As China is fueling global growth prospects, the real risk haunting the international economy is protectionism, sanctions and geopolitics — increasingly disguised by disinformation in the West.
THE ongoing year marks the 75th anniversary of the founding of the People's Republic of China. On Sept. 21, 1949, Mao Zedong announced to the nation that "the Chinese people have stood up... Ours will no longer be a nation subject to insult and humiliation." It was followed by a mass celebration in Tiananmen Square on October 1, which is celebrated in the mainland during the ongoing week.
In Washington, neoconservatives would like to reverse these 75 years of history, however. These efforts are likely to significantly accelerate after the US election. The first signs — disinformation wars setting the stage for economic instability and geopolitical turmoil — are intensifying.
Billions of dollars into propaganda
In 2023, international pundits first declared the Chinese economy a global inflation threat, then a global deflation threat. And when these trajectories proved flawed, China was declared collapsed, oddly amid its recovery.
More recently, in early September, the international news agency Bloomberg predicted that "deflation stalking China since last year is now showing signs of spiraling." A week later, the agency's China editor Philip Glamann warned that "worries about falling prices and the threat they pose to the world's second-biggest economy are reaching a crescendo." The essay featured a photo of a gray Shanghai with just two people, a bit like Newsweek's fake report over a year ago that claimed Shanghai had collapsed.
Intended or not, such reports distort economic realities by amplifying the risks of the Chinese economy beyond recognition. On Friday, ironically, China stocks closed out their best week since 2008 as the country's central bank cut its reserve requirement for banks as part of the stimulus measures announced to boost property and financial markets.
Chinese economic challenges are real but manageable. It is the billions of dollars wasted in disinformation and hundreds of billions of dollars misused in efforts at military interventions in the United States that now pose a real and tangible threat to the global economy.
In early summer, Reuters found that, at the height of the Covid-19 pandemic, the US military had launched a secret campaign to discredit China's Sinovac inoculation in the Philippines and several other countries in Southeast Asia, Central Asia and the Middle East. But the Pentagon's military psy-ops are just a part of the huge influence machine.
In early September, the US House passed a bipartisan $1.6 billion for the State Department and USAid over the next five years to deliver anti-China propaganda globally. That massive spend is about twice the annual operating expenditure of CNN — all of which will be used for the sole purpose of lies about China.
'China collapse' ideologues genocidal business gurus
The ultimate goal seems to be to destabilize the Chinese economy. The most consistent oracle of the "China collapse" theory has been Gordon Chang, the darling of Washington and Fox News, who — strangely enough — has repeated his thesis since 2001. In a recent Fox interview with Maria Bartiromo, he declared — surprise, surprise — that "China is falling apart."
Chang serves in the Gatestone Institute, notorious for its Islamophobic disinformation campaigns and far-right policies. It is funded by Rebecca Mercer of the Mercer billionaire dynasty that in 2016 financed the Brexit campaigns in the UK and Trump's campaigns in the US. The ensuing trade policies led to aggressive protectionism and geopolitics that have fostered the worst geoeconomic fragmentation since the rise of Nazism in the 1930s and stagflation in the 1970s.
At Gatestone, Chang has pushed the idea that Taiwan should launch a missile attack on the Three Gorges Dam and drown the downstream population to signal that they are "prepared to take Chinese lives in the hundreds of millions."
It is not a chance event the escalation is taking place now. China has a central role in the rise of the Global South that seeks peace and development, not friction and war. If China is destabilized, the rise of the Global South will take a severe hit.
China's rise driving the Global South
After centuries of colonialism and half a century of the Cold War, the economic gap between the countries of the West and the Global South only increased in the postwar era due to the inherently unequal exchange. What has changed this equation over the past two decades is the rise of China.
In 1949, China accounted for barely 4 percent of the global economy. Following the reform and opening-up policies, the figure has almost quintupled to 19 percent of the world GDP today. The implications are world-historical.
Until the 1990s, the developing world was dependent mainly on the West. By 2007, the large emerging economies, spearheaded by China, fueled global growth while the West began to stagnate. In the process, the growth impact of China on low- and middle-income economies has soared.
These trends have dramatically accelerated Chinese investment abroad since the launch of the Belt and Road Initiative (BRI) in 2013, the rise of the new complementary development institutions like the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB), thereby boosting modernization in many emerging and developing economies.
In this way, China is pulling along many of the world's middle- and smaller-size economies in its train. However, today this great project is threatened.
The real global risks
Through much of the ongoing year, trade has driven China's economic growth, fueling the rebound of the Caixin manufacturing PMI. Unsurprisingly, the two fastest-growing export categories — electronics and electric vehicles — have been targeted by Washington and Brussels. Yet, the net effect has been curious. The Chinese automaker BYD's lowest-priced model in the US would still be the cheapest in the market, even with a 100 percent tariff.
In the second quarter of the year, Western governments blacklisted a record 198 Chinese entities. Looking ahead, as research group Rhodium cautions, "sanctions are likely to remain a key risk for global investors as scrutiny of Chinese companies expands into new areas."
Effectively, US policies aimed at reducing imports and bolstering domestic production are marked by the expansion of "Buy American" provisions. As new research shows, this has resulted in the "increasing cost of buying American." Ordinary Americans pay the bill for their governments' tariff and sanctions wars. And so may the Europeans soon. It is not a chance event that trade wars against China have gone hand in hand with high inflation in the West.
Before the trade wars of the Trump administration, China replaced the US as the engine of the world economy. Over the past decade, China has contributed 31 percent to global growth, more than three times the US share. In the next five years, China's contribution could still prove greater than that of all G7 economies combined.
In the foreseeable future, the greatest threat to global recovery is not China but the poisonous mix of protectionism, sanctions and geopolitics in the West. It relies neither on international law nor international consensus but on brute force. Worse, now it threatens to undermine the rise of the Global South.
Dr. Dan Steinbock is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see https://www.differencegroup.net/.
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