China's Economic Philosophy- Part II

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Rawlston Pompey

Monday, 19 March 2012 02:30

By Rawlston Pompey

Antigua and Barbuda, under the leadership of the late national hero, a visionary and insightful leader, the pragmatic Prime Minister, DR. VERE CORNWALL BIRD, was said to have been the first leader among the Organization of Eastern Caribbean States (OECS) to have recognized and formally established diplomatic ties with what was then called “…Communist China.”

Such reference to the communist nation was primarily due to its “…ideologies- administratively and economically, as well as its foreign policies and domestic affairs. The earlier established relations were to be further strengthened by the indomitable Prime Minster, Honourable DR BALDWIN SPENCER.

Such ties, nonetheless, were said to have been founded on respect for sovereignty and cooperation on matters of mutual concerns and/or interest to both nations. China’s economic philosophy was said to have been created by one of its revolutionary leaders-DENG XIAPING who was accredited with the creation of the MARKET ECONOMY for his nation.

CHINA’S PERSPECTIVE

From that perspective, such concept refers to an economic system, said to be the utilization of a “…FREE PRICE SYSTEM.” Such meant that allocation and distribution of all national resources with “…public ownership” being reserved to strategic sectors of its economy. For this model, it was said that the STATE would utilize “…Market mechanisms” to direct economic activity in the same manner governments affect economic decisions in “…Capitalist economies.” It showed that in the 1970s, the Chinese leadership led by DENG XIAPING sought to revolutionize China’s economic policy, by reforming the system. It showed also that in the late 1980s, it had gradually moved away from what was described as “…Maoist Communism” and shifted to a “…market economy.” Further research revealed that the “…Market Economy System” had its fair share of problems.

WORLD’S STRONGEST ECONOMY

Today, China was said to have the world’s most vibrant and strongest economy. Seemingly for this reason both    impoverished and rich nations have sought its friendship. Hence most had established diplomatic relations    and have sought assistance in various forms. In keeping with its economic philosophy, China has developed an economy that experts across the globe had described as “…phenomenon.” Thus, when matters involving foreign influence, dominance of its products, project developments and “…concessionary loans” are raised, regional peoples appeared quick to focus on China and its exploits. Part of its exploits is to “…lend, spend and retain accrued financial benefits.”

SIR RON’S CONTENTIONS

Despite China’s unique approach to economic viability, its “…communist ideals and system of governance,” after the United States, it was said to be boasting the world’s second largest economy. It has been accused by western leaders to have manipulated the “…capitalist system” of free-market economy to “…good economic advantage.” Since the advent of globalization, former diplomat SIR RONALD SAUNDERS and current international and regional affairs writer had seen a dangerous and domineering commercialized Chinese trend within the region.

COMMERCIAL DOMINANCE

SIR RON was convinced that such trend had permeated most of the small regional states. He may have been worried that such commercial dominance was placing significant “…exportable capital” in the hands of Chinese businessmen and that such was bad for economic growth. For these reasons, he had expressed grave concerns over what may have, or may have been seen as a growing “…Chinese Small Business Expansionism,” now overtaking the place of the once dominant indigenous commercial activity within the region. Appearing on Observer’s Big Issues programme [March 18, 2012], when asked by host SHELTON DANIEL about the Chinese situation, president of the Employers Federation ACRERS STOW seemed unaware, thereby vaguely skirting the issue. Clearly, hedging, he said that “…no studies had been done.”

EXPLOITATION

As a consequence, China was said to be exploiting the “…Capitalist System,” of which the United States had complained of “…manipulating its currency.” Such was to be seen in the conduct of foreign trade, thereby placing it in a better and stronger economic position than other nations. Its primary lending financial institution is the “…EXPORT-IMPORT BANK (EXIM) OF CHINA.” Established in 1994, the State-owned bank, interestingly, featured prominently within its mission statement is “…Assisting …Chinese companies with “…comparative advantages in their …offshore contract projects and OUTBOUND INVESTMENTS.” Given its mission, there may still be many regional peoples and leaders who appeared to be under an illusion that relations with China bring immense economic benefits to their nations. There is no such thing as “…free lunches.” Everything has value and conversely, it has a cost.

CHINESE DOMINANCE

First to speak to the dominance of Chinese enterprises and the overwhelming commercialization of its products throughout the OECS was ST.LUCIA. Similar concerns were subsequently echoed by the Federation of ST.KITTS and NEVIS that expressed concerns over the plight of indigenous business operations. Many of which were said to be facing closure due to the fiercely competitive environment and low prices on what some business operators and consumers have described as “…inferior quality goods.” Some may be under illusions that China’s readiness in providing concessionary loans signified a “…BOND OF FRIENDSHIP.” Economic experts have argued that such readiness was in fact “…financial business,” and not necessarily the economic interest to other nations. If it was proven that “…Economic Friendship Bonds” existed in China, then it may be linked to institutions other than the national EX-IM “…EXPORT/IMPORT BANK.”

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SIR RON’S OBSERVATIONS

This may have been the message former diplomat and current affairs writer SIR RONALD SAUNDERS may have, in earnest, continually attempting to convey to both regional peoples and leaders. Through a recent Observer radio programme he had emphasized the need for the region to challenge China on its trade policies. While many may have listened, few may have heard, let alone heeding his message. It was suggested that some regional leaders lacked the inability to offer challenges. Consequently, many may have even taken a “…hands off” policy in challenging the Chinese authority of its unfair trade and export practices. Some regional leaders may even say as in the case when ANGELA MERKEL rebuffed   suggestions of “…currency devaluation” [G20 Meeting], “…It was neither economically justified nor politically appropriate” in challenging China on its trade and “…lending policies” particularly toward impoverished States, such as those within the OECS.

BUSINESS PHILOSOPHY

Thus, it was not by miscalculation that one of CHINA’S international business corporations “…Beijing Chang Cheng,” more popularly known within the region as “…Beijing Construction and Engineering Group” (BCEG), has as its strategic intent, “…Enlarging and Enhancing International Business.” Hence, its mission statement “…GOING OUT GLOBALLY.” Evidence of CHINA’S intent and mission may be seen almost everywhere within most regional States.

CHINESE DOMINANCE

For instance, there are the “…innumerable clothing and household stores that operated by Chinese owners in buildings at every street corner; …obnoxiously scented re-cycled rubber and plastic items, fumigating the atmosphere, choking and stifling both workers and customers everywhere. Then there were countless supermarkets and fast food restaurants, serving copious amount of greasy foods of “…fried-rice and chicken.”  These business entities were dominant within the regional commercial sectors. They were managed, operated and serviced by a sizeable Chinese workforce and sparsely employed indigenous people.

HORRIFIC NIGHTMARE

Based on earlier Chinese economic philosophy, research has shown that such shift had resulted in, inter alia, widespread “…grievances over inflation; …limited career prospects for students;” while “… corruption of the party ELITE was growing rapidly.” The slow pace of economic reforms had prompted “…affirmative action,” forcing restless students to the streets in protestation. Such, as may be painfully reflected, became “…HORRIFIC NIGHTMARE” to surviving protesters, the Chinese people and the rest of the world.

MILITARY MIGHT

The people became discontented and a seemingly frustrated student population mounted what was described as”…sustained peaceful protests,” lasting for several weeks at the Tiananmen Square. Seemingly in a ruthless, insensitive and cold blooded move, deadly force was unleashed upon what historians have written was the “…hundreds or thousands” of unarmed students” allegedly massacred by the military [Internet-Tiananmen Square]. If the students’ actions were seen as revolutionary, the military had crushed it decisively out of existence. Such came with the shift toward economic reform.

CRUSHING DEADLY FORCE

Subsequently the Chinese leadership tolerance level appeared to have ebbed low. Then in a show of “…sheer brutal and deadly force,” the military might of the nation was employed and descended upon the unarmed students that had resulted in a carnage. Television imagery had shown that protesters were flattened in the streets like disposed plastic bottles and aluminum cans that were being exported to that nation for re-cycling into substandard or “…INFERIOR GOODS.” Such was the leadership philosophy in dealing with what media reports suggested were “…peaceful protests” to induce economic and democratic change.

WATCHED IN HORROR

The world had expressed its horror and abhorrence, equally as leaders had watched helplessly as CHINA disdainfully, insensitively and decisively used its “…VETO POWER” on a United Nations resolution for cessation of bloodshed among SYRIAN people. Such appeared to have reflected, not its economic philosophy, but a reflection of its dark and evil side and “…oppressive policy.” Though such may have been seen as one of its philosophical ideologies, China’s economic influences appeared to have obscured the vision of many nations. Many saw it as purely “…internal affairs” and in the recent economic meltdown, its economic prosperity and concessionary loans to the many nations, appeared to be all that currently matters, while the heinous action had slipped from their thoughts to become oblivious.

UNDER ILLUSIONS

Except for US President BARACK OBAMA and a few other world leaders, it was not clear why many western nations, including those within the region who appeared to have been “…UNDER ILLUSIONS” that CHINA’S interest was inextricably linked to their nation’s interest.  Contrary to such illusory thinking and/or belief, however, China’s interest was all about “…Market Economy Socialism.” That part of its ideology allows only for the “…collective interests of its citizens” and that of the nation as a whole.

CONCESSIONARY LOANS

Then there were the“…CONCESSIONARY LOANS CHINA had been providing to unsuspecting nations. Clearly it had been smarting under the guise of lending” as part of its infrastructural development policy that many developing and under developed nations had found irresistible. Such loans, the interest rates of which financial experts have contended in the current financial environment, have been “…soaring with rapidity,” either through currency depreciation and/or fluctuation.

MP BROWNE’S SUGGESTION

Making such observations was Member of Parliament Honourable GASTON BROWNE. He had suggested that loans should be borrowed in United States currency. He had warned his nation that it could be a costly affair, having the “…Eastern Caribbean Currency or EC dollar” “…floating with the Chinese currency.” Instructively, just like the EC dollar, China’s RMB is pegged to the US currency and part of its finance and economic philosophy was “…BUYING US DOLLARS” in building up its foreign currency reserves. It does not offer or give “…CONCESSIONARY LOANS” in any other currency but its own, the “…RMB” or RENMINBI. Borrowers, therefore, may remit in US currency which was to China’s foreign reserves interest.

ECONOMIC STIMULATION

The experts have posited that these loans neither brought any “…economic stimulation,” nor add any “…GROWTH” to the economies of borrowing nations. However, since the funded projects were primarily infrastructural development, nations were left with beautiful edifices and/or bridges. The experts were of the view that the financial returns were channeled back to China through their technical expertise such as engineers and payments to skilled and unskilled labour that it had provided for construction. Additionally, manufactured materials for those projects had to be purchased by Chinese contractors from their suppliers and/or exporters. Thus, such finances were said to have ended up from whence it came, the internationally acclaimed- “…EX-IM BANK” of China. 

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STATE APPROVED LOANS

Hence, the profits from such loans are channeled into the “…EXPORT-IMPORT (EX-IM) BANK,” from which internal manufacturers, exporters or “…Chinese offshore companies” as well as foreign nations may source through “…STATE APPROVED LOANS.” Regional States - CARICOM and OECS - were not excluded from access. The oddity had been that due to the sophisticated arrangements, OECS borrowers may not physically access such loans.

One may have comprehended what Grenada’s Prime Minister TILMAN THOMAS, had alluded to respecting a “…Concessionary loan” from one of TAIWAN’S statutory bodies.

STATE-OWNED COMPANIES

It was to be understood that a loan from a State-owned financial institution, does not necessarily mean “…direct government’s involvement with borrowers.” However, State-owned companies allowed for government control of its assets externally. Similar provisions exist within this jurisdiction as in the case of the Antigua and Barbuda Public Utility Authority. This agency was empowered to source finance with the sanction of Cabinet. It can institute litigious proceedings and can be litigated against. In the case of Taiwan, it would appear that one of the loan conditions was in the case of dispute, litigation proceedings were to be instituted in the United States. It was not disclosed in which jurisdiction such proceedings may be instituted should there be a contractual dispute between EX-IM BANK and the nation.

AMBASSADOR SHOUL’S OPTIMISM

The citizenry, through social media were made aware of recent contentious issues surrounding energy generating plants and costing that may be affected by “…currency fluctuation.” These came against the backdrop of a global economic crisis. Notwithstanding, the expert’s perspective of a grim economic outlook, His Excellency Ambassador DAVID SHOUL appeared confident that China may allow for adjustments to the rate of interest. He was optimistic that remittances for the energy development loan of Chinese $300M RMB or US$47M to EX-IM, even with the possibility of currency fluctuations, it might not be gravely affected. Some financial experts, however, shared no such optimism.

CHINESE MAGIC WAND

Thus, this may necessitate waving of a “…Chinese-made magic wand.” Accepting Prime Minister, Honourable DR BALDWIN SPENCER’S recent press briefing on the nation’s indebtedness to China, even with the Ambassador’s suggestion and the “…re-negotiation” suggested by Member of Parliament Honourable GASTON BROWNE, such appeared doubtful. Prime Minister Honourable DR BALDWIN SPENCER appeared to have been right with the interest rate fluctuating. In a press release published at “…Caribbean Press Release .Com,” the original cost was quoted as US$43M, thereby possibly reflecting the currency fluctuation that appeared to have driven the cost to US$47M.

BOND OF FRIENDSHIP

Such optimism by the Ambassador, however, may have been founded on a presumptive “…BOND OF FRIENDSHIP” existing between China and Antigua and Barbuda. Instructively, the EXIM Bank’s representative seemed to have contrary thoughts. The media had quoted him as saying that “…CHINESE LOANS NEVER CHANGE.” In the real world, it was a widely known and mutually held belief that “…friendship was friendship” while “…business was business.”

BAD PLAY/BAD PAY

However, in some human interactions, whether in love or business affairs, there had been regular fall-outs. Frequently, it was either when friends “…BAD PLAY” or borrowers “…BAD PAY.”  A classic international case of “…BAD PLAY and BAD PAY,” appeared to have been the fiasco between leading to “…TAIWAN” litigating against borrower, island of Spice- GRENADA over a concessionary loan for the construction of its international airport. Seemingly, there was not enough Spice to repay TAIWAN after it had unwittingly severed diplomatic relations in support of the “...ONE CHINA POLICY.”

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ONE CHINA POLICY

Internationally, China was said to be more concerned over its economic and foreign policies. Those who have studied China’s economic philosophy had concluded that such were inducement for    “…support of national votes” within the various international bodies. Most have argued that such financial assistance was not only for supporting the “…ONE CHINA POLICY,” a pledge most regional leaders had reportedly made along with Prime Minister Honourable DR BALDWIN SPENCER. Such policy speaks to a unitary State called CHINA. There was also a “…PRINCIPLE” that speaks to two governments, but insists that despite two governments, TAIWAN is an inalienable part of one “…MAINLAND CHINA.” Some experts had opined that support for such policy was in effect “…TRADEOFFS” for China to spread its manipulative influence across frontiers and its “…monopolistic fangs” deep into the global economy.

SWITCHING ALLIANCE

There may be lessons to be learned from the GRENADA experience. Seemingly, it was switching alliance and severing diplomatic relations with TAIWAN in adherence to the “…ONE CHINA POLICY” that appeared to have plunged the Grenadian authorities into economic chaos with TAIWAN. The experts have also argued that such policy was made on the premise of compromising quality and cost to national importers. Adding to the “…TRADE EXPLOITS” and manipulation of exports by that nation, was its short shelf-life products ranging from “…bamboo items, ceramics and plastic wares to obnoxious smelling rubber products” which often required decontamination with environmentally-friendly products within the household environs.

See related stories:

China's Philosophy - Economic Attractions

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