Many Americans and some Canadians may be loathe to admit it but this is coming from a former CIA spy master:
Eurasia is the greatest landmass of the world, embracing Europe and all of Asia — some of the oldest and greatest centers of human civilization.
Eurasia increasingly means “Asia” in which the “Euro” part figures modestly. Furthermore, China has now become the center of Eurasia as the world’s second-largest economy. Not surprisingly, China — like the Muslim world — projects a decidedly “anti-imperial” bent based on what it sees as its humiliation at the hands of the West (and Japan) during its 200-year eclipse — during one of its dynastic down cycles. But China is very much back now into a classic “up-cycle” mode of power and influence again and is determined to project its weight and influence. India, too, now is now a rapidly developing power with regional reach.
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Today, China announced it has ratified the emissions-cutting agreement reached last year in Paris, giving a big boost to efforts to bring the accord into effect by the end of this year. The United States was also expected to announce that it was formally joining the Paris Agreement in advance of the Group of 20 summit.
China is the top emitter of man-made carbon dioxide emissions, and the United States is second. Together, they produce 38 percent of the world’s man-made carbon dioxide emissions.
Both were key to getting an agreement in Paris last year. To build momentum for a deal, they set a 2030 deadline for emissions to stop rising and announced their “shared conviction that climate change is one of the greatest threats facing humanity.”
China has been on a worldwide buying binge in recent years with its state-owned enterprises (SOEs) splurging US$111.6 billion (C$146 billion) in the first seven months of this year alone, reported Reuters. That figure already surpasses the US$111.5 billion mark set by China’s outbound FDI for the entire year last year and approaches the total amount of inbound FDI of US$126.27 billion. But, as Chinese state firms celebrate their successes, they face increasing push-back on national security and market access grounds, not to mention totally unrelated red herrings such as China’s South China Sea (SCS) claims and ‘human rights’ record.
Two cases in particular stand out – in July, the post-Brexit-Cameron government of Theresa May launched a surprise review of the US$24 billion Hinkley Point nuclear project at Somerset which is being co-financed by SOE China General Nuclear Power Corp. (CGNPC), bringing a sharp halt to the much-touted “golden age” of China-UK relations spearheaded by the former Cameron-Osborne team.
Then, in August, Australia blocked the A$10 billion (C$9.887 billion) sale of a 50.4% stake in Ausgrid to China’s State Grid Corp. and Li Ka-Shing’s Cheung Kong Infrastructure Holdings. Analysts believe the veto, which follows the ban on the massive 101,000 km2 Kidman family farm sale to Chinese interests last year, owes much to seats won by the NXT and the One Nation party, two right-wing protectionist blocs in the Australian Senate following recent national elections.
The decisions did not go down well in Beijing. In the wake of May’s decision, Chinese Ambassador to the UK Liu Xiaoming warned, “the China-UK relationship is at a crucial historical juncture. Mutual trust should be treasured even more.” The situation has not been helped by the fact that a trusted advisor of the new Prime Minister who has her close ear is an ardent Sinophobe who wrote a scathing diatribe against China last October accusing the previous government of selling out Britain’s national security. On top of that, the US Justice Department charged an American national working for CGNPC of illegally developing and producing special nuclear material in China.
In a bid to appease the Chinese, Ms May sent a high-ranking Foreign Office official to reassure Chinese Foreign Minister Wang Yi that Britain attached utmost importance to Sino-British cooperation. Ms May also made a personal appeal to Chinese President Xi Jinping and Premier Li Keqiang in the form a letter. Currently on her first trip to Beijing as Prime Minister for the G20 Summit, she’s seeking to comfort the Chinese that despite the Hinkley delay, Britain wants to solidify ties that are wide-ranging and multi-faceted.
In blocking the Ausgrid deal, the Australian authorities had expressed concerns that the main electricity network serving 1.6 million homes and businesses in Sydney and beyond in New South Wales, the country’s largest state with 7.5 million inhabitants, could be compromised in times of crisis. Although Scott Morrison, Australia’s Treasurer, declined to comment on specific national security risks the sale posed, sources cited dangers of Chinese cyberattacks and electronic espionage. Not surprisingly, xenophobic Senators in the governing coalition pointed to SOEs, the SCS dispute, and the nature of the Chinese government as key red flags.
But, red herrings aside, there is nonetheless a palpable change in foreign attitudes toward Chinese investment in general and Chinese SOE money in particular. “Protectionism is resurfacing. In many parts of the world, we have seen calls for deglobalization”, commented Chinese deputy Foreign Minister Li Baodong. But, it’s not just trade protectionism that’s rearing its ugly head but Western business groups and government officials are ever louder raising long-standing gripes about access of their companies to the Chinese market.
They point to restrictions on foreign companies in Chinese industries such as financial services, healthcare, and logistics. Just prior to the G20 Summit, a European Union Chamber of Commerce (EUCC) annual paper stated bluntly, “this unbalanced situation is not political sustainable and for its own benefit, China should begin reciprocating by opening and allowing European business to contribute more to its economy…If it is ultimately unwilling to offer reciprocal access to its own market, China cannot assume that it will indefinitely continue to enjoy open and unhindered access to the EU’s.”
Joerg Wuttke, President of the EUCC in China warned of a protectionist backlash saying nowadays European officials are more daring to speak their minds on the reciprocity issue. “It has reached the point where people are not afraid to speak up anymore. They feel like they have to be tougher in front of their constituencies”, Mr Wuttke told the media. A EU official involved in China trade added, “The Chinese would shut you down at once if you said you wanted to buy one of their grids. You wouldn’t get to the end of the sentence”.
In terms of policy, the EU recently introduced a groundbreaking expanded review process focusing on all assets managed by the State-owned Assets Supervision and Administration Commission (SASAC) under China’s State Council. This means an extra layer of oversight that could delay or even scuttle future Chinese SOE M & As of European companies, forcing them to jump through more hoops in a lengthy approval process.
The good news is that, on the other side of the Atlantic, the latest annual China-US Strategic and Economic Dialogue ended with a commitment to expedite the conclusion of a Bilateral Investment Treaty (BIT), a key issue for which is foreign access to protected sectors and the whittling down of China’s “negative list” of off-limits industries.
The US-China Business Council (USCBC) declared: “a high-quality US-China BIT would give American companies better access to China’s market and equal rights as Chinese firms”. A BIT would also help alleviate Chinese concerns over the activities of the US government agencies such as the Committee on Foreign Investment in the United States which has blocked a number of Chinese investments in the US before.
Robert Held, a Geneva-based financial consultant writing in the Asia Times newspaper suggests unless China starts allowing more reciprocity in market access, mistrust over China’s SOEs will only rise. Protectionism against Chinese SOEs “will become more stringent (in the US) and even more dramatically, in the EU, could become the norm. The writing is on the wall: reciprocity can no longer be postponed by Beijing without hurting its own interests”, he argued.