Big trouble brewing in China for American businesses
If your business relies on China for customers or its supply chain, you will need a new plan.
Chinese President Xi Jinping is cracking down on critical segments of the world’s secondlargest economy, and the Communist Party’s rising nationalism is shifting consumers toward domestic brands. The goal is to supplant the United States as the world’s superpower.
A Chinese submarine’s passage through Japanese waters escalated regional military tensions recently. The U.S. and Britain’s agreement to help Australia build its first nuclear-powered subs is a belated response to China’s decade-long saber-rattling in the South China Sea.
Chinese officials say the submarine deal reflects an “obsolete Cold War mentality.” I spent the waning years of the Cold War as a Soviet intelligence analyst in the U.S. Army, and based on the Chinese Navy’s latest war games, it’s Xi who is bringing Tom Clancy’s “Red Storm Rising” to life.
Xi’s key strategic move, though, is trying to control the world’s future energy resources, historically the path to global domination.
This is not a new project. China’s construction of islands in the South China Sea to claim the world’s most important sea lanes is brazen. Xi’s rewriting of the Chinese constitution to become president for life is autocracy. His attempts to crush dissent in Tibet, Hong Kong and Xinjiang are tragedies.
In recent weeks, Xi has placed severe limits on after-school tutoring because he doesn’t want wealthier families to get a leg up on the working class. He’s also limiting teens to three hours a week of video games. Stocks related to both industries crashed.
After crushing pro-democracy activists in Hong Kong, Xi’s enforcers have moved across the Zhujiang Estuary to Macau, considered Asia’s Las Vegas. Apparently, Xi was shocked, shocked to find gambling going on in there, and his disapproving eye sent investors running for the exits.
Hundreds of thousands of investors and business people who thought China’s rule of law would protect them are learning that a communist government can do what it wants when it wants.
Consider the 1,000 days that
China has held Canadian businessman Michael Spavor and former diplomat Michael Kovrig captive. Their only crime was working in Beijing when Canada arrested Meng Wanzhou, the chief financial officer of Huawei Technologies, on a warrant from the United States.
The longer Canada holds Meng, the more charges Chinese prosecutors pile on the men. I pity the American in China if and when Meng is transferred to the U.S. on bank fraud charges.
Xi has made clear in words and deeds that he wants to spread his vision of communism worldwide. Students of world history know that controlling access to energy has been both literally and metaphorically the key to holding power since the Renaissance.
Britannia ruled the waves because the tiny island kingdom worked out how to use hydropower and coal to industrialize. Mass production allowed Britain to dominate trade, build military might and colonize foreign lands.
The discovery and exploitation of hydrocarbons similarly powered the rise of the United States to superpower status. Texas oil fields guaranteed allied victories in the two world wars. U.S. control of Middle Eastern oil fields is what made the 20th century American.
Xi understands these lessons, which is why Chinese firms dominate the production of solar panels, wind turbines, batteries and the rare earth mineral mining needed to make them. China’s Belt and Road Initiative is a neo-colonial plan to exploit developing countries that produce the materials required for clean energy technologies. We did the same in the Middle East.
Then there is China’s application to join the U.S.-authored Trans-Pacific Partnership. U.S. diplomats had hoped the TPP would create an alliance capable of reining in China’s economic colonization. But since the U.S. dropped out, China now plans to defang it.
While Americans argue about clean energy tax credits, Xi’s government is spending tens of billions developing new energy technologies that will make oil and natural gas obsolete. China intends to literally become the world’s powerhouse.
Tackling the climate crisis is about transitioning to new sources of energy. Biden had hoped to convince Xi to separate climate cooperation from the geopolitical competition, but Xi correctly understands the two are inextricably intertwined.
The competition between the world’s two largest economies will intensify, and differing values and goals will translate into more confrontations. U.S. companies trying to bridge that divide will find themselves collateral damage.
Global companies like Nike are already moving manufacturing out of China, citing lessons learned from COVID-19. But the actual virus they are really fleeing is totalitarianism.
Other U.S. businesses would be wise to follow suit.