China has revised its trade strategy to make it less dependent on world markets while making the United States more dependent on its industrial base.
And not surprisingly, China has benefited from joining the global community but still wants to play by its own rules, and this time it is increasingly using trade as a political weapon.
Matt Pottinger, a deputy national security adviser under former President Donald Trump, said at a virtual hearing held by the U.S.-China Economic and Security Review Commission that China’s latest Five-Year Plan laid bare Beijing’s economic ambitions, which involved an an aggressive “offensive decoupling” to achieve those twin goals.
Chinese leader Xi Jinping is seeking to “sustain and enhance” what he referred to as China’s “superiority across the supply chain” to exert pressure on foreign trading partners, Pottinger said.
The National People’s Congress approved Beijing’s 14th Five-Year Plan in March. According to Pottinger, the plan institutionalizes an “audacious strategy” of offensive decoupling.
The new Chinese policy is intended to “wean China off industrial imports, while making those same nations highly reliant on Chinese supplies,” Pottinger said.
China already has been testing the waters on using trade as a political tool.
Australia, a key U.S. ally in the Pacific, has been used as a “guinea pig” in China’s offensive decoupling strategy, the analyst said. China has been punishing Australian exporters in connection with China’s “14 disputes” with Canberra.
Last year, a leaked document from the Chinese Embassy in Australia showed China was unhappy about Australian criticism of Chinese policy in Xinjiang and Hong Kong and toward Taiwan. Australia also banned Chinese telecom companies Huawei and ZTE from its 5G network.
Pottinger said China’s embargoes against Australian lobster and wine represented political retaliation. The White House, in response, purchased bottles of Australian wine for an event last year, he said.
Tensions between the United States and China have not receded under President Joe Biden, who called Xi a “thug” during his presidential campaign.
Pottinger said the current administration could propose an “economic NATO” that would allow member states to “pick up the slack” for goods that become the target of Chinese embargoes, citing China’s recent ban against Taiwanese pineapples.
CHINA’S GOVERNMENT A ‘MONOPOLY’
Strained U.S.-China relations came into full view last month, when the two sides met for high-level talks in Alaska and exchanged acrimonious words that reflected differing worldviews.
Miles Yu, a senior fellow at the Hudson Institute and former adviser to ex-Secretary of State Mike Pompeo, said Thursday at the hearing that China has benefited from joining the global community while playing by its own rules.
China’s “monopolistic government” exploits the “global free market system” and also takes advantage of an enormous supply of cheap labor at home to build its leviathan manufacturing base, according to Yu.
“In a historic mea culpa, [Richard] Nixon said he had created a ‘Frankenstein’ in 1972,” Yu said.
The analyst also said countries like the United States operated on flawed assumptions. U.S. democratic values and free market practices did not change the Chinese Communist Party, he said.
“The CCP never had any intention to merge with the rest of the world,” Yu said, citing Beijing’s illiberal methods of limiting foreign investors’ ability to take capital out of China, among other practices.
“We cannot peacefully coexist,” Yu said.
CHINESE BUSINESS EXECS WORRIED
The analyst also said China’s authoritarian approach to successful Chinese companies has invited criticism from top Chinese executives, including the billionaire founder of Alibaba.
“Jack Ma said all business entrepreneurs in China have no good ending because ultimately [the Chinese Communist Party] uses market mechanisms to absorb Western technologies,” Yu said. “Once [a company] gets big, the government takes over.”
On Saturday, Chinese authorities flexed their regulatory muscle with a record $2.75-billion fine against Alibaba.
The fine comes after Ma slammed Chinese regulations in a speech he gave in October. The tech mogul has since kept a low profile, while not protesting a government decision to block Alibaba affiliate Ant Group’s $37-billion initial public offering in November.