Wednesday, August 31, 2016

China-phobia by Erick San Juan

China-phobia by Erick San Juan

On September 4 to 5, China’s tourist hub of Hangzhou will be this year’s venue of the G-20 meeting and China’s President Xi Jinping is hoping to cement its standing as a global power when it host leaders from the world’s biggest economies. But China suspects the West and its allies will try to deny Beijing what it sees as its rightful place on the international stage.

While China wants to make sure its highest profile event of the year goes off successfully, Pres.  Xi will be under pressure at home to ensure he is strong in the face of challenges to his authority on issues like the South China Sea, going by reports in state media.

China has already made it clear that it does not want such matters overshadowing the meeting, which will be attended by U.S. President Barack Obama, Japanese Prime Minister Shinzo Abe and other world leaders.

State media has given great play to the idea that G-20 is for China to show leadership in shaping global governance rules and forging ahead with sustainable global growth, with the official People’s Daily saying this could be one of the G-20’s most fruitful ever get-togethers. (Source: Reuters published at

Can the G-20 meeting in China help boost Xi's nation’s image or his own image in the world community of nations? The mere fact that no matter how he tries to put major issues on the back burner, the heat will be felt and people will be reacting in the process.

One such issue is the Permanent Court of Arbitration ruling on the territorial disputes in the South China Sea. Although the decision has favored the Philippines, there are still incidents of Filipino fishermen being bullied by some Chinese coast guard. The world knows that China never accepted the decision and stubbornly insisted its claim based on their history. And in the process continuously building up structures in the reclaimed land despite protests from its neighbors and other countries passing in the region with their cargos.

Another one is with Japan on the East China Sea, again a disputed territory that has been going on for quite some time now and the issue will continue as long as China will insist on bilateral talks in solving the problem which is not what Japan wants.

These issues no matter how vague, could somehow affect the meeting of the member countries of the G-20. Of course, the main agenda – economy which is not doing well as per all the major economies of the world. And no matter how China manipulates the news on the real economic condition of their country, the truth will surface anyway.

Actually the following ‘incidents’ will show how China is doing in the economic front.

Was it China-phobia that recently forced Britain and Australia to postpone or cancel Chinese investment in their sensitive sectors? The two countries seem to be genuinely concerned about national security issues linked to these investments while China dismisses their fears as unfounded and absurd.   

In its two opinion pieces published on August 11 and 18, Xinhua News, the Chinese government’s official press agency, accused Great Britain and Australia of China-phobia and warned both  countries that their China-phobia could damage cooperation with Beijing.

Though China-phobia or Sino-phobia has long surfaced in some circles, this is probably the first time a key Chinese news agency has publicly mentioned it.

This came following the United Kingdom’s postponement of a $23.5 billion nuclear power station project at Hinkley Point, to which China General Nuclear Power(CGN) is supposed to finance a third, and Australia’s rejection of the sale of Ausgrid, its largest electricity network, to Chinese state-owned State Grid Corp and Hong Kong-based Cheung Kong Infrastructure.

China’s muscle-reflecting and its rather arrogant attitudes, e.g. “you’re wrong and we’re right” or “you’re a small country and we’re a big country” views, have stirred uneasiness and resentment in some countries.

Though it is unsure whether they have actually transformed into “China-phobia”, concerns or even fears over China’s intentions, behaviors and investments exist in Great Britain, Australia and perhaps in other countries.

Those apprehensions also play a key role in defining their relations with China. As shown in the editorial of the Independent mentioned above, China’s behavior in the international sphere, e.g. its assertive and coercive behavior in the South China Sea, affect perceptions and apprehensions of the UK’s government and public.

This demonstrates that like material powers, e.g. economic and military capabilities, non-material factors, perceptions and reputations, are also influential in international politics. (Source: Why some countries are concerned over Chinese investment by Xuan Loc Doan, August 29, 2016 in Asia Times)

These two countries have their concerns and doubts on how they will deal with China because on the surface no matter how China extends its soft power operations, there are still underlying issues that has to be taken into consideration especially when it comes to national security.

Lastly, China’s ‘growing mountain of debt’ as what was reported by Bloomberg that “Some prominent investors are worried about China’s debt. George Soros sees an 'eerie resemblance' between conditions in China now and those in the U.S. leading up to the financial crisis in 2008. It’s similarly fueled by credit growth and an eventually unsustainable extension of credit,” Soros told the Asia Society in New York in April.

BlackRock Chief Executive Officer Laurence Fink was asked about China’s mounting debt on Bloomberg TV in May. “We all have to be worried about it,” Fink said, adding that he remains bullish on China’s economy in the long run.
> And in June a Goldman Sachs report warned that the country’s large and unaccounted-for shadow-banking activities raised concern “about China’s underlying credit problems and sustainability risk.”

Indeed, many segments of the Chinese economy have taken on considerable debt, especially since the global financial crisis. Over the past decade, total debt grew 465 percent. Debt rose to 247 percent of gross domestic product in 2015, from 160 percent in 2005. Bloomberg Intelligence breaks China’s total debt into four components: bank, corporate, government, and household.

This isn’t to say that China doesn’t have some serious problems. Growth is slowing and the economy needs major restructuring. There will be winners and losers and turmoil in the market. Shadow-banking activities add another risk. It isn’t certain that the government will handle the challenges in the next decade as deftly as it has in the past. The country’s economy is far larger and more complex.

Fortunately for the rest of the world, China has a high savings rate. Capital controls aren’t fully lifted, making capital flight difficult. The government has almost complete control of the banking industry. In addition, China’s listed banks get about 70 percent of their funds from deposits. In comparison, U.S. investment banks in 2008 relied heavily on short-term money-market funding.

Such circumstances make it unlikely that China’s debt will spark a global crisis in the near future.”

Indeed, a lot of expectations and worries will come at China’s doorstep as it welcomes this year’s G-20 meeting. Can it help China project the image it desperately wanted? Let’s wait and see, especially how the Federal Reserve meeting on September 20-21 will play on and most likely will increase its interest rate which could create a sliding domino effect for the world in the process.

No comments: