Liberal democracies can contain authoritarian China

As of early 2019, the CCP’s actions had already eroded business confidence to the point that many want to leave. With Chinese businessmen aware that the CCP (under Xi Jinping) had increased its control of every aspect of Chinese society at the expense of economic and political liberalisation, one poll (by Hurun) of 465 wealthy individuals found that only one-third remained very confident in the country’s economic prospects compared to nearly two-thirds two years earlier. The poll also found that 14% had no confidence in the CCP leadership, with nearly half considering migration to a foreign country, a reality confirmed by investor visa applications to the UK alone soaring by 45% in the first quarter of 2019 with 67 approved, more than half of all those issued.

With widespread distrust of the CCP, it is hardly surprising that much greater pressure has emerged in recent years to temper China’s rise.

Already, with China taking contested territory from neighbours in the South China Sea, the US, Japan and Australia are working with other nations to help counter balance China in the Pacific, including India which has the third highest level of military spending in the world as of 2018.

While Australia too has much to lose in the short-term if it alienates the CCP, given that China received about 32.6% of Australia’s total Australian goods and service exports for 2018-19 (around $A153 billion), more Australian voices are calling for a new national security strategy that focuses on both national economic resilience in terms of trusted supply chains and the military threat. This includes the reality that China supplies 90% of Australia’s imported medicines, and Australia has only 29 days’ worth of liquid fuel stocks at refineries and wholesale terminals, compared to the International Energy Agency’s 90-day fuel security benchmark.

In economic terms, and despite some tensions between the US and European Union (EU), there is also support for President Trump’s call for “dramatic” reforms to the World Trade Organisation (WTO) with most concern about China, with WTO director-general, Roberto Azevêdo acknowledging the need for change.

This includes support from Australia’s Morrison government, although tempered by its ongoing commitment to a rules-based multilateral trading system.

Most liberal democracies accept that China is the worst culprit with regard to unfair trading practices. While trade between Europe and China is worth around 1 billion Euros per day as of 2019, the EU by the end of 2019 had 93 of its 140 trade defence measures targeting China, compared to 10 for Russia, 7 for India and 6 against the US.

During 2019, the European Commission also introduced a new framework to facilitate closer scrutiny of foreign investment in Europe, with member states encouraged to specifically review investment in sensitive sectors including critical technologies and infrastructures, as well as transactions involving state-controlled entities.

Of course, not all liberal democracies will be as strident in their opposition to the CCP. For example, Huawei continues to expand its foothold within Europe’s 5G landscape (including the UK), while the US, Japan, Australia and New Zealand have banned Huawei from building their 5G infrastructure.

And, while Chinese investors abandoned plans in 2018 to build a deep-water port in Sweden amid local concerns about the project’s environmental and security implications, with some of its cities/towns by early 2020 halting co-operation with Chinese towns over concern about free expression and human rights, Greece during 2017 pleased the CCP when blocking an EU statement at the United Nations criticising China’s human rights record given significant Chinese investment.  

In a Cold War where the distribution of resources will indeed matter, common sense will demand that the wealthy liberal democracies will have to work together to limit China’s influence. For example, during September 2019, Japan and the EU signed a major deal to build infrastructure and set development standards around the world, in what was seen as a response to Beijing’s Belt and Road Initiative.

A failure to cooperate may indeed lead struggling liberal democracies to welcome more Chinese capital, even when they may not agree with the CCP’s anti-democratic stance. For example, while polls show that the Greeks welcome Chinese investment, 69% of respondents in 2014 felt that China did not respect the personal freedoms of Chinese citizens, with 62.4% in 2017 expressing the view that human rights were not respected.