Ukraine’s losses are China’s gains - Vassily Kashin (Modern Diplomacy)

 

Ukraine’s losses are China’s gains

Modern Diplomacy,  June 30, 2022

By Vassily Kashin

A woman walks past sandbags piled for defensive protection, in Odessa, Ukraine. © UNICEF/Siegfried Modola.

The conflict in Ukraine will have major strategic consequences for Chinese foreign policy in the Indo-Pacific. It will promote the deepening of Russian–Chinese economic cooperation that will make both countries more resilient to Western economic pressure. Long-term instability in Europe will make it more difficult for the United States to boost its Pacific presence for years to come with significant US financial and military resources being drawn toward supporting Ukraine.

The conflict has demonstrated that the West is not able to impose sanctions on a major economy without damaging its own stability. The war has also shown the effectiveness of the Russian nuclear deterrent, making even a limited Western intervention unthinkable.

China will be the main beneficiary of the Ukraine crisis. But this is not reflected in China’s political rhetoric which has been carefully calculated to avoid any major fallout with the European Union and other developed countries, while also maintaining close cooperation with Russia.

The official Chinese position has remained consistent with the statement made by Chinese Foreign Minister Wang Yi in February 2022 at the outbreak of the war: China is concerned with the violence and wants it to stop. It maintains that the territorial integrity and security interests of all parties need to be respected. China also maintains that NATO enlargement is partially responsible for the crisis.

On the economic front, China has seized the major strategic opportunities provided by the war. During the first four months of 2022, trade between Russia and China increased by 25.9 per cent. Russian exports to China grew by 37.8 per cent, to US$30.85 billion. The physical volume of natural gas exports also jumped 15 per cent.

China is in line to supplant the European Union as Russia’s main economic partner. The Chinese Ambassador to Russia Zhang Hanhui has called upon Chinese businesspeople to ‘fill the void’ left in the Russian market by outgoing Western businesses. Cooperation with China has contributed to Russia’s federal budget surplus between January–April 2022 despite the war. Maintaining this financial and economic stability appears to be Russia’s strategy as it continues to press in Ukraine.

By 2023, most or all bilateral trade is expected to be conducted in renminbi. Chinese companies and brands will likely dominate large segments of the Russian consumer market and will become Russia’s key industrial and technological partners. There is also a growing trend towards a large part of Russian trade being conducted with third countries in renminbi.

With the expected expansion of the logistical infrastructure, China will obtain a major source of strategic commodities. China will be able to procure these commodities at significant discounts because Russia will be isolated from many other markets and China will be using its own currency. This will significantly reduce the West’s ability to leverage economic pressure points against China.

Some of China’s top-tier global companies are visibly reducing their presence in Russia because secondary sanctions could affect their operations in international markets. But cooperation in many areas will be overtaken by second-tier corporations with limited or no global exposure. Such companies will still be powerful enough to operate in the Russian market. Their operations will be serviced by specialised banks with no exposure in the West, like in Iran.

Strategically, this transition — coupled with deep internal changes in the Russian political economy — will make Russia largely immune to economic warfare. For the foreseeable future, the West will have no other means to deter Russia in Europe except for costly military options. In turn, this will provide major strategic opportunities for China in the Pacific.

The military lessons of the war for China are too early and too difficult to assess based on available data. One characteristic of the Ukrainian conflict is an unprecedented scale of propaganda and misinformation from all sides.

But two clear lessons have emerged from the war so far. First, US and NATO allies will always try to avoid a direct military confrontation with a major nuclear power. Even if a power is fighting a full-scale war at their doorstep. Second, economic war on Russia has caused significant problems for Western economies, including rising inflationary pressures and falling growth rates. Any comparable actions against China, an economy ten times bigger, will devastate much of the world economy. This makes any such action extremely unlikely.

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Traditional Security vs Non-traditional Security - Dhritiman Banerjee & Ayush Banerjee

Traditional Security vs Non-traditional Security

Dhritiman Banerjee & Ayush Banerjee

Modern Diplomacy, June 3, 2020

https://moderndiplomacy.eu/2020/06/03/covid-19-a-new-non-traditional-security-threat/

Dhritiman Banerjee

There exist various types of threats that a nation faces in today’s world. These primordial threats, in turn, affect a nation’s security dilemma in ways more than one. These can be of two primary type- traditional security threats and non-traditional security threats. Traditional security threats are threats to national security that arise out of conventional international issues such as water sharing, land sharing, etc. These disputes often result in a full-scale war or conventional conflicts among the nations involved.

Similarly, non-traditional security threats are the concerns that a nation faces due to the increased complexity in the conduct of foreign relations after the wake of the new world order, post-1945. As more nations gained their independence and as more international organisations were formed, these threats spread throughout the world resulting in diplomatic tensions and, intra-state and inter-state armed conflicts. At times these conflicts also involve non-state belligerents as well. Large scale migration, environmental degradation and climate change action, intensification of ethnocentrism towards ethnonationalism leading to ethnic conflicts, cyberspace security risks, terrorism and violent extremism, etc. are examples of such non-traditional security threats.

Traditional security threats were directly aimed at the system of governance of the involved international actors, often involving various proportions of military conduct and an aggressive foreign policy coupled with intelligence operations. Meanwhile, non-traditional security threats are complex systems of organised opposition to a dominant entity or actor. These may not involve armed warfare or an aggressive foreign policy as such. For instance, the 9/11 attack on the twin towers in the United States by Al-Qaeda affiliates amount to a non-traditional security threat, in general, and terrorism, in particular. This attack was not directly aimed at toppling over the regime in power, rather spread the message of radical extremism globally by a non-state actor of violent nature. Such threats are becoming more and more predominant in the 21st century.

Another instance of a non-traditional security threat stemmed out of the growing resentment for the authoritarian regime in power in Syria, which triggered the Syrian refugee crisis in 2011-12. The rapid displacement of people in rural locals within the nation created large scale dissatisfaction in terms of the economy with a rise in unemployment rates and poverty among with the loss of their means of livelihood. This displaced populace travelled beyond the already fragile Syrian border into several European states that triggered a spillover of the Syrian refugee crisis resulting in a security risk for most south European states such as Greece and Italy. Invariably, most of the European states shut down their borders due to an imminent security risk from extremism and rising ethnocentrism that may have resulted from integrating the refugees into their formal economies. More recently, India shut down its borders on the displaced Rohingya refugees from Myanmar, stating the probable cause of extremism being imminent within such a marginalised, persecuted populace.

The Case of Covid-19

This year shook the global political order. By March 2020, the coronavirus outbreak in Wuhan turned into a full-scale health crisis across the world. The virus had spread throughout the globe and new epicentres were discovered almost every week. Nations such as the United States, Spain, Italy, India, United Kingdom, among others have been severely affected ever since. However, alongside the health risks associated with the virus, as most governments focus on the research and development of a safe vaccine, the security risks are becoming more important as a part of this discourse with each passing day. There are restrictions on fundamental freedoms such the freedom of movement and assembly. While most major channels of information have shifted to the domains of cyberspace, governments have become heavily reliant on data infrastructures and domestic resource capacities. The transportation industry alongside others has been severely affected, affecting the national economy. The food supply chain has frayed. There have been no practical international trade operations except for highly politicised transfers of essentials and medicare. Millions have lost their employment and means of livelihood. Fear and panic have spread among the public at large. In a few nations, internal displacement has risen hundred folds.

However, as the Covid-19 pandemic spreads chaos, non-traditional security issues may not result in a nuclear catastrophe, but it may directly or indirectly threaten the survival of States. This time period is extremely important for all governments to reshape their policy processes to curtail the social, economic, political, diplomatic and human security risks associated with the outbreak. While many governments have opted to follow a phased lockdown model to tackle the health-related issues associated with the outbreak, they have failed to implement public policy to curtail the other risks associated with it. This nonchalance has resulted in a new age security dilemma that coerces the States into taking policy actions they never planned to adopt.

There are several security threats that pose a risk to major governments due to the Covid-19 pandemic. In the economic context, Covid-19 has increased market volatility such that the price of risk assets has fallen sharply with economies both large and small recording a significant drop of at least 30% at the trough. Tobias Adrian and Fabio Natalucci estimate that “Credit spreads have jumped, especially for lower-rated firms. Signs of stress have also emerged in major short-term funding markets, including the global market for U.S. dollars. Volatility has spiked, in some cases to levels last seen during the global financial crisis, amid the uncertainty about the economic impact of the pandemic. With the spike in volatility, market liquidity has deteriorated significantly, including in markets traditionally seen as deep, like the U.S. Treasury market, contributing to abrupt asset price moves.” It is said that all jobs created since the financial crisis in the US, have been completely wiped away during this Covid-19 outbreak. This creates an atmosphere of public agitation against the government that continues to trigger mass protests and activism. The financial security, housing security, employment security concerns are paramount in this distraught for the public and government alike. International trade is at a standstill affecting all the export-oriented economies around the globe. These nations are now bound by self-reliance on domestic industries creating a need to romp up securitisation efforts at the domestic level itself.

Moreover, Covid-19 is set to increase political instability in countries such as Japan, South Korea, India, Italy, China and the US due to the economic repercussions of the lockdown and also due to the public reaction to governmental policy in efforts towards eradicating the virus. In fact, if the virus causes a global economic meltdown or a global recession, it will perhaps be due to the economic perils the US economy shall face in the coming years. This will also considerably influence Trump’s reelection campaign, as he may be forced to prioritise digital media campaigns over public campaigns due to the risks emanating from Covid-19. There will be rising security concerns with regard to the same considering the fact that there has already been illegitimate involvement of foreign actors in the previous election campaigns wherein Cambridge Analytica was allegedly charged for deliberating manipulating audience content with the help of the Russian Federation.

The Covid-19 pandemic has increased the dependence on cyberspace as software applications such as Google Meet, Skype and Zoom gain in popularity. This gain has been noticeably triggered by the idea of working from home and due to the conversion of physical classroom education to online learning modules. This brings into focus the need for an enhanced cybersecurity mechanism that can allow easy access while also protect the private and personal data of the users. There have already been reports which suggest that the security at Zoom has already been breached. This called for close inspection and proper securitisation of the features to ensure its clients’ next-generation data protection, as a remarkable landmark in the domains of cyberspace security. It is also said that the spread of Covid-19 will increase strategic disinformation campaigns leading to the spreading of propaganda, fake news and manipulated content. Much of this content may also undertake dubious angles on the virus outbreak itself inciting public dissatisfaction leading to panic and mass hysteria. While governments may also attempt at withholding valuable information and data on the actual consequences of the virus especially by downlisting the rate of mortality and infection behind the veil of public security.

The Council of Europe Cybercrimes division has reported that there is valuable evidence that malicious actors are exploiting the cyberspace vulnerabilities to cater to their own advantage. For example, it stated that phishing campaigns and malware distribution through seemingly genuine websites or documents providing information or advice on Covid-19 are used to infect computers and extract user credentials. Attacks against critical infrastructures or international organizations, such as the World Health Organization are becoming seemingly probable. Such agents also use ransomware targeting the mobile phones of individuals using applications that claim to provide genuine information on Covid-19 in order to extract financial information of the user. They can also obtain access to the systems of organisations by targeting employees who are teleworking or video conferencing. Fraudulent schemes where people are tricked into purchasing goods such as masks, hand sanitizers and fake cheap medicines claiming to prevent or cure Covid-19 are also being used for the same purpose by the cybercriminals. These are a few instances that add to the security dilemma the nations face due to the rapid spread of Covid-19 across the world.

Alongside these, the defence industry is set to experience a major slowdown due to the pandemic. Production, manufacturing facilities and supply chains could be affected as the requirements shift towards civilian and police equipment from heavy military equipment. More importance will be given to recovery and aid systems than weapons and ordnances. However, defensive readjustments continue to remain important for ensuring adequate security especially with respect to border control, protection of personnel and institutions, protection of natural resources from exploitation, ensuring law and order as law enforcement and paramilitary operations remain the primary preventive measures at the monopoly of the governments. This crisis will also have profound geopolitical consequences, particularly for the US-China relationship.

Tarık Oğuzlu believes, “the years ahead will likely see the geopolitical rivalry between the U.S. and China intensify. This power competition will likely transpire within a post-liberal international order in which neither the U.S. will continue to act as the chief provider of global public goods nor China will acquiesce in the role of norm-taker.” We already know that the USA under President Trump’s presidency has already begun questioning the liberal international order from within. Notwithstanding Trump’s reelection in November, the isolationist and nationalist tendencies within the current American society will continue to grow more radical and dominant. There may be smear campaigns that could affect the well-settled Chinese populace in order to expunge them from the integrated American society. Instances of racism and ethnocentrism will grow and lead to civic hostilities threatening public order and human security norms. Similarly, China under President Xi Jinpinghas adopted a more assertive and claimant role in international politics, and China has changed its course from the ‘bide your time and hide your capabilities’ dictum in history. Trade between the two major powers has already come to a standstill.

In the words of Ahyousha Khan, “…it is essential for states to counter non-traditional security threats because they can potentially reduce national resilience of states to prosper. The consequences of these threats would be more damaging for developing world, where there is population density, lack of medical facilities and most importantly economic vulnerability of the state to handle such threats for a prolonged period of time.” It is evident from the aforementioned instances that Covid-19 is, in fact, a non-traditional security threat in ways more than one. It leads to multitudes of security concerns hat encompasses most major domains of politics including the economy and cyberspace. Securitisation and protection services are of paramount importance in the same regard. It can be stated that the need to protect the civilians from such non-traditional security threats will lead States to assume a more authoritarian role whereby the State will increase surveillance on its citizens and will curtail the freedoms of movement and expression. Political leaders often exploit these non-traditional security threats to fulfill their own political interests and to secure their own position as the leader of the party. Such is the security risk arising out of the pandemic at large.

A ascensão declinante da China - Todd Royal (Modern Diplomacy)

China’s Descending Rise

By

 Todd Royal

Modern Diplomacy, November 10, 2019

https://moderndiplomacy.eu/2019/11/10/chinas-descending-rise/

China is in a sustained economic slowdown. This is causing malignant unease among the political and economic leadership of the communist party in Beijing that governs China. Investing in China will be different, because: 

“The country’s first sustained economic slowdown in a generation. China’s economic conditions have steadily worsened since the 2008 financial crisis. The country’s growth rate has fallen by half and is likely to plunge further in the years ahead, as debt, foreign protectionism, resource depletion, and rapid aging take their toll.”

Chinese social structures are under duress over their aging society. Formerly in the 1990s-early 2000s: “China had the greatest demographic dividend in history, with eight working-age adults for every citizen aged 65 or older.” 

Once societies age, marital numbers decrease, and overall productivity plunges. China’s explosion of older citizens versus working-age will bring unique circumstances for global consumers. Factual evidence of slower productivity is evident throughout China, and will have to be considered for any financial or economic decision for decades ahead. The Chinese economic miracle bursting is largely due to aging demographics.

No one in western or eastern economic analysis circles or think tanks realistically saw this coming former President’s Deng Xiaoping opening of China. This was termed, “Socialism with Chinese characteristics (and/or) ‘socialist market economy,’” still ongoing. This slowdown will have deep ramifications for the global investment community, liberal order in place for over seventy-five years, and Chinese financial wealth that now spans the globe.

When countries age, and use reproductive rights to control populations, they become more assertive abroad, and repressive to its citizenry; this describes China’s social, political and economic philosophies that govern over a billion people. Since its one-child policy was enacted, Chinese economic productivity will plummet, “because it will lose 200 million workers and young consumers and gain 300 million seniors in the course of three decades.”

Suppressive economies have difficulty innovating, producing enough goods domestically, and integrating into world economic mechanisms that intends to distribute wealth globally. But this isn’t the first time these warnings have been made publicly.

Former Premier, Wen Jiabao gave a prescient declaration in March 2007 during the long march of economic progress when Mr. Jiabao had misgivings about China’s growth model by stating, “(Chinese growth had become) ‘unsteady, unbalanced, uncoordinated and unsustainable.” Recent numbers indicated China’s official GDP “has dropped from 15 percent to six percent – the slowest rate in 30 years.” 

Expansionary Chinese growth hasn’t experience this level of downturn since the end of the Mao into post-Mao era. What this does for the Belt and Road Initiative that is paving the way for investments into Central Asia up to the Arctic Circle is uncertain? Deep investment difficulties could witness China stopping the flow of billions of infrastructure projects into countries and continents such as Africa desperate for growth.

Public figures from the Chinese government generally have the economy growing at six percent, but many analysts and economists peg the number(s) at “roughly half the official figure.” China’s GDP has consisted of bad debt that typical financial institutions and western governments will transfer from the state to public sector and ultimately costs passed onto consumers. For China’s wealth to increase when so much domestic wealth is spent on infrastructure projects to increase GDP these official numbers need context.

China has bridges, and cities full of empty office and apartment buildings, unused malls, and idle airports that do not increase economic productivity, and if that isn’t the case then infrastructure increasing economic measurements will decrease. Unproductive growth factors officially known are: “20 percent of homes are vacant, and ‘excess capacity’ in major industries tops 30 percent.” According to official Chinese estimates the government misallocated $6 trillion on “ineffective investment between 2009-14.” Debt now exceeds 300 percent of GDP.

What’s discovered is the amount of China’s GDP growth “has resulted from government’s pumping capital into the economy.” Private investments have trouble overtaking government stimulus spending, and Foreign Affairs ascertains “China’s economy may not be growing at all.”

Chinese economic growth – post-Mao – saw the country’s self-sufficiency in agriculture, energy, and water almost complete by the mid-2000s. Through economic malfeasance, population control, and resource decimation, “water has become scarce, and the country is importing more food and energy than any other nation.” Environmental degradation is destroying the basic necessities for every day survival. 

This is where the world community and financial resources of east and west can meet needs, and grow interconnected, global economies. Energy is one of the biggest areas that China will engulf global energy supplies

The U.S. Energy Information Administration believes China will continue being the largest natural gas user in non-OECD Asia, and by 2050:

“Expects that China will consumer nearly three times as much natural gas as it did in 2018. China’s projected increase in natural gas consumption is greater than the combined growth of natural gas consumption in all other non-OECD Asian countries.”

Opportunities for liquid natural gas (LNG) facilities to be built globally, and in China to spur domestic and international economic activity are unlimited. As China goes, so goes Asia, and the world is now in the “Asian Century.” Investors, geopolitical strategists, and anyone concerned with global security should never believe it is wise to let China continue to falter economically and societally. Setting up investment mechanisms and diplomatic vehicles that benefit China, and the world community is a prudent choice.

When military choices defeat sound fiscal and monetary polices, the past 150 years have brought “nearly a dozen great powers experienced rapid economic growth followed by long slowdowns.” Normal, civilized behavior was pushed aside. What’s needed for Chinese economic growth is the free flow of information, managed wealth, consumer goods, and research/innovation.

Decades ahead, and current economic realities point to China being a great power that is under pressure, but still needs capital. A weak, unsecure China who isn’t satisfied with its place in the Asian hemisphere or global economic system isn’t good for continued prosperity. It would be smarter to engage and invest within China in the areas of energy, water, agriculture, and electricity where opportunities still abound.