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Deficit blows out in China’s trust account with the world

Posted By on July 10, 2020 @ 17:23

The biggest driver of Australia’s 2020 defence strategic update [1] is the waning of Canberra’s trust in the decision-makers in Beijing. A secondary driver is the recognition that how the US uses its power will not always align with our interests. Both mean Australia must do more for its own security and prosperity in the poorer, more dangerous and more disorderly world [2] Prime Minister Scott Morrison has described.

Trust gives governments, companies and populations the ability to form partnerships, enter contracts and rely on others in times of crisis—public health crises like the pandemic or security crises like conflicts and war. Trust between governments enables trust in contractual agreements between companies. Active distrust—or worse, government intervention over the top of contractual arrangements—is corrosive to business confidence and investment.

As the world faces the health and economic tragedy of the coronavirus pandemic, trust is in decreasing supply and increasing demand. As discussed in my podcast interview with The Strategist editor Brendan Nicholson, trust is appreciating in value globally.

It’s striking that Beijing has chosen now to run down its stocks of trust, first by aggressively denying any issues with its handling of the coronavirus outbreak in Wuhan, then with the belligerent ‘wolf warrior [3]’ behaviour of its representatives, and its military aggression in the South China Sea [4] and on the India–China border [5]. Economic coercion, like that against Australia over the barley trade [6], is corroding confidence in economic engagement with China.

Australians’ trust in China hit a high point in 2018, with 52% of respondents to the Lowy Institute’s poll [7] saying they trusted Beijing to ‘act responsibly in the world’. But by April 2020, Beijing’s actions had changed that with the militarisation of the South China Sea, cyber hacking of Australia’s parliament [8] and major political parties, and interference in Australian domestic politics through funding scandals [9] or stoking pro-China demonstrators [10] on university campuses, all combined with the growing Chinese presence in our near region [11].

Australians’ trust in Beijing to act responsibly has collapsed in the Lowy poll, from 52% to 23% [12] in two years. If the poll were taken now, just three months on, that figure would be lower again, because Beijing has both threatened and put into effect economic coercion against Australia. The Chinese ambassador to Canberra threatened punitive trade measures [13] affecting students, tourists and exports. Beijing has since threatened to widen its economic coercion [14] to other goods, resources and services.

Australians are not alone in trusting Beijing less. European leaders and officials are talking seriously about revitalised ‘economic and industrial sovereignty [15]’, to remove vulnerabilities Europe faces from its reliance on production chains from China. They are also pushing back against aggressive ‘mask diplomacy’ [16], supporting Australia’s call for an inquiry into the causes of the pandemic, and revisiting thinking [17] on suppliers for their 5G networks.

According to the Singaporean think tank ISEAS-Yusof Ishak Institute’s State of the region 2020 [18] survey released in January (before the pandemic), ASEAN nations’ officials, academics and businesspeople assessed China as the major power least trusted to ‘do the right thing’. Almost no one (1.5% of respondents) saw Beijing as a benign and benevolent power. And some 39% viewed China as a revisionist power that wanted to make Southeast Asia its sphere of influence. Trust has declined since the 2019 survey.

Similarly, Indian consumers are aligned [19] with their government in reducing consumption of Chinese goods and services. New Delhi has banned [20] numerous Chinese companies’ apps and digital products owing to its lack of trust in Beijing given the Chinese military’s aggressive behaviour on the India–China border.

This matters because trust is the new international currency that will enable countries and companies to rebuild prosperity and security in the post-pandemic world. Trust is what allows governments and companies to live with vulnerabilities and exposure to others.

Governments and companies that show they can be trusted to deliver during the crucible of the pandemic will make great partners in our future world where vulnerabilities aren’t magically managed by a dispersed global market driven by cost. Far less reliance will be placed on governments and companies whose word cannot be trusted in a crisis.

It’s doubtful that Xi Jinping and those around him understand the enormous negative impact of this realisation for China’s strategic, political and economic future—because now is the time he’s chosen for China to run a huge trust deficit with the world by introducing the new national security law in Hong Kong.

If any waverers in the Indo-Pacific, Europe, the Americas or Africa still thought Beijing would act responsibly on the global stage, the tragedy that Xi is inflicting on the 7.5 million people of Hong Kong should end their doubts. Despite loud claims [21] that anyone criticising Beijing for this is interfering in China’s domestic affairs, even Xi must know that’s not true.

The repressive law [22] makes it a crime to speak freely, to protest, to mention democracy, to criticise Beijing’s decisions, or even to talk with foreigners about political issues between Hong Kong and Beijing. It also sidelines Hong Kong’s independent judiciary by creating a power to try cases under the new law separately, without appeal processes in Hong Kong courts. This removes a fundamental protection Hongkongers had against abuse of power.

All these freedoms, and the independent judiciary that makes them meaningful, were simply and clearly guaranteed by China for 50 years in the text of the 1984 joint declaration [23].

Beijing has broken those commitments. What it has done in Hong Kong is a fundamental breach of the joint declaration, not a minor compliance issue. The question at stake is not about how China manages its internal affairs and what we may all think about that. It’s about whether Xi and his colleagues can be trusted on any other commitment they make to any nation. That engages the fundamental interests of every country and gives us a collective interest in pressing Beijing to keep its word.

So, pushing Beijing on Hong Kong is the opposite of interference in internal affairs. Only by reversing course on Hong Kong, living up to its 1984 commitments and returning the freedoms and judicial independence it has taken from the people of Hong Kong can Beijing begin to repair the major trust deficit its actions have created.

It may sound idealistic or fanciful to call for Xi to return to those commitments, but achieving this should be the international community’s goal. Steps towards that goal are already being designed by various governments, as in the UK giving a path to citizenship for the almost three million Hongkongers entitled to a British national (overseas) passport, and Australia and others providing migration paths for those seeking to escape the controlling hand Beijing has placed over the territory.

Ironically, if Beijing does reverse course, China’s economy will be the major beneficiary, because Hong Kong is still the gateway for foreign money and investment into the mainland—and China’s economy now needs all the help it can get. We all have a stake in the choices Beijing makes from here, and we all have a stake in shaping those choices to our collective benefit.

A future where Xi and his colleagues make deposits into the trust account China has with the rest of the world, rather than further withdrawals, is a future all of us should work towards.

Article printed from The Strategist: https://www.aspistrategist.org.au

URL to article: https://www.aspistrategist.org.au/deficit-blows-out-in-chinas-trust-account-with-the-world/

URLs in this post:

[1] 2020 defence strategic update: https://www.defence.gov.au/StrategicUpdate-2020/

[2] poorer, more dangerous and more disorderly world: https://www.pm.gov.au/media/address-launch-2020-defence-strategic-update

[3] wolf warrior: https://www.scmp.com/week-asia/opinion/article/3087400/chinas-zealous-wolf-warrior-diplomacy-highlights-both-beijings

[4] South China Sea: https://www.reuters.com/article/us-vietnam-china-southchinasea/vietnam-protests-beijings-sinking-of-south-china-sea-boat-idUSKBN21M072

[5] India–China border: https://www.economist.com/leaders/2020/06/18/how-to-end-the-perilous-indo-chinese-border-spat

[6] barley trade: https://www.abc.net.au/news/2020-05-19/barley-china-australia-tariffs-trade-dispute-explained/12263298

[7] Lowy Institute’s poll: https://www.lowyinstitute.org/publications/2018-lowy-institute-poll

[8] parliament: https://www.reuters.com/article/us-australia-china-cyber-exclusive/exclusive-australia-concluded-china-was-behind-hack-on-parliament-political-parties-sources-idUSKBN1W00VF

[9] funding scandals: https://www.smh.com.au/national/huang-xiangmo-s-assets-frozen-as-tax-office-pursues-him-for-140-million-20190916-p52rub.html

[10] pro-China demonstrators: https://www.theguardian.com/australia-news/2019/jul/27/australia-warns-diplomats-after-china-praises-patriotic-clashes-with-pro-hong-kong-protesters

[11] near region: https://www.abc.net.au/news/2018-11-18/us-pushes-further-into-pacific-with-png-manus-naval-base-deal/10508354

[12] 23%: https://poll.lowyinstitute.org/

[13] measures: https://www.timeshighereducation.com/news/china-warns-australia-student-boycott

[14] widen its economic coercion: https://www.bloomberg.com/news/articles/2020-05-19/china-mulls-targeting-australian-wine-dairy-on-coronavirus-spat

[15] economic and industrial sovereignty: https://www.bundesregierung.de/resource/blob/975226/1753772/414a4b5a1ca91d4f7146eeb2b39ee72b/2020-05-18-deutsch-franzoesischer-erklaerung-eng-data.pdf?download=1

[16] aggressive ‘mask diplomacy’: https://www.straitstimes.com/world/europe/germany-says-china-sought-to-encourage-positive-covid-19-comments

[17] revisiting thinking: https://www.ft.com/content/1c226144-a3a9-4533-ab14-88d65142ba05

[18] State of the region 2020: https://www.iseas.edu.sg/images/pdf/TheStateofSEASurveyReport_2020.pdf

[19] aligned: https://timesofindia.indiatimes.com/india/87-indians-ready-to-boycott-chinese-products-for-next-one-year-survey/articleshow/76475675.cms

[20] banned: https://www.reuters.com/article/us-china-india/indian-pm-modi-shuts-weibo-account-after-banning-chinese-apps-idUSKBN2430E0

[21] loud claims: https://www.reuters.com/article/us-hongkong-protests-london/china-tells-u-s-and-britain-to-stop-interfering-in-hong-kong-affairs-idUSKBN1XS1D1

[22] repressive law: https://www.bbc.com/news/world-asia-china-52765838

[23] 1984 joint declaration: https://treaties.un.org/Pages/showDetails.aspx?objid=08000002800d4d6e&clang=_en

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