Chinese President Xi Jinping (Photo by FLORENCE LO / POOL / AFP)

Facing the China question

What should, or can, be done about China’s power overseas?

Artillery Row

At the latest grand summit of Western powers in Japan, a certain Rahm Emanuel stood out from the crowd. Those of us who remember Emanuel as Chief of Staff in Barack Obama’s White House, and then as Mayor of Chicago, recall a no-nonsense operator who never left you in any doubt as to what the political message was — often laced with four letter words.

Now, as US Ambassador to Japan, Emanuel set the table for a new war front against Xi Jinping’s China, in language that was diplomacy light, conflict heavy. He made no use of his trademark expletive deletives, as they call them in Washington DC, but still issued a clarion call to arms over China’s use of “economic coercion” against the wider world, specifically trade partners and developing countries that took Chinese loans.

“This has been China’s most pernicious and persistent tool of economic subversion,” Ambassador Emanuel, chosen by the Biden team to get out front early and often, has said. “Beijing has moved to weaponize international trade.” He listed “an arsenal of illegitimate tactics”: rampant intellectual property theft, corporate espionage to steal trade secrets and cyberattacks on corporate systems.

South Korea and Australia have both suffered Xi’s wrath

In case you felt that was not enough, Emanuel offered this summary: “In short, economic coercion has become political warfare by other means.” The Chinese Foreign Ministry, never missing a beat these days, quipped back that the United States was using “its great power status to engage in coercive diplomacy”. Touche.

What’s at work here, beyond the latest summit, is a chilling combination: fear of China, writ large, and the political imperative to respond. Washington, increasingly, sees China as a threat across the board, with Xi Jinping on a relentless march to making it the world’s number one economy, with military and diplomatic clout to match. Whilst Ukraine’s President Zelensky took the headlines in Hiroshima, with the back-and-forth over American-made fighter planes for the war with Russia, the other, much longer-term debate lay in the West’s argument with itself over how best to confront Xi.

What’s not in dispute here is the punitive strategy of Beijing, which is using its economic muscle to unleash instability, even collapse on others who have big loans from China. In the countdown to the G7 summit, Washington produced strong, widely-distributed evidence of the damage done to a host of poor countries, ranging from Kenya to Pakistan, including two that have gone into default, Zambia and Sri Lanka.

Factor in Beijing slapping sanctions on rather more powerful players. South Korea and Australia have both suffered Xi’s wrath when he has been displeased with their policies. The result? What Rishi Sunak, towing the Washington line, calls “the pernicious use of coercive economic measures to interfere in the sovereign affairs of states”.

That strategy, everyone at the table in Hiroshima accepted, includes silencing countries that might oppose Xi’s dictatorship at home and abroad. Witness the assault on the Muslim Uyghurs in Xinjiang, or think Taiwan and Hong Kong.

“China’s economic coercion has become part and parcel of its foreign policy against many trading partners,” says Victor Cha, a veteran of the National Security Council in Washington, citing the likes of Japan, Lithuania, Norway, even Germany. He notes that countries which interact with Taiwan, support democracy in Hong Kong, oppose genocide in Xinjiang or offend “China’s core interests” face sanctions and embargoes that can cost tens of billions in damages. “From Beijing’s perspective, coercion works.”

Even the United States has China third on its list when it comes to trade

Yet. Much as the Biden team might see “political warfare”, with economics on the front line (a little ironic that, given America’s longstanding use of its own economic muscle), the reality is that key players in the Western alliance simply cannot contemplate such, because they cannot afford such. Japan, for example, counts China as its biggest trading partner. So too does the European Union, and Commission President Ursula von der Leyen could hardly be clearer. She stresses “de-risking, not decoupling”, insisting Europe needs and wants business with China. Even the United States has China third on its list when it comes to trade.

So here’s the dilemma. “China’s GDP is going to outstrip the USA in the next few years, and offer an even bigger market, that will be huge,” to quote one World Bank economist. “So having access to China is critical for advanced economies.”

It’s telling that the Biden team is seeking a semblance of Western unity in the standoff with China rather than making it economic warfare. The Biden package highlights making supply chains “more resilient” — namely less dependent on China — and tight export controls that will “protect sensitive technologies from theft”. National Security Adviser Jake Sullivan is now at pains to say the mood is “not hostile” to China — a far cry from where Ambassador Emanuel, working to a White House script, had gone.

There, evidently, lies the take-away from this latest round of what’s next with Xi Jinping. We have a Western alliance united in theory about the need to challenge China, and Xi’s modus operandi across our world economically, but divided over how far anyone can and should go when its key players consider the cost of not doing business with Beijing.

Some still cling to hope that dialogue is possible, warning of catastrophe for some of the poorest countries if China doesn’t forgive debt — and conflict if major economies move to sanction Beijing. “My view is that we have to drag them (China) to the table, impolite way to say it, I know,” says Kristalina Georgieva, head of the International Monetary Fund, also present at the G7 in Japan. “We need to walk, and work together.”

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