What to do about the Quiet Takeover


All societies experience threats to their continued well-being, In recent years, we have had the 2008 financial crash, Covid 19 and, of course, global warming. Terrorism is a constant threat but there is another more insidious hazard which has not roused as much concern – yet it affects every one of us more directly than terrorism.

It differs from existing and well-discussed threats because it is generally considered beneficial to the West. I refer to the aggressive buying of businesses, resources and infrastructure throughout the world by China.

The pattern of civilisations is that they flourish, reach a peak and then slowly decline. When Europe was in the Dark Ages, China had been flourishing for thousands of years dominated by a feudal system of wealthy landowners and subservient peasants. As an example, in the eleventh century AD, the Song dynasty governed a healthy economy, an expanding population, a sophisticated banking system and paper money which had been in use around four hundred years before reaching the West.

During the seventeenth century, the mini ice age caused widespread famine in China. This, together with high government taxes to fight wars, crippled peasants and provoked rebellions. The nation suffered economic decline which provoked a pent up drive to return to its previous status.

Its return to being a leading nation was delayed by the promises of communism, inhibiting industrial progress until near the end of the 20th century. Without the distraction of Mao’s communism, China would have grown to be a dominant power in the world many decades earlier. 

The Chinese Communist Party, operating as state controlled capitalism so successfully that previously low-wage Asian economies have been unable to compete and until recently have lost parts of their manufacturing bases to China. Buy an Apple electronic item and it will be made in China, as are Japanese radios, cameras, computer games consoles, books for readers in the West; virtually all children’s toys and, even wooden toys labelled  ‘made in Poland’.

Wealth was produced in the West by the Industrial Revolution and even now, more than two centuries later, living standards are supported by the residual wealth from this. But the momentum of the West has been growing weaker for many decades.

The inertia in the monetary organism results in the disparity between the high currency values of the West and the lower currency values of the East which means that manufacturing, which produces tangible wealth, is carried out in the East and predominantly China, as is evidenced by unemployment, empty factories and once-prosperous regions now supported by welfare or by public sector jobs which consume national wealth.  

It is a paradox that the USA, while fighting unwinnable wars on foreign soil, has to borrow trillions of dollars each year to survive. The US, still the world’s biggest economy has, as stated by the Department of the Treasury, a national debt which in 2000 was under $6 trillion .

By the year 2019 this had increased to over $22 trillion. In August 2023, it was around $32.91 trillion US dollars, around two trillion more than a year earlier, when it was around 30.94 trillion US dollars. Ironically, an appreciable proportion of this is from China. We thus have the anomalous situation that China, still ostensibly communist, lends money to capitalist USA so that it can afford to buy Chinese goods, whereupon the loan is recycled back to China.

How has China been so dominant?  Its advantages are a low wage structure, a work force used to accepting orders, often working in conditions which unacceptable in more developed countries.  Most significantly, it has a command economy. This means that decisions can be made without the need for the public discussions which characterise democratic societies.

In comparison with the USA, there are a lot more qualified engineers in China, its factories are bigger and can react fast. ‘Made in the USA’ is no longer universally possible as many US factories have closed and been moved to China or Asia. In the USA, middle class manufacturing jobs are diminishing as the nation does not have sufficient people with the necessary skills to operate and manage factories.

Another major advantage of China is the ease with which capital is made available by the Bank of China for businesses and overseas projects.  

China has invented the Belt and Road Initiative (BRI) ostensibly to bring affluence to poorer parts of the world. 

The reality is that China’s control through BRI, is growing constantly.  To support the BRI, Beijing has injected massive amounts of capital into Chinese public financial institutions such as the Chinese Development Bank (CDB) and the Export-Import Bank of China (EXIM).

These banks enjoy low borrowing costs, as their bonds are treated like Chinese government debt with very low interest rates and they have access to lending from the People’s Bank of China, allowing them to lend cheaply to Chinese companies working on BRI projects.

Let’s consider examples of the increasing Chinese takeover of strategic resources through BRI.

China lent money to the heavily indebted Sri Lankan government under President Rajapaska to build the Hambantota port, even though feasibility studies said the port wouldn’t work and India had refused to lend money for the project.  When completed, the port, with tens of thousands of ships passing by, attracted only 34 ships in 2012. Sri Lanka was not able to repay the Chinese loan so China took over the port and 15,000 acres of land, even so, the loan is still owed to China.

With Chinese loans, Mattala Rajapaksa International  Airport (MRIA) was built and failed to attract traffic.

This is one of the examples of China’s loans to extend its influence around the world.

President Xi Jinping’s BRI become a debt trap for already indebted countries. The transfer gave China control of territory close to India and a strategic presence in a commercial and military shipping lane. Now 60 per cent of Sri Lanka’s national debt is owed to China. 

Let’s consider Greece.  China Ocean Shipping Company (COSCO) which wanted to turn the Greek port of  Piraeus into the biggest commercial container terminal in Europe.  Initially, Greece said no but, Xi Jinping,  meeting  Prime Minister Mitsotakis said: “We want to strengthen Piraeus’ transhipment role and further boost the throughput capacity of China’s fast sea-land link with Europe.” 

Mitsotakis agreed after he visited China, saying  Piraeus should become Europe’s No.1 port. The result is that Cosco is now majority shareholder in Piraeus. Xi said that China wants to expand its investments in the energy, transportation and banking sectors in Greece.

Takeovers of this nature by China are being replicated throughout the world. It is buying up resource rich Africa and developing regions using Chinese management and labour, so that the beneficiary is China.

China want to increase its control of Hong Kong with new laws restricting the freedom of Hong Kong citizens, in conflict with the agreement signed when Britain ceded control.  China has pressurised HSBC and Standard Chartered bank with rescinding their licences to operate in China and Hong Kong. These banks have issued statements saying that the new laws will be beneficial  to Hong Kong.

There is growing resistance to the takeover of world enterprises by China.  In USA, investment and business purchases by China was over $180 billion between January 2005 and December 2019. The US has now passed legislation limiting Chinese access to the country and investment from China has dropped. 

Donald Trump prohibited Chinese electronics giant Huawei from participating in the provision of 5G in USA and has cut off the supply of US designed silicon chips to Huawei and to China. 

As James Lewis, technology director at the US based Centre for Strategic and Internatonal Studies, says: in spite of stealing technology, China is still ten years behind the US on high end chips. Huawei initially got round this embargo by buying from TSMC in Taiwan. The US Commerce Department then shut down this route by refusing to licence TSMC to supply chips to Huawei.

In UK, Imagination Technologies, designers and licensors of world beating silicon chips was bought by a Chinese owned company which tried to place its own people on the board and also to move technology to China. This was not allowed by the UK. As a result of this and other ingresses by China, there is a UK move to inhibit investment from China of strategic resources.

Dictators such as Xi Jinping have an implicit need to be seen to be strong and capable of building empires, placing the interest of his own people above that of all other nations – a primary cause of wars. China’s defence spending in 2019 was 7.5 per cent higher than in the previous year, and it has expanded since then.

Is there anything which can be done? We are faced with declining resources, a rapidly expanding population and a climate which is becoming increasingly inimical to humanity. Yet we persist in xenophobic and inter-nation hostility. We should forget our differences and pursue global co-operation. There are enough problems in the world to overcome and only by working together will we find solutions. 

This may seem a naïve goal, easy to state but, with the inter-ethnic and inter-religious hatred which exists, impossible to achieve. Yet it has been done before.

In the midst of the extreme aggression of the Second World War, President Roosevelt and Winston Churchill initiated a programme of reconstruction which resulted in 44 nations meeting in 1944, at Bretton Woods USA.

Out of this agreement, the International Monetary Fund, The World Bank and the World Trade Organisation were founded. This programme of co-operation formed the basis for re-building a shattered world after the war and a return to prosperity.

The Covid 19 pandemic has caused devastation from which we may not recover for many years. Every nation which underwent lockdown now has excessive debt and failed businesses. 

We are faced with widespread recession which may progress to depression. It is time to resuscitate the Bretton Woods mentality, ignore our differences and enter a period of inter-nation co-operation where we concertedly shape mankind’s future. 

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Radix is the radical centre think tank. We welcome all contributions which promote system change, challenge established notions and re-imagine our societies. The views expressed here are those of the individual contributor and not necessarily shared by Radix.

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