TO BE RICH IS GLORIOUS

The quote as the title of my thought is not from an ardent capitalist, but from a hardboiled Chinese communist under Mao for nearly thirty years- Deng Xiaoping.

The sum and substance of Chinese rise of wealth in the world comes our as an essence out of a single lines. Rest are gory details.I think, 

The Chinese Communist Party must be waiting for the day for Mao to pass and when he did, China shed its Red Book economics under Mao that has been no good for Chinese.

The once despised private enterprises made a comeback. Street vendors reappeared on city streets after decades of absence. Profit ceased to be a dirty word. In a bold experiment some state-owned farms no longer had to remit all their profits to the government and were allowed to retain profits.

Deng Xiaoping, once Mao’s right-hand man, announces a new basic policy of Reforms & Opening. China was changing far too rapidly and in a way that western world was awed.

That opened the Chinese economy for foreign investments and that too at terms that were too lucrative to ignore by the profit mongers of the west.By late eighties, China was exporting nearly 35% of its produce, which was previously unthinkable & it was largely due to a wave of cheaply produced textiles to begin with. 

As trade opened up, foreign investment poured in the “special economic zones” and special concessional treatment was given to foreign investment that none could ignore.The number of special economic zones rocketed to 2,000 by the end of the millennia. 

With foreign investment on the rise, the economy grew around nine percent plus a year with help of private enterprise while the inefficient state-owned enterprises languished and faded and with that came the end of stranglehold of regional bosses, who were either punished by jail or death in the name of corruption. 

Wealth creation comes with its own downside.

Chinese were showing the world that how wealth is created and how to build a reserve that stands at US Dollar close to four Trillion US Dollars at mid March 2020.

By end of 2012, China overtook Japan as the second largest economy of the world and just behind USA. With such wealth creation in a span of just three decades, came in the rogue & surveillance capitalism that embraced a single motive- profits. Nothing else mattered.It gives jitters to USA, as China is in a position today to manipulate its currency and can drop value of US dollars worldwide by devaluing its currency without taking any dent to its local economy by just liquidating a fraction of its currency reserve.

With wanton profit motives came the desecration of nature, the rivers in China got so polluted that one could fall sick to the level of hospitalisation by just taking bath in it. The sky became red to yellow to any other colours except blue as we know. The smog and smoke were often so thick that sunrays could hardly reach the earth for days. World started taking note of that, but did nothing.After all, Americans were also interested in profit repatriation from China by doing nothing except investing and giving some intellectual properties to bolster their profits in an easy way by shifting jobs to China and other places at fraction of the cost in manufacturing and in IT sectors. 

Makes sense for a Capitalist society that turned blind to national priorities.Europe also turned a blind eye to these woes of China that were considered local issues. Profits sat on top of all other priorities for everyone in the world in last thirty years.Chinese were the happiest as they made huge amount of money that was unthinkable even three decades back. 

Today China produces two Billionaires every week- a number that is not going to get surpassed by any country in near future.This was not only the power of capitalism, but was abated by reckless state sponsored rogue capitalism for the economy and Communist iron rule for the people, who are still treated with as much contempt as it was during Mao’s regime. 

Profit and wealth creation was the only motive.However, it never ended there and it bolstered to old Chinese obsession of expansionist ambitions. To attain that goal in last twenty years, China carefully picked on vulnerable nations, disturbed nations and corrupt nations to ingress and expands its goal.They started with toxic debts with huge bribe as bait to political class of the country to accept the terms that can never be fulfilled by any legitimate government under any thought and thinking of any political dispensation. 

Countries after countries fell to the game of Chinese Checkers and pawned their country to Chinese for a song.Asides, many African nations are also debt trapped by China and are on verge of collapse to cede more than what they bargained for. Notably are – Angola, Ethiopia, Kenya, Republic of Congo, North Sudan, Zambia, Cameroon, Nigeria, Ghana and several others.

The list is equally appalling in South America and in Asia. It is a frightening situation.The menace of falling into Chinese debt-trap was real, and it is happening. Africa is slowly being tied to the yoke of Chinese debt. China ensured its future wealth in third world.  

Some sold their country for a port, some for a railway line, some for infrastructures and some just for sake of personal wealth where leaders pawned the country.And to get their global influence complete in Asia and in Europe, they invented the OBOR initiatives and countries after countries along the roadmap took the bait of development and countries on both flanks of the route gladly accepted to collaborate on a hope of development - the Chinese model of development. The country those are in debt trap of China mainly just due to OBOR initiative are Djibouti, Kyrgyzstan, Laos, the Maldives, Mongolia, Montenegro, Pakistan, and Tajikistan.

Shylock was a hated character created by Shakespeare as a toxic money lender that demanded his pound of flesh instead of an ounce; China took cues and asks for tons of it. This has now led many countries to go for a debt swap by pawning infrastructure rights to royalty in several countries for even fifty years. That is what sustains wealth creation.  That is wealth creation model of China that professes to be communist country for political convenience & advocates Capitalism for personal convenience for the political class.

While on external front China was on a mode to cherry pick weaker countries that were willing to toe its line, internally China was creating economic zones on standalone basis that were self sufficient in terms of their requirements from start to finish and build a formidable supply chain in an containment zone with minimum cost with scant regards for copyright and IP rights.World loved China for its cheap products that were distributed & dumped around the world at significantly less cost that developed country could produce.Made in China has arrived and they no longer needed to surreptitiously write Made in PRC to avoid the tag of “Cheap Chinese” product. Chinese products were main-stream and acceptability was high.

Today, China manufactures all of World’s 80% Air-conditioners, 70% Mobile Phones, 65% Shoes, 74% Solar Cells, 60% Cement, 45% Ships, and 50% Steel, 40% Laptops (Surpassed by Taiwan that China claims as its own) and even more than 60% of high end fashion brands.China today produces today nearly one in three cars made in the world and it today produces more than 50% of all Electric Vehicles in the world and a technology that is still new in the world.Economies of scale & reverse engineering alongside a formidable supply chain and logistic support, China had the unique proposition that was unmatched by other to match the price of global companies that helped China set up with technology and skills, today they find no match in pricing to compete with them.

Bolstered with such large wealth creation, China took fancy to pick up companies in developed world where they were finding it difficult to enter due to several concerns being raised on practices followed.In the process they surreptitiously entered Western Europe and America and started taking over languishing and sick companies from owners/ shareholders/ governments who were finding it difficult to difficult to run them profitably due to cheaper Chinese products. What an irony- they sold it to the same fellows who squeezed them out of business.It helped them earn the moniker – Factory to the world.

China has ingressed all over the world and largely due to myopic leadership over last forty years, out of that first 20 years China allowed FDI at liberal terms and promise of cheap labour, as a result any company that was who's who in USA had a base in China & Europe followed USA. .Last twenty years, China has started nibbling companies in USA and in Europe. Earlier it was low tech manufacturing and companies like that and later high tech and cutting edge.Similar things happened in Europe and countries like Italy, Spain, Portugal and Greece (PIGS, as I call them) became a pawn of China and there is no way that can be redeemed unless by expropriation and takeover by government or by EU intervention.

I do not think that EU will salvage these PIGS again. They will have to learn to carry their own cross to become a survivor. Being a crusader for EU causes is a long shot for them.USA realised it late and then in last ten years or so, they started putting restrictions and scrutiny of all FDI in USA by China under a PRESIDENTIAL ORDER to put brakes on China’s expansionist ambitions.But by then significant damage was done. 

China has acquired several US companies with controlling interests.Europe followed USA and the damage there was far more extensive, including in Germany and England. Germany has now a special board to vet Chinese FDI and they filter it with national security perspective and interests with a fine tooth comb.

But damage is done.

Now for a brief Indian perspective of China and Chinese to understand the haplessness and desperation a “Competitor” can have.Indian Business houses were prodded by some state Chief Ministers, especially Modi,  in early part of this century and that continues even today- urging China to invest in Gujarat & and in India- as a result, 30% of valuation of Gujarat based companies listed on stock exchange has Chinese shareholdings ranging from 10% to 40%. Time would replace the Indian Promoters by Chinese Promoters & given the recent kneejerk reaction of India, sparked by a 1% share bought by Bank of China in HDFC Bank, may take many such decisions to international arbitration & Courts. 

Ring fencing an interest as an afterthought has its serious downside. India never learns a lesson & right from 1962.

Today, just like UN- WTO is also heavily influenced by China. After all, their investments through toxic debts are bound to pay when one has half of Africa and South America and major part of Asia indebted to them. Voting do matters in these bodies.

Chinese are showing the world that how wealth is created and how to build a reserve that stands at US close to four Trillion US Dollars.US can only print more Dollars with consequences. 

China have direct control on most popular emerging neo business names in India. Government has only abated that in the name of FDI.Today,the biggest payment platform Paytm is Chinese owned, Big Basket is Alibaba owned and biggest learning app for students in India Byju's is owned by Ten Cents. All are Chinese. And more than 50% of Smartphone sold in India are made by Chinese companies under making in India initiative, rest are direct imports.

To think that China only supplies cheap plastic dolls and cheap mobile in India is a topic for rustic and uneducated fools to discuss and burn effigies on roads by getting paid less than two dollars for a bravado and exhibition initiated by an equally vacuous political party. .

The initiated ones in India are definitely worried by this Chinese assault by FDI routes that can only be steered through tight policy guidelines that ring fences national interests.

If not done in the right earnest then, India is almost ending like Italy in Chinese hands unless we realise it quickly and start evaluation FDI much more qualitatively and specific. It may hurt bilateral bonhomie of a few political “leaders”, but would help the country salvage its leftovers.  Indian political dispension must realise this very quickly before the fangs are put in much deeper. And Chinese Dragons have very sharp teeth and an un-satiated belly.

Most of Europe and USA doesn't have problem of geographical boundary and occupation dispute, but India has and major ones at that from East to West and also from North to South with China.If it’s not OBOR, then it is the policy of STRING OF PEARLS in south end of India and in the oceans surrounding India. 

I am leaving this thought for a political thought on bilateral.

So China became wealthy by its sensibilities by dumping ideologies and by embracing for profit motives to suit its conveniences.They key to its success had been mass production & reverse engineering and dumping it to the world stifling local industrial equilibrium.

Where China gained most over the world is its political stability as a key factor, unlike in a multi party democracy where are equal voice of dissent and consensus that only consumes time over a decision. China has none like that.

Industrial network clustering and world class infrastructure that they have developed China in a world powerhouse that is matched today by none.And to top it all, The Chinese government helps the industries to the hilt as needed.

So post CORONA, world would see a new world order that could mean demolition of several world order, Winding up or at least rewriting the rules of many World Agencies like WTO & UNO and its arms, if they survive at all the skewed bi & multilateral relations in an emerging world order where political dispensions would find it hard to convince its citizen about a deficit- TRUST.

26 Apr. 20

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