China – Facade and Reality

The rise of the Far East can no longer be stopped – even if the United States is currently attempting to do just that by means of a trade war. For the time being, they earn more blame than praise for their actions, especially since the current government appears to the world public as a ruthlessly ruffian smashing the precious porcelain of international diplomacy.

How fronts shifted within a single decade! With brutal directness, the American president is trumpeting to the world his new message “America First”. That means in effect: “We allow ourselves to be unashamed national egoists, whatever the rest of the world may think.” Compare this with China from where the world hears very soft, almost tempting siren calls: “We, the Chinese, are strengthening our own economy, certainly, but we are doing so in order to serve as a locomotive for the rest of the world. Without us, economic growth on the globe would be so much lower!

From the US of Donald Trump

the world hears more and more disturbing threats. It is true that the American president now treats Kim Jong Un, an extremely brutal but clever dictator, like a cherished friend (so that it is hard to say whether we shall find such friendship of the chief representative of a democratic nation more touching than embarrassing), but at the beginning it seemed as if the USA were ready at any moment to unleash a  militarily strike against North Korea. In Venezuela they are willing to do so anyway, but through its foolish policy the Trump administration achieves the exact opposite of its intention. This unfortunate country, completely shattered by the corrupt regime of Maduro, would have got rid of its president anyway (according to a survey by the Ministry of Defense in 2016, two thirds of Venezuelans were in favor of his deposition, by the end of the year the number had jumped to 80%!). But now the nation is welded together under its president – due to the permanent threats from the US. Trump proceeds with similar clumsiness in Iran, where he wantonly smashed the porcelain carefully cemented by Obama. Without even trying to get the consent of the two major nuclear powers Russia and China, yes, in utter contrast to Putin and Xi, the new American president seems always ready to publicly humiliate even his traditional allies. In other words, he confronts a bewildered world with the behavior of an unpredictable boor who knows but one maxim only: The more danger, the more honor.

Of course, the slogan “Our country first and foremost”

applies everywhere in the world. This is a natural part of Realpolitik and it is especially characteristic of China and its rise. Regardless of whether we look at its annexation policy in Tibet or Xinjiang or its encirclement of Taiwan, national power politics is carried out with iron consistency – just as almost all other states have done and continue to do. But countries transform this Realpolitik into a twofold evil, if they demonstratively boast of their true intention. Those who conceal their national egoism behind fine words at least let us know that they do not consider egoism to be praiseworthy in itself. Of course, that’s exactly why they tend to conceal it with nice words in the first place. On the other hand, those who, like President Trump, turn egoism into a virtue hurt the rest of the world all the more with their stupid honesty. Does the US, a country that used to be and still is the richest source of intellectual achievement as it produces the best researchers at some of the world’s best universities, deserve such a government? Perhaps it does. The US now pay dearly for having bought excellence abroad while neglecting elementary education at home. Donald Trump is the true representative of the uneducated masses. In modern times, no democracy can survive with an uneducated population.

China has three thousand years of civilization behind it

the American president’s boastful manner must seem to the Chinese as ridiculous as it is embarrassing – at least they will judge it as unforgivably stupid. As for themselves, they are masters of the beautiful show behind which they cleverly conceal their intentions and the by no means all too pleasing reality of their country. To the outside world, China is presenting a facade of peace and harmony (a notion they particularly like), pretending to be on the side of the poor and underdeveloped nations. China boasts an open and green economy, which it furthermore describes as communist, more precisely as “Socialism with Chinese Characteristics”. Its leadership always pretends to act on behalf of the people.

None of this is true – and yet we can say that China is currently the most successful state in the world and that it is acting on behalf of and with the consent of its people, because success is an elixir that acts like a drug and makes all concerns fade. To begin with:

It is true that only in its coastal regions

and a few places of the hinterland did China so far achieve the same material standard of living as we are accustomed to in the countries of the West. But with growth higher than six percent, the increase in national wealth is progressing in giant strides. It is therefore only a matter of time before China will have overtaken the countries of the West, especially the US, because the latter are getting a little more indebted every year – that is, they are getting poorer – while China has become their most important creditor and gets richer with every year.

Meanwhile, increasing prosperity has created a broad Chinese middle class. Millions of people have escaped thousands of years of poverty in just a few decades – a miracle that only the industrial revolution and its massive (especially fossil) energy consumption were able to bring about. China followed this path with strategic perseverance paid for with greatest sacrifices. At first it absorbed the dirty work of industrial production from the states of the West, without caring for the immediate welfare of man and nature, because that would have made production more expensive and delayed its rise. As for Western investors, these did not come to China out of love for its people, but in search of the highest possible profit. It was only later, when the Chinese population itself had already gained a minimum of purchasing power, that they were also interested in Chinese local markets – but again it should be made very clear: Profit not sympathy with the suffering masses or the intention to develop the country drew them into the country (thereby confirming the famous verdict of Adams Smith that we have less to expect from the goodwill of an economic subject than from his well-understood interest).

The Chinese for their part wanted to offer income and work to the masses

and – at least as important – to copy industrial production processes as quickly as possible so that they could develop their own national production. This goal they achieved in a truly remarkable way. But the cost of this par force marathon from agricultural society to industrial power proved to be very high. To this day, the country suffers from the ecological devastation of their brutal “instant-industrialisation”. Air, water and soil were poisoned nationwide.

In its efforts to restore former greatness to its country without raising mistrust, the government cultivates the high art of understatement. China still calls itself a developing country. This reduces mistrust and resistance among the rest of the world and gives China the opportunity to act as an advisor to other developing countries. It is a masterpiece of Chinese diplomacy to deliberately refrain from all great power behavior and erect a facade of outward modesty. Again, what a difference from the constant boastings of Trump increased to the point of embarrassment. The world finds it increasingly difficult to overcome the suspicion that a great power simply wants to conceal its decline! Trump makes it easy for China to claim at every opportunity that it totally differs from the United States as it is not a hegemonic power, which ruthlessly imposes its own will on the rest of the world.

But we should not be fooled! 

This is nothing more than a fig leaf, behind which we easily recognize the working of merciless power politics. Tibet was incorporated into the empire in a surprise coup; as of now, the gentle and compromising Dalai Lama is still denounced as a devil in human shape. In Xinjiang, the land of the Uighurs, a policy of ethnic cleansing is pursued with extreme ruthlessness, tens of thousands of people are imprisoned in concentration camps. Even before that, the central government had pursued a policy of mass immigration of Han Chinese, which turned the Uighurs into a minority in their own country. For China is adamant in holding fast to Xinjiang’s rich resources, this explain why Beijing does not relent in its fight against the Uighur Muslims. In the South China Sea, too, China is acting as any other emerging power before it: it is expanding at the expense of its weaker neighbors. Of course, we in the West are not in too good a position to criticize the Middle Kingdom. As long as the formerly great powers of Europe possessed the power to do so, they pursued at least as ruthless a policy for several centuries.

As far as its economy is concerned

China recently likes to describe it as particularly open, especially in order to distinguish itself from the recent protectionism of Donald Trump. But history holds a clear lesson in this matter too: All states are protectionist or, conversely, insist on the greatest possible freedom of trade, depending on whether such a policy benefits or harms them. Until the twenties of the last century, the United States protected its own industries with high tariffs against European (above all English) competition. Japan did so until the 1970s, China until a few years ago. A developing nation only has a chance against the superior competition of foreign states producing with their developed industries both cheaper and in far higher quality, if it seals off its borders with high tariffs or ensures through appropriate incentives that foreign investors and capital choose their country for production.

The situation changes fundamentally, however, the very moment that a country’s industries are no longer endangered by foreign competition in terms of quality and price. All leading industrial states insist on the freedom of trade, because their exports now substantially increase their prosperity, while they no longer need to fear foreign goods. But this does not invalidate the fundamental truth that protectionism proves to be decisive either for obtaining prosperity or to maintain it: the first case applies at the beginning of industrialization, in order to offer it a chance against far superior competitors; the second case arises at the stage of an aged industrial economy, when it is no longer able to cope with the onslaught of low-cost suppliers.

The latter situation is characteristic of the United States

when compared to China and it could soon apply to Europe as well. With its huge population, its power- and goal-conscious government, the Middle Kingdom would as of now be in a position to serve the entire world as the only workbench, provided that other nations do not pursue policies to protect and maintain their own industrial sector. Don’t adhere to the mistaken belief that the economic world may be divided into two halves: here services, research and intellectual innovation, there machines, factories and industrial production. The head of research cannot do without the body that takes care of actual production. Services as well as research presuppose an industrial basis and rest on the concrete skills and knowledge of the engineers that go with it.

The fast-growing superpower China

with its expansive industrial and trade policy will in the near future decide on war and peace. With its New Silk Road (One Road, One Belt), the country has made its quest for expansion visible to all. The United States is less affected, as it is now taking measures against further de-industrialization – here Trump can be sure to be backed by both major parties and the population at large (even if not by powerful investors). However, the United States took this step far too late, because outsourcing no longer only benefits the top one percent of investors, who since the 1980s so much profited from it, but meanwhile the masses have become dependent on much cheaper Chinese imports.  On the shelves of discounters such as Walmart, goods from Chinese production took up 90% of the space already in 2008 (Ian Morris 2010, pos. 8557).

And what about Europe

after Trump has activated the emergency brake in his own brutal way, thus forcing China to look for alternative markets in order to dumb its huge overproduction? True! The Middle Kingdom now doubles its efforts in order to conquer European markets – and Europe is much less able to defend itself against the attack. The EU not only suffers from its incapacity to speak with a single voice instead of 28 or now 27 voices, but also because Germany’s powerful exporters, above all the car companies, now cater to more customers in the Far East than in their own country. They would resolutely oppose any attempt to embark on the same path as the Americans. Europe’s industrial and trade policy is – still – determined by the big German car companies.

On the other hand, China sits already invisible

even if inaudibly at the European table, whenever Europe’s future is being decided. China knows to exploit with consummate skill the weakness of some EU member states by granting them cheap loans in return for the promotion of its interests. Countries like Hungary, Greece, Italy and the UK that benefit from Chinese money will be wary of agreeing to measures that could offend the far eastern giant. In this way, China plays its power behind the scenes whenever EU rules require unanimity in the European Council. In his usual way, Donald Trump is undiplomatic here too: he does not hide his aversion to a United Europe. But the Chinese are far more sophisticated. To the outside world, they repeat like a mantra their whole-hearted support for European unity; in reality, they are dismantling it by making member states dependent on their money. Of course, they are perfectly aware that only a truly united Europe is able to offer them effective resistance. The lesson that Europe should learn from this danger seems obvious. As long as the Union does not replace the principle of unanimity with majority voting in matters of foreign and trade policy, it will not be able to cope with external pressure!

We should realize in time that the Chinese are planning for the long term

they have the longer breath. They will soon start the mass production of electric cars and displace Germany’s proud, once leading car brands from their own and from foreign markets. Probably in two years’ time they will be marketing long range-aircraft that are of the same quality, but much cheaper than the corresponding products of Boeing and Airbus. To be sure, such a development is welcomed by orthodox economic theory, because it believes that customers should always buy where products of equal quality are offered at the lowest price. Unfortunately, this view is dangerously one-sided as it overlooks two major non-economic factors: the shift in the nature of traded goods and the political dimension.

Like Japan, China is a country with few raw materials of its own, including arable land

but with a highly disciplined, hard-working population, which by now is well-educated and in IQ tests displays an above-average intelligence. What China needs is imported food and raw materials, and what it can offer the world is the work of its hands and heads, that is finished industrial products. It is therefore best for China to buy the former from all over the world and export the latter. This inevitably leads to a shift in political power. It need hardly be emphasized that the exporters of wine, soy, corn, oil or copper usually have less power than the manufacturers of airplanes, cars and rockets. In the past, Europe acquired and fortified its supremacy in precisely the same way. It was based on the fact that European countries produced and sold industrial products all over the world and in return imported the raw materials necessary for their production. The shift in the nature of traded goods thus sheds its light on the eminent political dimension of trade – a fact Orthodox economics prefer to ignore.

The Chinese don’t get tired

to sell their export offensive as a gift to the world: everyone would gain from it. As the Chinese themselves know best, this is simply not true. In a world where effective power is still based on cannons, only the exporter of industrial products really benefits because research too remains directly linked to production. The more a state’s export shifts to raw materials or food, the less power it derives from such trade. This explains the nervousness of the United States, which by now has largely lost its once world dominating industrial base due to continuous outsourcing. In order to safeguard their prosperity: the American Way of Life, they rely more and more on the specific domain where they still maintain their former greatness: military supremacy. But in view of their exorbitant debt, they are less and less able to shoulder its immense financial burden. Hence the increasing pressure on allies to increase their military spending and import more goods from the US.

Façade and reality not only diverge

with regard to China’s real intentions but their disparity is obvious in the country itself. The Middle Kingdom declares itself a communist country, but it now generates more and more billionaires. Ever since Deng Xiao Ping told his compatriots that to be rich is no longer a sin, Mao’s ideal of material equality was silently transferred to the dustbin. China practices capitalism in an unabashed form, but with greatest success, because it managed to liberate ever-growing parts of its population from utter poverty. As long as the government is able to continue this story of success, the masses will accept billionaires without much ado. Meanwhile, communism serves as a welcome façade behind which to conceal an economic pragmatism whose positive effects cannot be denied. Compared to the West with its rampant defeatism, the country is in a mood of rising optimism.

Certainly, there are still a thousand arguments and dark sides

to denounce the rise of the great Eastern power. Like many other Chinese cities, the city of Beijing just stinks; industrialization has inflicted deep wounds both on man and nature. But wherever a society industrializes at a rush, the pollution of air, water and earth is one of its teething troubles. There is much to suggest that China will follow the Japanese example and that its new wealth will soon enable it to largely eliminate the visible consequences of the destruction of nature. China is one of the very few countries where the forest instead of being more and more reduced like in most other countries, it is actually increased by intensive re-forestation.

Wealth is the best medicine to heal wounds

created by poverty in the first place. This is already shown by the fact that it furthers the unfolding of creativity. It is truly amazing to observe how China, wherever it uses its newly acquired riches to create beauty, does so by profiting from a tradition of more than two thousand years. As ugly as we find most of the mega-cities raised in a rush to accommodate China’s immense masses, so brilliant and sometimes magnificent are the modern centers of representation: stadiums, congress halls, etc. They show how China sees its future if it can realize it according to its own wishes and imagination.

But in one respect, its rise is likely to cause immense problems

to the rest of the world. China has dramatically increased its ecological footprint in its own country and is about to do so wherever it extends its influence. The Chinese themselves do not, of course, see the matter in the same way. Here too, they like to hide behind a beautiful façade. If you believe them, they now resolutely switch their whole industrial production to green methods. To gain credibility, they rightly emphasize that China surpasses all other countries in the extent of its solar plants and wind farms. What they prefer not to mention is the fact that at the same time they build more nuclear and even more coal-fired power plants. Saving the planet requires a policy that radically limits resource use and the resulting poisoning (climate change), but China’s policy amounts to just the opposite.

Here too, however, the West is by no means in a better position

If – as we should actually do – we were to increase our CO2balance by the proportion created by the goods we buy from China, we would be faced with a significantly higher ecological footprint. Furthermore, we would be forced to ask ourselves whether outsourcing our production makes any sense at all, given that in Europe we have better rules of environmental protection.

Put in another way, we may well conclude that from an ecological point of view, outsourcing has been a mistake from the outset. Economically speaking, it was both a gain and a loss. It was a huge gain for originally underdeveloped countries, whose wealth it increased or created in the first place. It was a loss for already developed states whose wealth it diminished.

The commitment to the people

annually conjured up at the “People’s Congress” is a political façade too. In fact, the citizen’s every step is monitored by the state; those who openly oppose the regime disappear within labor camps. There can be no question of freedom in a Western sense. The most intelligent analyses in the political, economic and social fields still come from the states of the West, above all from the United States, which can still boast of having the world’s leading universities. But we shouldn’t fool ourselves. The channeling of all intellectual energies into industrial construction and the research that serves it provide the Chinese intelligentsia with sufficient opportunities for active cooperation. In contrast to the past, more and more Chinese students, therefore, prefer to return to China after completing their education in Western countries like the US. Instead of making their knowledge and skills available to the United States, they carry it to their home country. The lower degree of freedom does not seem to really bother them. It is not perceived as an intolerable constraint as long as the country’s rise is unchallenged and its people are proud to be world leaders in more and more areas. The patriotism of the Chinese is understandable, under Xi it has already turned into a militant nationalism.

It is undeniable that an ever-increasing number of Chinese

are getting better and that they have reason to look with justifiable pride at their own achievements. A growing number of Chinese tourists abroad bears witness to the rising self-confidence as does the incredible, in our countries barely thinkable but doubtless highly impressive pomp that Beijing so masterfully stages at the receptions of foreign heads of state or at international exhibitions. Everyone immediately understands that the Chinese president is not a socialist in a communist worker’s attire, but the modern reincarnation of a more than two thousand year old tradition. Foreign heads of state used to pay homage to the Chinese emperor as tributary vassals. This ritual is reinstated with all its ancient pomp in the Chinese 21stcentury. Even the prime ministers and presidents of Europe now outbid each other in attitudes of submission when they go on pilgrimage to Beijing to secure Chinese investments for their countries – China now holding the world’s largest foreign exchange reserves and being the largest creditor on the planet. As of now, Beijing has already turned into the secret capital of the world. It seems only a matter of time before it replaces Washington and becomes its official one.