Date: 02/28/2023
Author: Mr. X
Machiavelli reportedly said, “Wars begin when you will, but they do not end when you please.” It’s more complicated than that. We might add that wars don’t really begin when most think they begin. Preparations must be made before an invasion. Money must be spent, training conducted, dissent crushed, and the population prepared. There is a point of no return, but the real decision has been made long before the order arrives for the troops to go in.
I think China has now crossed that decision point. It’s not a point of no return, but it’s an indication of what China is going to do in the coming years.
At the most recent National People’s Congress in Beijing, the Party announced it would increase its military budget by 7.2%. That far outpaces the increase in general public expenditure of just 5.7%. It also represents about $224 billion. “Our armed forces, with a focus on the goals for the centenary of the People’s Liberation Army in 2027, should work to carry out military operations, boost combat preparedness and enhance military capabilities,” said Premier Li Keqiang.
The government has set an economic growth level of 5%. That’s considered fairly conservative. Last year, the country missed its 5.5% target. It only hit 3%, an outcome largely blamed on COVID-19 lockdowns. That policy even drew rare public protests against Xi Jinping. Nontheless, Jinping is consolidating his position within the party, making it clear that China is now under something akin to personal rule rather than Communist Party government. In fact, Premier Li Keqiang’s dutiful recital of statistics and party platitudes was something of a going away party for him, as he represents a form of collective leadership that no longer applies to the People’s Republic.
Still, if he represents a softer line than Xi Jinping, his comments on reunification with Taiwan should ensure that no one has any illusions about China’s long-term objectives. He argued that “external attempts to suppress and contain China are escalating” and that the PRC “should promote the peaceful development of cross-Strait relations and advance the process of China’s peaceful reunification.”
The 7.2% increase in the military budget marks the first time the growth rate for defense has increased for the third year in a row. Spokesman Wang Chao dismissed concerns, saying the defense budget is increasing at a “relatively moderate and reasonable growth rate.” “China’s military modernization will not be a threat to any other country,” he said. Nontheless, China’s growing military power is worrying the United States and its allies.
Taiwan’s Mainland Affairs Council said: “We once again call for Beijing’s recognition of the fact that Taiwan is not part of China, and vice versa. They should respect the people of Taiwan for upholding the nation’s sovereignty and believing in freedom and democracy, and stop the united front propaganda by military threat and imposing its political framework on Taiwan.” Taiwan Defense Minister Chiu Kuo-cheng has also warned that the Chinese military may try a “sudden entry” near its territory soon.
Retired Admiral Phil Davidson told Congress in 2021 that China could invade Taiwan by 2027. That’s a psychologically important deadline – mentioned at the Party Congress – which marks the end of what China’s government has called the “hundred years of humiliation.”
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However, the real problem is not China. It’s that there is no an emerging bipartisan consensus in Washington to force China to seek allies.
The United States is already negotiating with European countries about the possibility of imposing sanctions if China provides military support to Russia. German Chancellor Olaf Scholz said “we all agree that there should be no arms deliveries, and the Chinese government has declared that it will not deliver any either.” He said he is “relatively optimistic” that the issue won’t arise. European Commission President Ursula von der Leyen said it was simply a “hypothetical question” and that there is no evidence China is considering such a move.
Yet what happens if China does consider such a move? China has already set itself up by condemning American arms shipments to Ukraine and promoting its own peace plan. Hungarian Prime Minister Viktor Orbán said his government supports the Chinese proposal. Russian ally Belarus has also backed the proposal. If the West sends more weapons to Ukraine – as America may decide to do with F-16s this week – China will have its propaganda line that it tried to resolve the conflict but the West made it impossible.
The United States is already trying to freeze China out of the semiconductor market. This week, Senator Mark Warner (D-VA) will introduce a bill that will give President Joe Biden a legal framework for banning foreign technology, including TikTok. Senator John Thune (R-SD) is expected to back it. The GOP may actually support it more than Senator Warner’s own party. The House Foreign Affairs Committee, with unanimous Republican backing, has already advanced legislation that would give President Biden authority to ban TikTok. The US Commerce Department announced new sanctions on dozens of Chinese companies last week for supposedly supporting a campaign directed against ethnic minorities in China and helping Iran dodge sanctions.
Not surprisingly, President Xi Jinping said that China “should ultimately rely on scientific and technological innovation” to foster economic growth. This is paired with the so-called “two must-haves” campaign, which are designed to build self-sufficiency in manufacturing and the food supply. National stockpiling of basic food staples has increased by more than 13% according to budget figures released this weekend. China has long decried the use of economic sanctions in diplomacy.
The real question is when China will make its move for self-sufficiency in diplomacy. China has been conservative, perhaps even cowardly when it comes to its attitude towards Russia. Despite the supposed boasts of a “no limits” partnership, China has not done much to help Moscow besides buying oil. There’s little willingness for China to confront Washington openly in support of Russia’s supposed “multipolar world,” at least until recently. China’s interest is in the war going on for as long as possible, all the better to deplete Western arsenals.
Yet waiting and watching may not be possible for China much longer. Intense American pressure will put additional strain on the Chinese economy no matter what Beijing decides, as China has now become a rare bipartisan issue in Washington. China can’t afford for Russia to actually lose the war – something that seems unlikely now, but may change if promised Western weapons are able to facilitate a Ukrainian offensive in the spring. Most importantly, China is going to be forced to lean on foreign policy accomplishments if it cannot meet its economic targets. The relatively conservative 5.5% target is indicative of this fear – and even that target may be too much this year.
On February 2023, China’s Ministry of Foreign Affairs released a document called “US Hegemony and Its Perils.” The rather crude and outdated looking website conceals the radical reality of this analysis. China defended Russia’s line on “misinformation,” accusing the United States of hypocrisy and even an international war against free speech.
The United States practices double standards on the freedom of the press. It brutally suppresses and silences media of other countries by various means. The United States and Europe bar mainstream Russian media such as Russia Today and the Sputnik from their countries. Platforms such as Twitter, Facebook and YouTube openly restrict official accounts of Russia. Netflix, Apple and Google have removed Russian channels and applications from their services and app stores. Unprecedented draconian censorship is imposed on Russia-related contents.
China also seemed to call for an end to American hegemony itself.
While a just cause wins its champion wide support, an unjust one condemns its pursuer to be an outcast. The hegemonic, domineering, and bullying practices of using strength to intimidate the weak, taking from others by force and subterfuge, and playing zero-sum games are exerting grave harm. The historical trends of peace, development, cooperation, and mutual benefit are unstoppable. The United States has been overriding truth with its power and trampling justice to serve self-interest. These unilateral, egoistic and regressive hegemonic practices have drawn growing, intense criticism and opposition from the international community.
Countries need to respect each other and treat each other as equals. Big countries should behave in a manner befitting their status and take the lead in pursuing a new model of state-to-state relations featuring dialogue and partnership, not confrontation or alliance. China opposes all forms of hegemonism and power politics, and rejects interference in other countries’ internal affairs. The United States must conduct serious soul-searching. It must critically examine what it has done, let go of its arrogance and prejudice, and quit its hegemonic, domineering and bullying practices.
In other words, China has signed up for Russia’s “multipolar world.”
In March 2022, my late friend Dr. Kent Moors delivered a 226.15% gain on a put option on Russia. I think a similar opportunity is coming for China. It won’t be in the short term. China is still keeping its options open. Yet those options are closing, regardless of Beijing’s long term plans. The United States will continue to squeeze China economically, emboldening Chinese nationalists at home eager for a showdown with the hegemon. The war in Ukraine will continue and the West will increase aid, meaning that China could be accused of standing aside while a now demonstrably hostile power bloc wages a proxy war against an ally. Finally, China can’t back away from the annexation of Taiwan, as nationalist foreign policy accomplishments will be needed to compensate for economic problems. 2027 is not so much a deadline for Taiwan, but for the People’s Republic of China, as Beijing’s possession of the Mandate of Heaven will run out by then unless it can somehow recapture its previous level of economic growth. Conflict with the West is practically inevitable.
Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for RogueInvesting.com to bring you news on what those with power are debating, planning, and doing.
