China’s ‘wolf warriors’ spring from internal problems
2 Jun 2020|

In Australia, as in many other countries today, two self-isolating clusters of influencers have emerged that seek to steer dealings with the People’s Republic of China.

The two groups rarely intersect except to voice mutual suspicion. Neither deploys sufficient time or effort to understand what’s happening deep within the PRC itself—the principal driver of events and of the surrounding heightened rhetoric.

They focus instead on how the PRC’s impact washes up on our shores. They play in the shallows.

One group has belatedly become so anxious about the PRC’s ambitions for Australia that it believes we can and should decouple from China in all spheres. But today’s turmoil cannot simply be rebadged as a new Cold War. The PRC is globally enmeshed, utterly unlike the Soviet Union of old.

This is a comparatively tiny group.

The second is the bulging circle comprising the elites whose broad backing the PRC has successfully enlisted—chiefly in state and local governments, and among university administrations and corporate leaders.

The members of this second group commonly recapitulate the key talking points of the party-state, as if they’ve privately uncovered rare truths:

  • To criticise the PRC is to be racist, or to dog-whistle to racists.
  • The PRC and the communist party that’s run it for 70 years cannot and must not be separated out from China and the Chinese people whom it rules.
  • Even mild questioning of party-state strategies amounts to ‘vilification’.
  • The rise of the PRC to global dominance, especially economically, is inexorable.
  • To criticise the PRC is tantamount to fawning on the US and endorsing President Donald Trump unquestioningly.
  • Chinese people all align with the party’s tightly scripted version of the country’s history that dwells on its suffering, uniquely, a ‘century of humiliation’ visited on it by foreigners, thus requiring foreigners today scrupulously to avoid appearing to revisit that century.
  • Taiwan must be viewed as a province of China, whose ‘return’ is inevitable.
  • China can only be governed effectively by a firm central autocratic ruler; democracy would be disastrous.
  • Most importantly, do not discuss or question the conduct of the party or its leaders within China, despite the massive churning of the political and security structures and of key personnel driven by the restless, risk-taking Xi Jinping.

Chinese diplomats are succeeding in having these talking points amplified by those whom they have over the years courted, including by offering preferential access to and in the PRC.

The success of this strategy relies overwhelmingly on China’s continuing capacity to weaponise its economic growth.

It will remain an important economic force. But the settings are changing, as testified by Premier Li Keqiang’s abbreviated annual ‘work report’ to the National People’s Congress on 22 May. It set no growth target, instead stressing stability.

That’s understandable as China attempts to resurrect a coherent economic strategy following first Trump’s trade war, then Covid-19. As the bottom line, China will battle, as Li said, to staunch unemployment, whose impact is already leaking alarmingly into the countryside, now bereft of much of its income as migrant factory workers lose their jobs.

These challenges have come at a peculiarly bad time—just as China was attempting to retool its economic fulcrum towards domestic consumption and away from exports and infrastructure spending. As a result of the latter—intensified following the global financial crisis—total debt had built by the start of 2019 to US$40 trillion, 304% of GDP and 15% of global debt, and each yuan spent has resulted in dwindling productivity.

But Beijing has now committed ¥3.75 trillion to back new local government special-purpose bonds, the chief source of finance for infrastructure. That’s good news for Australian iron ore, coal and nickel producers; it buys a lot of steel, even though it also ensures that the debt burden keeps building.

Xi, like Trump, is also championing self-reliance, especially in technology. But it needs, for now, the support of global tech to achieve this, yet those firms have begun disinvesting from China for a range of reasons, including production costs.

Outward investment will continue, but at an even lower level. It simply can’t be a priority. Australia has naturally experienced this decline. It’s part of a broader trend that’s being felt all over, especially in developed economies.

After capital controls were toughened, China’s direct investment overseas fell in 2017 by 53%. The announced value of Chinese overseas mergers and acquisitions fell 31% last year, and Britain replaced China as one of the top three investors in Germany.

Further pressure is being placed on China’s financial system by Xi’s hallmark Belt and Road Initiative. The program is built on hundreds of billions of dollars of loans, chiefly coordinated through the Chinese Development Bank and China Exim Bank. Now, the borrowing countries are suffering grimly from the Covid-19 economic lockdown and urgently pressing for restructuring, repayment holidays or simply forgiveness.

Conceding would cause economic—and possibly popular—trouble at home, while refusing to do so would risk shedding the global influence Beijing has so assiduously built up.

Xi has just been forced to concede to an investigation by the World Health Organization into the origins of the pandemic, though he tried to spin that it’s what he always wanted by throwing forward its timing.

But this hasn’t been a good year so far for him or for the PRC—although Premier Li Keqiang naturally put a brave gloss on these dilemmas at the opening of the National People’s Congress last week, declaring ‘decisive victory’ against the pandemic in Hubei province and ‘pivotal progress’ in the ‘three critical battles’ against poverty, pollution and the risk of a financial collapse.

However, the PRC cannot now achieve Xi’s ambitious goal of doubling the economy in the decade to the end of this year. That would require about 6% growth in 2020. And how will he now seek to celebrate the party’s centenary next year?

Both of those Australian China cohorts predicate their positions on Beijing’s continued surge in strength, while flagellating themselves about our getting too close, or too far, from their versions of China.

But Australia’s problems with Beijing result from the latter’s travails—and from the new directive for Team China to parade its wolf-warrior credentials—more than from what might be called the Canberra consensus.

This loose understanding of how best to relate to a changed China has won the support of a large majority of Australians. It encompasses most frontbenchers of both major parties, and many leaders in the defence, security and economic establishments.

It champions Australia’s important economic connections—one-third of exports and one-quarter of imports—and diverse people-to-people links with China, insofar as that is commensurate with safeguarding our core interests and values. Both have been put in play by Xi’s Make China Great Again program, which is tangling riskily with countries everywhere.