It is very difficult for the West to change China, says expert – 03/29/2021 – World

The West does not have many instruments to change China, the conflict between Beijing and Washington tends to escalate, but ultimately economic interests will speak louder from side to side.

This is the assessment of Arthur Kroeber, one of the most important American economic analysts with regard to the country of Xi Jinping, on the resurgence of geopolitical tensions between Chinese and Westerners.

Founder of the consulting firm Gavekal Dragonomics, based in Hong Kong and Beijing, he told Folha on Friday by telephone (26) to believe that the Chinese post-pandemic recovery is “very solid”.

“They handled the crisis very well. There will be no problem in the short term. In 2020, GDP grew by 2.3%, the best of any major economy. In 2021, I think it will be 8% to 9%, ”he said.

At the annual meeting of the Chinese People’s Congress last month, the government set a modest 6% growth target to create fiscal space and tackle structural bottlenecks.

“The most important is the idea of ​​creating growth with the induction of the state in the high-tech sector. It’s very ambitious, they’ve never done it and they can potentially lose a lot. “

For Kroeber, “it makes sense to focus on technology,” despite the risks.

One of the goals is to gain independence from the West in the chip production lines, which have come under threat of disruption from the United States.

The economist points to the catalyst of the process: the Cold War 2.0 created by Donald Trump in 2017, in which each subject has become a source of conflict between Americans and Chinese.

“Until five years ago, the United States spoke cooperatively about China. With Trump, they decided to compete. [O novo presidente, Joe] Biden is basically saying the same thing, ”he says.

For him, “in the short term, there will be a national security establishment that wants to disengage from China, while the business world wants to continue its investments.”

Indeed, the first diplomatic meeting with the Chinese during the Biden era, in Alaska two weeks ago, was marked by stern and public accusations.

The interdependence of the world’s two largest economies can be measured in their mutual direct investment.

Over the past 30 years, Chinese companies have invested $ 154 billion in the United States. Conversely, it was US $ 258 billion.

It is an insurance, believes Kroeber, against the scenario of the “Tucidides trap”.

Created by Harvard professor Graham Allison, the term evokes the Greek historian of the war between Sparta, then the dominant power, and Athens, the ascendant, in the 5th century BC.

Looking at similar situations over the past 500 years, Allison examines the likelihood of a recurrence of conflict in the form of war between Washington and Beijing.

“I find that very deterministic. There can be a war, cold or hot, of course. But that will only happen if everyone makes a lot of mistakes, ”he says.

There is no lack of shocks in the Taiwan Strait or in the South China Sea. There are asymmetries: in addition to having a larger economy, the United States has military spending almost four times that of the Chinese, for example.

He shares the view that the assertiveness of Xi, the increasingly autocratic leader of the communist dictatorship he has led for nine years, also weighs in the equation.

The repression of democratic movements in Hong Kong and the treatment of the Muslim minority in Xinjiang province have led to obvious questions in the West.

After all, business is done with a country even accused of genocide by its rivals.

“But I don’t think it’s just a problem with the United States, it’s also with Europe. And every time they say they don’t agree with [a repressão em] Hong Kong, the Chinese counter-attack, ”explains the researcher.

“At the end of the day, financial interests are very important. There may be a limit to this, but there is little the West can do to change China. “

He underlines, on the other hand, that the question of values ​​leads to a contradiction which “will only increase”.

“Biden is betting on an industrial policy to rebuild the American base. He thinks, “How are we going to compete?” And says, “Invest in our own capabilities,” ”he said.

“Most likely, the two countries will coexist, and in three or four years there will be even more interdependence.”

Kroeber also views initiatives, from the West and China, with greater technological independence, with skepticism.

“I don’t think it’s possible to completely separate the world. In Europe, for example, [gigante de telecomunicação chinesa] Huawei is through 4G. And betting on the Western makers of 5G means more time and money, ”he says.

“The technological production chain crosses China. I don’t think it’s possible to have a future without zero Chinese participation. Countries with security challenges, like the United States, will work harder and be able to succeed locally. “

He also points out that while Huawei’s products are tempting, China’s self-contained and censored internet model is not something to export – except as an idea for other authoritarian regimes.

In contrast, China’s plan to reach the 2030s as a leader in the semiconductor market seems difficult to implement.

“In the last five years they have invested US $ 50 billion and will invest more. They have a good chance of success with less sophisticated chips, ”he says.

Even so, today Beijing only has autonomy for about 25% to 30% of its needs – chips go in everything from cell phones to warplanes.

The problem begins with the dual-tech, civilian and military chips. American, Japanese or Dutch machines are needed to produce them.

And since last year, Washington has been pursuing an industrial policy to encourage the main Chinese supplier, the Taiwanese TSCM, to invest in the United States.

“The capacity of the Chinese is hampered. Theoretically, the United States can stop everything, but it will also destroy its interests, ”he said.

When asked about Brazil’s diplomatic problems with China, embodied in the Ambassador’s battles in Brasilia with the children of President Jair Bolsonaro, Kroeber is straightforward.

“The Chinese are very clear in their priorities. First the USA, then Europe, the American allies in Asia. Brazil is right at the bottom of the list, ”he said.

For him, China’s interest in Brazil is split between direct investment, as the State Grid has done in the electricity sector, and geopolitics.

In this case, have a foothold in the strategic backyard of the United States. “They want to prevent the creation of a very large alliance of countries against China. But they do it very carefully, ”he says. The Americans did the same with their allies in the Indo-Pacific.

For him, Brazil should bet on the diversification of its agricultural program, avoiding basic products and seeking to broaden the range with processed foods.

Kroeber will speak about post-pandemic China in a virtual seminar of the Brazil-China Business Council and the Brazilian Center for International Relations at 10 a.m. on Wednesday (31).

Interested parties can register at http://bit.ly/TheVenture-CapitalistArthurKroeber. Mediation is provided by Folha columnist Tatiana Prazeres.

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