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Dr. Arslan Chikhaoui, Executive Chairman of the Consultancy and Studies Center, NSV
The
Covid-19 crisis may well bring about an era of deep change in
international alliances, although these shifts will take some time.
China has tried to seize the momentum since largely recovering from the
epidemic, with the twofold aim of turning its weaknesses into strengths
by reorienting the narrative of its performance in the crisis and
taking advantage of the problems encountered in Europe among allies,
for instance.
One
thing is certain, however: Beijing is likely to try to exploit the many
areas of tension and division in order to continue to advance its
broader vision of becoming the center of the international system by
the time of its centenary Global China 2049 Initiative.
The
Covid-19 pandemic is thus turned into an opportunity for China, in
which it will attempt to develop and consolidate its strategic
positioning throughout the world. Beijing has, therefore, developed a
proactive scientific and health diplomacy as a complement to its
economic diplomacy.
Changing the world order
Henry
Kissinger recently stated: “The coronavirus pandemic will change the
world order forever. When the Covid-19 pandemic is over, institutions
in many countries will look as if they have failed. It is not a
question of whether this judgment is correct from an objective
point of view. The reality is that after the coronavirus, the world
will never be the same again. The effort to deal with the crisis,
however great and necessary, should not prevent the urgent launch of a
parallel initiative to ensure the transition to the new
post-coronavirus order. Leadership is managing the crisis largely at
the national level, but the disruptive effect of the virus on societies
knows no boundaries…The pandemic has become an anachronism, reviving
the walled city at a time when prosperity depends on global trade and
the free movement of people.”
Former
French Prime Minister, Jean Pierre Raffarin, declared that: “The
coronavirus and its morbid context reinforce the tension of the
Sino-American duopoly, already engaged in commercial, technological and
political competition. This will cause a shock to the Chinese economy
and more uncertainty on the American side. And since the Chinese
response is perceived in the United States as a humiliation, the latter
will in turn want China to suffer the price. This tension will mark the
next fifteen years even if Donald Trump is not reappointed at the end
of 2020. The position against China is gaining a strong consensus in
Congress. In this context, we see everywhere the logic of propaganda
developing, which is counterproductive”.
Finally,
the former French Foreign Minister, Hubert Vedrine, emphasized that:
“The United States is now trying to stop China’s rise to hegemony. This
is a radical change in policy compared to the last decades. And it has
an impact on the whole world, including Europe. We know that Europe
believed, perhaps more naively than others, that globalization was a
win-win situation. It is struggling to realize that it must become a
power that can command respect.
We
must do so in our relations to the United States, with whom we are
allies but with whom we must not align ourselves, especially as their
policy of unilateral sanctions is iniquitous. But we must do so in
relation to China as well; we need to seek balanced relations, and
therefore ensure that China does not abuse its new power. All this
depends on us, and on our will. European countries must be able to
command respect for each other, not have to endure or choose, and to
assert their positions. Again, this presupposes a genuine strategic,
military, industrial and technological will.”
Post-Covid uncertainty
In
light of these statements by personalities who are both influential and
knowledgeable about international relations in general, and China in
particular, it seems clear that the post-Covid-19 uncertainty and
China’s ambition to assert itself as a new power on all fronts worry
leaders in many countries. China will want to position itself as a
post-Covid-19 leader. Indeed, China is winning the health battle over
Covid-19 and is recovering quicker than Western countries. It wants to
set itself up as a solid challenger for a new world order by relying on
the concept of the four self-confidence factors decreed by Xi Jinping
in 2016: confidence in one’s own system, one’s own path, one’s own
theories, and one’s own culture.
As
the pandemic continues to rage in the West, Beijing has glorified the
effectiveness of Chinese crisis-management and stressed the weaknesses
of Western countries. The aim is to project the image of a model China.
This communication of persuasion has touched the hearts of Chinese
citizens because it speaks to the pride of the country and its image in
the eyes of the world, in a very emotional context linked to public
health.
China: scientific diplomacy
In
the current crisis, China is putting into action its scientific
diplomacy in the fight against the pandemic to promote its services,
products and training programs, as it did around the ‘New Silk Road’
through its trade diplomacy. It will spare no effort to position itself
as the country leading the way out of the crisis and will offer, in
particular, emerging and developing countries medical and paramedical,
industrial, logistical, technological, economic and, by correlation,
financial solutions to revitalize their economies. In some countries,
Chinese companies have already started to propose solutions to fight
Covid-19.
China
will not be able to impose itself universally and will undoubtedly face
opposition from some countries in the coming years. Many, however, will
strengthen ties with China, such as Algeria, Italy, Serbia, Pakistan,
Cambodia and others that have communicated positively about China’s
assistance and crisis management. Beijing has termed these
“iron-strong friendships.” As for the relationship between China and
Russia, the strategic rapprochement observed over the past seven years
does not seem to be jeopardized by this pandemic.
In
the post-Covid-19 world, Beijing will certainly emphasize the
superiority of its system of governance. This will involve military
demonstrations and celebrations throughout the country, with a
glorification of Xi Jinping and the Communist Party. These celebrations
will highlight Chinese technologies (military equipment, satellites,
drones, robots, etc.) which have been at the center of China’s
investments for several years.
Technological tug-of-war
The
technological tug-of-war between Beijing and Washington will
undoubtedly continue, and not only so around 5G communication
technology. Indeed, at the end of March, China announced, as part of a
post-Covid-19 economic recovery plan, massive investments for the
development of technologies, including the 5G network, data centers,
smart cities, connected objects, and block-chain technology for storing
and transmitting information, etc.
On
the geopolitical level, Taiwan will become the crystallization point
for Sino-American tensions in the post-Covid-19 era. The great revival
of the Chinese nation led by Xi Jinping involves the recovery of Hong
Kong, but also, in the long run, of Taiwan with the idea of correcting
the errors of history. Hong Kong has returned to the Chinese bosom,
except that unrest remains strong, and Beijing would like to go further
in the political integration of this territory. As for the situation in
Taiwan, it is seen as an anomaly that needs to be rectified, a priority
for Beijing, all the more so as Washington’s policy of support for this
state has gone quite far with President Trump, which is greatly
bothering Beijing.
For
several years now, Xi Jinping has been saying that he wants to lead
reforms in world governance. Chinese diplomacy will undoubtedly
redouble its efforts to seize the new institutional opportunities that
will present themselves. The political determination to restructure
global governance is so strong that it will endure whatever economic
difficulties China may face.
Bretton Woods, obsolete?
By
way of illustration, prominent Chinese scholars have repeatedly argued
that the Bretton Woods system established after World War II is
obsolete and that it is time to turn the page on a Western-dominated
world. The post-pandemic era will undoubtedly generate calls for new
mechanisms and common, global, and more effective rules. Beijing will
raise these questions and will try to create multilateral forums
dedicated to the post-health crisis, with the theme of sharing the
Chinese experience and its model of governance. It could also create
new institutions, similar to the Asian Infrastructure Investment Bank
(AIIB) founded in 2014.
China
has begun to make proposals, under the banner of the fight against the
coronavirus, for new bilateral and multilateral cooperation mechanisms
and has called on the BRICS (Brazil, Russia, India, China and South
Africa), as well as developing countries, particularly in Africa, to
jointly reform global governance. China is unlikely to succeed in
promoting a consensus-based world organization. International
organizations will increasingly lose credibility, as some of them will
no longer be able to bring the world’s two leading economic powers to
the same table due to the intense Sino-American rivalry. Every American
withdrawal from an institution fuels suspicions that America is passive
while China is undermines it. Europe could contribute through
multilateral activism to reverse this trend, but it would be very
difficult and time-consuming.
The New Silk Road
China
offers initiatives to all, from the AIIB to the New Silk Road,
including the allies of the United States. While Beijing cultivates
secrecy about the extent of its partnerships and excludes signing
formal alliance treaties, Washington is waits for clarification from
its allies.
In
this battle to reorganize the world order, China poses itself as a
challenger in the sense that it has an interest in maintaining
strategic ambiguity and in proposing its initiatives to as many people
as possible, some of whom will accept them.
Analysts
agree that we’ll see a bi-polarization of the world, but it will be
more of a pole configuration of relatively permeable countries than of
fixed and clearly defined blocs.
Unlike
the former USSR, China appears to be a rallying power by wanting to
widen its circle of countries known as the “circle of friendly
countries”. The aim is to gradually change the balance of power with
the West and be supported in its positions by a large number of
countries in international organizations. For instance, in October
2019, China succeeded in bringing together some 50 countries within the
United Nations to defend its anti-terrorist policy in Xinjiang, after
some 30 other states had called for an investigation into the
internment camps of the Uighur population.
New international reserve currency
Wang
Zhenying, President of the Shanghai Gold Exchange (SGE), recently
advocated the creation of a new international reserve currency. He
intends to counterbalance the US Dollar (USD), whose value he predicts
will decline in the long term. According to financial observers, this
statement is legitimate because the USD has already lost 98% of its
value against gold since the creation of the US Federal Reserve (FED)
in 1914.
Washington
uses the USD and the extraterritoriality of US law as geopolitical
weapons. In other words, countries that do not respect the economic
embargoes decreed by the United States expose themselves to reprisals.
Mr. Wang believes that “the dollar is a weapon for the US, but a source
of insecurity for other countries.” These words echo those of the
former Governor of the Central Bank of China, Mr. Xiaochuan, who wants
an international reserve currency disconnected from individual nations.
The
fact that the President of the European Monetary System (EMS) advocates
a new international reserve currency is not without significance. This
suggests that China wants to put the Gold Standard back into
international trade, i.e., an international monetary system in which
states pay for their gold imports. The use of gold would have the
advantage of suppressing speculation on the foreign exchange market.
Russia and Turkey have suffered in recent years with the collapse of
the value of their currencies under the blows of American banks.
It
is impossible to destabilize a country by the exchange rate when
international trade is settled in gold. The gold standard was abandoned
by the United States in 1973. This was the blow that brought the end of
the international monetary system after World War II. In China’s eyes,
the resurrection of the Gold Standard would prevent the United States
from running a trade deficit without the value of the USD collapsing.
Indeed, the value of the USD is artificially supported by the fact that
the rest of the world has to buy it to purchase oil.
The
fact that oil is sold exclusively in USD forces all central banks to
hold most of their reserves in USD which are eventually return to the
US pool. To put it plainly, the US can afford to run a trade deficit
because the dollars it spends end up coming back in through debt,
preventing the USD from depreciating in the process.
Sino-US reconciliation
Today,
threatened by a common enemy – the Coronavirus – the United States and
China are far from being reconciled. Worse still, the Sino-American
conflict is escalating. The economic slowdown is reducing China’s
need for imports. The price of oil has fallen drastically, as American
shale oil is no longer a profitable alternative to Saudi crude oil. The
reduction in the influx of Chinese tourists and students to the United
States is brings down imports of services, including tourism and
training. As the November 2020 US presidential elections approach, we
are likely to see excessive and even inflammatory statements by
President Trump justifying the announcement of new measures against
Beijing. The outgoing President will first want to mobilize his
electorate against a competing Democratic candidate.
Sino-American
trade is not only limited to imports and exports. The turnover of the
American subsidiaries established in China was 164 billion USD in 2018,
according to the latest estimate of the National Bureau of Economic
Research. In the same year, US exports to the Chinese market were
around 109 billion USD. However, the Covid-19 health crisis caused a
drop in the sales of American subsidiaries in China in the first
quarter of 2020.
Starbucks,
for example, is forecasting a 50% drop in sales in China, its largest
market outside the US, for the current year. General Motors, which
sells more cars in China than in the US, has seen its joint-venture
with Shanghai Automotive Industry Corporation’s sales plummet by 92% in
the first quarter (Q1) of 2020. French car maker, Renault, for its
part, sold only 633 cars in China in Q1 of 2020, compared to 19,000 in
the same period in 2019. As a result, Renault has decided to withdraw
from its joint-venture with Dong Feng.
Many
informed experts point out that the Covid-19 pandemic will have
contributed to the decoupling of the US and Chinese economies. But
neither China nor the United States are winners in this war, which has
added consequences to the collapse of world trade caused by the
Covid-19 health crisis. Technological rivalry is at the center of
tensions between the United States and China, which has the ambition to
evolve from ‘a country that manufactures in China to a country that
designs in China’.
Made in China 2025
To
achieve the objectives of the “Made in China 2025” plan, the country is
investing in Research and Development (R&D), to which it devotes
2.1% of its GDP. By closing its market to Google, Apple, Facebook, and
Amazon, Beijing has been able to build its own national champions
(e.g., Ali Baba, Baidu, Tencent, Xiaomi). In the field of artificial
intelligence, China is almost at the same level with the United States,
and the containment of the population due to the Covid-19 epidemic has
led to great progress in facial recognition and the tracking of people.
Moreover,
in a telecommunications market shaken by the introduction of 5G, China
is making its mark with the company Huawei, which is becoming a key
player. Despite its inclusion in the Entity List, the Chinese
manufacturer has increased its purchases of American components by 8
billion USD in 2019 and its turnover has increased by 19%. The American
strategy to contain Huawei is clearly a failure. However, while the
Chinese telecommunications giant has won a battle, it has not yet won
the war, according to many observers.
The
alternative is not a network built by a competing equipment
manufacturer, but a disaggregated system based on a virtual network
that operates in the Cloud and replaces traditional dedicated network
equipment. In geopolitical terms, it should be noted that the Cloud is
an area in which very important players are American (Google, Amazon,
Microsoft, and Oracle). On 8 April 2020, the launch by the Japanese
company Rakuten of a first virtual network has aroused great interest
in the telecommunications industry. The absence of Huawei in the
working groups around this technology is to be seriously considered.
Chinese soft-power offensive
According
to experts, the Chinese soft-power offensive has benefited from the
American withdrawal and President Trump’s “America First” policy. Well
before the appearance of Covid-19, the Trump administration had
proposed major cuts in the budget allocated to international aid
(-21%). On 14 April 2020, President Trump announced the suspension of
American financial participation in the World Health Organization
(WHO), to which the United States is the largest contributor. As part
of the stimulus package, the US Government is planning a USD 274
million increase to the initial USD 2.2 trillion budget for USAID and
the Centers for Disease Control and Prevention (CDC).
The
United States retains two advantages. The first is the popularity of
its university system, which attracted one million foreign students,
300,000 of whom were Chinese. The second advantage is the US Dollar,
which continues to be both a refuge and a weapon.
China: rewriting coronavirus history
Chinese
authorities are rewriting the history of the coronavirus epidemic,
overcoming their initial suppression and their pressure applied upon
the WHO to delay the declaration of a pandemic state. They attribute
their success to the efficiency of the Chinese political system,
compared to the inefficiency of Western governments in general, and in
passing, have overlooked the successes of two Asian countries in
managing the epidemic: South Korea and Taiwan. One can remain doubtful
about the scope of these offensive communication actions but still
commend the initiatives of Ali Baba founder Jack Ma to supply medical
equipment to many countries, which gives him an international standing
comparable to that of Bill Gates.
Most
informed observers agree that the only way for China to emerge from
this health crisis as a winner and to put behind its careless attitudes
at the beginning of the epidemic would be to win the race to develop a
vaccine. In the future, Chinese influence would increasingly
focus on the BRICS and emerging and developing countries, in
particular, on the African continent, while the United States would
reconnect with its allies in Europe where issues (Brexit, Iran, the
Middle East, Libya, etc.) of divergence and even tension would
nevertheless persist.
Dr.
Arslan Chikhaoui is currently Executive Chairman of the Consultancy and
Studies Center ‘NSV’ established in Algeria since 1993
(www.nordsudventures.com). He is a member of the World Economic Forum
Expert Council (WEF-Davos), and the United Nations Civil Forum (UNSCR
1540). He is an Alumni of the NESA Center for Strategic Studies
(NDU-Washington DC). He is also a stakeholder in various ‘Track II’
working groups: New Partnership for Africa’s Development (NEPAD),
Security in the Mediterranean, North Africa and Sahel region,
Non-Proliferation of Weapons of Mass Destruction in the MENA region,
Security Sector Reform in North Africa.
Arslan CHIKHAOUI
Chairman
NSV consultancy & studies centre
GSM1: +213 655 559 195
GSM2: +213 661 557 520
Office: +213 21 632 429
www.nordsudventures.com
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