of the 5G network and, above all, the future 6G network – which China is already working on to market by 2030 -, together with its low-priced smartphones, are an excellent channel for both A.I. applications and possible interference at public or private level.

On these bases, the excellent location of the Iberian Peninsula makes China show a special geopolitical interest in Spain. Our country occupies, as is known, the intersection between the Atlantic West, which connects with the Americas, and the Mediterranean East, open to Suez and the Indo-Pacific area; between a North, which points towards the great European ports, and a South, which looks towards Africa from the Peninsula and the Canary Islands. Spain would be, in short, an excellent platform for the distribution of Chinese goods, both because of the described geographical situation, and because of the positive political relations we have with the rest of Europe, the USA, Latin America and the African continent.

The Chinese government seeks to control, through investments, the aforementioned north-south and east-west routes that cross our country. The seriousness of the project is confirmed by its acquisition – total or partial – of at least 40 ports around the world, including its strong presence in the ports of Barcelona and Valencia and the attempt to take control of the port of Algeciras. There is more. In 2018 alone, Chinese companies invested more than 1 billion euros in Spain, when the previous year, in 2017, the figure was 390 million.

At the same time, Beijing has developed its strategy in the field of Spanish telecommunications. Media factors, such as the Alibaba shop window in Madrid, are the manifestation of much deeper realities; for example, that Huawei and ZTE are already leading companies in our country with a magnificent position in the 5G market. The activities of Chinese companies in Spain have been carried out in accordance with all the parameters of our legal system.

As regards direct participation in the NRS, our country has so far maintained a prudent attitude. Despite the intense requirements of President Xi Jinping in his last official visit in November 2017, Spain did not sign its entry into this new Silk Road.

For its part, the European Union, having overcome an initial enthusiasm, looks with growing scepticism at the whole NRS project. In this case, it has set the precedent for Germany, a state whose economic standards are otherwise strongly in favour of free trade. However, in December 2018 it tightened its national laws to prevent non-European companies from acquiring substantial assets from German firms. Although not cited in this new regulation, the name of China was on everyone’s mind.

Germany’s attitude served as an encouragement for the joint communication issued in March 2019 by the European Parliament, the Council and the Commission. In that communication, the EU points out, firstly, that its own relationship with China moves simultaneously in different areas, ranging from cordial cooperation and respectful negotiation to economic competition and systemic rivalry. In recognition of this reality, the European Parliament has urged the Commission and the member countries to take measures to ensure security in the face of China’s technological presence in the EU, which is perceived as a growing threat. At the same time, the Commission has preferred not to join the NRS, given that it considers the specific Community strategy for connecting Europe and Asia to be sufficient; a strategy that already has an EU-China Connectivity Platform, designed under principles of transparency and reciprocity. Furthermore, this is the only way to guarantee the Union’s financial, economic and political autonomy.

As for the US, the current Trump administration maintains a very critical approach towards China. With moments of tension and détente, both countries are plunged into a crude trade war. Chinese investments in the US have dropped drastically -from $45 billion in 2016 to $5 billion in 2018-, the main US intelligence agencies -CIA, FBI, NSA, etc.- have strongly discouraged the use of Chinese mobiles and a Presidential Order from Donald Trump himself has directly prohibited the use of telecommunications equipment from Chinese companies by public institutions in US territory.

Allow me to recapitulate the scenario described so far. In the case of China we are dealing with an exceptional country; it has a millenary culture and a huge workforce, which for very low salaries -by Western standards- reaches very high levels of productivity; a country that does not respect many of the international regulations and whose State intervenes strongly in all areas of life, both public and private. Much as we dislike the theoretical framework of its system, the practical achievements of the Chinese Government cannot be underestimated either. This tutored economic opening up in certain areas of its vast territory – we are also talking about the third largest country in the world, after Russia and Canada – has lifted 700 million of its nationals out of extreme poverty in one generation and created a middle class of over 300 million people.

 

Subverting liberalism using liberal logic

Does Chinese expansion affect security and Spanish interests? The answer to this question is affirmative; and it could be added that it affects in several ways, moreover. Our trade balance records an increase in imports from China that is much higher than Spanish exports to this country. In 2018, this Spanish trade deficit amounted to 20,632 million Euros, 3.8% more than in 2017. The same happens at European level; the EU’s trade deficit with China was 185,000 million euros in 2018.

As we have already indicated, all Chinese export companies are either public or heavily subsidised by the state. Therefore, Spanish companies compete at a clear disadvantage with respect to Chinese companies in our own domestic market. In addition, the opening up of the huge Chinese domestic market, if any, is taking place at an unusually slow pace. Given this scenario, it is logical that both Spain and the EU should maintain a trade deficit with the Asian giant. If the conditions of the game remain unchanged, there is nothing to suggest that the current trade landscape will improve in the future.

That said, attention should be drawn to a specific factor: China’s international expansion is not merely a mere economic and financial project. As we pointed out at the beginning of the article, at no time does China intend to become a full free market system; its restricted acceptance of aspects of economic freedom is always subordinated to its political aims, of which the NRS is the spearhead. To summarise briefly, and using Marxist terminology, we could point out that China seeks to progressively penetrate the economic infrastructures of countries with open economies and thus end up aligning their respective political superstructures with the interests of the Chinese state. Beijing does not crave the principles of liberal democracy. With its tutelary state capitalism it seeks to reinforce its autocratic and nationalist one-party model, while extending its power over the whole of Eurasia.

The key to its strategy, in which economic, political, diplomatic and military spin-offs converge, is to enter international markets in order, in a second phase, to control some of its key economic structures. They can do this thanks to the fact that the Chinese government has a huge amount of liquidity. The plan follows a sequential development: to promote economic exchanges, to build and/or control infrastructures under their control in order to facilitate these exchanges and to encourage massive investments in strategic sectors. Once the position of strength has been acquired, diplomatic and political pressure begins to influence the decision-making capacity of States to the benefit of Chinese autocracy. In short, to subvert the dynamics of liberalism by employing liberal logic itself.

The NRS is today the star instrument of a regime that has put into place this sophisticated economic and political strategy. The budget of more than 800,000 million euros acts as a new Marshall Plan for the 21st century, only in this case, unlike the original one, it prefers to overthrow the Liberal Order born after the Second World War in order to move towards a scheme in which China and its authoritarian model play a greater role.

In carrying out this strategy, there is a powerful reality that rows in favour of Chinese interests: most countries in the world live in the developing world, they need investment and China can act as a great planetary lender. Therefore, the expansion potential of the NRS is very high.

Surprisingly, today’s China is doing nothing more than reproducing on a global scale and in the middle of the Contemporary Age its traditional synocritical conception of the relations between the ancient Empire of the Centre and its peripheries, subject to the condition of tax states. Within this logic of domination, it is always easier to obtain the obedience of an autocratic model, where the conformist local oligarchies are indebted to the interests of the colonial Empire, than to a free and full democracy, in which power is distributed and controlled.

Russia, for its part, watches this process from a certain sympathy towards Chinese interests; not surprisingly, given that the current regimes of both countries share an aversion to democracy based on universal principles. Indeed, Moscow has aligned itself with Beijing in its effort to promote the Polar Silk Road – one of the many routes of the NRS. This route crosses Eastern Siberia to reach the North Pole seas and thus, through the Arctic ice, reach North America and Western Europe faster.

Russia’s alliance with China, which goes beyond the economic sphere, could also enter the military arena, as we saw during the Vostok-2018 manoeuvres. In fact, in 2018, in eastern Siberia, and at a time of high tension with NATO, Russia deployed 300,000 soldiers, 36,000 tanks and armed vehicles, more than 1,000 aircraft and 80 warships. They were one of the most impressive military exercises in history. Vostok, in Russian, means “east”. The novelty was that China participated in these exercises with 3,200 soldiers, plus armored and airplanes. Mongolia, on the other hand, entered with some military units.

The (Central) Empire Strikes Back

Today’s China is not Mao’s. The messianism of an ideology-Marxism-Leninism-which during the Great Leap Forward and the Cultural Revolution alone killed 10 to 20 million people and left the country much more impoverished, both economically and intellectually, does not prevail. The objectives of the People’s Republic of China in the 21st century are economic growth, which, as we have indicated, already benefits very broad strata of the population, and the re-emergence as a great world power.

A brief historical overview is useful here. China, throughout its millennial history, has always been the dominant nation in Asia, although in its case, Huntington points out, it would be better to talk about civilization rather than country. Only during its long century of humiliation (1839-1945) did China lose that position to Western, Russian and Japanese imperialism, which it is now trying to regain. Since 1949, a CCP that is as much Marxist as it is nationalist has been working on this mission.

Consequently, the world order that emerged after World War II is not comfortable for China for three different reasons: it is led by the United States, not by it; it has its centre in the West, not in Asia; and its paradigm is liberal democracy, not one-party authoritarianism, which with its economic success seeks a new vignette of legitimacy: that of being a kind of enlightened despotism of the 21st century. Hence its interest in putting an end to the current balances. To this end, it makes skilful use not only of the traditional economic, political and military instruments, typical of any great power, but also of the geo-economy.

In his latest book, The Future is Today (2018), José María Aznar points out that the Chinese geo-economy combines a plethora of methods -commercial, financial, sanctions policies, cyber-attacks, investments, etc.- to achieve geopolitical ends. This geoeconomic strategy is in line with the classical Chinese mentality, in which the ultimate excellence, Sun Tzu argued, is not to win every battle, but to defeat the enemy without fighting. Henry Kissinger explains this point of view: victory is not the triumph of the armed forces, but the achievement of political objectives, which in this case include Chinese geo-economic expansion at a global level, and also the demonstration that the economy and the World Order can function without liberal democracy.

Since 2010, Beijing has invested at least EUR 145 billion in Europe. Its presence in key infrastructures, energy and electricity networks, high-speed trains and ports, with no European correspondence on Chinese territory, only generates dependence on a giant power with a neo-colonial attitude, which also promotes alternative models of governance on a global scale.

Thus, the caution of the Commission and some EU Member States towards Chinese investments is relevant and in line with the relatively prudent policy pursued by Spain. However, the neocolonial expansionism of the former Central Empire, added to the isolationist attitude of the current US administration, would require a thorough analysis and a precise public-private strategy, which are not on the agenda of the debate in Spanish public opinion today.

Having said this, the connection with China is not negative as such. On the contrary, it is positive, but not through the NRS, but on transparent and safe tracks, among which the already mentioned EU-China Connectivity Platform stands out, which does take into account WTO rules. Spain, like the rest of the European countries, while supporting China’s take-off, believes that all political mechanisms must be used to ensure that China is truly open to international rules.

Spain appreciates all that Beijing has achieved through its own efforts, but considers that its international projection must be in conditions of reciprocity. In this way, the presence of Spanish companies in China could provide purchasing percentages similar to those of Chinese companies in the Spanish market. This is a question that not only concerns the commercial interest of the West, but also the commitment of Chinese society to prosperity in freedom. However, the Chinese domestic market continues to be subject to tariff barriers or measures of equivalent effect that close it off, which is all the more serious given that 17.5% of the world’s population lives behind the Great Wall.

In conclusion, the non-signature of the NRS is necessary for Spain, but insufficient. For reasons of national security and market freedom, it would be necessary to follow the European Commission’s recommendations in order to guarantee the control of our own structures and services – both physical and digital – given that Chinese companies have not only an economic but also a political objective.

It seems reasonable to set limits on the presence in our country of ambitions that are far removed from our society and which, in the medium and long term, could be clearly in conflict with the general interest of this same society and of Spain as a nation.

This article, under the title Relations of the Western World with China: trading partner, economic competitor, systemic rival, was originally published in issue 64 (October-November 2019) of the journal Cuadernos de Pensamiento Político, published by the FAES Foundation.


 

José Ramón Barros Cabalar
Journalist and communication consultant

 

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José Barros

Consultor

Consultor y periodista especializado en Comunicación Institucional, Política y Asuntos Públicos. José tiene además una amplia experiencia en campañas electorales, donde ha trabajado en la definición de estrategias y en la preparación de innumerables intervenciones públicas. Estas funciones reflejan su competencia para transformar datos e información de muy variada procedencia en conocimiento cualificado y estructurado tanto para atraer la atención del gran público como para conseguir una acción eficaz. Entre los puntos más relevantes de su carrera profesional, destaca su labor como asesor en dos Gabinetes de Presidencia -Gobierno de España y Comunidad de Madrid-, así como su faceta de articulista sobre Relaciones Internacionales y Cultura en algunos de los principales periódicos españoles.