Monday 4 September 2017 01.15 EDTLast modified on Monday 4 September 2017 19.35 EDT
On Friday afternoon, the eve of North Korea’s most powerful ever nuclear test, China’s football-loving president received a gift from the world’s greatest ever player.
“Good luck,” read the handwritten message from Pelé on a canary yellow Brazil jersey handed to Xi Jinping by his South American counterpart, Michel Temer.
Xi needs it. Experts say Kim Jong-un’s latest provocation – which some believe was deliberately timed to upstage the start of the annual Brics summit in China – exposes not only the scale of the North Korean challenge now facing China’s president but also his dearth of options.
“The Chinese are pissed off, quite frankly,” says Steve Tsang, the head of the Soas China Institute.
“But there is nothing much they will actually do about it. Words? UN statements and all that? Yes. But what can the Chinese actually do?”
Zhao Tong, a North Korea expert from the Carnegie-Tsinghua Center for Global Policy in Beijing, believes there are a number of possible answers.
Sanctions or turning off the taps
The first is to further tighten sanctions on Kim’s regime by targeting its exports of textiles and clothing.
Xi could also deprive Kim of another key source of revenue by agreeing to limit or completely prohibit up to 100,000 North Korean labourers from working overseas, including in China.
A third and far more drastic option also exists: cutting off North Korea’s crude oil supply. “This nuclear test is one of the few things that might trigger a cut-off of oil supplies, but we are still very reluctant to do so,” one person close to Chinese foreign policymakers told the Financial Times after Sunday’s detonation.
Zhao doubts Xi will choose that risk-strewn path. He believes turning off the taps could prove an irreversible decision since the pipeline delivering oil to North Korea is old and would corrode and break if left unused. Crucially, though, it would cripple North Korea’s economy, almost certainly bring down Kim’s regime and create a massive refugee and security crisis just a few hundred miles from Beijing.
“That is one of the most radical measures China could ever take and it could have strategic implications if the regime’s stability is affected,” says Zhao. “It is not going to be immediate but over time it could have an impact on the regime’s survival.”
Cheng Xiaohe, a North Korea expert from Renmin University in Beijing, also admits tightened sanctions are the only feasible response: “China has been pushed into a corner and has few options left.”
That said, some believe appetite is growing in China for a more robust response to Kim Jong-un’s continued provocations.
“This is an insane country, and he is an insane leader,” says Zhu Feng, an international security expert from Nanjing University. “We are now at a historic turning point and – from my point of view – China needs to strengthen coordination and cooperation with the international community, particularly with the US, Japan and South Korea.”
“I think the domestic discussions about cutting crude oil supply are increasing,” says Zhao, who thinks the mood in China – North Korea’s key ally and trading partner – may be starting to shift.
“If things settle down very quickly … that will give Xi Jinping some leeway to take more radical measures against North Korea,” Zhao predicts. “But if domestic politics continues to play out until the 19th party congress, then I don’t think China has any room to take radical measures.”
Smart cookie and the wildcard
Tsang believes the apparent lack of effective options to halt Kim Jong-un’s nuclear ambitions underlines what a shrewd strategtist he is and how successfully he was toying with both China and the US:“He is a smart cookie – a very, very smart cookie.”
As long as China was not a direct target of North Korean aggression, Xi would view Kim as an irritant rather than a threat that needed to be immediately crushed: “At the moment nobody seriously sees the North Korean missiles and nuclear weapons as a threat to China … The most likely target would be the Japanese. Now how unhappy would Xi be with the prospect of … the Abe administration being blasted to pieces? Neither outcome would actually make Xi lose any sleep.”
But for both Kim and Xi, there is one wild-card and he goes by the name of Donald J Trump. Tsang says conventional military advice suggests the US president would not risk a military strike against North Korea for fear of sparking a devastating counter-attack against South Korea and a broader regional conflagration that would inevitably suck in China.
“You’re talking about 10,000 different pieces of [North Korean] artillery … which could lob shells into the vicinity of Seoul and cause huge damage,” said Tsang. “So Kim’s reasonable calculation is that there is not actually a lot that Trump can do about it and there is almost certainly nothing the Chinese will do about it in concrete terms.”
Trump, however, was no conventional president. “The problem is somebody like Trump does not behave necessarily in line with your normal Obama and Clintons of this world and therefore the risk of him ignoring professional military advice is not negligible,” says Tsang.
“It would be negligible under Obama and extremely unlikely under Clinton or, for that matter, probably even George W Bush. But we can’t say the same of Trump. That’s one thing about Mr Trump, isn’t it?”
I cover business and investing in emerging markets.Opinions expressed by Forbes Contributors are their own.
Chinese President Xi Jinping walks with Brazilian President Michel Temer in Beijing on Friday, just two days before the opening of the annual BRICS Summit on Sept. 3. China is far and away the most powerful of the five BRICS. (Photo by GREG BAKER/AFP/Getty Images)
Is it at all humiliating to the Russians, at least a little bit, that the Chinese are far and away the biggest, baddest BRICS nation? Russia used to be a world superpower. It’s a world oil power. A world nuclear power. But beyond that, China is more relevant to the world economy than the Russians.
Brazil. What about them? For years, the commodity bubble made it seem Brazil was on its way to becoming the runaway leader of Latin America, surpassing Mexico, which is basically a U.S. import market. Brazil was, and is, a more diverse economy than Mexico. They weren’t dependent on any one nation, really. Then the commodity bubble burst and Brazil’s purchasing power has dropped, putting it on par with China’s. GDP per capita is also similar. China’s Happy Meal toy making economy has grown up and is home to more new billionaires than anywhere else. And as leaders from Brazil, Russia, India and South Africa meet in Xiamen on Sept. 3, it is clear to everyone watching that China is the leader.
Russia needs China because it is in a never-ending feud with the West. They have two things in common, generally: commodities supply and demand, and a desire for a multi-polar world, though this is probably more Vladimir Putin’s thing than Xi Jinping’s. China is at least as dependent on the U.S. as Russia is dependent on Europe.
Brazil needs China because that’s where all of its soybeans and iron ore goes. Brazil’s agribusiness is vital to the economic recovery now just two quarters young. In May, China and Brazil launched a joint investment fund to increase productive capacity. The fund has an initial sum of $20 billion and will reportedly go to finance investment projects in Brazil (not in China) that are of interest to both countries. Brazil’s president, Michel Temer, is already in China. He wants to convince them to buy airports and participate in other privatization bids as Brazil tries to trim more fat from its federal government.
Following the recent border skirmish, India can probably do without China. India’s main trading partners are the U.S. and United Arab Emirates. But if you include Hong Kong with China, then China is No. 2. More importantly, India’s imports are heavily dependent on the Chinese. Some $59 billion worth of Chinese imports moved into India in 2015, more than the No. 2 Sweden and No. 3 U.S. combined. Bilateral trade volume between China and India also rose by 21.5% year-on-year to $47.52 billion between January and July 2017, Indian customs data show.
South Africa needs China investment and Chinese buyers for its raw materials. China is its biggest export market, accounting for around $12 billion. That beats South Africa’s No. 2 partner, the U.S., with around $7 billion in exports, both based on 2015 figures.
China is a total beast. South Africa, Russia and Brazil are particularly at its mercy.
Indian Prime Minister Narendra Modi and Xi Jinping at the BRICS summit in Goa, India last year. India and China have agreed to pull back their troops from a face-off in the high Himalayas where China, India and Bhutan meet, signaling a thaw in the months long standoff. It’s a relationship where China has more Aces up its sleeve than India. (AP Photo/Manish Swarup, File)
Although all five of these countries stand to gain from closer commercial ties, China is the one that will gain the most. China has just about enough money sitting in international reserves to equal the economic output of Brazil ($1.7 trillion), Russia ($1.3 trillion) and South Africa ($295 billion). It’s state owned enterprises have the funding to buy strategic assets abroad, like water and oil and gas infrastructure. And its new billionaires like Jack Ma, founder of the e-commerce giant Alibaba, has his eyes set on being the Jeff Bezos of emerging markets. He basically already is.
The upcoming BRICS Summit will end on Sept. 5 with the usual rhetorical messaging and memorandums of understanding about how they will all accelerate trade, investment and technological know-how. China’s Commerce Ministry spokesman Gao Feng said on Friday that China wants to deepen international cooperation in improving industrial capacity. In convincing their emerging market partners that they need to get more productive, China can sell them their new robotic technologies. All those Chinese workers replaced by automation, can work building the screws and attaching the wires and packaging up new robots to ship to Brazil instead.
A few BRIC country companies have big business in China, too. It is not entirely a one way street. Brazil’s Embraer jet manufacturer has a facility in southern China, and builds planes with their Chinese joint venture partner.
Russian investment bank, VTB Capital, set up shop in Shanghai in 2015.
India’s Tata Group family of companies is in China. IT firm Tata Consultancy Services is there, with the usual tie-up with a Chinese firm. Tata Steel has two steel mills in China. Tata’s Jaguar Land Rover unit has a JV with Chery Automobile to build the luxury cars in Changshu.
South Africa’s Old Mutual financial services firm used to have a foothold there but are now looking to dump their insurance unit, at least.
Meanwhile, here’s a quick snapshot of what China has accomplished, as outlined on Friday by China Daily:
Gezhouba Group announced March 30 that it will spend up to $200 million to acquire 100% stake of Sistema Produtor Sao Lourenco, a water supply company in Brazil, China Daily first reported.
China Investment Corp partnered with Brookfield Asset Management in April to take a 90% percent stake in Nova Transportadora do Sudeste, a natural gas pipeline company owned by Petrobras.
It is clear who is the big buyer and who is staking claim to turf long term. Brazil is selling; China is buying. South Africa is a seller, too. So when Putin and other leaders meet in China on Sunday, they will all know on many levels, that in terms of global finance and trade, they are no longer equals.
House Speaker Paul Ryan does not hold traditional town-hall meetings. The Wisconsin Republican is so frightened by his constituents that he now opts for restricted events where the questioners and the questions are screened. But the frustration with Ryan has grown so great that the restrictions are no longer sufficient to shield this political careerist from scrutiny.
When Ryan participated in a “CNN Town Hall” last week, the questioners from Racine and other communities in his district asked tough questions, as did moderator Jake Tapper.
One line of questioning was particularly devastating—as it revealed Ryan’s startling ignorance regarding not just poverty but the antipoverty programs he seeks to diminish and dismantle.
Good evening, Mr. Speaker. I know that you’re Catholic, as am I, and it seems to me that most of the Republicans in the Congress are not willing to stand with the poor and working class as evidenced in the recent debates about health care and the anticipated tax reform. So I’d like to ask you how you see yourself upholding the church’s social teaching that has the idea that God is always on the side of the poor and dispossessed, as should we be.
Ryan answered with a spew of right-wing talking points about how historic antipoverty programs have supposedly failed.
The status quo isn’t working, Sister, and what I think we need to do is change our approach on fighting poverty instead of measuring success based on how much money we spend or how many programs we create or how many people are on those programs, you know, measuring on inputs. Let’s measure success in poverty on outcomes. Is it working? Are people getting out of poverty?
To bolster his claim, Ryan announced that “we’re in the 32nd year of the war on poverty. Trillions spent, and guess what? Our poverty rates are about the same as they were when we started this war on poverty 32 years ago.”
No one except Paul Ryan thinks the war on poverty started 32 years ago. 2017 minus 32 is 1985. That’s the middle of Ronald Reagan’s presidency.
The war on poverty had its roots in the administration of President John Kennedy, when he and his aides took an interest in Michael Harrington’s groundbreaking 1962 book, The Other America. In that book, the prominent democratic socialist explained that it was practically and morally wrong for a nation as wealthy as the United States to look the other way while close to a quarter of its population lived in poverty. Kennedy’s successor, Lyndon Johnson, used his January 8, 1964, State of the Union address to announce a war-on-poverty legislative agenda that proposed a variety of education, health-care and community-action programs to address economic inequality and injustice. “Our aim,” announced Johnson, “is not only to relieve the symptom of poverty, but to cure it and, above all, to prevent it.”
So Ryan got the most basic math wrong—more than two decades wrong. In so doing, he displayed startling ignorance of issues that he should know well. Ryan’s is a dangerous ignorance. The proof of that came in his repetition of the lie that says the antipoverty programs that were launched in the 1960s did not work. In fact, according to the Center for Poverty Research at the University of California-Davis,
Historically, the official poverty rate in the United States had ranged from a high of 22.4 percent when it was first estimated for 1959 to a low of 11.1 percent in 1973. Since its initial rapid decline after 1964 with the launch of major War on Poverty programs, the poverty rate has fluctuated between around 11 and 15 percent.
The official poverty rate is currently in the middle of that range, around 13.5 percent. So, in addition to getting the timeline wrong, Ryan got the measures of results wrong.
Poverty dropped dramatically when antipoverty programs were initiated in the mid-1960s and it has not returned to the levels that existed before the launch of the war on poverty. Should poverty rates be lower? Absolutely. But it is not war-on-poverty programs that keep the rates from dropping. It is the failure to maintain the commitment to “curing” and preventing poverty that LBJ and the Democratic congresses of the late 1960s evidenced.
Republican presidents from Richard Nixon to Ronald Reagan to the Bushes dialed down the fight against poverty—and the Democratic presidents who followed LBJ were too cautious about dialing it up.
Paul Ryan, with his proposals to gut the Affordable Care Act, and with his long history of looking for ways to undermine Social Security, Medicare, Medicaid, and nutrition programs, has got the calculus exactly wrong. Despite the evidence that federal, state, and local action to address poverty works, he wants to weaken those programs.
Ryan missteps were noted by the crowd in Racine. They booed him frequently as he attempted to answer the sister’s questions with economic fantasies.
For her part, Sister Erica Jordan was unimpressed by the speaker.
“I think he is really naive,” she said. “Trickle-down economics has never worked. The budget is cutting programs in a way that hurts the poor. I wonder how often he talks to poor people. I don’t think he has much opportunity to really talk to people who are struggling.”
The nun was having none of Paul Ryan’s preachments.
“It’s unconscionable that our elected officials feel free to do what they’re doing right now taking away health care, threatening Social Security and Medicare,” the sister explained to Commonweal magazine in a thoughtful conversation with John Gehring, the author of The Francis Effect: A Radical Pope’s Challenge to the American Catholic Church (Rowman & Littlefield, 2015).
It is just wrong. Speaker Ryan is a leader and he seems to be totally complicit in this way of thinking. I want him to really think about my question. I’ve been so distressed by this Congress and going through what we did during the health-care debate. There is such a disregard for the common good and the poor. It makes me angry. I do believe he is a man of faith, but I think he is misguided.
“Misguided” is a very polite word for Paul Ryan. But the sister can be polite. She won her debate with the Speaker of the House—on moral and factual grounds.
The U.S. negotiator who worked on the original North American Free Trade Agreement says that despite Trump’s suggestions, he will not likely terminate the deal anytime soon.
Mayor Fred Eisenberger took issue with one of U.S. President Donald Trump’s tweets today. (Adam Carter/CBC)
Ambassador Carla Hills was George H.W. Bush’s trade representative presiding over the initial talks in the early 90’s. She told CBC News Network’s Power & Politics she has been assured by people close to Trump that his threat was actually referring to a mechanism that could be enacted five years from now, after an assessment had been made into whether all three parties had met their commitments.
“Let’s hope that’s what he intended,” she told host Rosemary Barton. “It’s a better interpretation than an ending of the agreement when our economies are so closely linked and we have so many jobs that are dependent.”
Windsor Mayor Drew Dilkens similarly responded to trump on Twitter, saying, “35 of 50 States call Canada their # 1 customer. I look forward to hearing the position of elected officials from those states.”
CHINA has promised to cut average concentrations of PM2.5 airborne particles by more than 15 percent year on year in the winter months in 28 northern cities to meet key smog targets.
In a 143-page winter smog “battle plan” posted on its website yesterday, the Ministry of Environmental Protection said the new target, for the October-March period, would apply to Beijing and Tianjin, along with 26 other cities in the smog-prone provinces of Hebei, Shanxi, Shandong and Henan.
China’s efforts to control pollution have often roiled the prices of steel, iron ore and coal with output routinely curtailed as a result of emergency smog regulations and inspection campaigns.
China is under pressure this year to meet its 2017 air quality targets. It aims to cut 2012 levels of PM2.5 by more than a quarter in the Beijing-Tianjin-Hebei region and bring average concentrations down to 60 micrograms per cubic meter in the Chinese capital.
But PM2.5 averages rose in the first seven months of the year as a result of near record-high smog in January and February, which China blamed on unfavorable weather conditions.
Experts still believe, however, that China remains on course to meet the 2017 targets set out in a groundbreaking air quality action plan published by the government in 2013.
“Actually, air quality from April to June was among the best over the last five years in Beijing, and we still have confidence in achieving the target,” said Shelley Yang, a project manager at the Clean Air Alliance of China, a non-profit organization that includes academic, government and corporate organizations that “care about clean air.”
The government is leaving nothing to chance, with some of China’s smoggiest cities under pressure to complete annual steel and coal closure targets by the end of September and implement tougher restrictions in the following months.
By October, big steelmaking cities such as Tangshan and Handan must have plans in place to cut output by as much as 50 percent to limit smog during the winter heating season from November.
The region is also under pressure to eliminate thousands of coal-fired boilers, further restrict road haulage of coal and ensure power generators, steel mills and coking plants complete upgrades aimed at controlling emissions before heating systems are switched on.
Hebei is responsible for a quarter of China’s steel output, with Tangshan alone producing around 100 million tons a year. Neighboring Shanxi is China’s biggest coal producer, with more than 900 million tons of annual output.
Trump accused of breaking promise to coal industry CEO
9:28 a.m. ET
Drew Angerer/Getty Images
The CEO of “the largest coal mining company in America” believes President Trump has broken his promises to miners, The Associated Press reports. Murray Energy CEO Robert Murray claims he told Trump that without the White House invoking an obscure emergency order to protect coal-fired power plants, he would have to lay off more than 6,500 miners. Murray allegedly convinced Trump, and Trump told his energy secretary, Rick Perry, three times that “I want this done.”
The order allows “the Energy Department to temporarily intervene when the nation’s electricity supply is threatened by an emergency such as war or natural disaster” by offering a temporary exemption of “power plants from obeying environmental laws,” AP writes.
Murray argued that his biggest customer, the coal-burning FirstEnergy Solutions, faces bankruptcy. “As stated, disastrous consequences for President Trump, our electric power grid reliability, and tens of thousands of coal miners will result if this is not immediately done,” Murray wrote in letters reviewed by AP.
The Trump administration ultimately rejected invoking the emergency order, deeming it an unnecessary response. “We look at the facts of each issue and consider the authorities we have to address them, but with respect to this particular case at this particular time, the White House and the Department of Energy are in agreement that the evidence does not warrant the use of this emergency authority,” said an Energy Department spokeswoman.
Trump has long been considered the “savior” of the coal industry, although Paul Waldman writes for The Week that “the truth is that … coal jobs were mostly lost to automation and aren’t coming back.” Jeva Lange
Money talks. At least it did for Eddie Chen and, presumably, for many of the 420,000 of his Taiwanese compatriots who opted to earn a higher salary by working in mainland China.
Chen, 26, moved from the Taiwanese capital, Taipei, to Beijing in 2014, first to study a Masters on a full scholarship, and then to work in PR for a major international company.
He earns double what he would in his native Taiwan, where starting salaries for graduates have barely risen since the late 1990s. “China has a bigger market and there is more globalization here,” he explains. “Taiwan does not offer many opportunities for young people.”
Official government statistics reveal that by 2015 over 720,000 out of Taiwan’s roughly 10-million strong workforce, 72.5% of them with an undergraduate degree or higher, had moved overseas for better job opportunities.
Unsurprisingly, neighboring China, with its common language, has absorbed the majority.
But it is also actively luring Taiwan’s best talent, contributing to an acute brain drain that not only threatens the Taiwanese economy, but has prompted fears that Beijing, which claims the island as its own territory, is using its economic clout to try to buy political influence.
A recent flow of mainland initiatives to recruit Taiwanese students and entrepreneurs has jangled nerves in the self-ruled democracy that China is expanding efforts to win the loyalty of the younger generation with financial sweeteners, taking advantage of Taiwan’s sluggish economy.
China has targeted Taiwan’s educated elite for years, but a recent uptick in job and education incentives suggests a shift in tactics since cross-strait relations soured over Taiwanese President Tsai Ing-wen’s refusal to accept Beijing’s policy that the island of 24 million is part of ‘One China’.
Its attempts to punish Taiwan through international isolation, blocking it from United Nations meetings and poaching from its small remaining pool of diplomatic allies, appears only to have fortified Taiwanese resolve to forge their own identity.
The young in particular identify more acutely with Taiwan as their home country and China as a giant neighboring state. But the long term impact of offering millennials a higher standard of living is hard to predict.
China has made no secret of its belief that financial benefits can, over time, dilute, and eventually displace national identity and advance its unification agenda.
Reports emerged in April that Beijing would appeal to business grass-roots through the All China Federation of Taiwanese Compatriots, led by Wang Yifu, a former advisor to President Xi Jinping on Taiwan.
The plan to offer attractive study and work opportunities was followed this summer by invitations to Taiwanese local leaders and youth groups to mainland camps and cultural activities.
Last month, China’s education ministry announced it would halve the quota of Chinese students in Taiwan while relaxing entrance rules for Taiwanese at mainland universities, fueling suspicion of attempted social engineering.
Taiwan’s Mainland Affairs Council, which oversees cross-strait relations, urged China to “cherish and maintain” educational exchanges, warning against “interference or restrictions.”
It reminded Taiwanese students of “major differences” between the two countries’ education systems.
But politics is the last thing on Ling Kuang-hsuan’s mind as the postgraduate student, 22, excitedly prepares to start a two year Masters course in human resources at Peking university this September.
She believes Peking’s top reputation will improve her job prospects and, like Eddie Chen, she sees her future in China.
“I hope I can stay in China and find a job…Most of my friends also hope that they can work there after they graduate,” Ling adds. “There are many international companies that don’t have a franchise in Taiwan but they do have one in China.”
Her chances are good. China’s major cities offer a thriving scene of multinational companies and lucrative incentives for start-ups.
In 2015, Chinese e-commerce magnate, Jack Ma, announced a $330 million fund for Taiwanese entrepreneurs.
Just last month, the Taipei-based China Times reported an award of almost $400,000 for a business start-up contest for Taiwanese youth in Shanghai.
Chen admits that China’s vibrant business climate lured him back after his studies when he struggled to start a PR company in Taiwan.
“It was easy to start, but not to survive,” he says. “In Taiwan they play more a short term game. They want their investment back soon.”
The Chinese, however, treated him like a “star”, offering an office and financial incentives. “The Chinese government want people to start-up. They want this trend,” he says.
Chen sold his stake in his company to advance his career in a large international firm.
In China, ambitious Taiwanese professionals also find they can progress quicker than they would at home. “Our company is willing to give younger people more of a chance,” says Chen.
China may feel like a foreign country where “we still understand that we are different culturally and politically”, but for now it is Chen’s home. “Taiwan is much more a place for retirement,” he adds.
The roots of Taiwan’s talent deficit lie in its slow export-reliant economy and the failure to make tough reforms to attract foreign investment and to shift from previously successful labor-intensive industries towards high technology and services.
Meanwhile, neighboring China enjoys high growth. In July it reported an annual pace of 6.9% while Taiwan hovers at around 2%.
To add to Taiwan’s woes, graduate salaries have stagnated. In 1999, a university graduate could expect an average monthly salary of around $900. By 2016, this had risen to just $925.
“If China is growing at 6 percent a year and Taiwan is growing at 2 percent a year, which is going to be the most attractive place to go to stake out your career?” asks Michael Zielenziger, Asia expert and a managing editor at Oxford Economics, a U.K.-based economics and research consultancy.
“It’s very difficult for a young, bright Taiwanese student to ignore the bright lights, big city appeal of either China or the States. It’s a challenge to the government to make the country more attractive, to keep people at home and bring them back,” he says.
Caught in a vicious cycle, low wages have left young people less inclined to start a family, contributing to declining birthrates.
Youth are resentful that Taiwan’s generous state pension system leaves, for example, retired high school teachers on a monthly stipend of around $2,250, while they struggle to make ends meet.
The resulting exodus leaves less workers to support the swelling ranks of the old, pushing the pensions system towards the brink of bankruptcy.
Gordon Sun, director of the forecasting center at the Taiwan Institute of Economic Research, says the nature of the brain drain is exacerbating Taiwan’s economic troubles.
“They are high level managers, engineers, they are rich, their income is high,” he says.
“Most of their spending or consumption is in China. So in Taiwan our consumption cannot grow,” he argues. “We need them to come back and live here and spend here.”
But the notion of China presenting itself as the land of opportunity in exchange for Taiwanese loyalty is misguided, believes Taipei-based analyst Michael Cole, a senior fellow at Nottingham University’s China Policy Institute.
Firstly, China has no clear strategy to win over Taiwan. “Right now, they don’t know what to do,” he argues.
“They’ve long been infatuated with notions of economic determinism. They tried that with Tibet and they tried that with Hong Kong to an extent,” Cole says.
“They still don’t seem to realize the pragmatism with which people are dealing with China, in which they recognize the opportunities for their career or for investment, but very rarely does that translate into a shift in self-identification or support for unification.”
Lo Chih-cheng, a legislator with the ruling Democratic Progressive Party (DPP), agrees that young people will see through attempts to politically manipulate them.
“They want to show especially to young people, that China is their future, and Taiwan has nowhere to go to but to turn to China. That’s their strategy: Taiwan has to depend on China for economic development,” he says.
“I don’t know whether it works or not but I don’t think it will change their identity,” Lo adds. “There is a huge difference between the way of life in Taiwan and China that will reinforce their views about themselves being Taiwanese not Chinese.”
Others are more concerned that the long term impact of offering financial security to an entire generation, could slowly erode resistance to China’s political ambitions.
Unlike Hong Kong, freedom of speech and democracy is not directly under threat for now in Taiwan, giving the young fewer reasons to push back. Taiwanese identity is strong, but willingness to advocate independence less so.
Rex, 36, a Taiwanese banker, moved to Guangzhou, southern China, two years ago as he did not want to lose his job in Taiwan in middle age. “I don’t see a future for my work in Taiwan,” he says.
He now prefers the dynamism of China compared to the more regulatory business culture at home.
Politics plays little role in Rex’s personal life, but he believes that “Taiwan and the Chinese are going to merge some day in the future, 50 or 100 years from now” for more practical reasons.
“China is just too big and in Taiwan you cannot live without China being involved in your business,” he explains.
For many who opted to stay home, the steady drip of China’s economic influence over those who left has become a touchy subject.
Earlier this year, a Taiwanese man, Jeremy, 25, who works in Shanghai was denounced online as a “communist bandit” after he urged young people to leave and seek a better life overseas.
“I have friends in Taiwan who work inconceivably hard every day. They’re up at 5am and don’t finish up with work until 9 or 10pm at night. And what for? They have no future and no hopes,” he said in a video that went viral.
Dr Yang Tzu-ting, a research fellow at the Institute of Economics at Taiwan’s Academia Sinica, believes that a large Taiwanese labor force in China could “threaten our national security” and encourage some to become advocates for unification.
The best way for the Taiwanese government to counter this is to create better jobs and to boost the services industry, he argues.
An example would be to remove stifling annual quotas on medical training to create a health tourism sector, he says. Another would be to make universities more competitive to prevent academics escaping centralized, and low, wages.
Ross Feingold, a Taipei-based lawyer and public policy analyst, agrees that the Taiwanese government is not doing enough to stem the brain drain.
“One way to look at it is if China succeeds in getting young people to remain there during election time and not return home to vote for the DPP, that that would also work to China’s advantage,” he says.
“I think it’s just a transactional relationship where people want to have jobs that pay better and offer opportunities for promotion. Whether it builds personal affinity remains to be seen.”
Supply chains and commodity needs mean China doesn’t run massive trade surpluses with everyone
August 20, 2017, 8:00 AM EDT
China’s big trade surpluses hog all the headlines, but imbalances go both ways.
South Korea’s $72.2 billion surplus with the People’s Republic in fact tops a list of more than 40 nations that export more to the country than they import from it, followed by Switzerland and Australia, data compiled by Bloomberg show. Besides commodity exporters such as Iran and machinery producers like Germany, smaller economies such as Ireland, Finland and Laos round out the tally.
Imports by the world’s biggest exporter show how its humming factories prop up other economies – and for some of those, what’s on the line should they find themselves involved with territorial disputes or geopolitical tensions with one of their biggest customers.
In Asia, South Korea and Malaysia are among the most vulnerable to China’s economic arm-twisting, while Japan and Vietnam look relatively immune, according to Bloomberg Intelligence estimates based on their trade surpluses with China as a share of total output.
One of China’s biggest appetites is for machines and electronics from South Korea, Malaysia and Germany, according to World Bank data from 2015, the most recent year available.
Semiconductors from South Korea and Malaysia account for much of that as they’re brought in and then installed in other electronic products assembled in China’s factories.
The iPhone itself is an ecosystem that illustrates the global reach of far-flung supply chains. China’s assembly lines for the device incorporate expensive components imported from sources including Germany, Japan, South Korea, the U.S. and Taiwan.
Such complex and crucial trade relationships give South Korea something of a buffer against Chinese reprisals like those it faced last year after agreeing to install a U.S. missile defense system.
“Eighty percent of Korean exports to China are intermediate goods, and everyday people can’t see them from the outside or feel them,” said Yang Pyeongseob, a senior research fellow at the Korean Institute for International Economic Policy in Beijing.
China’s factories, construction sites, vehicles soak up oil, metal and materials from commodity exporters around the world, so when the economy sneezes it spurs big swings in things like the Australian dollar or Mongolian gross domestic product.
Those two countries are key suppliers of iron ore, precious metals and coal. Meanwhile, oil from Angola, Oman, Iran, and Venezuela helps keep China’s cars and trucks running, and Turkmenistan sends natural gas. Chile offers metal, mainly copper, but wine and cherries are more familiar South American imports on Chinese supermarket shelves.
Swiss trade is driven by pharmaceuticals, chemicals and precision instruments and watches. The surplus size may have been distorted by commodities trading, which doesn’t necessarily lead to actual shipments.
South Africa’s shipments include diamonds, gold and wine. Elsewhere in the southern hemisphere, Brazil was China’s top overseas source of soybeans, soy oil, beef and sugar last year, according to China’s Ministry of Commerce. The most populous nation imported 38 million tons of soybeans alone from Brazil last year.
And farmers in New Zealand are increasingly stocking those supermarket shelves for more discerning consumers. China imported more lamb from New Zealand than anywhere else, the most wheat from Australia, and the largest amount of fruit and nuts from Chile.
— With assistance by Catherine Bosley, and Xiaoqing Pi
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