Eying the Chinese wallet

How the Middle Kingdom reaches out in the modern day

In his formal victory address prime minister in waiting Imran Khan underlined a progressive foreign policy that is being lauded in many quarters. While Khan reaching out to India, and Afghanistan, underscored the reconciliatory position he wants to start out on, the speech was dominated – as expected – by mentions of China.

From China’s anti-corruption drive, to the China Pakistan Economic Corridor (CPEC), Imran Khan wooed Beijing just like every leader of Pakistan has done in recent years, and many following Khan are likely to do owing to Beijing’s economic clout which continues to grow.

An in-depth insight into that fiscal power and everything that it brings to the table is provided by Shaun Rein, the Founder and Managing Director of the China Market Research Group (CMR) in his latest book The War for China’s Wallet.

Rein, who has authored bestsellers on China, The End of Cheap China and The End of Copycat China,underlines how Beijing uses its wallet to drive home its political ambitions. From the South China Sea, to the Middle East, as Beijing looks to connect its sphere of influence with the One Belt One Road (OBOR) strategy, there are both promises and warnings to be mustered from Pakistan in Rein’s book.

China isn’t particularly interested in forming alliances, in the traditional (read western) sense of the word. So what it does is that instead of seeking friendship, it offers two alternatives for most states that it engages with: economic partnership or economic hardship.

The Chinese success story has also resulted in a mass movement of the Chinese population overseas, in turn bringing with them their local ethos

What did China do when South Korea installed Terminal High Altitude Area Defense (THAAD), a US developed anti-ballistic missile defense system? It banned K-Pop and South Korean film stars from coming to China, boycotted brands originating in South Korea, a curbed tourism from the country.

The same treatment was meted out when Mongolia hosted the Dalai Lama in 2016: within a month China stopped the import of Mongolian commodities and canceled the visit of the country’s deputy prime minister.

When the Nobel Peace Prize was awarded to Liu Xiaobo, who – among other things – has called for the overthrow of the Chinese Communist Party, Beijing ended normal relations with Norway and the country’s salmon imports fell down by 61.8 percent within a month.

China hits where it hurts the most: the economy – one that in many cases it had made dependent on itself in the first place.

“Beijing [has] invented a new form of statecraft: instead of guns and ships, the government deployed economic carrots and cudgels, even against China’s erstwhile allies.”

While East Asia has experienced Chinese fiscal hegemony at the closest quarters, Beijing’s expansion, of course, is fast growing, with Middle East now firmly in its sights. The Middle East in turn brings its own sectarian fault-lines and a minefield of alliances.

For instance, while Iran has been a close partner of China – because of the latter’s oil needs and both aligning against the US – in 2016, Saudi Arabia became China’s leading trade partner in the Middle East, with bilateral trade growing from $1.26 billion a decade ago to $60 billion.

“The Middle East is a vital gatekeeper to OBOR’s success. But the question remains: Can China implement OBOR successfully in the Middle East with all the internal divides and competing demands for its political patronage or support?”

The author argues that to understand China’s foreign policy and economic warfare it is important to comprehend how the country got here in the first place.

“China has become a superpower more by circumstance than by intention. A mere result of its size, China’s explosive economic growth was largely inevitable in the aftermath of Deng Xiaoping’s and Marshal Ye Jianying’s sweeping political and economic reforms in the late 1970s and 1980s… Under frequent American condemnation of its political system, China felt largely estranged from the US-led system.”

While the first half of the book is dedicated to China’s fiscal prowess and the ‘hammer and carrot’ policy, the second half discusses the country’s internal workings and business cultures, and how they impact their dealings overseas.

How Chinese SOEs do domestically, and how their interactions are in foreign countries, will impact both international geopolitics and the global economy.

“To succeed, foreign brands need to show that they will not only provide the right services and products to Chinese companies, but also that they will adhere to Chinese laws and regulations and for which the Chinese government is willing to allow foreign investment.”

The Chinese success story has also resulted in a mass movement of the Chinese population overseas, in turn bringing with them their local ethos. How such migrations, and China’s hefty share in global tourism, impacts host countries is thoroughly discussed by Rein as well.

“The War for China’s Wallet has shown China’s President Xi Jinping is looking to signal to the world that China has reached a level of power that demands respect and equal billing to western nations that have ruled the world political system since the end of World War II.”

For Pakistan, the lessons are simple. With increased financial dependency on China, comes an increased subservience and unconditional adherence to Chinese policies in the country. What it also brings is a mass influx of Chinese goods, culture and people, which will leave an imprint on the country in the years to come as well.