CHINAMacroReporter

The Chinese Communist Party Fears Ending Up Like the Soviet Union

‘The propaganda ministry - within four to six weeks - managed to turn China into a problem for Europeans. China’s standing in Europe is eroding by the day.'
by

|

CHINADebate

May 20, 2020
The Chinese Communist Party Fears Ending Up Like the Soviet Union

Part 1: The View from European Companies in China

Part 2: The Chinese Communist Party Fears Ending Up Like the Soviet Union

Part 1

The View from European Companies in China

‘The propaganda ministry - within four to six weeks - managed to turn China into a problem for Europeans. China’s standing in Europe is eroding by the day.'

Malcolm Riddell: ‘How are European businesses faring in China?’

Joerg Wuttke: ‘European companies in China were doing well until January this year.’

  • ‘Business was good for those that are permitted to operate here.’

‘But you have to keep in mind that there are lots of companies in Europe that have their nose against the China window and want to come in, but cannot. ‘

  • ‘We estimate that we lose about 30 billion Euros every year because of companies not being able to operate in China the way Chinese companies are able operate in the European Union.’

Malcolm: ‘How do you see the relations between China and Europe businesses in China?’

Joerg: ‘Well it's a very mixed picture.’

  • ‘We had, over the last year, a relatively smooth ride compared to the U.S.-China relationship.’

‘But at the same time, the U.S.-China trade battle sucked the oxygen out of our room for a long time.’

  • ‘In the later part of 2019, we wanted to have high level meetings, we wanted to engage.’
  • ‘But China simply wasn't able to focus. They were totally absorbed by the trouble Trump was causing them. So we had a real attention problem.’
  • ‘This is funny because Europe happens to be the largest market for China - way bigger than the U.S. market - and we are by far China’s biggest technology provider.’
  • ‘After 15th of January when the Phase One trade deal was signed in D.C., we got a bit of attention from the Chinese - then coronavirus happened.’

‘Europe is not the kind of world power the U.S. is.’

  • ‘For us, China is in an economic story.'
  • ‘The U.S.-China relations has the security story on top of the economic.’

Malcolm: ‘Relations between Europe and China seem strained lately. What’s behind that?'

Joerg: ‘Europe has always been sympathetic to China.’

  • ‘Europeans felt a lot of goodwill towards China, in January in particular, when China was struggling - Europeans were moved by the pictures of Wuhanese standing on balconies singing.’
  • ‘That goodwill turned around immediately when China was starting to donate equipment into Europe, particularly Italy, in the latter part of February and made a big fuss about it.’

‘What really annoyed us was when European people, as well as companies, donated money and equipment in January, the Chinese government asked us to lie low and not talk about it. So we didn't.’

  • ‘Then all of a sudden we see China celebrating any mask that they landed in Europe.’

‘And of course on top of it, we are now experiencing the rhetoric, the assertiveness, the bullying of the ‘Wolf Warrior’ diplomats you have written about.’

  • ‘We now enjoy Wolf Warriors in our capitals - in Stockholm and Paris and Prague and other places.’

‘It is a very sad story to see how the propaganda ministry - within four to six weeks - managed to turn China into a problem for Europeans, and how China’s standing in Europe is eroding by the day.’

Malcolm: ‘Is Europe feeling pressure from the U.S. and China to pick a side?’

Joerg: ‘Yes, the Chinese and the U.S. are putting pressure on us to make up our minds, "So who are you with? With us or with them?" ’

  • ‘In this binary system, that's certainly not very positive to make a choice.'
  • 'Besides, actually we don't want to make a choice.’

‘We are - if you include Britain - the largest economic block. We have a world currency. We don't have the army, and we look very messy, but as a matter of fact, we are an economic powerhouse.’

  • ‘So we don't want to make a choice.’

‘We lean towards the U.S. of course for the system that we have, the democratic values that we have.’

  • ‘And we certainly want to lean on China too because that means 30% of economic growth over the next 10 years coming out of China.’

‘So there’s a lot of soul searching have right now in Brussels, Berlin, and Paris, and other capitals.’

Part 2

The Chinese Communist Party Fears Ending Up Like the Soviet Union

‘The quality of administrative leadership in China is eroding.’

Malcolm: ‘Joerg, you have been in China for 30 years. Could you identify some of the biggest changes you’ve seen in the government?’

Joerg: ‘What I notice is that the quality of administrative leadership in China is eroding.’

  • ‘When I look back 30 years, I remember the times, particularly in the nineties, when the leadership was open-minded, engaging, and took on difficult tasks.’

‘Now that seems to be down to just one person, Liu He, who is willing to do the heavy lifting.’

  • ‘The rest of the gang I think is more aiming at sort of administering and just venturing on.’

‘There’s a complacency among the administrative leadership.’

  • ‘And complacency is bad for business because there have to be structural changes in this country, and they simply don't happen.’

‘Take state run enterprises, for example.’

  • ‘Everyone knows that they are bad for business. Everyone knows they're sucking money out of the system.’
  • ‘But the political leadership still rewards SOEs.’

‘On the other hand, Chinese private enterprise is incredibly innovative and unbelievably good. They create the jobs and value.’

  • ‘And they are being pushed in the corner in favor of SOEs.’

‘Just look at Nick Lardy’s two last books.’

  • ‘In the earlier book, he talks about how China is moving toward a market-oriented economy.’
  • ‘Then, three years later in his next book, this poor chap has to eat dirt and admit that Mao has taken over again.’

Malcolm: ‘Why do you think the administrative side is eroding?’

Joerg: ‘My company and I were - and I remain - very close to former Prime Minister Zhu Rongji - he's my hero, frankly. And one of his ministers is a bit of a political coach to me.’

  • ‘So when there was a major screw up in late 2016 - all of a sudden four provinces lacked gas for three months - I asked him, “Minister so-and-so, why did this happen?"

‘The Minister told me, “Well, it’s because of the corruption campaign.” ’

  • ‘ “The good people are leaving,” he said.'

“Why? Three reasons,”

  • “A) They don't have a side income.”
  • “B) They are held responsible for the rest of their life lives for any decisions they make, and”
  • “C) They now have to spend to a lot of hours a day in political studies.”

“And so they leave the ministries - the economic ministries in particular - and go into private business where they can make a decent living.”

  • ‘He concluded by saying, “A third-rate team doesn't make first-class policy. Just get used to it." ’

‘So, on the one hand, you have the best people leaving these decision-making bodies.’

  • ‘And, on the other, those who are still there are scared stiff.’

Malcolm: ‘What’s driving all this?’

Joerg: ‘The Chinese Communist Party – it’s a Leninist party after all – is driven by fear.’

  • ‘The Party has a lot of anxiety and wants to secure its position.’
  • ‘That anxiety comes from three traumatic experiences related to Russia.’

‘The Russian trauma starts with Khrushchev in '56 denouncing Stalin.’

  • ‘That really brought the Sino-Soviet relationship to a standstill.’

‘The second trauma was Gorbachev’s opening up Perestroika and Glasnost.’

  • ‘That showed the Chinese that if you make political changes, then four years later you could be heading for the exit door.’

‘The third trauma is the Yeltsin years.’

  • ‘This showed the Chinese that if you privatize SOEs, if you give this opportunity to businesspeople to buy them, then you end up with an oligarchy.’

‘So, this is the fear the Party has, of ending up like the collapsed  Soviet Union.’

  • ‘They look at this again and again - all the time - in order to avoid Soviet mistakes.’
  • ‘They're mesmerized by the Soviet and Russian story.’

‘Let's see the Chinese, with all this learning, can mastermind a different ending.’

  • ‘At this stage, though, mesmerized as the Party may be, it looks like they might end up where they don't want to be.’

More

CHINAMacroReporter

February 18, 2021
'Like It Or Not, America Is Still A Superpower'
‘The twentieth century was littered with the carcasses of foreign leaders and governments that misjudged the United States, from Germany (twice) and Japan to the Soviet Union to Serbia to Iraq. Perhaps the Chinese, careful students of history that they are, will not make the mistake that others have made in misjudging the United States.’
keep reading
February 16, 2021
'Is China experiencing an advance of the state sector?'
‘The value-added produced by state-owned enterprises has usually been in the range of 25-30% of China’s GDP. And what’s really striking about those numbers is that they just haven’t changed very much over the past 25 years. The share of China’s economic output being produced by SOEs today, under Xi Jinping, is not significantly different than it was under Hu Jintao, or even in the later years of Jiang Zemin.’
keep reading
February 16, 2021
‘China Blocked Jack Ma’s Ant IPO After Investigation Revealed Likely Beneficiaries’
‘Behind layers of opaque investment vehicles that own stakes in Ant Financial are a coterie of well-connected Chinese power players, including some with links to political families that represent a potential challenge to President Xi and his inner circle. Those individuals, along with Mr. Ma and the company’s top managers, stood to pocket billions of dollars from a listing that would have valued the company at more than $300 billion.’
keep reading
February 18, 2021
'Like It Or Not, America Is Still A Superpower'
‘The twentieth century was littered with the carcasses of foreign leaders and governments that misjudged the United States, from Germany (twice) and Japan to the Soviet Union to Serbia to Iraq. Perhaps the Chinese, careful students of history that they are, will not make the mistake that others have made in misjudging the United States.’
keep reading
February 16, 2021
'Is China experiencing an advance of the state sector?'
‘The value-added produced by state-owned enterprises has usually been in the range of 25-30% of China’s GDP. And what’s really striking about those numbers is that they just haven’t changed very much over the past 25 years. The share of China’s economic output being produced by SOEs today, under Xi Jinping, is not significantly different than it was under Hu Jintao, or even in the later years of Jiang Zemin.’
keep reading
February 16, 2021
‘China Blocked Jack Ma’s Ant IPO After Investigation Revealed Likely Beneficiaries’
‘Behind layers of opaque investment vehicles that own stakes in Ant Financial are a coterie of well-connected Chinese power players, including some with links to political families that represent a potential challenge to President Xi and his inner circle. Those individuals, along with Mr. Ma and the company’s top managers, stood to pocket billions of dollars from a listing that would have valued the company at more than $300 billion.’
keep reading
February 14, 2021
How to Keep U.S.-Chinese Confrontation From Ending in Calamity
'The two countries need to consider something akin to the procedures and mechanisms that the United States and the Soviet Union put in place to govern their relations after the Cuban missile crisis—but in this case, without first going through the near-death experience of a barely avoided war.'
keep reading
February 14, 2021
The United States, China, and Taiwan: A Strategy to Prevent War
‘We believe that a crisis is building over Taiwan and that it is becoming the most dangerous flashpoint in the world for a possible war that involved the United States of America, China, and probably other major powers.'
keep reading
February 13, 2021
Why China Will Go Green - Really
‘To Communist Party leaders, greenery increasingly aligns with their economic and political interests. China, a populous country that is cruelly lacking in clean water and arable farmland, and which hates having to rely so heavily on imported energy, has a selfish interest in embracing what President Xi Jinping calls “ecological civilisation”.’
keep reading
February 11, 2021
'The Biden Team Wants to Transform the Economy. Really.'
‘Biden and his more activist advisers hope to modernize key industries and counter an economic threat from China, swiftly emerging as the world’s other superpower. “The package that they put together is the closest thing we’ve had to a broad industrial policy for generations, really,” says Scott Paul, the president of the Alliance for American Manufacturing.’
keep reading
February 10, 2021
‘What the ‘Hong Kong Narrative’ gets wrong'
‘For a significant cohort of the [“pro-democracy”] protesters, the more accurate label would be “anti-China activists.” The one thing that seems to unite them is not a love of democracy, but a hatred of China.'
keep reading
February 8, 2021
Why the Anglosphere sees eye to eye on China
‘Some of America’s European allies are very wary of what they fear will be a new cold war with China. By contrast, the US is getting more support from the UK, Australia and Canada.’
keep reading
February 7, 2021
' "Longer Telegram" | To Counter China’s Rise, the U.S. Should Focus on Xi'
A strategy that focuses more narrowly on Xi, rather than the CCP as a whole, presents a more achievable objective.'
keep reading
February 7, 2021
'The Sources of Soviet Conduct'
'The main element of any United States policy toward the Soviet Union must be that of a long-term, patient but firm and vigilant containment of Russian expansive tendencies.’
keep reading
February 7, 2021
'Remarks by President Biden on America's Place in the World'
“We’ll confront China’s economic abuses; counter its aggressive, coercive action; to push back on China’s attack on human rights, intellectual property, and global governance.”“But we are ready to work with Beijing when it’s in America’s interest to do so. We will compete from a position of strength by building back better at home, working with our allies and partners, renewing our role in international institutions, and reclaiming our credibility and moral authority, much of which has been lost.”“That’s why we’ve moved quickly to begin restoring American engagement internationally and earn back our leadership position, to catalyze global action on shared challenges.”
keep reading
February 7, 2021
'In Search of Today’s George Kennan'
‘Kennan provided a framework to break through the bitter divide between those who believed America should return to its prewar isolationism, and those who believed the USSR was itching for a dramatic showdown with the capitalist west.’
keep reading
February 7, 2021
' "Longer Telegram" Sets Off Fierce Global Debate'
'The fierce global debate set off this week by a thought-provoking paper - “TheLonger Telegram: Toward a New American China Strategy” – has underscored the urgency and difficulty of framing a durable and actionable U.S. approach to China as the country grows more authoritarian, more self-confident and more globally assertive.'
keep reading
February 7, 2021
The 'Longer Telegram' & Its Discontents
Why everyone wants to be George Kennan‘In 1947 X penned his history-changing “Sources of Soviet Conduct” in Foreign Affairs,’ wrote Edward Luce in the Financial Times in 2018.‘The piece, which crystallised America’s cold war containment strategy, was the making of George F Kennan’s life-long reputation as a master of geopolitics.’‘ As the architect of a doctrine that won the cold war.’
keep reading
February 7, 2021
'Brookings experts analyze President Biden’s first foreign policy speech: Focus China'
'To respond effectively, Biden argued, America will need to rebuild leverage, e.g., by pursuing domestic renewal, investing in alliances, reestablishing U.S. leadership on the world stage, and restoring American authority in advocating for universal values.'
keep reading
February 7, 2021
'Why the ‘Longer Telegram’ Won’t Solve the China Challenge'
‘Perhaps the most problematic aspect of the 'Longer Telegram's' emphasis on Xi—“All U.S. political and policy responses to China therefore should be focused through the principal lens of Xi himself”—is the author’s conclusion that Washington should be seeking to escape from, and even try to effect the removal of, Xi’s leadership because that could restore U.S.-China relations to a potentially constructive path: “its pre-2013 path—i.e., the pre-Xi strategic status quo.” ’
keep reading
February 4, 2021
Why Beijing Is Bringing Big Tech to Heel
‘Beijing’s recent antitrust efforts are motivated less by worries about the tyrannical nature of monopoly power than by the belief that China’s tech giants are insufficiently committed to promoting the goal advanced by the Chinese Communist Party (CCP) of transformative technological innovation—and thus may be undermining the effectiveness of Chinese industrial policy.’
keep reading
February 3, 2021
'Secretary of State Antony Blinken on U.S. Policy Toward China'
‘There’s no doubt that China poses the most significant challenge to us of any other country, but it’s a complicated one.’
keep reading
February 3, 2021
'Burma’s Coup and Biden’s Choice'
‘The top U.S. priority in Asia is limiting Beijing’s ability to control independent states like Burma, which is strategically situated in the Indo-Pacific. The U.S. response needs to take into account China’s regional designs.’
keep reading
February 3, 2021
'Myanmar, Burma and why the different names matter'
‘Unlike most of the world, the U.S. government still officially uses "Burma." '
keep reading
February 3, 2021
'Coup a further complication for tricky Myanmar-China ties'
‘Even if China played no role at all in ousting Suu Kyi, Beijing is likely to gain still greater sway over the country.’
keep reading
February 3, 2021
‘Beijing Won’t Let America “Compartmentalize” Climate Change'
‘‘You want China to take action on climate change?" asks Xi Jinping. "Let’s talk about what you’re going to give to get it.’’
keep reading
February 3, 2021
Burma: At the Center of the U.S.-China Competition
In today’s issue: 1. China Lays Out Its Position / 2. The U.S. Lays Out Its Position / 3. Burma: At the Center of the U.S.-China Competition / 4. Burma or Myanmar?
keep reading
February 3, 2021
'A Conversation with Politburo Member Yang Jiechi'
‘History and reality have shown time and again that these issues concern China's core interests, national dignity, as well as the sentiments of its 1.4 billion people. They constitute a red line that must not be crossed.’
keep reading
February 3, 2021
'National Security Advisor Jake Sullivan on U.S. Policy Toward China'
‘Being prepared to act as well to impose costs for what China is doing in Xinjiang, what it’s doing in Hong Kong, for the bellicosity of threats that it is projecting towards Taiwan.’
keep reading
February 3, 2021
'Coup Puts Myanmar at the Center of the U.S.-China Clash'
‘Chinese oil and gas pipelines snake across Myanmar from China’s landlocked Yunnan province to the Bay of Bengal—a route that Beijing wants to transform into a broader economic corridor with road and rail connections.’
keep reading
February 3, 2021
'Biden's whole-of-National Security Council China strategy'
'National security adviser Jake Sullivan is personally focused on China as a priority, building capacity across departments and agencies and running processes that break down old silos between foreign and domestic policy.'
keep reading
January 31, 2021
'Biden’s Nightmare May Be China'
‘The coming years represent the greatest risks since I began covering U.S.-China relations in the 1980s, partly because Xi is an overconfident, risk-taking bully who believes that the United States is in decline.’
keep reading
January 31, 2021
Opinion | Marco Rubio: 'China is exploiting U.S. capital markets and workers. Here's what Biden should do.'
‘China can finance its industrial ambitions with the deepest, most liquid capital markets in the world — our own.’
keep reading
January 31, 2021
The UK Stands Up, the U.S. Not So Much
“We have honored our profound ties of history and friendship with the people of Hong Kong, and we have stood up for freedom and autonomy—values both the U.K. and Hong Kong hold dear.” British Prime Minister Boris Johnson
keep reading
January 31, 2021
'U.S.-China Capital Flows Vastly Underestimated'
‘And yet, debates around US-China passive securities investment suffer from shortcomings similar to those inherent in the early debates about US-China bilateral FDI and VC: official data do not provide a clear picture for policymakers to understand the scope and patterns of two-way investment flows and stocks.’
keep reading
January 31, 2021
'Why U.S. Securities Investment in China is Vastly Underestimated'
‘The conduits of US securities investment in China that are obscured or ignored in the US Treasury International Capital (TIC) dataset constitute a majority of all holdings, so these figures vastly underestimate the true scope at the end of 2020.’
keep reading

Heading

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.