The Giant Petri Dish with Territorial Ambitions: China

 

                      From the Financial Times

"The U.S. must take seriously China’s legitimate concerns, stop containing and suppressing China’s development, and particularly stop using salami tactics to constantly challenge China’s red line." 

PRC Foreign Ministry statement.

According to the Cambridge Dictionary, “Salami-slicing means a series of actions to remove or reduce something by small amounts over a period of time so that people are less likely to notice any changes.” Shortly after the above-quoted warning, “China’s military sent 71 planes and seven ships toward in a 24-hour display of force directed at the self-ruled island, which China regards at its own territory. The move came after China expressed anger at Taiwan-related provisions in a U.S. annual defense spending bill.” Yahoo!News, January 4th.

Drawing closer to Moscow and notwithstanding a recent positive conversation between Presidents Joe Biden and Xi Jinping, Beijing seemed to up its saber-rattling, reinforcing its claim to Taiwan. Those so-called “salami tactics” include a willingness to fly US military aircraft increasingly closer to those PRC incursions, leading Beijing to suggest a head-on collision could easily occur (between aircraft and perhaps nations). Despite its territorial claims, the PRC has never directly governed Taiwan; the island nation’s link to the mainland is historical. Further, the United States has never recognized China’s claims over vast portions of the South China Sea. While supporting a voluntary merger of Taiwan and the PRC into “one China,” the United States has repeatedly stated that it will maintain its right of free passage over and through international waters and airspace.

China is experiencing its own new set of problems, ranging from restarting its economy after a series of disastrous “zero COVID” lockdown policies to the unexpected military failures of its ally, Russia. As noted in my recent Yuan to go Digital? blog, China’s frustration with domination by the United States of the global financial markets and systems is pushing them to new roads to circumvent those seeming implacable controls. But meanwhile, Xi’s rapid reversal of his nation’s near 3-year “zero COVID” policy, almost overnight, has led to businesses opening, requiring even sick employees to show up. Way too fast. While there are signs of improving COVID treatment option in China, those efforts are still nascent; the currently deployed vaccine there is woefully inadequate and ineffective. COVID is exploding in the PRC, and we know accurate numbers are being suppressed.

The January 5th The Economists suggest the following reality: “Inside China, the virus is raging. Tens of millions of people are catching it every day. Hospitals are overwhelmed. Although the zero-covid policy saved many lives when it was introduced (at great cost to individual liberties), the government failed to prepare properly for its relaxation by stockpiling drugs, vaccinating more of the elderly and adopting robust protocols to decide which patients to treat where. Our modelling suggests that, if the virus spreads unchecked, some 1.5m Chinese will die in the coming months.

“There is not much outsiders can do to help. For fear of looking weak, the Chinese government spurns even offers of free, effective vaccines from Europe. But the rest of the world can prepare for the economic effects of the Communist Party’s great u-turn. These will not be smooth. China’s economy could contract in the first quarter, especially if local officials reverse course and seal off towns to keep cases down. But eventually economic activity will rebound sharply, along with Chinese demand for goods, services and commodities. The impact will be felt on the beaches of Thailand, across firms such as Apple and Tesla, and at the world’s central banks. China’s reopening will be the biggest economic event of 2023.

“As the year progresses and the worst of the covid wave passes, many of the sick will return to work. Shoppers and travellers will spend more freely. Some economists reckon that gdp in the first three months of 2024 could be a tenth higher than in the troubled first quarter of 2023. Such a sharp rebound in such a huge economy means that China alone could power much of global growth over the period.

“The party is banking on it. It hopes to be judged not on the tragedy its incompetence is compounding, but on the economic recovery to follow. In Xi Jinping’s year-end address, the party chief thanked pandemic workers for bravely sticking to their posts and, while nodding to ‘tough challenges’ ahead, promised that ‘The light of hope is right in front of us.’ He sounded eager to look past the pandemic, emphasising the chances of a swift economic revival in 2023 and offering reasons to be proud of living in a rising China under party rule.

“The ending of China’s self-imposed isolation will be good news for places that depended on Chinese spending. Hotels in Phuket and malls in Hong Kong suffered as Chinese were locked up at home. Now would-be travellers are flocking to travel websites. Bookings on Trip.com rose by 250% on December 27th compared with the previous day. Economists are pencilling in a gdp boost for Hong Kong of as much as 8% over time. Exporters of the commodities that China consumes will also benefit. The country buys a fifth of the world’s oil, over half of its refined copper, nickel and zinc, and more than three-fifths of its iron ore.

“Elsewhere, though, China’s recovery will have painful side-effects. In much of the world it could show up not in higher growth, but in higher inflation or interest rates. Central banks are already raising rates at a frenetic pace to fight inflation. If China’s reopening increases price pressure to an uncomfortable degree, they will have to keep monetary policy tighter for longer. Countries that import commodities, including much of the West, are at the greatest risk of such disruption.”

But there is a bigger and more immediate risk, as pointed out in the December 28th MSN.com:

“With the virus now able to circulate among nearly one-fifth of the world's population -- almost all of whom lack immunity from previous infection and many of whom remain unvaccinated -- other nations and experts fear China will become fertile ground for new variants.

“Antoine Flahault, director of the Institute of Global Health at the University of Geneva, told AFP that each new infection increased the chance the virus would mutate… ‘The fact that 1.4 billion people are suddenly exposed to SARS-CoV-2 obviously creates conditions prone to emerging variants,’ Flahault said, referring to the virus that causes the Covid-19 disease.” And there is always a question as to the effectiveness of even our most up-to-date vaccines when confronting a litany of variants hell-bent on replicating. We’re testing travelers from China and some other Asian venues upon their arrival at US airports, but that will not obviate the obvious threat. We just may need more than just a GDP-booster.

I’m Peter Dekom, and our best efforts at protecting the United States from the realities, threats and vagaries of the rest of the world will never be sufficient in a planet based on massive interdependence.