Coping with the USA-China Conflict – Strategic Procrastination

While the western countries continue to do business with China, developing countries are being increasingly asked to make a choice.  The position is similar to that of the USA during the Cold War or the War on Terror – either you are with us or you are against us

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By Daud Khan and Leila Yasmine Khan
AMSTERDAM/ROME, May 5 2021 – For several years, a fast growing and assertive China has been challenging the USA’s global dominance.  China’s GDP, taking into account differences in purchasing power, is now greater than that of the USA; its military spending has been expanding rapidly and exceeds by wide margins that of other countries except the USA with which it is catching up; it is the manufacturing power house of the world; it is quickly moving up the technological ladder; and it is the key trading partner for an increasing number of countries.  All this is creating tensions with the USA and its key allies.

The western press is full of talk of how awful the Chinese are. Among the top issues are Chinese violations of human rights, their hounding of Muslim Uyghurs and their trampling of civil rights and other liberties in Hong Kong.

While the western countries continue to do business with China, developing countries are being increasingly asked to make a choice.  The position is similar to that of the USA during the Cold War or the War on Terror – either you are with us or you are against us

This hysteria will grow as China will take more aggressive postures on various issues such as the reunification of Taiwan (which it will surely do sooner or later); claims to various islands off its coastline; and commercial and political agreements around the globe, especially in resource rich countries such as those in the Middle-East and in Africa. 

Despite all the diatribes, and the talk of sanctions and boycotts, for the moment no one is walking away from doing business with China. In 2020 China was the largest recipient of foreign direct investment (FDI). In fact, while global FDI fell sharply, investment into China grew to a record level of over US$160 billion – and it is the big western multinationals are leading the charge into China.   

It is a similar story with Hong Kong. Despite all the criticism about Chinese repression and how it will destroy confidence, Hong Kong’s financial sector is booming. Forbes, a premier business news and analysis periodical – states that Hong Kong remains “a top choice for raising funds, and the city has ranked as the world’s number one IPO venue in seven of the past 12 years. In 2020 alone, HKEX recorded a 24% year-on-year fundraising increase, raising a total of HK$398 billion (US$51.3 billion) from 154 listings. This was the highest amount in a single year since 2010 ……”. Western financial institutions are heavily involved.  

So, while the western countries continue to do business with China, developing countries are being increasingly asked to make a choice.  The position is similar to that of the USA during the Cold War or the War on Terror – either you are with us or you are against us. 

But developing countries should remain well aware of the history of the last decades.  The USA had no compunctions about starting wars and invasions when it suited them; racism, discrimination and Islamophobia remains a part of the culture in many sections of society in western countries; and the anti-immigrant rhetoric that is fanned by their populist parties has been gaining ground. 

At the same time, developing countries should not have any illusions of what it means to end up in the clutches of the Chinese dragon. The Chinese may not have had a recent colonial history but there has been plenty of mayhem and bloodshed in their past. Moreover, as many countries are beginning to find out, Chinese friendship, aid and investments sometimes comes at a high economic and political cost.

The best strategy for developing countries in the coming years would be to avoid, at all costs, to take sides; to buy time; to hem and haw. But what I call “strategic procrastination” does not simply mean indecision or postponing. It also means looking around to get the best deal possible, trying to play one side off against the other, of negotiating and negotiating and negotiating.  

China’s foreign policy rhetoric is that it does not seek spheres of geopolitical influence. Rather, it seeks shared prosperity and its companies have been told to go out and make deals.  This is good news for developing countries and they should make sure that they use Chinese offers to also try and squeeze better deals from the USA or Europe.

If they have to upgrade their ICT hardware, they need to compare Qualcomm (American), Eriksson (European) and Huawei (Chinese).  If they have to buy or sell agricultural commodities they need to be talking to China’s COFCO, the new kid on the block, as well as the traditional big four grain traders (ADM, Bunge, Cargill and Louis Drefus) who have so far dominated world trade. If they have to build infrastructure they need to talk to the Chinese giants such as China Communications Construction Company as well as Bechtel (USA), or to some of the big Europeans such as Vinci and Skanska.  

However, trying to play off two super powers against each other is not a simple task.  It is certainly risky. And not all Governments may be smart and savvy enough to get this right.  

What would certainly help is greater transparency and public scrutiny of the big Government to Government deals being signed by developing countries – be it with China, the USA or any other country. 

And there is little doubt that given their rich history of NGOs, pressure, advocacy groups, and whistleblowers, western countries are better at this. It is essential that these groups continue their work in developing countries, and that national counterparts continue to be as welcoming and cooperative as they can.    

Another important source of technical assistance and oversight are the various UN agencies and international NGOs such Transparency International.  The press, academia and intellectuals in developing countries need to strengthen their links with these organizations – not only because of their skills and neutrality, but also because they are in a politically stronger position to speak out and be listened to.

 

Daud Khan works as consultant and advisor for various Governments and international agencies. He has degrees in Economics from the LSE and Oxford – where he was a Rhodes Scholar; and a degree in Environmental Management from the Imperial College of Science and Technology. He lives partly in Italy and partly in Pakistan

Leila Yasmine Khan is an independent writer and editor based in the Netherlands. She has Master’s degrees in Philosophy of Cognition and one in Argumentation Theory and Rhetoric – both from the University of Amsterdam – as well as a Bachelor’s Degree in Philosophy from the University of Rome (Roma Tre). She provided research and editorial support.