Beware Chinese Bearing Gifts
I have previously blogged about China's interest in developing joint investment projects in Africa to help develop natural resources. China's motives are not entirely altruistic. Yes, it hopes to further economic development in Africa. However, China's main motivation is to secure a leading role in African investment to quench its own thirst for Africa's vast mineral resources to fuel its own economic development. Up until now I applauded the Chinese for their efforts, self-serving or otherwise, because Africa has for too long been an ignored part of the world and left out of global economic development. Now, however, I believe China is acting to gain economic domination of key economies by providing financial support in a time of need, such as the enormous buying of U.S. Treasury bonds, and China's recent purchases of Spanish and Greek bonds that have made it the flailing Eurozone's lender of last resort.
China's interests are based on the belief that a surviving euro fuels demand for Chinese goods and allows China to diversify its massive dollar holdings. This is good deal for countries like Germany that are financially supporting weaker eurozone economies. As Europe's leading economic power, Germany could express its gratitude by softening its stance towards China on trade, the environment, and human rights. For example, China wants the EU to designate it a "market economy" within the World Trade Organization (WTO), which would make trade disputes against China more difficult, a demand the EU has so far resisted. Germany is also vying for the EU to drop its long-held arms embargo with China, a move the U.S. has long opposed.
Ultimately, growing trade ties to China could pull Berlin away from the West. Marcus Walker argues in the Wall Street Journal: "When you've carved out a lucrative niche selling precision machinery and luxury cars to fast-growing emerging economies such as China, who needs stodgy old Europe?"
Michael Schuman argues in a piece for Time Magazine online that: "In many respects, Germany's role in the world economy is similar to China's. Both are manufacturing monsters that are bringing instability as well as benefits to the world. Because of its export machine, Germany, like China, runs up a humongous current-account surplus, while its less competitive neighbors, like Spain, have fallen into deep deficits."
Some Europeans fear China is taking over their continent by buying its way in. Concern also exists over the issue of economic "rebalancing." Germany and China's economies did better during the recent economic downturn by relying heavily on exports, fueled by cheap currencies and low labor costs. The export-starved U.S., along with debt-heavy European countries like Greece and Portugal, have argued those dynamics killed their export markets and made the global recovery too reliant on their underwater consumers. Since then, the U.S. has pressured the world's top two exporters to boost domestic consumption by paying higher wages or cutting taxes. But China and Germany teamed up to kill those proposals at last year's G20 meeting in Seoul, South Korea. The more inroads the two countries make on trade, the less reliant they'll be on Western consumer demand.
Ironically, the recent actions by the Chinese bring to mine the expression "Beware of Greeks bearing gifts." The saying is adapted from the words of Laocoon in the story of the Trojan horse. In other words, do not trust "enemies" who bring you presents — they could very well be playing a trick.
Blog by Steven Mintz, aka Ethics Sage, August 10, 2011