China has a supply-side plan to subjugate the world economy that goes something like this: Having thrown the weight of the state — not to mention its coal-powered, forced labor underbelly — into ramping up capacity for everything from wind turbines to electric vehicles, it will flood the rest of the world with products at undercut prices. This will put overseas competitors out of business and leave countries reliant on Beijing for the green transition and more.
At least, that’s what would happen if other states empty-headedly absorbed whatever came their way. Yet they display that most irritating of all features: non-Xi Jinping Thought. Take U.S. Treasury Secretary Janet Yellen. Ahead of a visit to China in early April, she chided her hosts for not stimulating domestic consumption to absorb the fruits of the manufacturing surpluses they have created and sending it all overseas instead. Her playbook contains tariffs to back up the tongue-lashing if further action is needed.
Yellen’s criticisms are infectious. Ignoring Beijing’s howls that such moves are both discriminatory and a “reckless distortion of the definition of subsidies”, on April 9, Europe embarked on an investigation under its Foreign Subsidies Regulation into whether Chinese wind turbine companies are being given an unfair advantage from the state. This follows hard upon the launch of a similar probe into solar farms and its ongoing scrutiny of battery electric vehicles, which are currently clogging ports across the continent.
On the other side of the Atlantic, even Beijing’s BRICS+ partner Brazil is getting in on the act. Taxes on imports of Chinese vehicles are coming later this year, and the automotive industry is just one of several sectors under anti-dumping examination by Brazilian authorities. As Chinese processors scramble to offload their produce internationally following the collapse of the domestic property market, steel is one of them. According to the Wall Street Journal, Vietnam, India, the U.K., the Philippines and Turkey are all investigating China’s cut-price metal, too. U.S. President Joe Biden is promising to triple import taxes on it.
Seeing a threat to both its long-term strategy and its rocky economic recovery, Beijing has let the fists fly. Slapping its own tit-for-tat levy on U.S. propionic acid, a widely used substance for the manufacture of food, pesticides and medicines, it has also initiated a complaint with the World Trade Organization against the tax credits Washington provides as part of its Inflation Reduction Act. For good measure, it is hitting out at critics verbally, snootily telling the European Union that “many in the world are deeply unsettled” by its protectionism, and more broadly raging, “To politicize overcapacity or any other economic and trade issue and arbitrarily link them to security goes against the law of economics.”
But Beijing could be trapping itself in a vicious downward spiral with its aggressive stance and refusal to countenance change. Compounded by the repressive new “Article 23” law it has forced in Hong Kong, its de facto sponsorship of Russia’s war of invasion in Ukraine and the cyber-attacks it has launched against multiple democratic states, its churlishness is being challenged.
Among various present and promised sanctions, the U.S. is yet again tightening export restrictions on the transfer of the building blocks for artificial intelligence to China and asking partners like the Netherlands and South Korea to follow suit. It wants them not only to cease the sale of logic and memory chips as well as chipmaking equipment to companies under Beijing’s auspices, but also to discontinue servicing the equipment that has already been sold there as well.
Unable, therefore, to export at the cutting edge of the semiconductor industry, China has reacted by ramping up the manufacture of so-called legacy chips, i.e. those that may not be state-of-the-art, but still power everything from washing machines to medical devices. Again, the ploy appears to be to wipe out other businesses with a cheap chip tsunami and take revenge that way, but the EU-U.S. Trade and Technology Council can see what is coming. On April 5, it warned of “joint or cooperative measures to address distortionary effects on the global supply chain for legacy semiconductors” on the grounds that China’s sudden chip glut may be the result of non-market economic policies just like steel, wind turbines and electric vehicles etc.
Thus, in between ripping American chips out of telecommunications systems to create space for motherland versions, Chinese President Xi Jinping is chasing his own tail, a look he does not wear gladly. This explains his palpable frustration during an April 2 phone call to U.S. counterpart Joe Biden, during which he railed about China’s “legitimate right to development” and threatened that it would not “sit back and watch” as Washington adds “more and more Chinese entities to its sanctions lists.” His reaction will be quite another level if his banks get whacked due to what his Ministry of Foreign Affairs describes as “normal economic and trade cooperation” with Russia.
China is spinning itself around and around in permanent rage cycle in the West Pacific, too. Determined to annex the whole of Taiwan, Japan’s Senkaku Islands and parts of the Philippines’ maritime exclusive economic zone, it is deploying every trick in the book to seize more and more land and sea for itself at minimum military and political cost. Yet the more forcefully it pushes its claims, the further it consolidates alliances against itself.
With Manila, its attempts to extend the boundaries of Chinese Communist Party rule have taken the form of water-cannoning Filipino supply vessels to the Sierra Madre, a manned warship that the Philippines has deliberately run around on a submerged reef in the disputed Spratly Islands to keep an outpost there. However, this time, it has paired high-pressured water attacks with a sudden diplomatic hand-grenade, arguing that it in fact entered a gentleman’s agreement with the previous Filipino administration, whereby the latter would not repair the Sierra Madre or construct at the location where it is marooned.
Manila does not recognize the informal pact — which may never have existed in the first place — to de facto cede sovereignty over the reef in slow motion. On the contrary, it has instead participated in the first trilateral summit between Japan, the Philippines and the U.S. on April 11 to strengthen its position. The summit’s vision statement expressed serious concerns about China’s “dangerous and aggressive behavior” in the region, its “coercive use of Coast Guard and maritime militia vessels” and its “actions that seek to undermine Japan’s longstanding and peaceful administration of the Senkaku Islands” in the East China Sea.
The three countries pointedly committed to tripartite coast guard and other maritime activities, and, separately, from April 22, the U.S. and the Philippines embarked on their second largest joint military drill in history. In a crucial maneuver aside from the summit, Tokyo decided a more proactive stance on defense and arms sales to other nations and looked likely to participate in some aspects of the Australia-U.K.-U.S. (AUKUS) security partnership, a union China dislikes with a passion.
Support also came in for Manila from South Korea and India, whose foreign minister Subrahmanyam Jaishankar even put forward the possibility of defense and security cooperation. In response, Beijing rebuked both countries, each of which have their own geographical disputes with China, haughtily reminded Japan to “deeply reflect on its history of aggression” and, with regard to AUKUS, opposed “relevant countries cobbling together exclusive groupings and stoking bloc confrontation.”
Apropos Taiwan, Beijing’s angry and assertive behavior has recently included the now-familiar buzzing of the island with fighter jets, transport planes and drones, the unilateral opening of two new civilian flight paths dangerously close to two Taiwanese islands, the international goading of Taipei’s allies for being underdeveloped and a bizarre soybean spat with Paraguay, whose legumes it childishly denied importing, even as they could just about be seen in the corner of its mouth. By word of explanation, Paraguay’s soybeans cannot be acknowledged to exist on Chinese soil, because Asuncion recognizes the legitimacy of the government in Taipei.
Sinisterly, China also flashed diplomatic passports to tail Taiwan’s vice president-elect Bi Khim-Hsiao (蕭美琴) through the streets of Prague, while inviting Taiwan’s former president Ma Ying-jeou (馬英九) to visit and dress up as one country together with Xi Jinping, thereby ignoring Bi and other representatives that have been chosen in free and fair elections by the Taiwanese public.
None of this is bringing Taiwan closer. Taipei instead sees safety in deepening ties to Japan and the West, and it is taking its world-class chip industry with it. Thus, on April 8, TSMC, which makes the kind of technology that China can still only dream about, announced the signing of a non-binding memorandum of terms with the U.S. government worth $11 billion in grants and loans to produce “the world’s most advanced 2[-nanometer] process technology” in Arizona. This followed two days on from confirmation that it will build a second fab in Kumamoto, Japan as well.
Meanwhile, the U.S. House of Representatives passed a bill that may soon allow $8 billion of military assistance for the Asia-Pacific, including $2 billion for Taiwan directly, as Washington also invited Taiwan Navy Commander Admiral Tang Hua (唐華) to be a distinguished guest at the U.S. Pacific Fleet’s change of command ceremony. Taiwan itself bolstered its defense with two new naval corvettes and announced it is ahead of schedule with the production of missiles that can hit Chinese command posts and airports in the event of a Beijing attempt to invade.
On the diplomatic front, representatives of the U.K.’s opposition Labour Party, which is hotly tipped to take power in London soon, and a European Green Party delegation visited Taipei, the reverse of Bi’s aforementioned trip to Europe, which passed through the Czech Republic, Lithuania and Poland.
China took none of this well, ordering Washington to “immediately stop official interactions and military contact with Taiwan, and refrain from sending any wrong message to ‘Taiwan independence’ ‘separatist forces,’” while demanding the Czech Republic to “severely restrain certain politicians.”
In truth, however, its overcapacity for rage, like its overcapacity for manufactured goods, is finding fewer outlets on the international stage.
BEIJING ANGER-OMETER: 75/100 Efforts in vain (白費功夫)
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