Pushback against China continues

The multi-faceted threat from China continues to engage the attention of policymakers in Washington DC even as the US prepares to welcome a new administration under President-elect Joe Biden.

According to a media report in the US, Lance Kunce National Security Director at the American Economic Liberties Project recently alleged that China had in the last one year, strategically captured the US supply chain.

This he claimed, had made the US vulnerable and dependent on China. The statement and its import are well known and do not require reiteration, except as a function of US decision making to de-couple China and the US in the long run.

While President Trump would have liked to see this happen in this presidency, this is obviously easier said than done.

It remains to be seen if President-elect Biden will take up the challenge as he prepares to enter the office. 

The point is that China has not only made the US vulnerable because of its control of the supply chains, it also hurt American workers as they are losing skills they need to get the economy back on track.

Evidence of China’s hold in this regard comes from regular congressional hearings on tariffs.

They reveal that the US cannot produce essential products including certain weapon systems and other equipment, without some components or resources coming from China. 

Much more important, the US imports virtually all of the certain common antibiotics and over-the-counter pain medications from China, along with a high percentage of generic drugs used to treat HIV, depression, Alzheimer’s, and other ailments.

A 2019 analysis of non-tariff goods in the US revealed that more than half the US imports of furniture and footwear were from China, as did over 80 percent of its cellular phones and nearly all laptops.

The analysis noted that the problem for companies to set up elsewhere was not just higher costs and logistics, but the lack of a supply base for the tier-1 suppliers, and the dearth of equipment and related skills. 

In December 2020, the US designated 58 Chinese companies out of 103 as foreign entities, with military ties thereby restricting export, re-export, and transfers with them.

According to the US Commerce Department, the Bureau of Industry and Security will amend the Export Administration Regulations by adding a new 'Military End User' List, as well as the first tranche of 103 entities, which includes 58 Chinese and 45 Russian companies.

This establishes a new process to designate military end-users on the List so that exporters can screen their end-users. 

It is clear from the testimony of several congressmen that it is time for the US economy and individuals dealing with China to do business, but by pursuing self-interest (read national interest) above everything else.

China has used to its advantage its ability to penetrate the US industry and individuals controlling them with a view to extracting what is in their interests. 

Across the border in Canada, Trudeau’s government has confirmed that it rejected a takeover bid of a Canadian goldmine in the Arctic by China’s Shandong Gold Mining Co.

The Hope Bay goldmine in the northern territory of Nunavat was reportedly sold to Shandong by TMAC Resources for US$ 150 million in May 2020. Shandong is a Chinese state-backed metal producer. 

In October 2020, the Canadian government issued a notice to TMAC resources under the Investment Canada Act stating that Shandong was being stopped from proceeding with the takeover and that a national security review had been ordered on the proposed takeover. 

Canada-China relations had nosedived sharply two years ago when police detained Huawei Chief Financial Officer Meng Wanzhou at Vancouver airport. She has since been confined to the Pacific coast city, fighting extradition. In retaliation, China jailed two Canadians on espionage charges and halted billions of dollars in agricultural imports.

Prior to this, China had warned of an investment chill with China after Trudeau’s government rejected a Chinese takeover bid of the Toronto-based construction company, Aecon Group, citing national security concerns. 

The Canadian instance of pushback is one signpost in the larger pushback being led by the US. However, a word of caution on the role of Chinese companies operating globally and functioning at the behest of the Chinese government, especially in the light of Canada’s arrest of Meng Wanzhou.

Recently, reports appeared of how China had used Huawei technology to spy on the African Union (AU) Headquarters in Addis Ababa. What this means is that China was spying on leaders of the AU to gain information that could be used to coerce their African partners to create a policy to match China’s goals in Africa.

This indicates that Chinese state power through its companies, which are legally bound to help the Communist Party of China (CPC), exercises enormous power in the countries of operation. 

The Chinese state thus uses every trick in the book to obtain information and influence stakeholders in governments around the world. This is true in places as far removed as Australia and Nepal. It is also true in the US where Chinese influence operations have doubled in the last few years. In early December 2020, John Ratcliffe, US Director of National Intelligence wrote of a Chinese influence campaign aimed at “several dozen” Congressmen and Congressional aides.

He claims that China targets the US Congress six times more frequently than does Russia.

Meanwhile, a branch of the CPC known as the International Department, which is responsible for cultivating sympathy for the CPC with foreign politicians, is said to have ties with over 600 political groups in more than 160 countries.

Therefore, even as the world sees a pushback against China, the CPC and its organizations worldwide continue to operate to serve the interests of the Chinese state.

The degree and intensity of these operations vary from country to country and so does the modus operandi. In some cases, as we have seen above in the case of Canada, it is merely buying up natural resources.

In other cases, it could be infrastructure. In countries, such as Nepal, it is the wholesale cultivation of politicians, as seen in recent efforts to keep the Nepal Communist Party united.

Thus far, the chain of intrusive actions by China has seen strategic resistance from within the respective capitals. However, in more recent times, under the leadership of the US, a pushback has been initiated that transcends national laws and identity into a clear global anti-China stance.

This is the key lesson from the US dependence on China for its supply chains. As the new US administration begins the takeover process, one of the main challenges it faces will be to try and lessen US dependence on China.

While the route to this may be a difficult one, it is a necessary one that can have long-term implications if left unattended for long.