As has become very clear in recent years a Cold War is going on between the three superpowers – USA, China and Russia. The struggle for world power is immense and while the USA still has by far the largest military power China is catching up.
What is perhaps even more important than these military chest-beating exercises are the economic activities from China. The Belts and Road project is in full swing and while this looks rather benign on the surface this initiative allows China to create world power without the need for military confrontation. After defaulting on debts countries with projects funded by China are forced to hand over assets to China which allows it to expand its political footprint.
China has created major footholds all around the African continent. While most of the world hasn’t bothered too much Africa, beyond the obligatory aid, over the last three decades China has invested heavily in Africa. Back in the late 1980s companies that were at that stage unknown to me – like Huawei and ZTE – bought lots of our African reports, way before western investors became interested in our telecommunications research on this region.
Through these investments China now wields significant power in this region, a region that is going to become increasingly more important to western societies for many different reasons. Apart from economic neglect by the West, significant underdevelopment has resulted in often unchecked epidemics which could quickly spread around the globe and, with most of militant groups such ISIS and Al Qaeda now removed from places like Iraq and Syria, they are regrouping in Africa and from here they are yet another threat to the rest of the world.
Despite these problems, Africa is the last global economic challenge and there is much to gain here (not just economic development), and China is well-positioned to become the major beneficiary once this market takes off.
Back to the confrontation between China and the USA ………
China has moved up the value chain as Chinese President Xi mentioned when he launched his ‘Made in China 2025’ policy. It is fascinating to see the rapid growth of the Chinese digital giants Baidu, Alibaba, Tencent, Xiaomi (Team BATX). They are now well and truly challenging Team GAFAM (Google, Apple, Facebook, Amazon, Microsoft), which better reflect the previous FAANG Team (Facebook, Apple, Amazon, Netflix and Alphabet’s Google).
Collectively, the members of both these technology groups are digital innovation leaders, one group in China and the other one in the West. While they cater to the needs of individual users through their various offerings they are also leading the way for revolutionising industries and sectors through their products and services.
However, some of the growth of the BATX group is also based on unfair competition, as this group has been actively assisted by the Chinese government for example by preventing members from the GAFAM group from freely operating in China. This is part of the overall China trade policy, whereby China curtails western companies by limiting their access to the Chinese domestic market; and trade deals with China are made conditional on transfer of western (American) technologies and intellectual property to Chinese domestic partners.
At the G20 conference in Buenos Aires, America has clearly indicated that it no longer accepts this behaviour – this is partly being allowed because of the special conditions that China enjoys as a developing country within the WTO. I totally agree that some drastic changes are needed here on the part of China.
Back in 2010 when China was finally allowed to become a member of the WTO I argued that there was no need for the other members to look after China as this country was very capable of looking after itself. The fact that one of the outcomes of the G20 is a reorganisation of the WTO does now belatedly reflect that. In our current political environment, it will be a mammoth task to get any global consensus of what reforms are needed and what eventually will be implemented.
Back to the digital giants. Both teams are now waging a war of technical know-how and data access on a global scale. While China has an active international policy – also linked to the Belts and Roads Project – the west is falling behind, while China’s economic developments are actively supported by the Chinese Government, under neo-liberal policies in the West governments have been retreating from this area, leaving it largely to private industry to look after the economy, the USA is perhaps the worst case example of this policy.
This is particularly noticeable in large scale infrastructure developments such as broadband, smart energy, smart cities, affordable housing and public transport.
Lack of good government leadership has also led to xenophobia; an aging West heavily relies on migration to bring in new talent and provide labour for a range of sectors that are experiencing large scale job shortages. As we recently reported, the ICT sector especially is in desperate need of more talent – they are need of millions of new ICT staff. A major contributor to this problem is the wrong assumption that migration stops are needed to protect some of the old-world jobs and businesses.
Assisted by government vision and leadership, China has set its goal to become a world leader in artificial intelligence (AI) and other cutting-edge technologies. Its 5G technology is the best and most cost effective in the world and by boycotting the use of their technology in countries such as Australia, New Zealand and America it will be interesting to see what sort of consequences this will have for innovation and technology development in those countries.
BATX companies – not hampered by any of the restrictions the GAFAM team encounters in China – have gained a strong foothold in the American, European and Asian markets. In China these companies have now incubated more than 1,000 new ventures and are active in a total of 20 different sectors. Their operations facilitate both online and offline offerings and are rapidly expanding in the electronics hardware industry. Their annual growth is north of 50% and they continue to move into other sectors.
Apart from a well-functioning global trading system, both countries also heavily depend on a globalised and interconnected world and they should be far more serious about collaboration in relation to cybersecurity, and such discussions should most certainly include Russia as well. This is essential to avoid the current outcomes of their zero-sum game. For a truly multilateral system to function Russia and China will also have to reform their institutions in order to create an open market system, far more transparency, and better rules for oversight.
And as this is not likely to happen anytime soon this will remain a major stumbling block in international relations for many years to come.