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China has the economic gravity and confidence to match the international diplomatic posturing that challenges its own new assertive positions, says David Mahon

China has the economic gravity and confidence to match the international diplomatic posturing that challenges its own new assertive positions, says David Mahon

By David Mahon*

Across China there is evidence of an economically strong, COVID-free society.

In the northern Heilongjiang city of Qiqihar, with a population of just over five million people, the streets are choked with cars, couriers on mopeds weave among them delivering online purchases, and at night the restaurants are full.

Mask wearing is common, but many people no longer see the need. It is the same in other cities.

In Beijing there has largely been a return to pre-COVID norms, but catering has not fully recovered as many citizens still prefer to dine at home or order in, and traffic flows are generally lighter due to fewer non-residents returning after the initial travel restrictions last year.

Beijing is stricter than other cities. More people wear masks and the COVID app — which records citizens’ COVID status, with a green light granting access — is required to enter most buildings, take a taxi or Uber, or get onto public transport. If people choose to engage in normal life, they must register themselves with the public health system.

A number of restaurants in China have remained platforms for home delivery, avoiding the problems of securing and retaining staff, but also meeting the present demand for home dining. E-commerce has substantially compensated for the slower recovery of traditional restaurant and retail trade. China is more advanced than Western economies to the extent it has developed advanced social media marketing and integrated consumer financing and payment systems, not just online ordering and delivery.

Many foreign food and healthcare brands that had not adjusted to digital trends before COVID seem to be falling even further behind in post-COVID China, with its acceleration of online consumption.

Imported infant formula brands have lost much of the momentum they enjoyed pre-COVID, with many being unable to maintain sufficient stock in China in the first quarter of 2020. This prompted parents, who wanted to be sure they could feed babies the same brand over 12-18 months, to buy local Feihe and Junlebao formulas. This has also resonated with growing economic patriotism in China. In early April, in the office of a Zhejiang e-commerce distributor, the purchasing manager expressed a common view.

“I have been looking at suppliers of supplements and although Australia has led this sector, I don’t want an Australian supplier. Australia does not respect China. We are patriotic. The West shouldn’t push us around and then expect us to trust them in business.”

The Chinese Government will not favour trade with Western countries that it perceives to be colluding with the US to contain China. Even without tariffs, such as those placed on Australian wine and barley, consumers possess a spontaneous boycott power that can damage brands, as H&M and GAP are discovering.

While trade barriers as a weapon in political conflict can be devastating to specific sectors, it seldom does severe damage to diversified economies of scale. The US did little damage to Chinese manufacturers with its tariffs, and while China hurt the US agricultural sector, the net impact on the US economy has not been great. It is smaller countries with less diversified economies that are at greater risk.

Outside the few targeted trade barriers based on political considerations, China has lowered tariffs on over 800 items, at times even below levels previously enjoyed by countries at ‘Most Favoured Nation’ status. Tariffs on a range of meat and fish products have been cut by almost 50%. As China struggles with the economic complexities of American political containment, contrary to popular assumption, it continues to open and reform parts of its domestic economy.

The United States’ sanctions have had a serious impact on the Chinese technology sector, but with a strong core economy based on domestic demand, this will only have a slight impact on medium-term macro growth. The external pressure is making China even more determined to become more economically and technologically independent while maintaining its economic influence abroad, primarily to protect access to resources and ensure steady trade flows.  

Economic gravity

The global economy needs flexible trade and investment arrangements to fill the vacuums created by COVID if it is to avoid a prolonged patchwork of economic recessions. China lifted much of the world out of recession in 2010, and while it later slipped slightly in influence, it continued to generate one third of global growth.

In 2020, China constituted almost all of the world’s economic growth. As other economies recover, the proportion of China’s contribution will again diminish. But it will remain the prime driver of the global economy, generating around 30% of growth for the foreseeable future.

China’s GDP growth is likely to exceed 8% this year, even as the government reduces COVID related subsidies, restricts bank credit, and continues to restrain the property sector in coastal provinces. Successful, diversified economies have their own attraction.  

In two years, foreign purchases of Chinese Government ten-year bonds have doubled to US$ 300 billion. These offer yields of over 3.2%, compared to US Treasuries offering 1.7%. The US can probably keep returns positive by continuing to buy its own debt, but investors will lose money on many Western government bonds in the next two to three years, and negative returns may mean that in some cases investors will need to pay the issuers as bonds mature. Chinese assets will be looking increasingly attractive.

Diplomatic posturing

Continued attempts by the US and its allies to contain China and to force China to address domestic human rights issues through public condemnation and sanctions will make the world a poorer place, and ultimately will fail.

The prospects for more rational US-China relations in the future are not good, for President Biden is even more hawkish in many respects than his predecessor. Whether is it US trade negotiators stridently lecturing their Chinese counterparts in Alaska, or Biden announcing what is essentially a China containment alliance with Japanese Prime Minister Suga, the United States seems determined to treat China as an adversary and bully it into submission, as if China should be dealt with like 1960s Cuba.

The vulnerability but also strength of Western democracies lies in their transparency.

Western violations of human rights are usually exposed in an uncensored, although commercially coerced media, and then often dealt with by relatively independent judicial systems. China represents nearly one fifth of the world’s population, of which over 90% are Han by either blood or identification. Rights abuses exist in China, as they do in all countries and particularly those of scale.

China’s opacity makes it harder for fair and independent judgement of the scale of abuses, and at times leads commentators to exaggerate claims. With a more open media and independent legal system, rights abuses in China would reduce, and the country would also be less exposed to international criticism. China’s economic and technological evolution will depend increasingly on transparency and freedom of information, likely spurring greater openness over time.

Western media outlets are maintaining attacks on Chinese technology firms blacklisted by the US. Huawei is claimed to pose a risk to countries’ national security; voice recognition software company iFlytek is alleged to produce tools of state oppression; and recently sanctioned Tianjin Phytium Information Technology is alleged to produce supercomputers that can be used to develop weapons of mass destruction. There is no evidence that Huawei poses any such risk, and there is scant evidence of the other claims, but to most in the West, the claims are now facts.

Human rights are too important to be used as tools of strategic containment.

The United States and some of its allies believe that they can trade with China while judging it by rights standards they often do not comply with themselves. Countries that fear China’s rise are better to strengthen their own economies and compete, or even better, collaborate.

China, like any country, is more likely to heed constructive criticism coming from strong partners rather than lectures from adversaries.

Global wellbeing depends upon co-operation to build and maintain a strong economy, while improving fairness and environmental outcomes. China is an indispensable contributor to these ends.


*David Mahon is the Executive Chairman of Beijing-based Mahon China Investment Management Limited, which was founded in 1985. 

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46 Comments

The US and any countries follow its step to try to contain, weaken, separate China are evils that doom to fail.

13
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Xing why do do many Chinese move to the west? Is the west better?

The west had been richer due to tech advancement and the resulted resources robbed from all continents at the cost of indigenous people.

It is natural for people to move from poor to richer area.

However, I suspect the trend of Chinese migration to NZ will reverse in 10 years time.

You will not only see a brain-drain from NZ to AUS but one from NZ to China.

How do you see the trend of Chinese migration reversing?

Kiwis wont move to China because they don't speak Chinese. English is going to be the dominant language for many decades to come and this is one of the major drivers for migration out of China.

How do you see families moving from their 600m2 section and 5 brm house back to an apartment building in a smog ridden city.

I dont see it Xing.

It will be the young moving for the opportunity NZ will not offer in 10 years.

So if Nepalese people stole land 200 years ago in nz then they would be rich?

Now that China is reach. Will they all be moving back to China if the west is so bad?

And why has he / she / it moved here? X is always spouting off about the wonders of China.
The answer is likely that X doesn't in fact live here...

Here's a serious question for you, especially as I understand you are an NZ resident:

Which is preferable from your perspective?

1. NZ becomes neutral and is no longer beholden to any ANZSUS or Five Eyes agreements, plus any other similar arrangements we have. Commonsense would require that we upgrade our military capabilities (à la Switzerland) accordingly, as there would be NO military cooperation with any other nation. But we trade with whoever we please. Appealing benefits are that we no longer get involved in any more stupid military adventures that the US is prone to, and gives us more options geo-economically
2. NZ embraces the core principle of democracy and stands up to Fascism like it has in the past. This is one unifying principle that is not presently encouraged properly (unlike the USA) in NZ, as we have whittled away our principles to basic bitch capitalism. We steadily part ways with China, given it has embraced Fascism, to trade with more like-minded and progressive nations. Benefits are that we feel better about ourselves and are contributing towards a better world.

You comment really made my day! Fascists claiming to fight fascism.

The prevailing view was that New Zealanders were of superior stock to their counterparts across the Tasman.

A couple of reasons (Dr Barnes, et al) why NZ refused to join AU when (Seddon "King Dick") was running the country:

- NZ considered Māori to be a better 'class' of 'native' than indigenous Australians.
- NZ wanted a Kiwi-run South Pacific empire
- Economically, Australia was becoming less important
- Australia's convict past was considered a stain on the settlement
- Seddon hated Chinese, regularly calling them "Yellow Peril" and "Asiatic Hoards"

A short read, search your own if you want a longer one.

New Zealand turns down federation with Australia

You'll need to elaborate. Are you saying NZ is "fascist" based upon NZ history generations ago? The sentiment of the formerly "Great Britain" was fascist in comparison to today, as was the case in the dominions of it's world-spanning empire. Is it your view that NZ is the same today? If so, what's your rationale for that?

You sound like you are from a binary world with only around 300 years of history.

You sound like you are from a unary world with less than 100 years history.

Chinese history is only continued in Taiwan if my memory serves.

You STILL sound like someone who can't make a tangible argument, bot. I asked you a genuine question and that's all you have? I don't know why you bother.

If your views are representative of mainland China, then I wholeheartedly choose option 2.

Might is right they say. China has the might, and they aim to use it. If I randomly make '9 dashes' on a map no-one will pay much attention to me, it's different when China does it however.

15
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Well, he would say that, wouldn’t he? A good way to judge countries is by the number of people that wants to move to them. A fair chunk of the world’s population would move to the US, Canada, Australia, the UK and here. How many are queuing to get into China, Russia or Iran.

19
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If all Chinese were able to choose where they wanted to live I imagine China would be a small country indeed.

When you started to assume what you guess is the fact, that's when the problem starts. Surely you have not had any deep discussion with the Chinese. They believe there're huge opportunities in China and especially for those younger generations, living in China has a lot more fun. We need figures like % of population moving away from the country comparing with Number of people.

Clearly I have never spoken to a Chinese person in my life.....

but 50 million Chinese live outside china. How many foreigners live if China? a few hundred thousand at most and very few are westerners.

How bout them numbers?

By contrast, over the past year, from February to December 2020, as direct result of the coronavirus pandemic, there were 909 Australian deaths and a total of 24,408 casualty cases. In addition, approximately 50,000 Australians were liquidated abroad; that’s to say, forbidden by the government in Canberra to return to the country and their homes; they were officially classified as constitutionally dead. Total casualty rate, 74,408. Coutesy of John Helmer

Unfortunately one cannot believe any information that comes our of China. It is simply a case that many governments, including our own, that blatantly lie to the people.

David Mahon is a well known sinophile.

About 10 years ago he was on tv saying Chinese view kiwis as racists.

Judging from the comments here, I think he's not wrong though.

To question or disagree with China does not make one racist. Kiwi's in todays day and age are racist is bollocks. There maybe few as there are in any countries or cultures. Let's look to our utopia of south east asia where Chinese decent/ ancestor who are citizen's have to go study in western countries. Chinese citizens cant get top goverment jobs or positions in university/schools, no welfare, often extorted by the police and even the citzens can't buy land in some of these countries! Kiwi's have there flaws but are very tolerant/ welcoming compared many other countries. I roll my eyes when the cult call of "racist'" is shouted in any skepticism of a non western country/culture. As I said before I bandaged a guy who had been hit and run. The first person on the scene was a different race and didn't care, why? Chinese decent. No Kiwi, would leave anyone in a pool of blood. Few years ago two workers drowned in a drain, in that case it was a chinese woman who said out loud"who cares only foreigners!" As a Kiwi I was horrified by these actions. As for slurs, my god I hear this all the time from all the races! Kiwi's (what ever bloody race!) generally are good people. Saying that we bitch alot, myself included of course.

"About 10 years ago he was on tv saying Chinese view kiwis as racists"

Are you trying to say kiwis aren't racist? pull the other one.

No your right kiwis are. But so are Chinese that's a fact.

Couldn't agree more.

I cant think of any cultures that I have come across that aren't racist. Some are more than others, but its part of human nature.

Virtue signalers seem to be the most racist.

12
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This article made me feel like puking. Talk about a CCP apologist!
Not at all objective, doesn't address the demographic / economic headwinds ahead of China.
But we shouldn't be surprised - the author's business is wedded to China.

Yes. David's commercial interests are in China. That being said, you don't have to dismiss everything he says.

But I have every right to dismiss what he writes, and have.
It's a very unbalanced and biased piece.

I wonder if he reply to your comment.

Which way does NZ wish to choose - Washington & Canberra (and our western value set) or Beijing (and their totalitarian regime and values)?
We may not be able to enjoy both benefits in future.

I would have thought with the Democrats in power that now would be a good time to pivot towards the USA.

I think we will pivot roughly in proportion to dairy and dead animal exports.

There's plenty of talk about what NZ might lose economically if it pivots away from China.
Almost nothing on what economic opportunity we might lose out on from the west if we don't...

So give us examples of those lost opportunities. US, the UK and Europe are NZ economic competitors (all producers of primary products).
I personally think that NZ has not other options to stay with its Western allies. And it has to do it at huge economic cost. But if it wants to remain a sovereign country it has to take this very bitter pill. I think NZ is just buying time hoping that China behaves acceptably so NZ is not forced into such eventuality.

Australia and United States are currently NZ's 2nd and 3rd biggest export markets and take combined more exports from NZ than China does. Whilst the UK takes just 10% of NZ's trade with china - it is a market currently looking for Free trade agreements and has the potential to be NZ's 4th or 5th biggest trading partner. Add in rumours that Japan (NZ's 4th biggest trading partner) and is keen for a security alliance with the 5 eyes - NZ could find itself out of favour with some big markets if it veers too close to China.

Personally I think its time for NZ to seriously consider following Australias lead and bring manufacturing back on shore - this will mean less dependence on Chinese imports and more self sufficency.

The China / Australia dispute has already proven that other countries will protect the little guy in trade disputes (apart from Crayfish and coal- Australia has found new markets for most of its Chinese tariffed products - in some cases such as Barley - sales to new markets are more lucrative) - better to have the whole world have your back then protect one trade relationship.

Exactly. Arguably we stand to lose just as much if not more, economically, by siding with China especially if you consider opportunity cost.

While AU and US are significant markets, they are growing much slower than China is. In addition, they also have their own protectionist policies when it comes to food and dairy.

This guy is an apologist for an unashamedly proto-nazi state. Chamberlain tried the same thing with Hitler and look where it got him. The West has finally woken up that the more you give in the more they will take.

Well put. Almost treasonous.

Ideology driven!Most people who comment here long believed that CCP is evil and China is bad thus anything China do is bad and anyone who try to say any positive things about China is evil either. Because we shared same values with Americans and Australias. Regardless what America has done over the past many decades to invad smaller countries in a name of saving or liverating them. Well, we could definately ignore it because we have a democratic system and we are a democratic country, we got the power from our people to do all those thing. Yeah! that make perfect sense!

Are you trying to tell us that a genocidal authoritarian surveillance state doesn't fit the definition of evil?

If only we could report you to the government for wrong think.

https://www.independent.co.uk/asia/china/china-app-mistaken-opinions-rep...

An ugly and mentally defective article that's clearly batting for the wrong team.

Such a one-sided view by David. He has lost all his credibility with me.

Some interesting comments regarding the nature of the Chinese state. My $0.02 here: PRC is an authoritarian state in the communism coat, within it is still profoundly influenced by Confucianism, good and bad. Can China become a democracy like the current Anglo countries? Probably not. It may become an XXXL Singapore