Globalization: Made in China

20. 10. 2021
Maurizio Sgroi

At the beginning of January, the State Council Information Office of the People’s Republic of China published a White Paper illustrating how Beijing sees the near future of globalization. The document’s very title speaks volumes: China’s International Development Cooperation in the New Era. China describes itself as involved in a cooperative development of internationalization, part of its new era, which began in 2012 when President Xi Jinping decided that the country would start thinking and acting globally. That decision was re-stated at the Davos summit at the end of January, when the Chinese leader confirmed the endorsement of multilateralism. So China’s new era affects us all.

Beijing and the future of globalization

In Beijing’s vision of the future, “Made in China” will mean a great deal more than it does today. That is, no longer just goods, but also penetration into the mainstays of globalization, both material and immaterial: economic, political and military. Indeed, the era of China as producer of shoddy goods for the West, or at best as obliging manufacturer for its multinationals, ended long ago. Now China competes across the board in the strategic sectors of modern times. Let us consider three projects: the Belt and Road Initiative (BRI), Made in China 2025, and China Standards 2035.

The BRI seeks to establish new connections, drawing inspiration from the ancient silk roads, an allusion liable to evoke a glorious past and nationalistic nostalgia. But Made in China aims to turn the country into a technological power by 2025, while China Standards 2035 aims to set global standards for the next generation of technologies, where Beijing clearly believes it can play a leading role.

BRI, Made in China 2025 and China Standards 2035 are encapsulated in the “Digital Silk Road,” which advocates a link through technology-sharing between China and all countries wishing to participate. It surveys networks, and therefore also infrastructure (submarine cables, satellites, gps antennas), ai and big data. And perhaps even digital platforms to gather and profile personal data and to deliver goods and services in exchange for electronic currency. It is no coincidence that China is leading the way in testing a digital central bank currency.

All this presupposes the global spread of Chinese capital and of the renminbi, which is already being used more than it was just a few years ago, thanks to its inclusion in the Special Drawing Rights basket—the International Monetary Fund’s unit of account. The spread of China’s currency has occurred chiefly through trade, though it has also been helped by Chinese raw materials futures, which Beijing is gradually offering to non-residents. This area of activity has become more apparent since 2018, when Shanghai crude oil futures were launched.

Together, these few facts illustrate the global significance of the Chinese challenge. The basic coordinates of globalization are the trade routes travelled by goods, services and people, an exchange currency and a common language of communication, all under the auspices of a political order, whether shared or imposed by the diplomatic (or less diplomatic) use of force. Our globalization – which speaks English, reckons exchanges in dollars and travels largely along sea routes supervised by the US Navy – bears a clear American stamp.

In response, the People’s Republic of China has for years invested hugely in establishing new routes, spreading its own currency and strengthening its armed forces. Indeed, China’s military spending is the second highest in the world, after America’s.

It has invested particularly in its navy, with the explicit aim of possessing a world standard force by 2050. This completes the picture and explains why part of the Washington establishment regards Beijing as public enemy number one. But does the fact that China has decided to undermine some of the mainstays of existing globalization mean that it can succeed? Furthermore, is the country attempting this on its own, or as a team player? And lastly, is Beijing’s aim to command a new hegemony or to secure recognition of its relative importance, within a context of polycentric power? Time will tell. Meanwhile, we can formulate some conjectures on the basis of known facts.

BRI’s status

Let us begin with the first question: can China really create a “rival” globalization?. In 2013, illustrating the idea behind BRI, President Xi Jinping stressed that the project was not merely infrastructure development – however crucial – and cited five areas of cooperation with countries joining it: strengthening policy communication; road connectivity; unimpeded trade; currency circulation; people-to-people ties. In other words, 360-degree internationalization.

The mention also of political dialogue raises another question: if the features of certain kinds of globalization imply a reference political order, does this mean that the globalization that Beijing has in mind will spread its own policy model as well?

Almost eight years later, we can start to identify the status of implementation of China’s BRI in broad terms. One major factor is the China Global Investment Tracker, an analytical tool published by the American Enterprise Institute, which quantifies at more than 2 trillion dollars the total amount invested by China abroad between 2005 and 2020. The list includes more than 1,700 projects across the world, covering every sector.

One of the most recent updates (January 2021) says that “Belt and Road activity is not increasing, but it is holding up better than investment in rich countries.” So, though BRI has slowed somewhat due to the pandemic, it nevertheless continues to pursue the slow task of “familiarization” with interested countries. It achieves this partly by using the most refined instruments, such as advanced technologies and the Chinese currency, which is much more widely distributed in China’s partner countries, though international use of the renminbi remains limited.

Where China’s investments are going

If we examine how Chinese capital is distributed around the world, we can form a clear picture of the major targets and therefore of Beijing’s priorities. The United States is the leading country for investments received ($190 billion) while Europe is the leading region ($428 billion). Together, these two areas account for approximately $600 billion, of the total $2.1 trillion invested by the Chinese government worldwide. In other words, the large majority of investments – with all that they imply in terms of relations and influence – are concentrated in the world’s less advanced areas.

In its White Paper, Beijing stresses China’s desire to cooperate harmoniously with the rest of the world, helping the weaker countries, in a spirit of brotherhood. Being the first of the last entails responsibilities, China says, and these include providing help to those who need it.

But looking beyond this narrative, the distribution of capital abroad clearly follows less inspiring motives. Investments in the advanced countries are frequently portfolio investments and therefore largely aimed at profits.

Meanwhile, those in the less advanced areas are frequently direct investments, thus enabling China to penetrate the heart of those countries by providing not only financial but also technological and organizational assistance, in areas that often lack expertise. We can therefore venture an answer to the first question: it is very likely that China’s global initiative will increase, particularly in the less advanced areas of the international economy. While relatively unimportant in terms of gdp, the less developed world accounts for a great many countries, and these offer major strategic advantages which could, in the long term, substantially increase Beijing’s soft power internationally.

The strategic importance of central Asia

This brings us to the second question. In the attempt to establish a rival globalization, whether cooperative or not, are the Chinese playing alone or as part of a team? Let us try to answer this by considering one of the most interesting aspects of BRI: the China-Pakistan Economic Corridor (CPEC) The Chinese have invested more than $60 billion in Pakistan—even more than Russia. This is a somewhat complex project, ranging from the laying of optic fiber cables to the development of special economic zones. There is also the port of Gwadar, which provides an outlet to the Arabian Sea.

The CPEC project is interesting because, unlike other links in the BRI, China can pursue it, with all its complexities, by dealing solely with a country fortunate enough to occupy a very favorable geographical position, providing the ideal bridge to the Middle East.

Indeed, in January 2019, Saudi Aramco announced its wish to invest 10 billion dollars in the port to build a refinery. And Pakistan offers a gateway not only to the Middle East: the country also offers access to the complex world of Central Asia, the focus of attention of another leading player in our emerging globalization—Turkey.

Contacts between Pakistan and Turkey intensified at the beginning of 2021, particularly following the recent war in Azerbaijan. Partly thanks to Ankara, this has created a number of major advantages for the Azeris, with a view to control Nagorno-Karabakh, the focus of a decades-old dispute with Armenia. Turkey has also ratified the free trade agreement reached with Baku on February 25, 2020.

Pakistan, Turkey and Azerbaijan have much in common and have been cultivating good diplomatic relations for some time. Together, they represent an excellent way into Europe —a way that would be even stronger if the network of connections included Iran. It is no coincidence that there is talk once more about a railway connecting Turkey, Iran and Pakistan. This was at the center of the January 2021 talks between the Iranian ambassador to Baku and the head of the Azeri railways; the desire to develop cooperation between the two countries was made plain on that occasion. “Iranian contractors are keen to cooperate with Azerbaijan,” Iranian Economy Minister Farhad Dejpasand told the Islamic Republic News Agency on February 2, 2021. A few days later, Tehran’s Foreign Minister, Javad Zarif, visited Baku for an official meeting with the authorities.

This all also affects China in some way, as the Asian giant is a major consumer of Iranian oil. In summer 2020, Beijing announced a strategic cooperation agreement with Iran worth $400 billion, subsequently signed in March 2021. It emerges that the agreement envisages, among other things, an investment in the port of Jask, which looks onto the Strait of Hormuz, through which much of the Middle East’s oil traffic passes.

Between the Pakistani port of Gwadar and Iran’s port of Jask lies another port, also Iranian and no less important. Indeed, the port of Chabahar is included in the International North–South Transport Corridor project, an- other ambitious network of links that, in practice, aims to connect India to Russia via Iran. This link was also discussed during the Iranian foreign minister’s visit to Baku.

Azerbaijan is involved in this initiative as well. Furthermore, apart from its ethnic and linguistic connections with Turkey, the country also shares a long common history with Russia: it was no coincidence that Putin intervened to mediate in the conflict with Armenia.

Team game

Whatever the outcome of these major projects – many of them still exist only on paper – the very fact that they have been proposed demonstrates the considerable common interest among these very diverse countries, in building deep and lasting networks and relations. Significantly, Russia, Turkey, Azerbaijan and, to some extent, Iran are among the leading players in the great game of gas supplies to Europe.

We can therefore attempt an answer to the second question: it is entirely in China’s interest to play a team game with countries such as Russia and Turkey, despite old rivalries and continuing competition in connection with several issues. There are of course many points of friction. Consider the recent resurgence of tensions between Moscow and Ukraine, with which Turkey has signed a military cooperation agreement. But events in Syria and Libya and on the Caspian have shown that Russia and Turkey are often able to find a balance, to their mutual benefit.

In this team game for the development of an emerging globalization, China can be seen as the locomotive, if only because of its substantial financial means. In this sense, we can describe it as a “globalization made in China”.

But it cannot do much more than this on its own. Leaving aside the military aspect (China’s capacity is still well below that of the United States), the country lacks the capacity to develop other aspects of internationalization. The currency is still nonconvertible, and the world is unlikely to stop talking English and learn Mandarin. Beijing is well aware of this, of course, which is why it speaks of China’s “contribution to globalization”. This brings us to the third question: does China want hegemony or a share of hegemony?

Toward and “asian” policy model?

The best outcome that China can hope for in the near future is to enlarge its sphere of influence, primarily at the regional level. It can do so by using BRI as a means of influence in emerging and low-income countries, thus raising its international standing. This is of course the same aim pursued by other emerging countries, such as Russia and Turkey. These countries’ convergence on the objective of a “rival” internationalization could be facilitated by the fact that they also share a mode of government featuring high levels of planning and control. And this brings us to the last question: can China export its policy model?

In a book published a few years ago (The Future Is Asian. Commerce, Conflict and Culture in the 21st Century), Indian writer Parag Khanna postulates that the twenty-first century will belong to Asia, just as the twentieth be- longed to the United States and the nineteenth to Great Britain. For Khanna, Asia is a part of the world flanked by East Africa, along an imaginary meridian including Italy, as far as Japan, with a southern border in northern Australia, and his Asia is to be understood as a high-tech society with strong bureaucratic leanings, where the value of democracy is subordinate to the ability to guarantee citizens’ well-being. Such societies are willing to deviate from certain principles for the sake of efficient government action.

Such an outcome is regarded as disastrous by many in the West, but not by all, and perhaps no longer even by a majority. The idea of exchanging security for freedom has become established now in our own societies. We surrendered civil liberties in the name of the antiterrorist struggle and economic freedom in the name of security of income when the major financial crises occurred; we sacrificed both in the name of the health emergency. States have considerably expanded their sphere of action, just as technology has expanded its ability to penetrate the fabric of society. All this creates the conditions for an “Asian” outcome such as that envisaged by Khanna.

Anyone familiar with history knows that the liberal democratic system – the political order underlying our present globalization – began to spread in the second half of the nineteenth century. A long period of basically autocratic regimes was interrupted by the French Revolution and then the capitalist revolution, which together created the cultural growth medium in which civil and political freedoms flourished. The 1848 riots gave rise to the long sequence of social tumults culminating in universal suffrage and the political parties of the masses that make up the world as we see it today.

Nevertheless, truly liberal democratic societies are still in a minority in the world, and the recent tide of populism that has swept across the West has revealed how fragile they can be. Perhaps the thin veneer of liberal democracy conceals the resurgence of ancient impulses that now find their ideal fuel in so many people’s demands for security.

Or perhaps Oswald Spengler was right, a century ago, when he argued that the outcome of The Decline of the West would be a Caesarism “that will destroy the dictatorship of money and of its political weapon, democracy.” Indeed, the nineteenth-century parties of the masses have ultimately turned into the personal parties of the twenty-first century.

Be that as it may, if the West yields to these impulses, it will be granting “globalization made in China” the best possible assistance. The spirit of Asia will have permeated the West. Without even any need for a Belt and Road Initiative.

This article originally appeared in Aspenia.it.

Aspenia 91-92/2021

Maurizio Sgroi Globalization: Made in China