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  1. Home
  2. / Investing
  3. / Global Equity

China the Target on G7 Radar as Blinken Meets Key Asian Allies

Blinken says China is acting 'more repressively at home and more aggressively abroad.'
By ALEX FREW MCMILLAN
May 03, 2021 | 07:15 AM EDT

It's not news that China is acting more aggressively. It's news who said it.

U.S. Secretary of State Antony Blinken, about to meet with key U.S. allies, said on 60 Minutes that it is "profoundly against the interests of both China and the United States" to head anywhere in the direction of direct military confrontation. But China is taking dangerous steps in that direction.

"What we've witnessed over the last several years is China acting more repressively at home and more aggressively abroad," Blinken said on the show. "That is a fact."

It is indeed. Long gone is the belief that as China became wealthier, it would moderate, and open up. Its recent economic gains have supported a muscular approach in which it is pushing the boundaries of international tolerance. It's building islands in the South China Sea; stealing territory high on its Himalayan border with India; fighting a proxy war on trade with Australia; dispatching planes to invade Taiwanese air space; expanding its military spending; committing cultural genocide to eliminate Uighur society within its borders; and is eliminating through court cases and prison time all opposition here in Hong Kong.

The administration of President Joe Biden has been, to my mind, surprisingly strong on China so far. I was watching for any weakness, any appeasement, since the Obama administration in which he served had taken a softer course.

How times have changed. The Biden team have continued much of the pressure built up under former president Donald Trump, but to greater effect. Instead of ratcheting up pressure with the long-term goal of increasing trade with China and building stronger commercial ties, as the Trump team attempted, the Biden team is trying to corral international cooperation from U.S. allies, many of which were alienated during Trump's term.

"We're much more effective and stronger when we're bringing like-minded and similarly aggrieved countries together to say to Beijing: 'This can't stand, and it won't stand,' " Blinken said on the show.

Trump won a piece of paper from China that is a little like the one waved by Neville Chamberlain on his return from Germany and Chancellor Herr Hitler in 1938. The then-British Prime Minister said "Here is the paper which bears his name upon it as well as mine," which the Brit believed would bring "peace for our time." War in Europe began soon after.

Trump brought back the Phase 1 trade deal, with Chinese President Xi Jinping's name on it as well as his. And China has not been living up to its promises in that piece of paper. Some of that is understandable, since the pandemic has thrown economies the world over into chaos. But quite honestly, any piece of paper with China's name on it isn't worth its weight.

China, for instance, has stated that the Sino-British Joint Declaration that it signed with Britain over the handover conditions for Hong Kong, and which was ratified as a United Nations treaty, is a "historical document." It "no longer has any practical significance," as a Chinese foreign ministry spokesman put it in 2017, "now Hong Kong has returned to the motherland's embrace for 20 years." The legally binding treaty "is not at all binding for the central government's management over Hong Kong," as China sees it, when the whole point of having a U.N. treaty is that it is legally binding. Otherwise it literally is a piece of paper.

Phase 1 is a piece of paper. It requires China to buy an additional US$200 billion in U.S. goods and services over the next two years. Yet U.S. Trade Representative Katherine Tai said in her report delivered on Friday to Congress that China is not living up to its end of the bargain. China has improved its copyright law - on paper - in a way that should better protect intellectual property, since I.P. theft and rampant counterfeiting is a blight in China. But the changes don't go far enough in U.S. eyes, and it remains to be seen if they are implemented properly. China has plenty of good laws on paper that don't work in practice.

Tai has yet to schedule high-level talks with China over the Phase 1 agreement. That's something that the two countries are supposed to do twice a year.

Let's hope that Blinken and Biden are better at buttering up U.S. allies than their predecessors. Blinken is in London today for three days of talks with the G7, and his counterparts from Canada, France, Germany, Italy, Japan and the United Kingdom, with the European Union attending as an observer. Britain, as the host, has invited Australia, India, South Africa and South Korea, as well as Brunei, to participate as guests.

These are the nations that will be vital to building any kind of coordinated response to China's aggressions. India, Japan, South Korea and Australia are the Asian democracies that can sway China, through trade, diplomacy or political pressure. The combined economic output of the entire G7+ group would make it impossible for China to ignore - if there can be any kind of consensus on how to progress. China has proved adept at picking countries off with tantalizing trade deals, then bullying them in one-on-one negotiations.

The United States likes to use the same tactics, of course. China will not take well to feeling like it is being bullied. A collective course of action from those major economies could make headway if the path also seems attractive to China... not through appeasement but as an economic and political alternative.

Blinken said in the interview that the United States is not trying to "contain China," but to "uphold this rules-based order that China is posing a challenge to. Anyone who poses a challenge to that order, we're going to stand up and defend it."

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At the time of publication, Alex Frew McMillan had no position in the securities mentioned.

TAGS: Investing | Markets | Stocks | Defense | China | India | Australia | Europe | Canada | Japan | Global Equity

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