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Thursday, 21 November 2013

Ernst’s Economy in discussion at BNR Newsroom: the China issue pt II. Bernard Hammelburg speaks about China!

In the second part of BNR Newsroom, the semi-live talk radio show of BNR news radio, Paul van Liempt spoke with the “grey eminence” of foreign analysts and commentators, Bernard Hammelburg. 

His second guest was Fred Sengers, a distinguished journalist and blogger on China.

The topic changed to the new geopolitical role of China:

Paul: We're going to discuss the geopolitical relations of China. The country is f.i. 231 times bigger than The Netherlands. Which position does China have in the international diplomacy these days?!  

We start with discussing the recent assembly of the Chinese Communist party. How did you look at that, Bernard Hammelburg?

Bernard: China has a 4000 year old culture and things go traditionally at a very slow and smooth pace there. This recent assembly was the next step in a very much anticipated and smooth change process. This process will be evolutionary, not revolutionary: just a little bit more openness and change and a little bit more economic and personal freedom.

This change process comes at a very good moment. The country seemed to lose its momentum these days and there were many excesses, like corruption, self-enrichment and other political crimes. 

Bernard Hammelburg, foreign commentator of BNR
Picture copyright of: Ernst Labruyère
Click to enlarge
Xi Jinping has put an end to this in a very sensible manner, within the boundaries of what is possible in China. This was a very necessary step.

The export diminished, but at the same the internal market had grown - with 1.3 billion persons this internal market is enormously interesting for every politician, manufacturer and businessman. Just like with the United States before them, the focus of China is currently upon its internal market.

Nowadays, people have purchasing power, unlike in earlier years. The Chinese industry has to adapt to that. The current industrial production is equal to the service industry - both 48% - so these industries are starting to balance out. The government, irrespective whether it is communist or capitalist one – has to adapt to these developments in a sensible way. And I think that the current government is doing that.

Ernst: Will China be able to avoid the errors that Russia made in the nineties?

Bernard: The answer is yes. Under Yeltsin, Russia has been democratic for a very brief period of time, but Yeltsin litterally blew this democracy to smithereens. The Russians virtually never had a 'normal' period in their history. By the way, also in Russia a middle-class is developing now. This never happened before.

Still, Russia has only three export products: oil, gas and Kalashnikovs. That's all.

The Chinese have a larger, more complex and more balanced out economy and they handle it with much more care. China is f.i. building a vast defence industry now: initially, this industry had been based on imports, but they have started to export their own products now. Currently, these products can be considered as high-end, also from a technological point of view.

In earlier times, China was the country for manufacturing cheap products, clothing and microprocessors. Now the country is evolving, like Japan did in the fifties and sixties.

China is at the peak of  the world’s technological capacity these days. Today, the country is delivering highly skilled engineers at the speed of sound. The Chinese are manoeuvering very carefully and cunningly. Much more cunningly than the Russians did.

Fred Sengers: Xi Jinpin remembers the lessons of Russia in the nineties very well indeed. During the assembly of the Communist Party, he showed to the executives of the party a documentary about Russia in the years of 'perestroika' [i.e. Russian change period during the reign of Michail Gorbachev – EL]. Xi told all executives that China should not make the same mistakes as Russia did and that it should change at its own pace.

Paul: China is becoming more powerful on the world's stage. What will we notice from that?

Fred: China becomes more self-confident. The country is currently at a pivotal point in geopolitics. They still often mention themselves as 'yet a developing country': "please don't expect too much from us".

On the other hand, China states more and more often: "if you think that we have an important role in the world-economy, we want you to treat us with respect".

The Chinese politicians are not blind: they see that the only superpower, the United States, is losing influence at an alarming rate. They talk about a multi-polar world where not one country is dominant anymore.

Fred Sengers, Journalist and blogger on China
Picture copyright of: Ernst Labruyère
Click to enlarge
Paul: How do you have to look at China from a political and economic point of view?

Fred: You can't ignore China anymore. The country has become important in about every area. They understand that very well themselves.

The new policy of the Dutch cabinet towards China is, for instance: we should not be too bold against China. Instead, we should try become good pals.

When it comes to human rights, China doesn't hesitate anymore to 'return fire' when being attacked: they counter-attack the Western countries on topics like Guantanamo Bay (”Keeping people imprisoned for years without any kind of process”) or the massive evesdropping and telephone tapping in the US. "Say hi to the NSA from us"

Paul: Is it right that China does that?

Bernard: Yes, like the Chinese, the West is also not without sins and we even became more sinful recently, concerning topics like these. We like to preach in the West, but we don’t practice what we preach and we are often very hypocritical.

China, like Russia, likes to point us at this hypocrisy. We are screaming about Sochi and the gay rights in Russia, but conveniently forget to talk about the enormous amounts of executions in China: much more than all other countries in the world combined.
We also make a lot of noise about the Middle-East, but don't bother to talk about China.

Is the West right with this hypocritical policy? From a pragmatical point of view: yes! We really don't have a choice anymore.

Like President Clinton said in the past, in the eve to negotiations with China: "I cannot apply the human rights paragraph in the American trade law anymore (i.e. the Jackson-Fennick amendment). We are more dependent on China than China is dependent on us, these days". Clinton had a very keen eye for the changing geopolitical relations in those days.

Ernst: Is the Chinese regime unscrupulous to a certain regard? Or do they act from a certain compassion with the population?!

Bernard: You could say that the old Communist adage of "uplifting the poor", is something that China does extremely well. During the last five years, the Chinese minimum wage rose by 28% to €150-€200 per month. That is magnificent. What other country did so much for their poorest citizens in such a short amount of time as the Chinese did?! So I think that the Chinese government has indeed that compassion.

Fred: No country does more to fight poverty than China. And also in education, the Chinese government is making giant steps. It is too easy to talk about China in only two dimensions. Just like we lost a lot of our moral superiority in recent years, it is impossible to talk about China in black and white terms alone. Not everything they do is right and not all is wrong.

Bernard: Just one more thing. I don't believe one bit of the Chinese growth data: neither the 10% nor the 7% of growth. The growing prosperity of the poorest classes in China leads to enormous inflation, but that inflation is not incorporated in the Chinese growth data yet. Chinese growth is much lower than the Chinese state tells the world.

Haico Ebbers: There is a catch in the Chinese inflation rates. In this matter, I tend to believe the official Chinese inflation rate of about 4%. The prices for pork for instance went up considerably, but the prices for many other products went down. It is true that the Chinese government stimulates the economy, but the lower production costs of articles, due to better efficiency, leads to a lower inflation at the same time.
Haico Ebbers of Nijenrode University
Picture copyright of: Ernst Labruyère
Click to enlarge
Over the last ten years the real inflation rate in China might be 1% - 1.5% higher than the official rates, but that is about it.

Bernard: I don't agree. I always state: the Americans hang out on a limb, but always manage to find the way up in time. The Europeans talk themselves to sleep, without ever making a decision and the Chinese lie.

Haico: Of course, the Chinese statistical data are a mess. On the other hand: if you visited the country, you saw how much is going on there. And that is a lot. There is definitely growth in China, irrespective whether it is 7% or 5%. Anyway, things are changing extremely fast in China.

Guest in audience: Recently, China has been gathering enormous interests in the mining and supply chain of rare materials for the telecom industry, like Coltan. They are building strongholds around the globe to protect these interests. Is that a serious threat for Europe?

Bernard: Well yes, this is a situation to look after indeed, without directly calling it a threat.

The Americans possess the key in this process. Due to the developments at the energy markets – the US are getting more and more self-supporting with their domestic shale gas supplies –, the US are quickly losing their interest in the Middle-East.

Look at how they treat Iran these days. The Americans seem to abolish their demands concerning the development of the Irani nuclear bomb, and instead they want to end the cold war with Iran. This is a dramatical change of plans by the Americans.

The Chinese do need lots of energy from the Middle-East these days and they are entering into huge contracts with the Arabs to warrant their energy demands.

The US fleet is sailing away from the Middle-East towards the Chinese seas. The Americans definitely understand what is going on. The Europeans, as always, ... do nothing at all! The Europeans don't have a combined energy policy yet and we don't talk with the Arabs together, based upon a mutual interest.

Everybody in Europe is acting for himself and therefore Europe is much too late with sensing the newly gained geopolitical power of China, as well as the industrial, economic and military power.

Only Turkey is judging this correctly: as the second biggest member of the NATO, Turkey made a huge military order for high-tech weaponry in China, for God's sake! Right before our very eyes. Do you believe that?!

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