What can you say about a country that trashed the planet Earth with a deadly virus? That it knew what it was doing?
China has gotten away with it: businesses and industries destroyed or damaged; massive recession and unemployment; medical systems strained to the point of collapse; countries rent asunder by populism; transport systems in disarray; interruption of children’s education and development; loss of confidence in governments; rising mental illness, anger, and civil disobedience; vulnerability of the elderly and those with underlying conditions; and nearly twice as many American dead than in World War II. The full effects of COVID-19 and its variants are yet to be known.
Whether the COVID pathogen was an accidental release from the Wuhan Institute of Virology or an act of Nature via infected bats or pangolins matters less than the cover up by the Chinese Politburo — delayed disclosure by months, and the persecution of medical experts who tried to tell the truth. That domestic flights in and out of Wuhan were shut down while international ones were allowed to continue speaks for itself. Did the Chinese Politburo think that China should not be the only country to suffer — and that the catastrophe should be exported and shared?
The world’s reaction to this monstrous act has thus far been relatively mild. The full force of the world’s media, governments and multilateral organizations, judicial processes, and multinational companies has not been brought to bear. Yes, there was some initial outrage but it has subsided and yielded to a broad acceptance of the status quo: it is what it is, as they say.
So why is this? There are certainly two reasons: 1) money, and 2) fear of kinetic action.
Evidencing its economic might, China now appears to rank number one in outward foreign direct investment, which in 2020 exceeded $150 billion, according to the Hamburg-based data firm, Statistica, which seems to have accepted data from China’s Ministry of Commerce, the National Bureau of Statistics, and the State Administration of Foreign Exchange at face value. The New York-based Trading Economics also appears to have accepted these statistics from the Chinese government. Other Chinese official sources report total Chinese outward FDI (believed to be at historical cost, not equity) at nearly $2.6 trillion, putting China in third place. Chinese direct investment benefits employment and GDP in host countries: nearly $50 billion of Chinese capital had been invested in the roughly 70 Belt and Road Initiative countries by 2020, with considerably more committed. For example, China’s commitment to Pakistan, a crown jewel in the BRI, exceeds $60 billion. With an economic stick of this size, it is no wonder that China wants to rewrite the global rules for trade and investment to benefit Beijing and challenge the U.S.-dominated postwar order.
Further, China’s foreign exchange and gold reserves total $3.3 trillion, allowing it to buy its way into recipient countries, particularly in capital short developing countries. Accumulation of these reserves has been driven by consumption, with U.S. retailers linked real time to the producing factories in China. Adding to its economic influence, China holds nearly $1.3 trillion of U.S. treasury securities. Abruptly swapping out of some U.S. dollar instruments would put pressure on the dollar and increase U.S. interest rates, likely creating pandemonium in credit and equity markets — albeit with devaluation of China’s U.S. dollar holdings and incurring transaction costs.
A final economic factor is U.S. foreign direct investment in China, which approximated $125 billion in 2020 at historical cost. Nationalization of premier U.S. multinationals in technology and finance, for example, would be a high visibility form of retaliation.
Besides money is the fear of a kinetic reaction — that could be demanded by knowing the truth. Notably, the U.S. intelligence community stated that it was unable to determine the origin of COVID-19 in its report released in August, although as noted, there is already evidence of China’s duplicitous behavior and cover-up. Should China be called out the way President Kennedy called out the USSR for its construction in Cuba of launch sites to support nuclear ballistic missiles in 1962, the world would demand more than rhetoric and condemnations. China is now perceived as nearing military parity with the U.S., with its goal of equivalence by 2027, contemporaneous with the 100th anniversary of its armed forces. A U.S. military or cyber conflict with China would be catastrophic for the world, with potentially cataclysmic consequences for both China and the U.S. Further, there is some doubt among experts as to whether the U.S. could actually win a conventional conflict with China in the western Pacific.
As I have written in The American Spectator, the free market can inhibit China’s future aspirations. However, relocation of manufacturing and cutting cross-border and local exposure will take time and may not be enough. A trial at The Hague, a judicial body of the United Nations, might result in a loss of face for the Chinese Politburo, however the UN is tilted toward anti-western policies, and a complaint would position the U.S. in conflict with developing countries, and those members of the Belt and Road Initiative.
Unfortunately, we are currently stuck with this: “it is what it is.”
Frank Schell is a business strategy consultant and former senior vice president of the First National Bank of Chicago. He was a Lecturer at the Harris School of Public Policy, University of Chicago and is a contributor of opinion pieces to various journals.
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