China hype’s sprucing up its image at home and abroad

“Only when nations and peoples treat each other as equals and watch out for and help one another, can we safeguard common security, eliminate the roots of war, and prevent the recurrence of historical tragedies,” said Xi.

The parade coincided with reviews of Breakneck: China’s Quest to Engineer the Future by Dan Wang, a book that attributes the Communist Chinese leadership’s ability to steer the economy ahead rapidly to the fact that most of its senior leaders are engineers.

The US, by contrast, Wang argues, is weighed down by having too many lawyers and too much litigation. Wang contrasts the high-speed rail between Beijing and Shanghai that was built in a couple of years and has been running since 2011 with the planned super-fast link between Los Angeles and San Francisco, which is still years from completion. Cue alarming headlines like: ‘Does the Future Belong to China?’

If hype and a speedy infra build-up are what it takes to attain global dominance, China would have been unrivalled several years ago. Its public project management and engineering acumen is impressive. Its seizing of the commanding heights of the green economy, from electric batteries to solar panels and EVs, is awe-inspiring. Never mind that its companies in this race are heavily subsidized and only a handful make money.

Wang is duly reverential while also making the point that Shanghai, where he lived for many years, is also a much more liveable city today. Its parks have increased by a few hundred while he was there to an admirable 1,000 today and its metro system is world class. Wang recently complained of screechy New York subway trains.

As it happens, I am also in awe of China’s infrastructure, although I suspect many of its local governments are weighed down with billions in debt that will never be repaid. It’s also a matter of perspective: New York’s subway system began 120 years ago, Shanghai’s 90 years later. I am just back from New York and could not help noticing that its underground was far better than I remembered when I lived there in the 1990s.

Wang’s book has received mostly uncritical acclaim in the US. Despite his admiration of Shanghai, Wang lives in the US because he prefers its “pluralism.” Nevertheless, his book coincides with the US government at its most chaotic, except in seizing more power from the legislature. The parade in Beijing has also been a moment of shock and awe for China watchers in India and overseas. The temptation to accede to China’s relentless march seems harder to resist.

Still, a few caveats are in order.

For starters, Wang’s thesis that an engineering mindset to nation-building is far better than others is questionable. China’s leadership would benefit from having many more able economists and by letting more lawyers successfully defend activists and business people in the cross-hairs of the state. It is telling that the most widely admired Chinese civil rights lawyer of the early 2000s, Pu Zhiqiang, was sentenced a decade ago for “creating a disturbance” and “inciting ethnic hatred” and had his license to practice law revoked. He remains under residential surveillance.

The rule of law and property rights would make China a more admirable superpower. As the columnist Noah Smith points out, Japan’s industrialization of the 1960s and 70s was managed by bureaucrats who had studied law.

Given how the US has overturned the principal axioms of the global trading system, it may be tempting to embrace China as a counterweight. But, China’s approach to international trade in the past two decades has been profoundly mercantilist. Even as its exports to the US decline this year, China’s trade surplus with the world is expected to hit $1 trillion.

There is also the lasting overhang of a debt trap for many developing countries that joined Beijing’s Belt and Road Initiative. Countries in Asia and Africa have suffered from the difficult terms of large loans from China for infra projects whose benefits are not always clear.

A paper published by AidData and co-authored by academics from Oxford University, William and Mary in Virginia and the University of Hamburg, reveals how Chinese loans for infrastructure projects usually built by Chinese companies are collateralized with revenues from commodity exports:

“Our findings reveal a previously undocumented pattern of revenue ring-fencing, where a significant share of commodity export receipts never reaches the exporting countries. Revenues routed overseas secure priority repayment for the creditor; they remain out of public sight and largely beyond the borrower’s reach until the secured debts are repaid.”

The researchers reveal that over 60% of the collateralized loan portfolio of Chinese creditors in developing countries is typically not repaid from project revenues: “Instead, most of the cash flows come from sales of the borrowing country’s leading commodity export, such as oil in Angola, gas in Indonesia, or cocoa in Ghana.” It is a clever way of de-risking infra investments that are often white elephants, but pity the developing countries at the receiving end of such stiff credit terms.

As Xi said last week, “The great rejuvenation of the Chinese nation is unstoppable!” At many levels, we have been warned.

The author is a former Financial Times foreign correspondent