Between 1978 and 2020, China’s economy exploded, highlighted by four “leaps”: China’s GDP jumped from 367.9 billion yuan to 101.6 trillion yuan, its total GDP jumped from 1/15th of that of the United States to 70%, from 11th to 2nd in the world, and its share of the world economy jumped from 1.7% to 17%. to 17%. What does this mean for the world?
“Economic explosion” vs. “economic growth” and “economic development”
Here is a brief analysis of the terms “economic explosion”, “economic growth”, and “economic development”. In economics, “economic growth” has been equated with “economic development”, but it has been proven that this view of development has not brought real economic development to the Third World countries, but rather has led to a series of complex economic and social problems. The report of the Second Development Decade of the United Nations (1970-1980) pointed out that development was no longer merely economic growth, but the change of social system and social structure and the improvement of social welfare facilities were equally important. After that, the United Nations put forward a new development theory of “holistic”, “integrated” and “endogenous”, emphasizing the harmony between economy and politics, and between human beings and nature. Amartya Sen, winner of the 1998 Nobel Prize in Economics, proposed a “liberal view of development”, pointing out that development is a process closely linked to “individual freedom and social commitment” and is a way to expand people’s real economic freedom and power. It is also a process of expanding the economic freedom and power that people truly enjoy.
If this view of development is taken as a reference, then China’s economic growth in the last 40 years has not been “economic development” in the true sense of the word; at the same time, it has been quite extraordinary: for example, the Chinese economy has many inherent flaws, some of them fatal (this is the reason for the “Chinese economic collapse theory”). For example, China’s economy has many inherent flaws, some of them fatal (which is the reason for the “Chinese economic collapse theory”), but it has been growing; and this growth is unexpected by many people (for example, in 1991, when the economic gap between China and Japan reached a historical extreme and China’s GDP was only 11.9% of Japan’s, few people could have predicted that China would overtake Japan to become the second largest economy in the world in 2010). Therefore, this paper calls it an “economic explosion”.
In fact, China’s economic explosion is not economic growth and economic development in the usual sense. In a nutshell, China’s economic explosion “is the result of the economic unbundling of socialist ideology, combined with blood transfusions from developed Western countries, the great transfer of wealth, and the immoral economic behavior of the Chinese Communist Party. (The Devil Rules Our World: The Economy, by the editorial board of the Nine Commentaries)
This has brought about a series of very serious consequences for Chinese society (the four worst: disparity between rich and poor, human rights disaster, moral degradation, and environmental destruction), while at the same time giving the world the illusion that it is possible to develop the economy quickly by using state power and to win the economic competition by using immoral means. Therefore, it would be a disaster for the world if the Chinese Communist economic model is taken as a “success story”. Here are some specific issues.
The international debate on the Chinese economy: a market economy?
The economic explosion of recent decades has resulted in the Communist Party’s wealth and dominance, and has led to increasing conflicts and contradictions with major economies around the world. The international community is engaged in a heated debate with the CCP about the nature of China’s economy, which focuses on two main points: Is China already a market economy? Is China still a developing country?
For the CCP, obtaining market economy status means not only huge economic benefits (because if it is deemed a non-market country, trading partners can impose anti-dumping duties on China with relative ease when China exports too cheap products), but also important political considerations (promoting international recognition of the success of the CCP’s “reforms”). At one point, the CCP also launched a vigorous diplomatic offensive to gain early recognition of the market economy status of the seed countries.
After decades of planned economy during the Mao era brought China to the brink of collapse, the CCP’s “reform and opening up” and move toward marketization led to a dramatic change in the shape of the economy, and in 2001 China officially joined the World Trade Organization (WTO), becoming its 143rd member. According to Article 15 of the Protocol on China’s Accession to the WTO (which was later interpreted in different ways), China was considered a “non-market economy” country for 15 years.
However, largely due to the CCP’s failure to fulfill its initial WTO accession commitments, on December 11, 2016, this provision expired and the United States, Europe, and Japan refused to recognize China’s “automatic” market economy status. For example, a statement issued by the U.S. Department of Commerce said that the CCP has not undertaken sufficient reforms in accordance with market principles and that “the United States remains concerned about serious imbalances in China’s state-led economy, such as widespread overcapacity in industries such as steel and aluminum, and state ownership in many industries and sectors.” Behind the U.S., European and Japanese rejection is the concern that the CCP has strayed from the path of economic reform and opening.
Angered, the CCP filed a lawsuit with the WTO on “recognition of China’s market economy status”; however, “nothing could be done” and on June 17, 2019, the WTO dispute settlement panel said that the CCP had discontinued the lawsuit.
The international debate on China’s economy: a developing country?
China is now the world’s second largest economy, the top manufacturing country and the largest trading country (largest exporter and second largest importer), and an important exporter of capital (in 2014, for the first time, China’s outward investment exceeded its use of foreign capital by about $20 billion, and its stock of outward direct investment exceeded a trillion dollars). Yet, the Chinese Communist Party, which has always boasted about itself, keeps insisting that it is the world’s largest developing country. Why is that?
The core word is “profit”. For example, developing countries can pay less for the fees of international organizations. For example, developing countries enjoy special treatment. Under the WTO framework, developing countries enjoy special treatment, including: developed country members are required to safeguard the interests of developing country members, developing countries are allowed to use economic and commercial policy tools flexibly, developing countries are allowed to extend the transition period, developing country members will receive technical assistance; in the Paris climate agreement, in terms of energy saving and emission reduction, developed countries are much more restrictive than developing countries. are much more stringent than those of developing countries. For example, the World Bank provides a large amount of interest-free loans every year to support infrastructure development as well as agricultural production and education and health care in developing countries; while China is the World Bank’s largest lender, even after China exceeded the Bank’s “graduation” income threshold in 2016 (the current threshold is $6.895 per capita GNI), the World Bank-affiliated loan program is still in place, Even after China exceeded the Bank’s “graduation” income threshold in 2016 (the current threshold is $6,895 per capita GNI), the World Bank’s International Bank for Reconstruction and Development (IBRD) provided it with over $7.8 billion in loans.
The United States and the international community are particularly angered by the fact that the Chinese Communist Party has launched the “Made in China 2025” and “China Standard 2035” plans to compete for global high-tech hegemony, and that the Chinese Communist Party has the second largest military expenditure in the world, accounting for about half of the total military expenditure in Asia. On the one hand, the CCP receives billions of dollars in loans from the World Bank and the Asian Development Bank every year, while on the other hand, it is engaged in the “Belt and Road” project, investing hundreds of billions of dollars to finance large-scale projects in Asia, Africa and Eastern Europe, and so on.
However, in the WTO, there is no definition of “developed countries” and “developing countries”, and countries are allowed to choose their own, so the Chinese Communist Party has exploited the loopholes. Therefore, in the WTO reform, whether or how to define “developing countries” has become a major focus. The U.S. reform proposal proposes a framework to promote the reduction of special treatment for some self-designated developing countries. These countries are those classified as “high-income” by the World Bank, OECD member countries or countries that have initiated the accession process, G20 members, and any country that accounts for 0.5% or more of global trade. In fact, Taiwan (2018), South Korea (October 25, 2019), and Brazil (which wants to join the OECD), among others, have already renounced their status as developing countries in the WTO.
On February 18, 2020, the Office of the U.S. Trade Representative updated its list of “developing countries” to exclude 25 economies, including China, Hong Kong, and India.
Economic Coercion
If the international debate over China’s market economy status and developing country status is a macroeconomic threat, economic coercion is a direct threat to the international community. This has attracted a great deal of attention from the international community. For example, on May 13, Secretary of State Blinken and Australian Foreign Minister Payne said during a meeting with reporters in Washington that the United States would not leave Australia alone to face Chinese economic coercion. In other words, China’s “economic coercion” of U.S. allies is hampering U.S.-China relations.
In April 2020, Australia took the lead in the international community in proposing an independent investigation into the origins of pneumonia in Wuhan, and the Chinese Communist Party imposed a series of economic sanctions on Australia (China is Australia’s largest trading partner, and 1/3 of Australia’s exports go to China), causing Australia some economic damage (of course, not nearly as much as the Chinese Communist Party expected).
This treatment of Australia is just the latest example of economic coercion by the CCP. Economic coercion has long been a masterpiece of the CCP. For example, in 2016, the Chinese Communist Party hit South Korea hard over the “Sade entry”, including restrictions on the arts and culture, boycott of Lotte Group, travel ban, and other measures, forcing South Korea to make “three no’s and one no’s”: not to consider additional Sade system, not to join the U.S. anti-missile system, not to develop a trilateral military alliance between South Korea, the U.S. and Japan, and to limit the use of SAD in order not to harm the strategic security interests of China (the Communist Party).
For example, in 1992 France sold 60 Mirage 2000-5 defense aircraft to Taiwan (without aerial refueling, without air-to-ground missiles, and without threat to China’s territorial integrity and security). The Chinese Communist Party first tempted the French by making it clear that if the French side abandoned the sale of Mirage fighter jets to Taiwan, it would send a procurement mission to France to sign a number of cooperation projects and purchase $2 billion of French products with cash remittances. The delegation also provided the French side with a list of possible cooperation projects with the French side, a total of 8 categories, 50 projects, a total amount of $15.4 billion. But the temptation failed, and the Chinese Communist Party became furious and announced: the withdrawal of some proposed large-scale cooperation projects with the French side, such as the Guangzhou Metro, the Daya Bay Nuclear Power Plant Phase II Project, and the purchase of French wheat; no more negotiations with France on new major economic and trade cooperation projects; strict control over the exchange of personnel between the two countries at the vice-ministerial level and above; and the immediate closure of the French Consulate General in Guangzhou.
“Debt trap”
If economic coercion is a “fighting” tactic, the CCP also has a “pulling” tactic, which is to make the other side form economic dependence through massive economic aid, and in extreme cases, to form a “debt trap The extreme case is the formation of a “debt trap”. For example, the Hambantota port in Sri Lanka was given to China Merchants Port Corporation for 99 years because Sri Lanka could not repay its debts and 15,000 acres of land nearby.
On March 31, the Peterson Institute for International Economics, a research institute affiliated with the College of William and Mary and a Washington, D.C. think tank, released a report in March titled “How China Lends: A Rare Look into 100 Debt Contracts with Foreign Governments. 100 Debt Contracts with Foreign Governments,” which collected and analyzed 100 contracts between governments and Chinese state-owned entities in 24 developing countries in Africa, Asia, Eastern Europe, Latin America and Oceania from 1999 to 2020, and compared them to other bilateral, multilateral and commercial creditors. contracts were compared. The report draws three conclusions.
— Chinese (communist) contracts contain very extensive confidentiality clauses that prevent the borrowing country from revealing the terms and, in some cases, the existence of the loan.
— Chinese (communist) contracts typically designate Chinese state-owned banks as senior creditors, requiring the borrowing country to repay its loans in priority to other bilateral, multilateral and commercial claims.
— If a Chinese (communist) country disagrees with some of the borrower’s policies, it can use some of the contract’s provisions to cancel the loan and accelerate repayment, which may affect the borrower’s domestic and foreign policies.
Conclusion
If a regime that has achieved an economic explosion through immoral means, that claims “market-oriented reforms” but does not really move toward a market economy, that insists on special treatment for “developing countries” despite its economic supersizing, and that uses economic coercion and “debt traps” as a common means of achieving economic growth, then it will be able to use the “debt trap” as a means of achieving economic growth. “Tell us, is this regime an opportunity or a threat to the world?
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