Michael A. MacDowell
China’s remarkable economic growth is owed to several factors, not the least of which is an innovative and aggressive business climate fostered by a population that exudes hard work and can be easily directed by central authority. These cultural characteristics afford Chinese leaders indirect and increasingly direct control of most productive resources. The result is a relatively efficient system when compared to the mostly autonomous market oriented Western economies.
In many ways China is not just an economy, or for that matter a country. It is a culture whose members act in unison when it comes to executing strategies that advance the country’s economic prowess. Some of these strategies are obvious. Last September the Chinese Communist Party issued new guidelines for private companies. The guidelines reminded firms of their role to serve the state and vowed to use education and other tools to “continuously enhance the political consensus of private businesspeople under the leadership of the Party.” Jack Ma, founder of Alibaba, the world’s largest online commerce company, and Ant, a rapidly growing financial service company, seems to have run afoul of this policy and been silenced by the Party.
And of course, there is the continuing organized theft of technology from American and other Western Countries by Chinese companies and its military. While some technological espionage is publicly revealed, much goes unnoticed at hundreds of American companies, universities, and research institutes.
Other Chinese strategies and tactics that fly under the radar of most Westerners are policies designed to protect and grow their economy often at the expense of others. A case in point is the February 2020 decision of the Chinese People’s Congress of last year to ban the sale of wild animal meat in their “wet” domestic markets. Many health experts believe that these markets were the incubators of the COVID-19 epidemic.
What is not as well understood in the West is a subsequent move by the Chinese to make up for the loss of revenue in those markets by raising their domestic rebates on the Value Added Tax (VAT). This change gave wet market vendors and suppliers a 9% tax rebate for wild animal meat they exported to other countries. The Chinese are in essence subsidizing the export of meat that they have banned in their own country.
After more than a year delay, Chinese officials have just now given permission to a scientific team from the World Health Organization (WHO) to visit China and examine the origins of COVID-19. Perhaps Peng Liyuan, wife to Chinese President Xi Jinping and one of only nine “Good Will Ambassadors” to the WHO, might know why the delay.
While sounding conspiratorial, these examples and many others, are evidence of a formidable and aggressive Chinese campaign to surpass the U.S. as the leading world economic power.
China is the only major economy expected to report growth for 2020. One must give credit to the Chinese for what appears to be a seemingly uncoordinated and disbursed, yet in truth highly orchestrated economic growth policy implemented at the expense of Western economies. When combined with currency manipulation that keeps the value of Chinese currency artificially low, making Chinese goods attractive in international markets, and more recent efforts to supersede the dollar as the preferred international currency, the Chinese represent a formidable competitor.
The Chinese Communist Party, which last year removed the two-term limit thereby effectively making Xi Jinping president for life, has clearly adopted his approach to Chinese economic dominance of the world. This strategy includes controlling all aspects of Chinese economic life by usurping and controlling any threatening institutions or individuals. Such tactics would incite resentment at best in most Western Countries, but not among the Chinese. They seem mostly complacent with the loss of individual and corporate freedom, seeing it as a small price to pay for rapid economic growth and the prosperity it spawns.
Combating the formidable economic power of China’s well-orchestrated economic growth plan will hardly be easy. It will take very thoughtful and strategic efforts from the new administration, as well as a more thorough understanding on the part of Americans of the strategies that China is using to counteract the centralized Chinese goals for economic superiority. If Americans cannot grasp the eventual costs of losing the economic battle with China, the future is hardly bright.
Michael A. MacDowell is President Emeritus of Misericordia University and is a trustee of the Calvin K. Kazanjian Economics Foundation. He lives in Estero, FL.