By: Denise Simon | Founders Code
Decoupling the United States from China is a convoluted and complicated process. Some lawmakers make it sound easy and say we should just terminate manufacturing agreements by U.S. companies and bring it stateside. Ah, but hold on… it is important to know some other details that lawmakers on both sides of the aisle are not telling you.
Consider the items below:
1. A Commerce Department official warned Congress recently that China is raising billions of dollars in U.S. capital markets and the activity could undermine American security.
Nazak Nikakhtar, assistant secretary for international trade at the Commerce Department, testified last month that Chinese companies raised $48 billion from American capital markets from 2013 through the end of last year.
Ms. Nikakhtar told the congressional U.S.-China Economic and Security Review Commission that 172 Chinese companies in September were listed on the three largest U.S. exchanges — Nasdaq, the New York Stock Exchange, and the NYSE American — with a total market capitalization of more than $1 trillion. More here.
2. Charles Lieber, the chair of Harvard University’s Department of Chemistry and Chemical Biology, and two Chinese nationals who were researchers at Boston University and a Boston hospital were charged by the U.S. Justice Department with lying about their purported links to the Chinese government. But hold on, it is much worse. China has a real impact on all levels of the U.S. education system. The Senate Permanent Subcommittee on Investigations issued a 96-page report describing the Confucius Institute and how those agreements work with domestic universities. Further, major universities failed to report the other monies they receive from China among other countries. It is shocking how foreign money has infiltrated the U.S. education system and to learn which country does what and how much, click here.
3. China launched its Long March 5B rocket into space. This is an effort by China to build a modular space station. It did, however, fall out of orbit falling for the most part into the Atlantic Ocean off the coast of Africa near the Ivory Coast. Additionally, as China continues to launch at least 12 more space operations it already has landed on the dark side of the moon. China and Russia are in fact collaborating on lunar operations including shared bases. Russia’s operations coordinating with China are centered and funded by Roscosmos for Space Activities and the Skolkovo Foundation. This is the foundation where Hillary Clinton created U.S. technology (Silicon Valley) and Skolkovo via the Clinton Foundation via a major donor known as Viktor Vekselberg. This is the other scandal of technology transfer(s) to rogue nations.
4. We are already somewhat versed in Chinese complicity in the pandemic and the World Health Organization but let’s go to the World Bank, shall we? As of early 2019, China was sitting on cash reserves of some $3 trillion. It is the world’s second-largest economy, behind the U.S. It directly lends more money to other nations each year than the $2 billion or so it borrows from the World Bank annually. The World Bank, based in Washington, D.C., was established after World War II to help European countries rebuild. Its mission has evolved over the years and is now to finance development in low- and middle-income countries with the goal of eliminating extreme poverty.
“From a pure economic vantage point, there is no good reason for the World Bank to continue making loans to China,” says Eswar Prasad, a professor of economics at Cornell University.
“The Chinese don’t need the money,” Prasad says. “There is a glaring optics problem.” He adds that the argument could be made that the money lent to China could be put to better use elsewhere.
And it’s not as if the World Bank has an infinite amount of money to parcel out. Its lending budget, drawn from reserves, donations and the interest it earns on capital, is limited. So a dollar lent to China is a dollar that is not available for a project somewhere else in the world. The Trump administration, which regularly beats up on China, accusing it of manipulating global trade rules for its own benefit, has blasted the World Bank for lending too much to China.
Prasad says the World Bank’s lending to China is becoming “untenable” and will have to stop fairly soon.
Bert Hofman, the World Bank’s country director for China, says the amount of money China is borrowing each year from the global bank is just a small fraction of what the country is investing each year in domestic programs. And he believes that motivation for China’s borrowing goes beyond money.
“The reason they still borrow is because they feel that the expertise of the World Bank is valuable to them,” Hofman says.
World Bank loans come with advisers and auditors who help implement (and monitor) bank-funded projects.
China gets access to international experts. The World Bank remains engaged with China and is able to see how new projects play out in this booming middle-income country. Hofman sees it as a win-win.
Prasad agrees that there are still some good reasons for the World Bank to remain engaged with China. Many of the bank’s loans to China are for projects addressing climate change and mitigating pollution from the country’s booming factories.
“The risk the World Bank faces is that if it only lends to very poor countries, it might end up not having much of a role to play in the large, fast-growing emerging-market economies,” Prasad says. “So the World Bank, in a bid to remain relevant and push its agenda on issues such as climate change and social development, has continued to lend to China.” More here.
*** The World Bank said its board adopted a new plan to aid China with $1 billion to $1.5 billion in low-interest loans annually through June 2025, despite the objections of U.S. Treasury Secretary Steven Mnuchin and several U.S. lawmakers.
Mnuchin told a House Financial Services Committee hearing that the Treasury’s representative on the board had objected to the plan on Wednesday, adding he wants the World Bank to “graduate” China from its concessional loan programs for low- and middle-income countries.
The five-year lending strategy plan was published on Thursday afternoon after the World Bank’s board “expressed broad support” for the multilateral development lender’s engagement in China’s structural and environmental reforms.
The World Bank said its lending would decline over the “country partnership framework” plan, in line with reforms agreed under a $13 billion capital increase agreed in 2018.
The World Bank loaned China $1.3 billion in the fiscal 2019 year ended June 30, down from about $2.4 billion during fiscal 2017. The new plan calls for lending to “gradually decline” from the previous five-year average of $1.8 billion.
“Lending levels may fluctuate up and down from year to year due to normal pipeline management based on project readiness,” the World Bank said in its plan.
*** So we have a collection of reparation options due to the pandemic when it comes to China, we have them building a space battlefield, we have corruption within China and now we have the U.S. at major odds with the Chinese Communist Party who is in violation of the One Country, Two Systems Act of 1997 with regard to Hong Kong. Secretary of State Pompeo declared to Congress that Hong Kong was no longer autonomous with The CCP in control which is correct but this will spark continued hostilities between the two nations even as naval conflicts continue in the South China Sea.
None of this will be easy but the reader should know more details to assess what may be ahead in global relations.