The chaotic situation in Afghanistan continues to dominate world affairs. Some observers believe that China can benefit from the Taliban’s takeover. But that is by no means a certainty, as the experienced journalist and Afghanistan expert Cem Sey explains in our interview today. Moreover, the economic opportunities in Afghanistan are often portrayed too optimistically, says Sey. China is still primarily concerned about security in the region. And rightly so, as another terrorist attack on Chinese engineers in Pakistan shows.
Meanwhile, US Vice President Kamala Harris has traveled to the Indo-Pacific to court confidence in Singapore and Vietnam. This is also happening against the backdrop of the hasty withdrawal of troops from Afghanistan. Her message: we are still here, and we are reliable. The region is particularly concerned about China’s aspirations for dominance in the South China Sea. Chinese voices have already indicated that the chaos in Afghanistan does not bode well for Taiwan and other US allies. That makes the Harris visit seem all the more urgent.
Another ongoing debate revolves around a possible decoupling of Western economies from China. The Kiel Institute for the World Economy (IfW) has made calculations on possible consequences, showing that a so-called decoupling would probably cost the Europeans dearly. IfW President Gabriel Felbermayr explains the details in today’s opinion piece As a media partner, China.Table will contribute to the institute’s discussion series called China Global Conversations.
I hope you will enjoy today’s issue!
Mr. Sey, after the West’s debacle in Afghanistan – is China the big beneficiary?
It is not yet possible to say that. Of course, after the fall of Kabul and the seizure of power by the Taliban, a geopolitical gap has emerged. The West will no longer fill this gap. And yes, China would like to have good relations with Afghanistan. The Chinese leadership has already announced as much. China also has good relations with Pakistan. And Pakistan is behind the Taliban.
This means that a region could emerge for the Chinese in which they could build railways and the like as part of their Belt and Road Initiative. But one obstacle remains: the Taliban’s proximity to violent Islamist terrorist groups. If extremists gain a foothold in Afghanistan, possibly supporting extremists among Uighurs in China, Beijing would not like that at all. That is why I think the Chinese will act very cautiously for the time being.
Als die Taliban vor 20 Jahren an der Macht waren, waren sie selbst eine radikal-islamische Gruppe. Das passt doch überhaupt nicht zu China. Oder ticken die Taliban inzwischen anders?
No, they don’t. But the Chinese are pragmatic and have no problem cooperating with other Islamist governments. Incidentally, the Taliban should not be confused with the IS either. The IS is a thoroughly fanatical movement. The Taliban interpret Islam very strictly and want to enforce it in an authoritarian manner. But they are not out to Islamise other countries.
People in the other Muslim-majority countries in the region view China and the expansion of its infrastructure in the course of its New Silk Road with great suspicion. Not least because of the Uyghur issue, the danger of attacks on Chinese facilities is growing in some of these countries.
Tajiks, Kyrgyz and Kazakhs, like the Uyghurs, are Turkic peoples and culturally much closer to them than the Pashtuns in Afghanistan. To be sure, there are extremist Taliban who sympathize with IS and take up the Uighur issue. But these are mostly in Pakistan. The Pakistani and Afghan Taliban are not the same. The goal of the Afghan Taliban was to have the foreign troops out of the country and restore their rule based on Sharia laws. They have now achieved that. Neither will Beijing send its troops into Afghanistan, nor is China the enemy from the Taliban’s point of view .
What has been the relationship of Afghans with China so far?
Many Afghans find China interesting. They see the Chinese as a people who were also oppressed by the West in the past, but who were able to free themselves from its clutches and are now a world power in their own right. Afghans find that admirable. Afghans also think pragmatically. For them it doesn’t matter whether their Chinese business partners are Muslim or not. Moreover, the Chinese have made the country many tempting offers.
In the case of the largest Chinese investment to date, the copper mine in Mes Aymak, China did not attach any conditions to its investment that went beyond business. The Afghans perceived this as eye-to-eye negotiations. They did not feel that way about the Europeans and the Americans. Unlike the Americans, China also does not want to interfere in internal affairs. Many people like that.
Afghanistan is supposedly rich in raw materials, and the Chinese appetite for them is great. Why haven’t the Chinese siphoned off much of it long ago?
Of course, Afghanistan also has mineral resources. The Soviets already discovered that in the early 1980s. But they also found out that it would be too costly to extract them. It simply wouldn’t be economical. In 2007, the U.S. sought arguments to stabilize public support for the mission in Afghanistan, which was already crumbling, and pulled the Soviets’ alleged findings out of the drawer, among other things. Many have believed it ever since. So the fact that Afghanistan is enormously rich in raw materials is just a legend.
The Chinese investments were not particularly successful. In Mes Aymak, the Chinese hardly promoted anything until the end.
But that was not because of the Chinese, but because of corruption on the Afghan side. Several villages had to be relocated for the mine. The farmers were to be compensated accordingly, and the Chinese also paid. But the money never arrived. This was followed by a legal dispute that lasted for years. In addition, an old ruin was then found on the construction site, whereupon international organizations came with their archaeologists. This led to further delays. In the north of Afghanistan, however, the Chinese have successfully developed a gas field, and the pipelines have been built.
The Chinese will be able to continue their business?
I suspect they do. The Europeans and Americans have stopped all their deals and cut off the money to Afghanistan under the Taliban. So the Taliban have no money and will be grateful if China and Russia now step in as donors.
So under the Taliban, the Afghan-Chinese relationship could become even closer?
I think it’s possible. As long as the West was in the country, it was more difficult for Chinese investors to gain a foothold. For example, when it came to the gas fields in the north of the country, the Afghan side had Western advisors on hand. These are now falling away.
Should China succeed in gaining an even stronger foothold in Afghanistan under the Taliban, what would be the consequences for the region?
Afghanistan is like a black hole in the region that threatens to engulf all the surrounding countries. It’s been that way for the last 20 years. All the bordering countries have huge drug problems. This is due to cultivation and trafficking in Afghanistan. It is the same with the arms trade. If the Taliban succeed in getting the drug and arms trafficking more under control, it will bring more stability to the region, and not only from the Chinese point of view. At the same time, however, there is the tense relationship between India and China. Both are trying to play out their rivalry over Afghanistan. And if the People’s Republic now spreads itself too thinly in Afghanistan, India will react accordingly. That in turn could destabilise the region.
Cem Sey is a journalist for German and Turkish-language media. He was the US correspondent for the Turkish-language section of Deutsche Welle (DW) from 2007 to 2019, lived as a correspondent in Kabul between 2012 and 2015, and in Singapore between 2016 and 2019. As early as the 00s, Sey was a regular media trainer in Afghanistan on behalf of the Deutsche Welle Academy, Mediathek Afghanistan and the United Nations Journalist Training.
The issue of trust is at the heart of Kamala Harris’ Southeast Asia trip. The US vice president has traveled to the region to reassure her partner countries of one thing: We are here, and we will keep order. This key message is the US signal that they seem to have understood the mixed feelings the withdrawal of its troops from Afghanistan has left in Southeast Asia. The superpower has been present in the region for decades as a force for order. The main concern is that the US could leave other allies, like those located around the South China Sea, to their own devices, paving the way for Chinese hegemony.
On Tuesday, Harris articulated the countervailing U.S. vision for the region during her visit to Singapore: “Peace and stability, freedom on the seas, unimpeded commerce, advancing human rights, a commitment to the international rules-based order, and the recognition that our common interests are not zero-sum.” Shortly after, the Vice President headed to Vietnam next, to promote her government as a reliable partner there as well. In doing so, she traveled to the country from which U.S. troops had quite literally fled in 1975 – providing the historical analogy to events in Afghanistan’s capital, Kabul, just days ago.
Political scientist Li Mingjiang of the Rajaratnam School of International Studies (RSIS) in Singapore commented on the psychological component of the chaotic images from Afghanistan to China.Table: “At least the chaos in Afghanistan sends some negative messages to a certain segment of the social-political elites in East Asia “but a few start to raise the issue of the US’ credibility.
If the US really loses support in the region, the pursuit of its interests in the Indo-Pacific could prove more complicated. Raw minerals, military bases and trade routes are vital for Washington. The US requires them to successfully assert their role as a dominant world power against China. Singapore’s port is almost indispensable as a shipping hub for US goods to the region. The Strait of Malacca, as the bottleneck of the western route to Singapore, is of immense strategic importance as a supply line. However, the same is true for China. It fears that its oil supplies from the Middle East could be blocked by the Americans off Malacca in an emergency.
Meanwhile, Kamala Harris failed to mention that it is China that is challenging Washington’s role. In her speech, on the other hand, the vice president stressed that the Americans’ involvement was not directed specifically against any particular actor. But the elephant in the room is the People’s Republic of China. Harris did not have to be more specific for listeners to understand.
The Chinese also made no effort to hide the obvious race for influence and trust among neighboring nations. The Chinese consulate in Ho Chi Minh City, also known as Saigon, posted a cartoon on its website over the weekend. It showed a man on the verge of drowning, loudly calling for help. A potential rescuer threw him a life preserver. The punchline of the cartoon: the would-be rescuer then stopped helping the drowning man, saying, “Goodbye, brother.” Clearly, this refers to America.
But such threats are unlikely to spark too much concern in Vietnam. The ideological ties between the two countries’ ruling parties and their shared socialist roots have long since given way to pragmatic realism. In Vietnam, at least, China’s arrogating and uncompromising attitude in the South China Sea has left many scars in its wake. In a survey among ten Southeast Asian states conducted by the ISEAS-Yusof Ishak Institute in Singapore, it is the Vietnamese who fear a Chinese rise in power the most – and favor a growing American influence in the region. It sounded almost spiteful when China’s state-run Global Times newspaper noted in its Monday editorial that Beijing was “Asean’s most important partner.” ASEAN is the association of Southeast Asian nations.
But China is struggling to sell its actions in the South China Sea – perceived as ruthless by many – to its neighbors as a policy of partnership. Beijing has a “long way to go in making its image more ‘lovable’,” believes Dien Nguyen An Luong of the ISEAS Institute, echoing President Xi Jinping’s new marching orders. In an op-ed for the South China Morning Post, Dien Nguyen cites simple reasons: “Anti-Chinese sentiments have seeped into Vietnamese discourse and have been entrenched. They will not fade away anytime soon.”
For the moment, it seems as if the US’s restrained communication in Vietnam is favored over China’s pugnacity. The local Chinese embassy has developed a bit of attacking the US verbally. The latter, in turn, limits its social media presence to topics like education and culture, as analyzed by the ISEAS Institute. The public apparently appreciates the justly and more subtle approach of the US.
Singapore’s Prime Minister Lee Hsien Loong recently indicated that the Americans are also ahead in other respects in the favor of the littoral states. He pointed out that the perception of resolve and commitment of the US in the region would depend on “what U.S. does going forward – how it repositions itself in the region; how it engages its broad range of friends and partners and allies in the region” A clear signal that was also heard in China. On China’s social media, numerous commentators took offense and badmouthed Singapore for apparently cozying up to the US. “Bootlicker,” being one of the insults. But it is unlikely that this rhetoric will win the People’s Republic any points.
Supply bottlenecks in the wake of the Corona crisis have fuelled discussions in the EU about greater economic self-reliance and the relocation of production of certain goods back from China, for example. Sometimes this is only about individual critical products, such as medical goods. But the range of production processes to be “brought home” is readily expanded by those who see China as a particularly powerful strategic rival. There may be good strategic reasons to stop sourcing critical goods or industrially important ones from China alone. What is often underestimated by the advocates of such a policy, however, are the costs involved.
At the Institute for the World Economy, we have simulated what the consequences would be if the EU were to double trade barriers – away from new tariffs – in order to promote domestic production. This could be done, for example, through preferential public procurement, tax benefits or other subsidies for EU suppliers – or through import quotas or bans on selected goods. The result: if the EU were to unilaterally double corresponding trade barriers against China, this would cost 130 billion euros (0.8 percent of gross domestic product, GDP) – with comparable countermeasures by China, the costs would grow to 170 billion euros (1 percent of GDP).
Even partial decoupling from international supply networks would thus significantly worsen the living standards of people in the EU – as well as in its trading partners. By contrast, the alleged benefits of greater autonomy or sovereignty are often diffuse and difficult to quantify. They may even be illusory if risks thereby cluster in a smaller number of markets. The recent flood disaster in Germany has shown that crises can also occur right on our doorstep, so production in Europe is not always a “safe haven”.
Intuitively, one would think that decoupling supply networks would pay off when a supplier country suffers an economic shock – such as China when the Corona epidemic was still a local event there. But even in this case, simulations show that a general decoupling of supply chains causes greater economic damage than if the economic shock from the affected country spreads to others.
A decoupling of the EU from international suppliers would also increase prices for intermediate goods. This translates along supply chains into higher prices both for goods consumed within the EU and for EU exports, which in turn make goods in other countries more expensive. Such unintended side-effects that an EU autonomy policy could have are often ignored.
As a country with particularly strong international economic ties, Germany would be hit harder than many other EU countries: In the event of a unilateral decoupling from China, Germany would bear around a quarter of the burden (32 billion euros, 0.9 percent of GDP). An escalating trade war with the People’s Republic could increase these costs by another 50 percent.
Some sectors in the EU would certainly benefit from a unilateral decoupling from China – such as wholesale and retail trade, the construction sector or mechanical and plant engineering. Other sectors – especially vehicle manufacturing – would lose value added. In the event of a two-sided trade war with China, the result would be negative across all sectors.
Those who want to reduce dependence should choose other instruments. Instead of forcing out Chinese suppliers, it would certainly make more sense to diversify supply networks in order to have access to several suppliers in cases of crisis or conflict. In the case of critical goods, for example from the medical sector, greater weight could be given to supply security in the procurement contracts between the health insurance funds and the pharmaceutical companies – for example by means of appropriate contractual penalties.
Warehousing is expensive, but can become a worthwhile insurance policy against production downtime if the willingness to pay for supply security is higher in the future than in the past. The development towards a circular economy that relies heavily on recycling not only has ecological advantages, but can also reduce dependence on third-party supplies of raw materials, for example. And a deeply integrated European internal market is perhaps the best insurance against dependencies in international economic relations.
Those who discuss the negative aspects of dependence on China must not ignore the costs of putting the advantages of the international division of labour at risk. This does not mean that “business as usual” is the best solution. But the cost-benefit analysis of a new policy approach with regard to China must be complete.
This article belongs in the context of the “Global China Conversations” event series of the Kiel Institute for the World Economy (IfW). On Thursday , Institute President Gabriel Felbermayr and Jörg Wuttke, President of the EU Chamber of Commerce in China, will discuss the topic “China and Europe: Risky Economic Dependencies?” aspart of this format.” China.Table is media partner of the event series.
Nicole Kidman is currently filming the Amazon show “The Expatriates” in Hong Kong; here she is seen at the end of a day of shooting in the Mong Kok district. The show is based on a book by author Janice Y. K. Lee. And it actually is about the many expats in the Chinese metropolis and their glamorous lives and friendships with fixed expiration dates. The Australian actress’ arrival in Hong Kong, had sparked resentment. Due to an exemption rule for celebrity filmmakers, Kidman was exempt from quarantine after entering the country.
The chaotic situation in Afghanistan continues to dominate world affairs. Some observers believe that China can benefit from the Taliban’s takeover. But that is by no means a certainty, as the experienced journalist and Afghanistan expert Cem Sey explains in our interview today. Moreover, the economic opportunities in Afghanistan are often portrayed too optimistically, says Sey. China is still primarily concerned about security in the region. And rightly so, as another terrorist attack on Chinese engineers in Pakistan shows.
Meanwhile, US Vice President Kamala Harris has traveled to the Indo-Pacific to court confidence in Singapore and Vietnam. This is also happening against the backdrop of the hasty withdrawal of troops from Afghanistan. Her message: we are still here, and we are reliable. The region is particularly concerned about China’s aspirations for dominance in the South China Sea. Chinese voices have already indicated that the chaos in Afghanistan does not bode well for Taiwan and other US allies. That makes the Harris visit seem all the more urgent.
Another ongoing debate revolves around a possible decoupling of Western economies from China. The Kiel Institute for the World Economy (IfW) has made calculations on possible consequences, showing that a so-called decoupling would probably cost the Europeans dearly. IfW President Gabriel Felbermayr explains the details in today’s opinion piece As a media partner, China.Table will contribute to the institute’s discussion series called China Global Conversations.
I hope you will enjoy today’s issue!
Mr. Sey, after the West’s debacle in Afghanistan – is China the big beneficiary?
It is not yet possible to say that. Of course, after the fall of Kabul and the seizure of power by the Taliban, a geopolitical gap has emerged. The West will no longer fill this gap. And yes, China would like to have good relations with Afghanistan. The Chinese leadership has already announced as much. China also has good relations with Pakistan. And Pakistan is behind the Taliban.
This means that a region could emerge for the Chinese in which they could build railways and the like as part of their Belt and Road Initiative. But one obstacle remains: the Taliban’s proximity to violent Islamist terrorist groups. If extremists gain a foothold in Afghanistan, possibly supporting extremists among Uighurs in China, Beijing would not like that at all. That is why I think the Chinese will act very cautiously for the time being.
Als die Taliban vor 20 Jahren an der Macht waren, waren sie selbst eine radikal-islamische Gruppe. Das passt doch überhaupt nicht zu China. Oder ticken die Taliban inzwischen anders?
No, they don’t. But the Chinese are pragmatic and have no problem cooperating with other Islamist governments. Incidentally, the Taliban should not be confused with the IS either. The IS is a thoroughly fanatical movement. The Taliban interpret Islam very strictly and want to enforce it in an authoritarian manner. But they are not out to Islamise other countries.
People in the other Muslim-majority countries in the region view China and the expansion of its infrastructure in the course of its New Silk Road with great suspicion. Not least because of the Uyghur issue, the danger of attacks on Chinese facilities is growing in some of these countries.
Tajiks, Kyrgyz and Kazakhs, like the Uyghurs, are Turkic peoples and culturally much closer to them than the Pashtuns in Afghanistan. To be sure, there are extremist Taliban who sympathize with IS and take up the Uighur issue. But these are mostly in Pakistan. The Pakistani and Afghan Taliban are not the same. The goal of the Afghan Taliban was to have the foreign troops out of the country and restore their rule based on Sharia laws. They have now achieved that. Neither will Beijing send its troops into Afghanistan, nor is China the enemy from the Taliban’s point of view .
What has been the relationship of Afghans with China so far?
Many Afghans find China interesting. They see the Chinese as a people who were also oppressed by the West in the past, but who were able to free themselves from its clutches and are now a world power in their own right. Afghans find that admirable. Afghans also think pragmatically. For them it doesn’t matter whether their Chinese business partners are Muslim or not. Moreover, the Chinese have made the country many tempting offers.
In the case of the largest Chinese investment to date, the copper mine in Mes Aymak, China did not attach any conditions to its investment that went beyond business. The Afghans perceived this as eye-to-eye negotiations. They did not feel that way about the Europeans and the Americans. Unlike the Americans, China also does not want to interfere in internal affairs. Many people like that.
Afghanistan is supposedly rich in raw materials, and the Chinese appetite for them is great. Why haven’t the Chinese siphoned off much of it long ago?
Of course, Afghanistan also has mineral resources. The Soviets already discovered that in the early 1980s. But they also found out that it would be too costly to extract them. It simply wouldn’t be economical. In 2007, the U.S. sought arguments to stabilize public support for the mission in Afghanistan, which was already crumbling, and pulled the Soviets’ alleged findings out of the drawer, among other things. Many have believed it ever since. So the fact that Afghanistan is enormously rich in raw materials is just a legend.
The Chinese investments were not particularly successful. In Mes Aymak, the Chinese hardly promoted anything until the end.
But that was not because of the Chinese, but because of corruption on the Afghan side. Several villages had to be relocated for the mine. The farmers were to be compensated accordingly, and the Chinese also paid. But the money never arrived. This was followed by a legal dispute that lasted for years. In addition, an old ruin was then found on the construction site, whereupon international organizations came with their archaeologists. This led to further delays. In the north of Afghanistan, however, the Chinese have successfully developed a gas field, and the pipelines have been built.
The Chinese will be able to continue their business?
I suspect they do. The Europeans and Americans have stopped all their deals and cut off the money to Afghanistan under the Taliban. So the Taliban have no money and will be grateful if China and Russia now step in as donors.
So under the Taliban, the Afghan-Chinese relationship could become even closer?
I think it’s possible. As long as the West was in the country, it was more difficult for Chinese investors to gain a foothold. For example, when it came to the gas fields in the north of the country, the Afghan side had Western advisors on hand. These are now falling away.
Should China succeed in gaining an even stronger foothold in Afghanistan under the Taliban, what would be the consequences for the region?
Afghanistan is like a black hole in the region that threatens to engulf all the surrounding countries. It’s been that way for the last 20 years. All the bordering countries have huge drug problems. This is due to cultivation and trafficking in Afghanistan. It is the same with the arms trade. If the Taliban succeed in getting the drug and arms trafficking more under control, it will bring more stability to the region, and not only from the Chinese point of view. At the same time, however, there is the tense relationship between India and China. Both are trying to play out their rivalry over Afghanistan. And if the People’s Republic now spreads itself too thinly in Afghanistan, India will react accordingly. That in turn could destabilise the region.
Cem Sey is a journalist for German and Turkish-language media. He was the US correspondent for the Turkish-language section of Deutsche Welle (DW) from 2007 to 2019, lived as a correspondent in Kabul between 2012 and 2015, and in Singapore between 2016 and 2019. As early as the 00s, Sey was a regular media trainer in Afghanistan on behalf of the Deutsche Welle Academy, Mediathek Afghanistan and the United Nations Journalist Training.
The issue of trust is at the heart of Kamala Harris’ Southeast Asia trip. The US vice president has traveled to the region to reassure her partner countries of one thing: We are here, and we will keep order. This key message is the US signal that they seem to have understood the mixed feelings the withdrawal of its troops from Afghanistan has left in Southeast Asia. The superpower has been present in the region for decades as a force for order. The main concern is that the US could leave other allies, like those located around the South China Sea, to their own devices, paving the way for Chinese hegemony.
On Tuesday, Harris articulated the countervailing U.S. vision for the region during her visit to Singapore: “Peace and stability, freedom on the seas, unimpeded commerce, advancing human rights, a commitment to the international rules-based order, and the recognition that our common interests are not zero-sum.” Shortly after, the Vice President headed to Vietnam next, to promote her government as a reliable partner there as well. In doing so, she traveled to the country from which U.S. troops had quite literally fled in 1975 – providing the historical analogy to events in Afghanistan’s capital, Kabul, just days ago.
Political scientist Li Mingjiang of the Rajaratnam School of International Studies (RSIS) in Singapore commented on the psychological component of the chaotic images from Afghanistan to China.Table: “At least the chaos in Afghanistan sends some negative messages to a certain segment of the social-political elites in East Asia “but a few start to raise the issue of the US’ credibility.
If the US really loses support in the region, the pursuit of its interests in the Indo-Pacific could prove more complicated. Raw minerals, military bases and trade routes are vital for Washington. The US requires them to successfully assert their role as a dominant world power against China. Singapore’s port is almost indispensable as a shipping hub for US goods to the region. The Strait of Malacca, as the bottleneck of the western route to Singapore, is of immense strategic importance as a supply line. However, the same is true for China. It fears that its oil supplies from the Middle East could be blocked by the Americans off Malacca in an emergency.
Meanwhile, Kamala Harris failed to mention that it is China that is challenging Washington’s role. In her speech, on the other hand, the vice president stressed that the Americans’ involvement was not directed specifically against any particular actor. But the elephant in the room is the People’s Republic of China. Harris did not have to be more specific for listeners to understand.
The Chinese also made no effort to hide the obvious race for influence and trust among neighboring nations. The Chinese consulate in Ho Chi Minh City, also known as Saigon, posted a cartoon on its website over the weekend. It showed a man on the verge of drowning, loudly calling for help. A potential rescuer threw him a life preserver. The punchline of the cartoon: the would-be rescuer then stopped helping the drowning man, saying, “Goodbye, brother.” Clearly, this refers to America.
But such threats are unlikely to spark too much concern in Vietnam. The ideological ties between the two countries’ ruling parties and their shared socialist roots have long since given way to pragmatic realism. In Vietnam, at least, China’s arrogating and uncompromising attitude in the South China Sea has left many scars in its wake. In a survey among ten Southeast Asian states conducted by the ISEAS-Yusof Ishak Institute in Singapore, it is the Vietnamese who fear a Chinese rise in power the most – and favor a growing American influence in the region. It sounded almost spiteful when China’s state-run Global Times newspaper noted in its Monday editorial that Beijing was “Asean’s most important partner.” ASEAN is the association of Southeast Asian nations.
But China is struggling to sell its actions in the South China Sea – perceived as ruthless by many – to its neighbors as a policy of partnership. Beijing has a “long way to go in making its image more ‘lovable’,” believes Dien Nguyen An Luong of the ISEAS Institute, echoing President Xi Jinping’s new marching orders. In an op-ed for the South China Morning Post, Dien Nguyen cites simple reasons: “Anti-Chinese sentiments have seeped into Vietnamese discourse and have been entrenched. They will not fade away anytime soon.”
For the moment, it seems as if the US’s restrained communication in Vietnam is favored over China’s pugnacity. The local Chinese embassy has developed a bit of attacking the US verbally. The latter, in turn, limits its social media presence to topics like education and culture, as analyzed by the ISEAS Institute. The public apparently appreciates the justly and more subtle approach of the US.
Singapore’s Prime Minister Lee Hsien Loong recently indicated that the Americans are also ahead in other respects in the favor of the littoral states. He pointed out that the perception of resolve and commitment of the US in the region would depend on “what U.S. does going forward – how it repositions itself in the region; how it engages its broad range of friends and partners and allies in the region” A clear signal that was also heard in China. On China’s social media, numerous commentators took offense and badmouthed Singapore for apparently cozying up to the US. “Bootlicker,” being one of the insults. But it is unlikely that this rhetoric will win the People’s Republic any points.
Supply bottlenecks in the wake of the Corona crisis have fuelled discussions in the EU about greater economic self-reliance and the relocation of production of certain goods back from China, for example. Sometimes this is only about individual critical products, such as medical goods. But the range of production processes to be “brought home” is readily expanded by those who see China as a particularly powerful strategic rival. There may be good strategic reasons to stop sourcing critical goods or industrially important ones from China alone. What is often underestimated by the advocates of such a policy, however, are the costs involved.
At the Institute for the World Economy, we have simulated what the consequences would be if the EU were to double trade barriers – away from new tariffs – in order to promote domestic production. This could be done, for example, through preferential public procurement, tax benefits or other subsidies for EU suppliers – or through import quotas or bans on selected goods. The result: if the EU were to unilaterally double corresponding trade barriers against China, this would cost 130 billion euros (0.8 percent of gross domestic product, GDP) – with comparable countermeasures by China, the costs would grow to 170 billion euros (1 percent of GDP).
Even partial decoupling from international supply networks would thus significantly worsen the living standards of people in the EU – as well as in its trading partners. By contrast, the alleged benefits of greater autonomy or sovereignty are often diffuse and difficult to quantify. They may even be illusory if risks thereby cluster in a smaller number of markets. The recent flood disaster in Germany has shown that crises can also occur right on our doorstep, so production in Europe is not always a “safe haven”.
Intuitively, one would think that decoupling supply networks would pay off when a supplier country suffers an economic shock – such as China when the Corona epidemic was still a local event there. But even in this case, simulations show that a general decoupling of supply chains causes greater economic damage than if the economic shock from the affected country spreads to others.
A decoupling of the EU from international suppliers would also increase prices for intermediate goods. This translates along supply chains into higher prices both for goods consumed within the EU and for EU exports, which in turn make goods in other countries more expensive. Such unintended side-effects that an EU autonomy policy could have are often ignored.
As a country with particularly strong international economic ties, Germany would be hit harder than many other EU countries: In the event of a unilateral decoupling from China, Germany would bear around a quarter of the burden (32 billion euros, 0.9 percent of GDP). An escalating trade war with the People’s Republic could increase these costs by another 50 percent.
Some sectors in the EU would certainly benefit from a unilateral decoupling from China – such as wholesale and retail trade, the construction sector or mechanical and plant engineering. Other sectors – especially vehicle manufacturing – would lose value added. In the event of a two-sided trade war with China, the result would be negative across all sectors.
Those who want to reduce dependence should choose other instruments. Instead of forcing out Chinese suppliers, it would certainly make more sense to diversify supply networks in order to have access to several suppliers in cases of crisis or conflict. In the case of critical goods, for example from the medical sector, greater weight could be given to supply security in the procurement contracts between the health insurance funds and the pharmaceutical companies – for example by means of appropriate contractual penalties.
Warehousing is expensive, but can become a worthwhile insurance policy against production downtime if the willingness to pay for supply security is higher in the future than in the past. The development towards a circular economy that relies heavily on recycling not only has ecological advantages, but can also reduce dependence on third-party supplies of raw materials, for example. And a deeply integrated European internal market is perhaps the best insurance against dependencies in international economic relations.
Those who discuss the negative aspects of dependence on China must not ignore the costs of putting the advantages of the international division of labour at risk. This does not mean that “business as usual” is the best solution. But the cost-benefit analysis of a new policy approach with regard to China must be complete.
This article belongs in the context of the “Global China Conversations” event series of the Kiel Institute for the World Economy (IfW). On Thursday , Institute President Gabriel Felbermayr and Jörg Wuttke, President of the EU Chamber of Commerce in China, will discuss the topic “China and Europe: Risky Economic Dependencies?” aspart of this format.” China.Table is media partner of the event series.
Nicole Kidman is currently filming the Amazon show “The Expatriates” in Hong Kong; here she is seen at the end of a day of shooting in the Mong Kok district. The show is based on a book by author Janice Y. K. Lee. And it actually is about the many expats in the Chinese metropolis and their glamorous lives and friendships with fixed expiration dates. The Australian actress’ arrival in Hong Kong, had sparked resentment. Due to an exemption rule for celebrity filmmakers, Kidman was exempt from quarantine after entering the country.
