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The Rise of China Inc.: Can it Prevail in the US-China Trade War?

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by Guanie Lim & Yat Ming Ooi

Founder and chairman of Geely Automobile Li Shufu (second from the left) pictured during a visit to Volvo Car Gent. Geely bought the Volvo brand in 2010 (Image credit: Belga)

‘The Fortune Global 500 is now more Chinese than American’. The headline piece of Fortune Magazine’s edition of August 2020 revealed much about the nature of global business. With more companies based in Mainland China and Hong Kong (124) than in the US (121), the list sparked intense debate China’s perceived ascendancy in the international economy. Following four decades of rapid growth, this is a clear image of what is conventionally known as China Inc. Searching for market share domestically as well as abroad, these Chinese firms (occasionally termed ‘national champions’) are known for their acquisition of large and well-established firms such as IBM, Club Med, and Volvo. Against the backdrop of an increasingly strained relationship between the US and China and instances of some countries pushing back against Chinese infrastructure deals in the Global South, a dual question can be asked: where is this rivalry headed to? And, what are the implications for the rest of the world?

Chinese Corporate Power

The Global 500 is a prestigious list and offers arguably the best snapshot of the state of global business. In its methodology, firms are ranked based on revenue. This approach is somewhat biased as it tends to favour companies operating highly regulated monopolies/oligopolies in large economies. Many Chinese companies fall into this category. Indeed, an analysis of those 124 Chinese companies in the Global 500 reveals that many are operating de facto monopolies/oligopolies in the domestic market, where non-tariff barriers remain high. Examples include Sinopec Group, State Grid, and China National Petroleum (all located within the top 4). Operating in chemicals, power, and petroleum respectively, these three firms are not only state-owned but also generate much of their revenue in highly-regulated, capital-intensive industries. Further down the pecking order, a similar trend emerges: of the twenty-four Chinese companies in the top 100, almost all operate in industries such as banking, insurance, construction, and mining.

At the same time, there is also a paucity of Chinese manufacturing firms on the list. This odd development has occurred despite Beijing’s push for ‘national champions’ in industries such as automobile production, steelmaking, shipbuilding, and aerospace. However, only two manufacturing firms – Huawei (private; 49th) and SAIC (state-owned; 52nd) – made it into the top 100.

Huawei can be described as a non-traditional firm in the manufacturing industry since a relatively large portion of its revenue is derived from what are essentially service activities (telecommunication installation, consulting, and repair). Even in the manufacturing of its renowned smartphones, core components are still sourced primarily from Western and Japanese business groups. For example, the Huawei P and Mate Series – which come with high-definition cameras – rely on German company Leica for the supply of camera-related components. Despite Huawei’s attempts at expanding into global markets, the firm continues to face difficulties in some markets, due to allegations of undue state support, and cybersecurity concerns. Most recently, its Chief Financial Officer has been under house arrest in Canada. In addition, the US has stepped up pressure on its allies to remove Huawei equipment from their telecoms infrastructures over concerns that the Chinese government could possibly lean on the company to allow it to conduct espionage, closely followed by the UK. Although it is premature to write off Huawei at this stage, it seems to be one of the highest-profile targets ensnared in the trade war between the USA and China.

For SAIC, an automobile player based in Shanghai, the outlook is somewhat better. Since its joint-venture with Volkswagen after the 1978 economic reforms, SAIC has been able to continuously strengthen its position in the domestic economy, emerging as a de facto lead firm. In the Global 500 list for 2020, it is ranked as the seventh-largest automobile company, surpassing brand name rivals such as BMW Group and Nissan Motor. However, like Huawei, there does not seem to be enough incorporation of critical manufacturing technologies, which forces SAIC to rely on more mature foreign companies. SAIC still sells vehicles from a variety of brands licensed from mainly Western automobile companies, in exchange for entry to the Chinese market. As of 2020, only two of its brands, MG and Roewe, have had (limited) success outside China. These two brands were acquired during the mid-2000s from now-defunct British carmaker MG Rover.

For the MG brand, in particular, SAIC’s internationalisation efforts have been bumpy. In 2012, SAIC entered into a joint venture with Thailand’s largest conglomerate, Charoen Pokphand (CP) Group, to produce MG cars in Thailand. With an annual production capacity of fifty thousand vehicles at the outset (which could increase to two-hundred thousand units), the company aspired to capture the Thai as well as the adjacent Southeast Asian markets. However, here again, progress has been slow. SAIC only managed to sell 23,740 MG vehicles in 2018, well below its total production capacity of 200,000 units. By capturing only a 2.3% market share in the Thai market, SAIC has failed to make a dent in the Japanese-dominated automobile market of Thailand (and by extension Southeast Asia).

Chinese Catching-Up in Retrospect

The experiences of Huawei and SAIC are sobering. Although undoubtedly ‘national champions’ in their own right within the large domestic market of China, there is not enough evidence to suggest they have become the sort of ‘global champions’ that successive Chinese politicians and bureaucrats frequently exhort them to be, nor are they necessarily setting the example for other national firms. Perhaps this suggests some underlying problems with China’s technological catching-up that goes unmentioned in both the euphoria surrounding the ‘rise of China Inc.’ and the pessimism engulfing the increasingly tense international economic environment? What we are advocating here is to step back and scrutinise both sets of development. While not denying China’s economic strengths, there is an equal need to unpack the nature of the Chinese economy.

As illustrated in the previous paragraphs, Chinese growth is mainly driven by a large domestic market, which obviates the need to create competitive firms with world-beating indigenous technologies. Chinese technological shortfall can instead be plugged by purchasing production and process expertise from foreign firms (through royalty payments for copyrighted products and mergers and acquisitions, for example), resulting in a dearth of genuine manufacturing ‘national champions’, for which long-term investment in R&D is required. If the fate of Huawei and SAIC is of any relevance, then we must more seriously take manufacturing as a key cog of development. More broadly, while one may like to envision a post-industrial society, no economy – barring small, wealthy offshore financial centres (e.g. Macau and the Cayman Islands) – transitioned straight into the high-income category without a competitive manufacturing sector. Without a strong manufacturing sector (and by extension command of technology), talks about a US-China trade war is overblown as China Inc. might not have the strategic depth to mount a sustained challenge.

The USA: Still No. 1?

Moreover, in the US, the situation is nowhere near as dire as what the popular media seems to suggest. Despite numerical superiority, Chinese companies account for only twenty-five per cent of the total Global 500 revenue against the US’ thirty per cent. Furthermore, two US companies made it into the top 10 – Walmart (first) and Amazon.com (ninth). Walmart, in particular, claimed the top spot for the seventh consecutive year.

In addition, thirty-four US companies made it into the top 100, outweighing the twenty-four hailing from China. Although US companies in the Global 500 participate heavily in service activities, it must be noted that some of the manufacturing behemoths have maintained or even enhanced their positions. In the top 100 roster, USA Inc. is represented by Ford Motor (31st), General Motors (40th), Microsoft (47th), and Dell (81st). Ford Motor and General Motors represent the mature automotive industry, while the latter two represent the more forward-looking information technology industries.

Amid the seemingly meteoric rise of Chinese companies, the US retains three salient points that will determine the outcome of the much-hyped trade wars. The first point that often goes unnoticed is the early mover status of US companies, which allow them to go abroad far more easily than companies originating from latecomer economies such as China and India. The US (and by extension, its cohort of companies) remains popular in many parts of the globe, in turn giving US companies quite simply the benefit of the doubt, a privilege that Chinese firms do not enjoy (at least for now). Take, for example, the ban that prohibited Huawei and ZTE from participating in Australia’s 5G network development. A cue the Australians took from the US.

The second point concerns the innovative capabilities of US companies. Historically, the US and other Western countries are famed for their ability to innovate. By innovating, we mean to create something new, and implementing it in the production process or bringing it to market as a new product. While US companies are moving some production out of China, this is unlikely to affect their ability to innovate as communication technologies have improved companies’ ability to innovate throughout their value chain. It is through the ability of US companies, often with support from the state, to continually renew and reinvent themselves that we see US companies extending their early mover advantage in the long run.

The final point brings our analysis into the behavioural realm. US companies have market-shaping capabilities. In other words, these companies can dictate what customers and consumers need and want in the US and global markets. No one knew we needed an MP3 player until the late Steve Jobs told us it is ‘cool’ to own an iPod. We had no idea we needed boutique takeaway coffee too. That is until Howard Schultz told us we should all be sipping on a barista-made, grande, vanilla latte with low-fat milk from Starbucks. Of course, there was more to the iPod story. Apple was excellent in crafting an ecosystem strategy, which created network and lock-in effects. The ability of US companies to create new demand, tap previously untapped markets, and influence consumer choices, reinforces US Inc.’s position in the global market.

Is China Inc. taking over from US Inc. any time soon? The short answer is no. Chinese companies are performing well in the globalised and connected world we live in today. But (most) open and transparent economies are ‘suspicious’ of Chinese companies’ intentions. Will China Inc. prevail if we have a full-blown trade war between the two largest economies? Maybe. Chinese companies are still learning and expanding. Moreover, they have the Chinese and surrounding Asian markets to fall back on if indeed a full-scale trade war materializes. Regardless, we can conclude that the US can prevail if it continues to do what it does best – extend its early mover advantage through innovation, market-shaping capabilities, and lock-in effects.

Guanie Lim is Research Fellow at the Nanyang Centre for Public Administration, Nanyang Technological University, Singapore. His main research interests are comparative political economy, value chain analysis, and the Belt and Road Initiative in Southeast Asia. Guanie is also interested in broader development issues within Asia, especially those of China, Vietnam, and Malaysia. In the coming years, he will be conducting comparative research on how and why China’s capital exports are reshaping development in key developing regions – Southeast Asia, the Middle East, and North Africa. He can be reached at guanie.lim [at] gmail.com

Yat Ming Ooi is Research Fellow in the Department of Management and International Business, The University of Auckland, New Zealand. He is also Adjunct Lecturer at Swinburne University of Technology, Australia. His main research interests are innovation management, technology and science commercialisation, and business models. Yat Ming is also interested in the role of new research funding policy plays in addressing grand challenges. He can be reached at y.ooi [at] auckland.ac.nz

 

British Foreign Policy towards China: Short-sightedness Disguised as ‘Pragmatism’?

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Britain’s Prime Minister Boris Johnson during the celebrations for Chinese New Year in London, 2020 (Image credit: AFP)

When COVID-19 is the product of a breach of human rights within China itself, ignoring human rights in a post-COVID world order is frankly naïve and hardly “pragmatic”.

In his 1941 State of Union address, U.S. President Franklin D. Roosevelt outlined the Four Fundamental Freedoms that every person in the world is entitled to enjoy: freedom of speech, freedom of worship, freedom from want, and freedom from fear. These four principles would later serve as the foundation upon which the 1948 Universal Declaration of Human Rights was formed, ushering in a new era in which the human rights violations of states became a matter of concern that permeates far beyond its own sovereign territories. Contemporary human rights were borne out of a pragmatic concern that our ideals and principles at a certain level become a personal matter; since without human rights, there can be no human security.

The end of the Cold War would put an end to ideological conflict over the value of fundamental freedoms. Today, our post-Cold War world order lacks such kind of predictability and, thus, more uncertainty with regards to the international order can be expected. Moreover, in a post-COVID-19 world and amid a crumbling Pax Americana under Trump, the traditional state advocates of human rights are now MIA. This is an erosion of the liberal world order which is eating itself from within, with President Trump projecting an image of the USA is quite the opposite of most of its traditional ideals. Across the Atlantic, Brexit has further distorted unity both in the Anglosphere and within Europe.

Indeed, some seem more concerned about the economic damage that COVID-19 will bring if we do not appease Xi Jinping’s China, citing Realpolitik as a justification. In this regard, Professor Kerry Brown argues that given Brexit, the UK should reconsider its stance towards the Hong Kong crisis, given the country’s weak economic relations with China. One can disagree with this assertion since the notion of China as a ‘successful capitalist nation’ leaves the causes and consequences behind this success undefined. That is not to say that relations with Australia and New Zealand are not anything positive, but we have to consider fostering free trade relations across the D-10 member states, as well as with the EU. As for China, the scrapping of the Green GDP Initiative in 2007 is an example. The initiative would have reduced the data on China’s real GDP growth to zero. Indeed, Green GDP took into account environmental degradation, socioeconomic inequalities, and loss of biodiversity in China’s real GDP growth. The environment being hardly a significant concern for the cold realism of the status quo international relations and diplomacy is of course no surprise to anyone.

But that clearly misses the point of what we are faced with during the COVID-19 crisis. Ideally, this pandemic will serve as a tipping point and a shift away from business-as-usual in dealings with China. Arguably, it was the country’s repression of the fundamental freedoms (primarily freedom of speech) of its own scientists and academics that lays at the root of the current crisis. Never has there been a more urgent time to stress the significance of human rights than in this time of Corona. Indeed, our quality of life can only flourish when our fundamental freedoms are respected.

To do so, we ought to do away with this perception that our idealist concerns can never overlap with our pragmatic ones. That is not to disregard China’s ability to be one of the most powerful economies in the world without civil and political liberation as illegitimate. But the staggering boom of China’s economy over the past couple of decades simultaneously led to the accumulation of enormous amounts of inequalities, on top of excessive environmental pollution and abuse. This abuse of nature also notably contributed to the ongoing pandemic. Even with these factors aside, the political economies of our free societies are not designed to compete with state capitalism.

British foreign policy is becoming more inconsistent by the day, whilst China’s policies remain consistently expansionist.

The formation of a Democratic 10 (D-10) and the potential intake of British National (Overseas), or BN(O), passport holders from Hong Kong (combined with potential ‘burden-sharing’ agreement amongst the Five-Eyes) is of course considerably an improvement from its initial blasé stance. But the latter fails to address the rights of the remaining Hong Kongers, and most importantly, should not be a panacea to the growing Chinese aggression in its blatant disregard for international norms. That is not to argue that this development has not been provoked by the Trump Administration, but my point is that this can be a recurring theme not just for Hong Kong but in any part of the world. If so, should our response be the same? The recent decision to merge the Department for International Development (DFID) with the Foreign Office is another example of how not to respond. Though a little premature to say, this could lessen the UK’s room of maneuverability and upset future British diplomacy. In so doing, it could also render the idea of “Global Britain” an oxymoron, given China’s usage of COVID to increase its influence in Africa, for instance. British foreign policy is becoming more inconsistent by the day, whilst China’s policies remain consistently expansionist.

However, China’s new National Security Legislation (NSL) for Hong Kong is more of a distraction from Xi Jinping’s party-state’s own mishandling of the COVID-19 outbreak in China itself, which has evidently hurt his standing amongst the elites of his own party. Those pragmatists who justify the incentive for us to appease President Xi in order to safeguard the financial repercussions of Brexit and of COVID-19 are too short-sighted. Those who are truly pragmatic will consider the long-term implications of our free societies and our very own public health and economic welfare; spurring our foreign policies towards China on to become more sophisticated and paying more close attention to human rights.

Over the past year, we have seen the relentless resistance of the people of Hong Kong against the Chinese state’s incursions. The more active approach that has now been taken towards creating a D-10 should extend to Hong Kong as well. If not, the crisis there is bound to produce refugee flows and further destabilise an already volatile region. This would be miscalculation at a time when Western influence in Southeast Asia is still lagging behind that of China. At the same time, a Cold War with China must remain off the table. The real pragmatic solutions should lie somewhere in between. There should be more craftsmanship put into our foreign policies. China’s declaration of its NSL in Hong Kong is clearly against the Basic Law that governs the city. Insofar as China lacks territorial legitimacy (at least until 2047) and the British by a supermajority in Hong Kong hold political legitimacy, there is little reason why this cannot be an advantage to British foreign policy. Commercial interests count too in the picture.

Despite our current obsession not to exacerbate the status quo, it is clear that we would not have arrived here in the first place if we had been standing up against Beijing’s disrespect for fundamental human rights. The country’s blatant disrespect for these rights emanates far beyond its sovereign territory. Previously, we in the West have considered that the effects of China’s unique form of governance (which is firmly opposed to human rights) was confined to its national borders. Yet, this pandemic has aptly demonstrated the far-reaching impact of China’s illiberalism at home. As such, Western policies ought to revise their hitherto assumptions and economic relationship vis-à-vis the CCP regime. So too must we reconsider our assumption that China’s diplomacy will be more scrupulous given Deng Xiaoping’s guiding philosophy of ‘hide your strength and bide your time’. Clearly, this time has now passed. China’s new position in the world order means that it can afford more knee-jerk reactions such as what we have in Xinjiang, Hong Kong, and now COVID-19.

This is significant despite the facts that while Donald Trump may not be re-elected in November and that Asia’s future will still considerably depend on Western financial institutions and trade relations. The lack of a cohesive strategy in the European and Anglosphere will mean that our intergovernmental organisations such as the United Nations will be more vulnerable to be dictated by China and Russia. How can we, coming from free, liberal societies, protect our own fundamental freedoms if we are not taking proactive steps in maintaining a world order that is now presenting to be getting less liberal and orderly?

Surely bargaining our fundamental freedoms for the sake of what is likely to end up as imbalanced trade relations with authoritarian regimes clearly is not what our forefathers have lost their lives for. At present, the ball remains in Britain’s court and we still get to call much of the shots even without the leverage of the EU. Through the D-10, one can be hopeful that the EU can still continue to render a force of unity and perhaps learn that referendums can seriously backfire. It is not to say that illiberalism anywhere will always affect us – it really depends on the power and reach of the country we are dealing with. While human rights may not be at the forefront of foreign policy-making, what we have now with COVID-19 is already a net financial loss. Realpolitik should seek to include human rights in its approach given the reciprocal implications on our fundamental freedoms, national security, and economic prosperity. It is unclear whether the British government realises this.

Sri Lanka between China and the West: Balancing on a Foreign Policy Tightrope

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by Shakthi De Silva

Hambantota port, victim of China’s debt-trap diplomacy? (Image credit: AFP)

After purportedly falling victim to China’s ‘debt-trap diplomacy’, the island of Sri Lanka took the international limelight in July 2017. Many observers referred to the Sri Lankan Government’s decision to hand over the strategically located Hambantota Port on a 99-year lease as indicative of a malicious plan to indebt countries to China. Scholarship discussed the case as depicting the seemingly nefarious nature of the Chinese Belt and Road Initiative and in many narratives, the island was portrayed as having no agency – a small power which ‘suffers what they must’ in Thucydides’ words.

The 2015 ousting of Pro-China President Mahinda Rajapakse by a former minister of his own party – Maithripala Sirisena – ostensibly signalled a shift in the country’s foreign policy. The optimism of such a ‘foreign policy reset’ was overshadowed by the outcome of the 2019 Presidential election which resulted in Gotabhaya Rajapakse’s victory. Western scholars ruefully reasoned that Sri Lanka would shift overtly towards China under Gotabaya Rajapakse, having witnessed a Pro-China foreign policy during the tenure of his elder brother – Mahinda Rajapakse (2005-2015).

This conjecture has not been borne out by facts. A few days after the election, Gotabaya welcomed Dr. S. Jaishankar, India’s External Affairs Minister – the first Foreign Minister to meet and personally congratulate him on his victory. Rajapakse also chose India as the first country to visit as head of state and after meeting Prime Minister Modi received a $400 million line of credit to fund several development projects on the island. Since then, he met with Wang Yi, the Chinese Foreign Minister, Sergey Lavrov, the Russian Minister of Foreign Affairs as well as welcomed the U.S Principal Deputy Assistant Secretary of State for South and Central Asia, Alice G. Wells in the same week.

Complying with the much-iterated policy of ‘Non-alignment and Mutual Friendship and Trust among Nations’ was a core tenet of Gotabaya’s election manifesto. In several public pronouncements after the election, President Gotabaya expressed his desire to adopt a balanced approach in his foreign policy; welcoming investments from and striving “to maintain friendly relations” with all parties. As China and the United States expand their presence in the Indian Ocean, what must they keep in mind when they engage with the new Sri Lankan administration?

Rationalising the Sino-Sri Lankan relationship

Western powers should take note of the fact that Sri Lanka has been in dire need of investments to kick start its economy since the end of its internal armed conflict in 2009. Foreign direct investments (including foreign loans received by companies registered with the country’s Board of Investment) during the first half of 2019 amounted to $501 million – significantly lower than most neighboring Asian countries.

A World Bank report detailing the projected GDP growth of South Asian countries ranked Sri Lanka just above the bottom, with a real GDP growth rate of less than 3% for 2019.  Since the island reached upper-middle-income status, it has had to borrow on commercial terms; thereby intensifying its debt crisis. In such circumstances, policymakers are attuned to attract as much investment as possible to spur an economy that has consistently lagged behind other regional powers. In so doing, China emerges as an attractive partner and, thus, increased its investment in Sri Lanka from $ 178.5 million in 2012 to $ 579 million by 2017. Although the United States is the largest source of foreign direct investment in the Indo-Pacific, its cumulative foreign direct investment inflows to Sri Lanka between 2013 and 2018 amounted to only $134 million. The economic rationale behind the close Sino-Sri Lankan relationship is clear to see.

Secondly, Western narratives portraying Sri Lanka’s predicament as a manifestation of Chinese ‘predatory lending’, ‘checkbook diplomacy’, or ‘debt-trap diplomacy’ hardly resonates with the local public. Numerous studies by Sri Lankan economists have uncovered how Sri Lanka’s debt crisis is not ‘wholly’ or even ‘largely’ caused by China. In fact, a much larger percentage of Sri Lanka’s external debt are loans raised through external sovereign bonds and foreign currency financial facilities. Locals are also prone to blame Sri Lankan politicians, particularly members of the United National Party, for finalizing the 99-year lease agreement of the Hambantota port.

Moreover, the West must also understand that Sri Lankans do not generally perceive China’s presence in the Indian Ocean as pernicious to the island’s security. Despite establishing a base in Djibouti, China’s engagement in the Indian Ocean has been relatively limited and benign, owing to the fact that Beijing’s primary security interests reside in the South China Sea and Taiwan Strait. In consequence, the island welcomes China’s presence in the region and has sought ways in which the two economies can closely integrate so that the island can benefit from China’s rise. Furthermore, the substantial quantities of medical supplies delivered by China after the outbreak of the COVID-19 virus exhibit Beijing’s desire to cultivate an image as a friendly benefactor.

Beijing’s support during the final phases of the internal armed conflict in Sri Lanka is another major factor driving the local public’s relative lack of apprehension towards Chinese activities in the region. Political engagement between the two countries has been robust. As of 2018, Sri Lanka had nine ‘sister-city agreements’ with China and 2013 saw the inking of a comprehensive cooperative partnership between the two countries. One report also suggested that between 2000 and 2017 there were 130 political visits between Sri Lankan and Chinese governmental leaders. This year also marks the 63rd anniversary of the inauguration of diplomatic relations with China.

Intensified allegations from the West against the state armed forces have also pushed President Gotabhaya to declare his intention of withdrawing from international institutions if they continue to press for transitional justice or demand for impartial investigations into the last stages of the war. For example, in his speech at the 2020 National Ranaviru Day commemorations, he emphatically stated: ‘In a small country like ours where our war heroes have sacrificed so much, I will not allow anyone to exert undue pressure on them or harass them.’ Therefore, continued pressure from the West on the human rights front will only push Rajapakse towards China – an outcome which the West nor Rajapakse are necessarily inclined to welcome.

However, this does not imply that Rajapakse will be beholden to Beijing. A pro-China policy stance is not an indelible position for most countries. Beijing would be wise to understand that a pro-China foreign policy can change if the leader is replaced by an alternative candidate in a democratic election or when the local ‘pro-China’ elite has a change of heart. To continue its robust relationship with Sri Lanka, it would be advisable for Beijing to enhance investments while also promoting people-to-people ties, particularly in the sectors of professional training and higher education

A pawn on the chessboard of great power politics?

Sri Lanka’s location has often been lauded as its most important asset but policymakers cannot solely avail on ‘strategic location’ if they wish to position the island as the hub of the Indian Ocean. In this complex and fluid environment, strategic astuteness has become a necessity for policymakers. Sri Lanka’s favorable location needs to be matched by a stable and coherent foreign policy as well as structural reforms to promote the island’s investment and business climate.

As great power presence in the Indian Ocean is unlikely to dissipate in the near future, misreading the landscape can prove costly for Sri Lanka. The island will witness increased presence and engagement with regional and extra-regional powers, which may create a situation where the island’s leadership might have to choose between one party over another. Local policymakers need to have hard-headed assessments of contemporary geopolitics, conduct unsentimental audits of the benefits and negative implications of diverse forms of engagement with regional and extra-regional powers, and resist a situation where Sri Lanka’s policy choices are constrained by external powers.

As China’s economy has entered a phase of gradual slowing down, Rajapakse would do best to remember that there are limits to what China can offer economically in the long run and therefore, diversifying ties with other regional and extra-regional powers would be in the island’s best interest.

 Mr. Shakthi De Silva currently serves as an Assistant Lecturer at the Department of International Relations, University of Colombo. His previous work has appeared on the South Asian Survey (SAGE), Journal of the Indian Ocean Region (Taylor & Francis), and the Diplomat Magazine. 

The Maoist Way of Guerilla Warfare and the Broader Challenge Presented by China

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by Tom Harper

Long Live Chairman Mao! Long, Long Live! (Image credit: Chineseposter.net)

In the eyes of the modern world, Maoism is a relic of a more ideologically divided world and of a China that no longer exists.  Nevertheless, the ideas and strategies of Mao continue to have a direct and indirect influence upon a diverse array of actors, ranging from the insurgent movements of the post-colonial world to post-Cold War Chinese foreign policy strategies. Here, followers of the strategies devised by Mao and his German-educated strategist, Zhu De, are inspired by their combination of Marxist ideology and the maxims from Sun Tzu’s The Art of War.  They applied these strategies to a China described by Mao as ‘half colonial, half feudal’[1], far removed from Marx’s original prognosis.

Prior to Mao’s leadership, China’s communist movement followed a strategy more in keeping with those of the Russian Bolsheviks, with cadres going to the Soviet Union for study.  The most prominent of these were known as the ‘Twenty-Eight Bolsheviks’, who were guided by advisors from the Soviet Comintern.  As a result of several strategic blunders in their rebellion against the nationalist KMT under Chiang Kai shek, which concluded in the Long March to Yan’an, Mao and Zhu were in a position to apply these strategies.

Mao and Zhu’s strategies were characterised by three main phases.  The first phase involved sending party cadres to the rural, isolated areas of China, which were often ignored by the KMT, which drew its support from the smaller urban class.  Unlike the Bolsheviks’ focus on the industrial proletariat, Mao saw the Chinese peasantry, which made up around eighty per cent of China’s population, as the driving force of communism in China.  To do so, these cadres sought to mobilise popular support through measures such as land reforms. These proved to be succesfull with a Chinese peasantry that had long been exploited by the feudal land-owning classes[2]. Over time, the communists were increasingly viewed as more capable administrators than the KMT, with the Chinese peasantry seeing the latter as corrupt and inefficient[3].

Through these measures, the Chinese communists had effectively created a parallel government in China’s agrarian provinces, in a manner similar to the earlier Taiping Heavenly Kingdom of Hong Xiuquan[4].  This made the KMT increasingly irrelevant to the lives of the Chinese peasantry which undermined Chiang Kai-shek’s rule.

The military aspects of Mao and Zhu’s strategies came in the second and third phases of these strategies.  The former involved utilising guerrilla tactics against stronger opponents, such as the KMT and the Japanese, to build support, and to acquire resources while the latter came in defeating the KMT through conventional warfare.  In doing so, the CPC was able to preserve their forces while the KMT bore the brunt of the Japanese invasion.  As a result, the CPC was better placed for the continuation of the Chinese Civil War after Japan’s surrender. In returning to Sun Tzu, Mao and Zhu used the maxim that ‘supreme excellence consists of breaking the enemy’s resistance without fighting’ to defeat a conventionally stronger opponent.  It was this maxim that had wider consequences as the new communist government sought to export its vision to the post-colonial world.

To China’s communist rulers, the largely agrarian post-colonial nations resembled pre-revolutionary China, which made it ripe for their efforts to replicate their earlier successes[5].  This came through assistance to the numerous anti-colonial movements battling the European colonial powers that had been damaged by the Second World War.  China’s bid to become the vanguard of communism in the developing world clashed with those of the Soviet Union, which also sought to promote its own vision of communism.  This became more pronounced with the Sino-Soviet Split of 1963 and there were often clashes between rival communist movements supported by Beijing and Moscow, such as the Angolan Civil War, where the Maoist UNITA battled the Soviet-backed MPLA.

It was the conflicts of the post-colonial world that drew attention to Maoist strategies from those who sought to combat it.  The earliest example of this was the French officer, David Galula, who witnessed the first phase of these strategies as a prisoner of the Chinese communists. After his release, Galula attempted to deploy these strategies against the anti-colonial movements throughout France’s overseas territories in a bid to deprive these movements of their local support.

While France failed to retain its colonies, Galula’s Maoist-inspired strategies caught the attention of American counter-insurgency planners who found themselves in the midst of the Vietnam War.  Like the Chinese communists before them, the National Liberation Front built support by mobilising the Vietnamese peasantry dissatisfied with the corrupt rule of the American-backed South Vietnamese government.  This influence was particularly notable in the Strategic Hamlets programme which replicated Galula’s earlier efforts in Algeria.

The Vietnam War was a case of where Maoist strategies influenced both insurgent movements and those who sought to combat them.  Ultimately, the Vietnamese communists were able to prevail over their stronger American foe by destroying its will to fight, as demonstrated by the fallout from the Tet Offensive in 1968.  Nevertheless, it was this pattern that would continue even after the Cold War.

With the end of the Cold War, Maoist strategies continued to maintain a degree of influence, the most visible of this being the groups within the developing world that still identified themselves with Mao’s ideas.  The most successful implementation of this was the overthrow of Nepal’s feudal monarchy by the Nepalese Communist Party in a manner eerily reminiscent of China’s own revolution, which once again came through the mobilisation of the Nepalese peasantry.

Maoist strategies also found a new audience in the midst of the War on Terror.  Just as these strategies had influenced Galula’s theories on counter-insurgency, American strategists, such as David Petraeus, invoked Mao and Zhu’s theories to justify the study of the non-military dimensions of warfare with the irregular conflicts in Afghanistan and Iraq.  This continued the influence of these strategies on both insurgent movements and their opponents.

The most unexpected manifestation of Maoist strategies has been in Chinese foreign policy itself.  During the Cold War observers, such as John Cooley, warned that China’s strategies in Africa were aimed at expelling the United States from the continent.  In so doing, these attempts would turn Africa into a ‘major revolutionary outpost’ in a Sino-centric world where the US was largely irrelevant[6].  Cooley’s warnings are eerily reminiscent of later fears of Chinese influence in Africa and echoed the first phase of Mao’s strategies applied on a greater scale.

Ironically, this would come to pass, not through Chinese moves, but rather through the disinterest in Africa in the post-Cold War era[7].  As a result, China exploited this development to capture hearts and minds in the developing world, which had often been ignored by the major powers.  As a result, China has become an integral feature of the economic landscape of these nations, which has made it more relevant to the governance of these nations.  It is this template which China has deployed to the wider world.

In addition, China has also built a parallel international order, through institutions such as the BRI, SCO and AIIB.  These institutions shadow more established American led bodies, such as the IMF and NATO, which has seen the emergence of two competing forms of global governance just as China had been fought over by two rival governments.  From this, one can infer that Chinese strategies do not seek to overthrow American hegemony, as it has often been accused of doing, but rather seeks to render it irrelevant to global governance[8].

Whether it be the low-intensity guerrilla conflicts throughout the developing world or the globe-spanning machinations of Great Powers, Mao and Zhu’s strategies retain a significant influence.  This has become especially notable with China’s wider challenge, since it follows a strategic culture that is very different to those of the Great Powers that came before it.  Therefore, an understanding of this is an imperative in crafting a more effective response to Chinese strategies.

[1] Mao Zedong, On Guerrilla Warfare (New York: Dover Publications Inc, 2005), p. 68

[2] Erik Durschmied, Beware the Dragon: China: 1,000 Years of Bloodshed ( London: Andre Deutsch, 2008) p. 223

[3] Rana Mitter, The War Years, 1937-1949 in The Oxford Illustrated History of Modern China (Oxford: Oxford University Press, 2016) p. 175

[4] Jonathan D. Spence God’s Chinese Son: The Taiping Heavenly Kingdom of Hong Xiuquan (London: WW Norton and Company, 1996) p. 173

[5] Julia Lovell Maoism: A Global History (London, Bodley Head, 2019) p. 138

[6] Lovell, 2019, p. 186

[7] Joshua Eisenmann, Eisenman, Joshua (2012) China-Africa Trade Patterns: Causes and Consequences, Journal of Contemporary China, 21:77, p.45

[8] Tom Harper, China’s Eurasia: The Belt and the Road Initiative and the Creation of a New Eurasian Power, Chinese Journal of Global Governance, 5.2, October 2019, p. 103

Tom Harper is a doctoral researcher in politics and international relations from the University of Surrey. His research interest is Chinese foreign policy in the developing world and has been published in the Cambridge Journal of Eurasian Studies as well as in the Conversation, the Asia Times and the Independent and has been interviewed by the China Daily and the Gazeta Do Povo. His articles have been translated into Arabic, French, Japanese, and Spanish. He can also speak Mandarin Chinese and Japanese

Strife Series on Human Rights, Security, and Diplomacy in the Asia Pacific – Introduction

by

by Anna Tan

(Image Credit: Shannon Stapleton/Reuters)

 

Editorial 

In recent years, the world has seen a rising number of civil protests and movements globally. The eruption of the Hong Kong crisis in mid-2019, where mainstream political dialogues reached a new level of fixation on the increasingly looming authoritarian power of China that pervades well beyond its mainland territories, shook many of us. The rise of China has been overwhelmingly redefining the overall regional security of the Asia Pacific, and how that development influences the shift in the nature of international relations is undoubtedly dependent on the alliance of the Asian countries with the West, especially with the United States.

Reflecting on Müllerson’s theory on the relationship of intrastate human rights and international security[1}, it is indisputable that China under Xi Jinping’s Chinese Communist Party (CCP) is a very strong authoritarian state, and its overtly aggressive policies against Hong Kong’s mass civil resistance not just made headlines for an incredibly sustained period of time throughout the year, but also threatens the international stability by means of possible similar aggressions. It threatens liberal democratic values that are upheld by many free and democratic nations from across the world, especially in a time where American influence has been on a rapid decline since the assumption of the Trump administration. In the Asia Pacific, while nations such as Hong Kong, Taiwan and South Korea face new challenges in manoeuvring through the changing dynamics of international security now jeopardised by the “America first” policy of the United States, other countries such as Myanmar welcome the rising Chinese hegemony. Why and how does this happen?

This Strife Series explores the interplay between human rights and security through diplomatic exchanges in the Asia Pacific. The series analyses how in some countries, addressing human rights, democratic freedom and maintaining status quo national and/or regional security seem to be mutually exclusive at times instead of being mutually reinforcing, despite sharing the common factor of China’s domineering economic leverage.

Publications:

In the first article (12/2019) “China’s Turbulent Year: 2019”, Professor Kerry Brown analyses how China’s aggression in response to the Hong Kong protests and its draconian policies to the Uighur population in Xinjiang have both comparable ‘tit-for-tat’ elements that the Chinese leadership may not have thought through carefully, but will have detrimental consequences to the international opinion on China’s usually very cautious and deliberate efforts on maintaining its diplomatic image.

In the second article (01/2020) “China, Myanmar, War Crimes and the Issue of National Sovereignty”, Anna Tan looks at how Myanmar under Aung San Suu Kyi’s leadership, has strangely shifted from being a Western ally during the landmark victories of the National League for Democracy (NLD) in the 2015 elections to an even stronger adherence to China’s orbit than ever before. She describes how the Sino-Burmese relations have evolved dramatically under the light of the Rohingya conflict in Rakhine and Myanmar’s subsequent genocide trial at the International Court of Justice (ICJ).

The third article (03/2020) “Taiwan Elections: Continuity, Change and the Cross-Strait Conundrum”, Evita Liagka explores what the victories of the Democratic Progressive Party (DPP) under the leadership of Tsai Ing-wen could mean for the future of Taiwan and its cross-strait relations. She points out that the China-Hong Kong crisis came in a convenient timing for DPP’s mobilisation of garnering greater support than ever before and since the public consensus on maintaining the status quo international diplomatic status of Taiwan has remained largely unchanged, we might not see a drastic shift in DPP’s policies from its previous term. However, KMT’s recent decision to swerve away from its pro-China stances might pose newer challenges for Taiwan in the years ahead.

The final articles are contributed by Yeseul Woo, analysing North Asia’s security issues from the perspective of South Korea.

  • In Part 1 (02/2020) “South Korea’s Dangerous Silence on Human Rights Abuses in North Korea”, Yeseul Woo argues why the US lack of sponsorship in the UN Security Council meeting on the discussion of North Korea’s human rights issues should not mean that South Korea should remain silent. Ms Woo explains why, in fact, South Korea’s silence justified by the importance of the nuclear security framework would actually be counterproductive in regional security in the long run.
  • In Part 2 (03/2020) “The First Tech War? Why the Korea-Japan Tensions are about US-China Competition on AI”, Ms Woo further explains that South Korea’s silence on North Korea’s human rights issues for the sake of North Asia’s nuclear security (described in Part 1) is actually the result of the deterioration of Korea-Japan relations which has led to South Korea withdrawing from the GSOMIA pact. Though Seoul retracted its decision last minute, Ms Woo argues that the tensions between Seoul and Tokyo are less about the debate surrounding comfort women and wartime forced labour, and is actually influenced by the US-China competition on Artificial Intelligence (AI) in nuclear surveillance technology.
  1. Müllerson, R. (1997). “Human Rights Diplomacy.” Routledge.

Anna Tan is a postgraduate student for MSc Global Affairs at King’s College London. Her research is focused on how Western human rights diplomacy affects democracy and authoritarianism in Asia Pacific. She has previously worked for UNDP Myanmar and the American Red Cross, and is a member of the Programme Committee of the Conflict, Security and Development (CSD) Conference 2020 hosted by the Department of War Studies and the Department of International Development (DID). Anna holds a BSc in Neuroscience. You can follow her on Twitter: @AnnaTanGTW.