The China Syndrome

While the world is being Sinified, the resistance is gathering force too

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The coronavirus pandemic has highlighted the problem of transparency, and what China’s lack of it means for the global order. But that problem has already been there in spades, ever since the West made a Faustian bargain by admitting Communist China into the global trading order.

Global markets can only function with a modicum of transparency, and free markets require limited government. Communist China has none of those attributes. Yet it was admitted into the global trading system on the mistaken premise that it would gradually acquire them. With China’s subsequent – and stunning – rise to become the world’s second-biggest economy, the postwar liberal order has been imploded from within and lies in ruins, contributing to the great world disorder we see today. Egregious Chinese behaviour on Ladakh’s icy heights is just one of the symptoms of that disorder.

There’s no doubt that Chinese firms are ferociously competitive, and their government has done an excellent job of developing infrastructure and tech prowess. But alongside Beijing has developed an extensive panoply of mercantilist, beggar-thy-neighbour policies that go against the spirit, if not the letter, of the principles of free trade and pursuit of competitive advantage that WTO is supposed to underpin.

These include currency manipulation, standards manipulation, a comprehensive system of state subsidies for national firms, repressing returns on household savings through an underdeveloped financial sector, forced technology transfers, forced joint ventures, technology theft including through cyberespionage, limiting exports of critical materials to deny key inputs to foreign firms, the weaponisation of trade for political ends.