China’s Difficult Global Integration

china

After the collapse of the Soviet bloc, China accelerated its repositioning in relation to the rest of the world. From the 1990s on, this huge country strengthened the broad and slow process of systemic transition based on a principle of gradual compatibility with the international system.

In economic terms, this is what we call the transition towards the principles of the “western style” market economy, implemented, with the agreement of the Communist Party, by a generation of openly “reformist” economists, among whom the prominent representatives Wu Jinglian[1] or Zhou Xiaochuan[2] (current governor of the People’s Bank of China).

In 1992, the Party decided that resources would be allocated by market forces rather than by state orders; and from 1998 to 2003, an extensive process of deregulation, liberalisation and privatisation was undertaken within the framework of that international compatibility.

The results did not take long to arrive: as of 2001, China was allowed to enter the WTO. But the arrival of an ultra-dynamic economy of 1.4 billion people into the smooth running international game has provoked a cataclysm which the WTO never fully recovered from[3].

In reality, it is not difficult to understand that as long as globalisation and its institutions were at the service of a single pole of power (the West which had created them in the first place), everything went well. But the arrival of China at the world’s table raised the question of who would actually profit from the game. The Doha Round, initiated one month before China’s integration to the WTO and destined to finalise in three years the liberalisation of world trade (with the avowed objective of developing the third world countries), was blocked by the one who had wished it: the West.

The failure of the Doha Round marks a sustainable reversal of the globalising impulse, simply because, if globalisation at the service of a single pole of power is easy (it is imperialism), the arrival of China in the game has caused a profound structural change in those dynamics by introducing the notion of a multipolar world – in this case “bipolar” but very soon to be followed by India’s perspective as an emerging global mastodon – whilst recent history has been unable to manage multipolarity other than through confrontation.

With one exception: the experiences of regional integration, which have applied principles of flat power structures based on complementarities and win-win logics. It is in these experiences that the world should have looked for the appropriate reorganisation tools of the new global realities. But the model which came out was, ultimately, neither more nor less than a cold war…

Our readers know that we have carefully followed China’s efforts to: integrate smoothly into the existing international system (WTO, G20…); then dilute the China-effect by embarking on the reformist BRICS dynamic, very close to the flat logics of regional integration; attempt to initiate an international monetary reform to lift the US and the world out of the dollar rut[4]; witness the violent attacks of the West against the BRICS attempt[5]; and finally focus on a strategy for the creation of new international institutions initiated by the BRICS or China (OBOR, NDB, AIIB, etc.).

End of the Chinese Patience

Here we are, and so far China has played with patience the card of global integration. In doing so, it has developed a network of commercial, economic, political and strategic partnerships with a growing number of countries and regions, paying particular attention to narrowing the links according to geographical logics. Thus, China initiated a rapprochement based on equality, not with the countries of South-East Asia taken individually, but with their coalition reinforced by a Chinese recognition of their relevance, namely the ASEAN, and despite the presence of notorious “enemies” (Vietnam, Japan, South Korea, the Philippines…).

In a few years, China has won considerable victories, the most recent of which is the ousting of South Korean President Park Geun-Hye, entangled in the threads of the American missile system THAAD, a guarantor of bad long-lasting relations with China; she would  probably be replaced by someone more conciliatory with China[6]. The other major progress of Chinese interests in the region is the shift of the Philippines out of US influence.

The US-China crisis in the South China Sea, just like the EU-Russia crisis in Ukraine, should have been an opportunity to create new lines of cooperation among these regions, and between China and the United States. Instead, conflicts have become harder and the logics of “you’re either with me or against me” have imposed themselves, forcing countries to take a stand; whereas the only way to guarantee their relative independence would be precisely not to impose anyone to make such choices.

Since 2014 and the Ukrainian crisis, the world is thus gradually structured into two opposing camps; with the multipolar BRICS also having to comply with this rule. And the US-China one-to-one is fast approaching.

This is how the United States will try to associate Russia to its camp in the coming months. Whilst China, via the New Silk Road, will try one last time to associate Europe to its own.

Our team is still looking at the last rays of hope likely to move us away from this dark scenario, such as the arrival of Antonio Guterres[7], the Portuguese reformist, at the head of the UN, or the strengthening of the G20 as a global political platform under the impulse of China and, hopefully, relayed by Germany in July 2017[8]; or the prospects to reorganise the Middle East in the wake of the end of the Syrian war. But it is still difficult to stay optimistic when we look lucidly where the heavy tendencies send us.

The current state of the Chinese positioning in the world makes it possible to see the following:

. the deployment of its zone of influence henceforth comes up against some pitfalls which point out its unexceedable limits: India on one side (with its large demonetisation plan, India has got rid of its financial dependence on China, which does not necessarily bode well for the future of relations between the two giants), Japan on the other (a country which is not yet ready to free itself from the US strategic tutelage);

. on the other hand, as we have just seen, the conditions are somehow met for good cooperation with ASEAN, knowing the gigantic infrastructure projects correspond to real financing needs of the region and, as such, are irresistible;

. the financial system based on the Yuan, considerably reinforced by China’s massive sales of foreign reserves and their change into Yuan, is now a reality, ready to integrate a multi-currency international financial system, but also, if rejected, ready to focus on regional logics.

China is clearly at the end of a long series of attempts to become globally compatible: positive participation in international forums, vast internal economic reforms, transnational investment projects and the creation of ad hoc tools. China is now ready; in a similar way to Russia which, in 2013, was ready to make its official entry on the international scene and relied on its Olympic Games to mark this recognition. But…

China versus the United States

But America closes itself and gets positioned on a clearly conflictual axis face to China.

In particular, there is the threat of accusing China of manipulating its currency[9], which would make possible “legal” sanctions of a protectionist nature (yet, since when does the United States need a legal framework to do so?). However, when we look at the following chart, which compares the evolution of the dollar index (value of the dollar against a basket of currencies composed of euro, yen, sterling pound, Canadian dollar, Swedish crown and Swiss franc) and that of the dollar against the Yuan, we see the bad faith of the US: since 2014, the Yuan has fallen against the dollar half as much as the mentioned basket of Western currencies…Subscribe and read the entire report in the GEAB 111 / 2017

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[1] Source: Wu Jinglian, Voice of Reform in China, MITPress, August 2013
[2] Source: Wikipedia
[3] Source: New York Times, 01/01/2016
[4] …mostly under the impulse of Zhou Xiaochuan, when he arrived at the People’s Bank of China in 2009, in the framework of the G20 in London which should / could have made history… but did not.
[5] … the BRICS’ effort to contribute to the position and structure of the needed reorganisation of the new global configurations, paid back by disregard and negation (we remind what we heard in Brussels back in 2014 : « we must ignore the BRICS, so that they will not exist ») of Brussels and Washington (which only saw in this effort a competing model).
[6] Source: CNBC, 2911/2016
[7] Source: Daily Star (Lebanon), 13/10/2016
[8] Source: G20.de
[9]     Source: CNBC, 29/12/2016