Expert on global reorganization: “China is claiming more power to shape events”

by Dietmar Ringel

[This article posted on 8/12/2024 is translated from the German on the Internet, https://www.telepolis.de/features/Experte-zu-globaler-Neuordnung-China-beansprucht-mehr-Gestaltungsmacht-9831999.html.]

China is challenging the West economically, politically and militarily. Belt and Road Initiative and rearmament in the Pacific. Is Germany reacting adequately?

Even if the headlines are currently dominated by the wars in the Middle East and Ukraine or the upcoming presidential elections in the USA, China is and remains a central topic of international politics. Relations with the West, especially the USA, are tense. The US-led Rimpac naval exercise, the world's largest, has just taken place in the Pacific – for the first time with the participation of the German Navy.

The Chinese ambassador has been summoned to the Foreign Office in Berlin on charges that China has spied on a German federal agency. And both the US and the EU have imposed punitive tariffs on Chinese products such as electric cars. China is allegedly violating international trade rules.

Thomas Bonschab has been doing business in and with China for 20 years. He runs a consulting firm for companies that are active in China and, together with the former head of the Hamburg Giga Institute, Prof. Robert Kappel, he runs the blog “Weltneuvermessung”.

Dietmar Ringel spoke to him in the Telepolis podcast about China's role in the game of world powers, German policy on China and the opportunities and risks of economic relations with China.

Shift in the global balance of power

▶ As the name of your blog suggests, it is about the shift in the global balance of power, especially in the direction of China. How can we measure how much the balance of power has now shifted in China's favor?

Thomas Bonschab: I think it's best not to look at day-to-day politics, but at the big megatrends. Then you can see how much China has gained in importance in recent years. If you look at the situation in the 1950s and even in the 1970s, the economic epicenter, where most of the gross domestic product was generated, was in the middle of the Atlantic, with the major target factors being the USA and Europe. Since then, it has continuously migrated eastwards.

Today, it is already quite a distance from Europe, and projections predict that by the 2050s the epicenter will be somewhere in the border area between China and India. And if you draw a circle of about 4,000 kilometers around this point, wherever it may be exactly, then more people live within this circle than outside it. And these people are currently claiming a very strong role in shaping the world order.

But economic performance is only one factor for measuring this. There are still many dependencies, for example on the dollar-based world currency system. The Chinese, in alliance with others, are trying to break away from this and establish their own payment systems. How far have they come with this so far?

Thomas Bonschab: These processes are certainly still in their infancy, but it is remarkable how much countries are joining forces. First with the Bric in 2006, then with the Brics with South Africa in 2010, and now even with the Brics Plus alliance formed this year. These are countries that don't really have much to do with each other, but they all have one thing in common, namely to develop alternatives to the US- or Western-led financial system.

These are all still initial movements, but we should not be under any illusions. It is rapidly gaining momentum and will certainly change the financial architecture significantly in the coming years.

Investments are declining

▶ There is also the “Belt and Road Initiative”, also known as the New Silk Road. Just a few years ago, this project was ridiculed by many. A lot of fuss, they said, and little behind it. Besides, the Chinese dictated the conditions to other countries. It was not of mutual benefit. Nevertheless, this story continues. Where do we stand at the moment?

Thomas Bonschab

Thomas Bonschab: The “Belt and Road Initiative” certainly had its highest financing expenditures about five or six years ago. It has become a little more sober, which is also due to the overall global cooling of the economy. Even China can no longer invest as much as it used to.

Nevertheless, we in the West should not belittle or make fun of such processes. They are actually attempts to create alternatives to the investment methods we are accustomed to and which are controlled by the West.

There is a whole package of measures, such as processes for the de-dollarization of the payment system, but also the establishment of new institutions, such as the Asian Infrastructure Investment Bank or the New Development Bank as alternatives to the corresponding UN institutions. I think we should watch this very closely.

▶ We also have to talk about the military balance of power, of course. The Americans are still dominant, but China is massively rearming. Do the Chinese want to become as strong as the USA or even stronger? And is there a military doctrine behind this?

Thomas Bonschab: China is claiming more creative power, and this is also reflected in the military build-up. However, it has to be said that China is currently still a long way behind the United States. Strictly speaking, all countries are far behind the United States.

You only have to look at the number of aircraft carriers, which are entire cities as mobile military installations. But China is catching up nonetheless. In addition, such facilities as an aircraft carrier or missile systems only work if cyber security also works. And not only the Chinese have improved in this regard, but also Russia and other countries. This is certainly a major concern for the West.

Arms race between the USA and China

▶ But back to the question of military doctrine. Are the Chinese saying that they want to catch up with the Americans in this area? Or is it perhaps also about lowering the level together so as not to spend so much money on military purposes?

Thomas Bonschab: I am actually not aware of such a doctrine. There are very strong claims, especially in the South China Sea and around the conflict-ridden issue of Taiwan. Otherwise, from a Chinese perspective, it is more of a compilation of different aspects in which one tries to gain influence on a global level.

This includes the development of hard power, i.e. military power. Above all, however, there are very innovative new methods of expanding influence at the economic level. And then there is the big issue of building soft power. But China is not doing particularly well in that regard.

▶ The West is increasingly accusing China of aggressive behavior – and here I want to take up the keywords Taiwan and the South China Sea. China claims a number of islands there for itself, and there are territorial conflicts with several neighboring states. Is China a danger to its neighboring states, and is China indeed acting aggressively?

Thomas Bonschab: Yes, I would say that neighboring countries are not worrying for nothing. China is claiming large parts of the South China Sea to secure its sea routes, and a power that has grown as fast as China's usually enforces its claims. Historically, this is not unusual.

Fighter jets near Taiwan

▶ Let's move on to Taiwan. From Beijing's point of view, Taiwan is part of Chinese territory. There are also repeated minor military attacks, such as military maneuvers in which Chinese fighter jets violate Taiwan's airspace. From a Western perspective, these are signs that China could try to occupy Taiwan militarily. Is this a real danger?

Thomas Bonschab: The message from the Chinese side is: Taiwan must be fully reintegrated into mainland China by the 100th anniversary of the founding of the People's Republic of China in 2049. Now there are various interpretations, particularly from the United States, which I think are very interesting. They deal with the question of when and how this reintegration could happen. It is very likely that it will happen. But when and how is open.

One position on this is that Taiwan's global change from the one imperial power, the USA, to the second, China, is inevitable. Whether this will happen by peaceful means and at what speed depends on the wisdom of China's political leadership. That is, it could also happen without military or other force. This interpretation is of course loved by the Chinese government.

But there is also a second one. It says that we are currently in a so-called danger zone, and that a takeover of Taiwan will most likely take place within the next ten years. Why?

Because China is currently on the decline again, has major demographic problems, major internal difficulties, environmental problems and so on. Therefore, according to the thesis, China will take Taiwan while it still has the strength to do so. These are the two competing interpretations. Unfortunately, I can't see into the crystal ball. We can only hope that, if at all, the first path will be taken.

But that would also entail a major risk for China. If it really does start a military conflict with Taiwan, it's clear how the West would react, that there would be major global political upheaval. And at the moment, China and Taiwan benefit from each other, for example, through good economic relations...

Thomas Bonschab: Absolutely. China is currently still very dependent on Taiwan. If China were to seek a conflict with Taiwan on this scale, things could quickly get out of hand. We could assume that the worst of all scenarios would occur, namely that Western military forces would also intervene, and we would then enter into a phase of maximum escalation. In this respect, we can only hope that the Chinese government weighs up the situation sensibly.

At the moment, it's a tightrope act, because there are nationalist forces at work in China itself that are calling for much more decisive intervention. And it is certainly not easy for the current political leadership to counter this.

On the other hand, China presents itself as a peace-loving country that, unlike the Western nations, has never waged wars of conquest. How does it square with this not to rule out military action against Taiwan?

Thomas Bonschab: China has no consistent history to say that it has only been peaceful. In China's 4,000-year history, there have been repeated moments when the country has made very strong territorial conquests and then shrunk again.

And what happened in the border territories is exactly the same as with all other great powers. It was not particularly nice, to put it mildly. It was associated with a great deal of brutality, exploitation and so on. As I said, it was very similar to other countries with aspirations to become a great power.

Let's talk about the relationship between China and the United States. These are by far the two leading world powers, although the Americans are currently losing influence – you described this at the beginning with reference to the economic figures. How great is the danger that this competition will degenerate into blatant hostility and possibly even military conflict? And what instruments do you think are needed to prevent that?

Thomas Bonschab: The problem is that the US and China both claim global leadership. What is particularly worrying – especially for someone like me who is primarily involved in economic matters – is that there are fatal similarities between the two countries. These include, above all, the tendency to place everything related to trade and economic cooperation under the perspective of national security.

In the past, global trade was seen as a moment of free exchange. Today, almost any cooperation is seen as an attack on national security. This is what connects the two countries. Furthermore, they are connected by the fact that there currently seems to be no fixed mechanism for communication on military and security issues. The political will for this is probably lacking on both sides.

And now perhaps the worst: neither the USA nor China has a great tendency towards self-restraint. In my opinion, the only way out of this is if so-called middle powers, i.e. powers that do not take sides with either the USA or China and fulfill a few other criteria, try to moderate this conflict.

Which middle powers could that be?

Thomas Bonschab: It's amazing which countries are on the move. I'll give you an example. Singapore – a very small country, only the size of a pinhead on the map, actually manages to take sides with the Americans and then with the Chinese, and is so attractive that neither China nor the United States can do without Singapore.

And that takes a lot of pressure out of the system. Other middle powers would probably be the United Arab Emirates or Turkey. Not Germany at the moment, though.

Why not?

Thomas Bonschab: Germany would potentially be more than a middle power, namely a leading power, almost on a par with the US and China. But only if there were a common European foreign policy position. However, there isn't one.

And it probably won't be anytime soon. So you always have to look at how strong Germany's power actually is. From a military point of view, even if a lot is happening at the moment, it is still miles away from China, not to mention the United States.

As for Germany's economic power, there has been a sharp decline over the last 20 years. German soft power continues to be considered attractive. But that alone is not enough to intervene in a conflict between the two major powers.

In addition, Germany has fallen into a trap. It is perhaps understandable, but not particularly wise, to side all too one-sidedly with the old allied friend USA and at the same time not to have any clarity about how to deal with China. Especially in economic terms, because our economic wealth is also generated in China.

I would like to follow on from that. China has been Germany's most important trading partner for years. For many German companies, the Chinese market is indispensable. Now you have just described how German policy on China tends to be aligned with that of the United States. Are Germany's own interests not being sufficiently represented? How would you describe the direction of current German policy on China?

Thomas Bonschab: As lacking in direction. In Germany, a lot of strategy papers are currently being published by the federal government or individual ministries – with a view to China or Africa. But it is not really possible to discern from them how one wants to deal with the countries concerned in the future.

I am convinced that Germany should try to remain neutral in all these conflicts and not simply implement what comes from the United States. You should and must speak clearly with China. The Chinese government can take it well. You just can't address the Chinese side as an enemy.

A central question that is also part of this debate is that of human rights. From a Western point of view, this is a very crucial point. There are many accusations against China: restrictions on freedom of expression and freedom of the press, a lack of party pluralism, penal camps for dissidents, mass executions, and so on. And of course this raises the question of whether the West can accept China as an equal partner under these circumstances.

Thomas Bonschab: The one question is whether we want to. The other is whether we have to to some extent. It is simply a fact that China is large and powerful and has also become indispensable for Germany as an economic location. But that doesn't mean that we have to put our values aside in some way and say that we are not interested in human rights in China.

As far as I know, former Chancellor Merkel always raised this topic during her trips. Then what happens when you deal with a great power happened: there is some emotion, a little smile, saying that you will remain in dialogue – and then not much happens. That is a dilemma that unfortunately I can't do much to change.

You are primarily active in business, with your own companies and with companies that you support in an advisory capacity. Is business with China really still a viable model for German companies in the future?

Thomas Bonschab: I would distinguish between large corporations and medium-sized companies. In my opinion, large corporations simply cannot avoid China. Or, as the saying goes: the biggest risk with China is not being in China. The markets there are simply too important for that. And these companies, these large corporations, all have the same problem. They get caught up in the maelstrom of the major conflict between the US and China and have to find solutions somehow.

For medium-sized companies, it is even more difficult. They feel more or less left alone, even by politicians. There are all kinds of political requirements, both from the German side, but especially from the Chinese side. For example, stricter controls in companies.

Or less personal freedom, which makes it increasingly difficult to send employees to China. On the other hand, China has fulfilled some Western demands. For example, it is possible to operate in China without a company share, i.e. without a joint venture.

That is no longer a problem. It is also much easier to get a visa. If you don't stay longer than two weeks, you don't need a visa at all. By contrast, Chinese entrepreneurs currently have almost no chance of getting a visa for Germany. So it is really difficult for German companies. They can't do without China altogether, but it has also become less attractive.

On top of that, there are the massive political cutbacks. I'm thinking, for example, of the punitive tariffs of up to 37 percent that the EU has imposed on Chinese electric cars. How justified are they in your view?

Thomas Bonschab: First of all, I have the impression that tariffs are always a poor response to the shift in competitive capabilities. We must not forget how it happened in China. We always reproach China for subsidizing Chinese companies. But in fact it was consumers who were subsidized. They were supported in switching to electric mobility.

These subsidies could also have been used to buy electric vehicles from VW, Mercedes or BMW. They just didn't exist in China because they hadn't been built yet. That is still the case today. In other words, if you make the political decision to stop climate change and switch to clean technologies, you can't just introduce tariffs because these technologies don't come from us, but from elsewhere. But that is what is happening right now.

The EU is saying that we have missed out on some competition, so we'd rather not let the others in at all. And there is another aspect. I don't know of any major power that has really changed its strategy because another economic area has imposed any tariff conditions. I can't think of an example of either the US or China doing so. In this respect, I believe that the tariffs will actually only hurt all sides, but will not bring about much change.

You described how subsidies in China affect consumers. The same thing happened in Germany. There were and are purchase premiums for electric cars. And the Americans also subsidize their economy, especially when it comes to new technologies. So are the Chinese basically just doing what others are doing?

Thomas Bonschab: Yes and no. Yes, they do it in a similar way, perhaps a little more efficiently than many European countries. But it is also a special form of industrial policy that is taking place in China, and one that should actually be addressed.

It involves the close interlocking of state requirements for financing by state-owned banks, large state-owned enterprises and the private sector. This link is very difficult for foreign companies, apart from large corporations such as BASF or Mercedes, to understand, let alone break.

And this is actually creating economic forces in China that we have not been able to keep up with in the past. We have not yet found a meaningful and effective answer to Chinese industrial policy either. I believe that this will be a major challenge for the European Union in the near future. And here, too, individual countries will probably not be able to cope. There must be European solutions for this.

Finally, let us take another look at world events. China is exerting more and more influence on international politics and is trying to act as a mediator in key conflicts. Recently, there was a meeting in Beijing of the hostile Palestinian factions from Hamas to Fatah, and before that, Iran and Saudi Arabia were mediated. And China is also considered a possible mediator between Russia and Ukraine. What can Beijing do here?

Thomas Bonschab: Personally, I wouldn't expect too much, because China alone is not attractive enough, not even for Ukraine. And Russia won't be able to rely on China alone either. China will probably always play a role in resolving global conflicts. But it will only be able to do so in combination with and with the support of the middle powers we talked about earlier.

Let's return to Russia. The West accuses China of not being neutral with regard to the war in Ukraine, but of taking Russia's side. How would you describe China's current relationship with Russia?

Thomas Bonschab: There are many reasons why China and Russia have become important alliance partners. Russia is an important partner in the Brics. Russia has many natural resources that are important to China. Incidentally, there is also a long border between the two countries and thus a need to avoid conflicts there. But all this does not make Russia and China allies.

In my opinion, they are connected, but not allied. The central market for China is Europe, not Russia. And as far as I know, China's gross domestic product is eleven times larger than Russia's. The Chinese will continue to be very careful not to lose Europe in the future – if only to protect their own economy. So, Russia is an important partner for China, but at the same time a thorn in its side.

I don't think that the Chinese government approved of Russia's attack on Ukraine. They were more likely to be annoyed about it in Beijing.

In the Telepolis podcast, Dietmar Ringel spoke with Thomas Bonschab, an entrepreneur and business consultant with 20 years of experience in China. Together with Prof. Robert Kappel, he is the editor of the blog “Weltneuvermessung”