- Communist China Survives as Other Communist Countries Collapse The West Tempted by Trade Offers Trade Opportunities Take Precedent Over Human Rights
- China Invites Trade and Investment
- Foreign Investors Get Special Treatment China Mania Abnormal Economic Boom Boeing Promotes Engagement Policy Unhealthy Economic Development
At that moment, the Chinese communists had recently lost much of their ideological appeal after the 1989 Tiananmen massacre. Within a month of the Soviet Union’s collapse, Deng Xiaoping embarked on his tour of southern China. The trip signified the last-ditch attempt of the Chinese Communist Party to survive. The end-of-the-world mentality permeated among the leaders of the Chinese communists, the last battlefront of the communist bloc.
When Jiang Zemin became the actual ruler of China, he did not try to save the Party in the way that Deng tried; rather, he built his own power base through the abuse of power and official corruption, which enabled him, his family members, and followers to pocket huge gains. Meanwhile, he also persecuted faith groups, thus bringing China to the brink of moral collapse.
Jiang Zemin and the Chinese communists are chipping away at the fundamental values of the free world.
In fact, Jiang Zemin has exploited the same human weakness—greed—both domestically and internationally. In China, he allowed corruption on an unprecedented scale to buy off CCP officials. Overseas, he offered business interests in exchange for their acquiescence. The CCP’s foreign policy was straightforward: “If you criticize any of our problems, I will shut down the China market to you and take our business elsewhere.”
However, the temptation of economic interests from the Chinese market and low-cost wages finally broke down the resistance of the free world, despite the thousands slaughtered at Tiananmen.
The free world engaged in trade with China as if it were a normal country. The West came up with a rationale to legitimize massive investment in China while doing very little in the way of promoting human rights and ending communism. One theory held was that the engagement with China will help to develop a market economy in China. With a growing economy, another theory said that China will see a rising middle class who will demand more rights and freedoms, and finally democracy. Or doing business with China will help Chinese companies adhere to international standards and establish the rule of law. Over twenty years have passed. History has shown that none of these hopes became reality. What actually happened was the free world allowed democracy and human rights to be downgraded in exchange for the economic benefits proffered by the Chinese communists.
So, China did open its door to the world. The plan was to use 1.3 billion people and its market as bait to attract foreign investment, and to use the capital and technology that the West had developed over several decades to enable the CCP regime’s economy to survive and even thrive. After 1989, the reform and open-door transition became a tactic to pull through political crises by means of economic development. A few years after the memory of the Tiananmen massacre receded, and the desire to continue international sanctions weakened, economic relations between China and the West began to heat up. Deng Xiaoping’s tour of southern China in 1992 triggered a new influx of foreign investment.
In the early 1990s, as the U.S. was China’s largest export market and trading partner, Congress had to decide annually whether to grant the Most Favored Nation (MFN) status to China. MFN status meant China must be treated equally with other U.S. MFN trading partners and get the lowest tariffs, fewest trade barriers, and highest import quotas (or none at all). It makes no sense that the MFN status was granted annually to a designated non-market economy where the state is heavily involved in subsidizing production!
However, at least the communist regime felt pressured on human rights issues in order to obtain the MFN status every year. Corporate America continuously lobbied on China’s behalf. At the beginning of the year 2000, the Clinton administration delinked human rights with trade and granted China the permanent normal trade relations (PNTR) status with the U.S. Very soon after that change in status, the worst period of China’s human rights ensued.
After PNTR was achieved, with the U.S. primarily focusing on the economic card, the international community as a whole lacked the incentive to take effective measures to protect the rights and freedom of Chinese people. In 2001, when China was admitted to the World Trade Organization (WTO), foreign investment embarked on a fast track. The economic capital infusion gave China quick economic prosperity, which helped finance the CCP’s never-ending campaigns to persecute Falun Gong practitioners. As a result, with the PNTR, China could ignore international condemnation as it launched its horrific persecution of Falun Gong practitioners. At the same time, it violated the human rights of Christian, Buddhist, and Tibetan religions and ethnic groups, especially the Uyghurs; however, observers agree that the Falun Gong persecution was the harshest.
Those who received honorary citizenship certificates from the Qinyang government enjoyed twelve special preferential treatments, or waivers from the law and regulations. Among them, one was not subject to being checked by police while at hotels, restaurants, and entertainment facilities upon showing the “honorary citizen” certificate. Unless they were under a criminal investigation, law enforcement could not conduct search of their body, vehicle, or residence. So long as the honorary citizen displays a special pass on their vehicles, there would be no fines or suspension of driver’s license for traffic violations, except for major traffic accidents. They could select any school for their children to attend. They would enjoy half price for medical treatment and free admission to scenic spots. Their spouses could attend local sports and performing arts events free of charge.
Prior to 2008, foreign-funded enterprises enjoyed generous corporate tax benefits. While the tax rate for domestic enterprises was 33 percent, the foreign corporate tax rate was 15 percent. In addition, local government often offered a considerable number of incentives, such as exemptions and deductibles for taxes and fees, together with favorable terms of land use and loans. The local governments would compete against each other by offering their most preferential policies, and sometimes, they would even waive the land use fees. With respect to tax relief, in some regions, foreign companies are exempted from corporate taxes for the first two years after making a profit and then pay half of the tax rate for three years thereafter. In others, tax exemption extends to the first five years and half the required tax for five years thereafter.
Multinational corporations are highly coveted everywhere. A popular practice with local governments is to sell the land at an extremely low price or even simply give it away. There was a story about a multinational corporation that intended to invest in a city and demanded extremely harsh conditions. If the terms were accepted, the local government would have to sacrifice the happiness of generations of local residents. But it finally agreed, and in order to get around the minimal land price as set by the national policy, the local government backdated the contract to two years before the policy was in effect.
Wall Street added fuel to the fire. Investment in China was most popular in those years. It would become a huge regret, not just a mistake, for a multinational company to overlook China and not participate in carving up that huge market.
With an injection of capital from global multinational conglomerates, together with advanced technologies and manufacturing opportunities, the Chinese Communist Party was able to shore up its economy and its crumbling legitimacy following the 1989 Tiananmen Massacre. After decades of destructive political movements, the Chinese people were poor and insecure. The willingness of Chinese labor to work under difficult circumstances for long hours at low pay and their desire for job security were very attractive to foreign investors who were looking for stable, low-wage work forces. Additionally, China’s poor human rights record and lack of independent labor unions were also advantageous. China had a population of 200 million migrant workers, who lacked residency rights and so were in no position to rock the boat with labor unions and protests. Furthermore, for a long period of time, foreign investors enjoyed creating enterprises with minimal concerns for the pollution they caused to air and water. All these factors contributed to the initial successes of the Chinese economy.
The CCP regime bet its legitimacy on its economic development, which needed western investment and infusion of capital. The CCP attracted foreign investment with its poor human rights, including that trade unions would not scare off foreign investors. Under the impression of China’s cheap labor and possibility of getting a piece of the Chinese market, many foreign investors have lobbied their governments not to touch the CCP’s human rights abuses and to delink investment with human rights. They advocate that “China is moving toward western democracy and progress is on the way,” that “economic development will bring about political reform,” and that the “Internet will bring China freedom of the press.” For their own interests, many foreign investors, together with the communists, have sacrificed the long-term well-being of the Chinese people and led China where it is. It was also done at the expense of the interests of the people in their home countries, resulting in prolonged economic sluggishness in their own economies.
Boeing took the lead in arguing that China will make progress toward democracy and respect for human rights by not raising the subject and engaging wholeheartedly in trade. The relationship between Boeing and the communist regime dates back to Nixon (and even before), who agreed on his historical trip to China in 1972 to allow the sale of U.S. aircraft. This period was before the normalization of relations between the two countries in 1979 that occurred under President Carter. Nixon was motivated by Cold War considerations and wanted to build an alliance with Beijing to counter Soviet influence. At the time, any technology transfer in those days would not have been of much concern. This strategic policy continued during the Cold War through the Reagan years. Boeing worked closely with China’s nascent aerospace industry with training pilots and assistance in improving upon China’s deplorable commercial aviation safety record, according to the article.
Boeing was a strong advocate for granting MFN (Most Favored Nation) status during the 1980s and early 90s. But after the shock of the Tiananmen Square Massacre in 1989, U.S. policy toward communist China went into reverse. Arm sales were terminated as was joint military planning. However, U.S. President George H.W. Bush believed it was beneficial to continue nonmilitary trade. Bush always made the argument that deeper economic ties with China would improve democracy and human rights.
During the following administration under Bill Clinton, “The battle over linking trade to human rights culminated before MFN was up for renewal in mid-1994. Boeing was reported to have ‘led the charge’ in rallying multinationals to ‘united against linkage,’ making the case that, in addition to the danger of lost jobs and higher prices, economic engagement was the best long-term strategy for political and economic liberalization in China. ... Throughout this period, as anti-engagement constituencies consolidated, Boeing and numerous other US firms played a key role in persuading Congress to uphold MFN.”
Later, Boeing and other multinationals played a leading role in the debate to grant China accession into the World Trade Organization (WTO). Leading the charge was President Clinton, who argued that not granting permanent normal trade relations (PNTR) necessary for the U.S. to support China accession to the WTO would cost American exports and jobs and reduce America’s influence with China to become a responsible stakeholder in the world economy.
The capital infusion allowed the economy to grow, yet it has led to an unbalanced development. The political system forbids free competition. As a result, western companies compete, if allowed, at a disadvantage to indigenous companies. So, the potentially huge market of China is mostly out of reach for them.
The communist regime uses economic assistance to African countries to achieve these objectives. Jiang Zemin provided African countries government assistance with no political strings attached. This policy was made clear in the 2006 China’s African Policy Documents, where it states, “The Chinese government, according to its own financial resources and economic development, continues to provide and gradually increase assistance to African countries within its capacity, with no political conditions attached.”
By contrast, western aid to third-world countries is often accompanied by certain requirements: reducing corruption, implementing democracy and equality, and moving towards a market economy. China’s aid makes no such demands. China is not interested in promoting democracies and market economies. In addition, China ignores other countries’ corrupt behavior, violations of civil rights, one-party states, and other anti-democratic practices. Because of China’s willingness to trade and invest with authoritarian countries, third-world countries are often more receptive to China’s aid than to western aid.
The one exception was when the United States tried in 1995, but could not muster a single co-sponsor. Later, in 2002, China’s third-world allies even voted the United States out of UNCHR, so that the United States lost its voice. No European country would challenge China as the United States did. For years, the UN Commission on Human Rights had not passed any motion that criticized China for its human rights abuses. From 2002, no country ever proposed such a motion. In this way, the Chinese Communist Party successfully bought most of the world’s governments’ support.
He continues, “In the fall of 1995, Chinese officials visited Mali, Guinea, Senegal, Gabon, Cameroon, Côte d’Ivoire, and Egypt. All of these countries “voted with China in the UNCHR April 1996 ‘no-action’ motion.”
Piccone quoted a European diplomat who told Human Rights Watch, “There are African countries who are heavily dependent on Chinese assistance, and who would not dare to say one word of criticism against China.”
In 2006, the Commission was dissolved and the UN Human Rights Council (UNHRC), which was more aggressive on sanctioning human rights abuses, became its successor. China couldn’t stop the creation of the HRC, although it wanted to.
China’s strategy to block international criticism of its repressive human rights record continues into recent times. But whereas before China mainly wanted to prevent international criticism of itself, in recent years, as it has acquired more economic and political power, it has become emboldened through promoting its obstreperous and unorthodox view on how nations should respond to human rights advocacy in their countries, according to Piccone. Like-minded authoritarian countries, who don’t want their human rights abuses scrutinized, agree with the Chinese argument that human rights must take a backseat and “respect” state sovereignty and nonintervention in internal affairs.
Fomenting division between the United States and Europe (as well as Russia and Japan) is essential to the aims of the Chinese communist regime. The diplomatic strategy of Jiang Zemin took advantage of the conflicts of the western alliance between the United States and the various European allies. After the Cold War, the West wanted to see a multi-polar world. That’s a worthy objective; however, people who value freedom and morality may weaken their alliance amongst each other by in-fighting that provide the Chinese communists an opening in which to maneuver. China has been befriending some countries while making enemies of others, taking advantage of conflicts and thereby advancing its position in the world.
China especially targeted France and Germany to break down western unity.
After the Cold War ended, France has been pursuing cultural diversity and a multi-polar world power structure. The French government strove to maintain its cultural independence, and advocated “cultural diversity” to resist America’s Hollywood culture. In the political arena, France advocated a multi-polar world and endeavored to boost Europe and its own influence as a European power in the world. Chinese media even reported that “France is the China in the West and China is the France in the East.” It was thus natural for France to become an important entity for China when dealing with the United States.
After the June 4, 1989 Tiananmen Massacre, France imposed economic sanctions against China as did other western countries. When France sold 60 Dassault Mirage fighters to Taiwan in 1992, relations between the two countries were badly ruptured.
Chinese communists started to make economic offers and took advantage of France’s political needs as well as President Jacques Chirac’s good impression of China. Secret negotiations between the two countries began in 1993. In 1994, China and France issued a joint communiqué, whereby France agreed to not sell munitions to Taiwan. In the same year, French Prime Minister Balladur and Jiang Zemin exchanged visits. In 1995, Chirac was elected president of the French Republic and continued the relationship begun before his tenure. In 1997, Chirac paid a visit to China and with Jiang signed the Sino-French Joint Communiqué, making France the first country to agree to a partnership with China. In 1999, Jiang Zemin visited Jacques Chirac’s hometown, and in return, Chirac visited Jiang’s hometown in 2000. During Chirac’s presidency, China and France upgraded their relationship from “comprehensive partnership” to “comprehensive strategic partnership.”
Jiang made inroads into France through cultural exchanges, which, given the different political ideologies of China and France, may be the best strategy to avoid international criticism. The two-year Sino-French Culture Year was his pet project. It was decided during the 1999 and 2000 exchange of visits of Jiang Zemin and Jacques Chirac that the two countries should jointly organize a Sino-French Culture Year. Both nations agreed to hold a Chinese Culture Year in France, from October 2003 to July 2004, followed by a French Culture Year in China, from the fall of 2004 to July 2005.
The Sino-French Culture Years covered almost all fields—politics, economy, military, literature, art, science and technology, education, sports, film and television, publishing, tourism, catering, fashion, and cultural relics. China and France’s trade volume in 2000 was $7.16 billion. After the Culture Year concluded in 2005, bilateral trade jumped to $20 billion. Chinese Communists’ diplomacy of purchase orders had knocked open the door of France.
In the early 21st century, China and France were already politically close. In fact, their political alignment was at its best in history. This was due to many shared political stances, such as on opposition to the war in Iraq, North Korea’s nuclear crisis, and conflicts in Lebanon. More importantly, it was due to the tacit opposition by both countries to U.S. dominance. The Chinese communists wanted to be able to challenge the United States, while France hoped to create another force of checks and balances by accelerating the process of EU integration.
In 2010 there were more than 3,800 French companies in China. The bilateral trade volume increased to $100 million a day. At the end of 2010, France had 4,121 investment projects in China, totaling U.S. $16.86 billion in contracts and U.S. $10.75 billion in actual investment. In 2002, the well-known French multinational group Alcatel relocated its Asia Pacific headquarters and R & D center to China. Electricite de France also moved its Asia Pacific headquarters to Beijing.
Because there is a lot of money involved in procuring big airplanes, either from the U.S.’s Boeing or France’s Airbus—the two main competitors for these kinds of aircraft—China was in a good position to extract favors from one or the other. The number of airplanes to purchase and the pick of the provider have political ramifications and usually are politically motivated decisions. In April 2003, China bought 30 French Airbus aircraft and another 40 in 2006, totaling € 2.6 billion (U.S. $3.1 billion). In the first nine months of 2007, China’s purchase of 28 more French Airbus was worth € 1.75 billion (U.S. $2.1 billion). As France made a good profit, Boeing anxiously sought to lobby its government, presumably, toward a more favorable attitude toward Beijing.
The above developments occurred in the early 2000s. During the period just before leading up to the breakthrough discussed above, Communist China’s underlying motive was always, with France’s help, to break the international sanctions of the arms embargo. Indeed, it worked to some degree but not to the full extent that China wanted. To be sure, on some major international issues, the French took a dishonorable path and supported China’s position on several occasions. For example, at the 1997 session of the United Nations Commission on Human Rights Commission, France, among many other countries, chose not to participate in the U.S.-led resolution that condemned China’s human rights record. As a result, the resolution was set aside as a “no-action motion,” a procedure that prevents member states at the UN from even debating a particular resolution.
On another occasion, France tirelessly lobbied the European Union to lift the EU arms embargo on China, but it met with stiff opposition from many EU countries and the effort failed to revoke the ban. In 2003, France, as the Chair of the Group of Eight (G8), asked that in addition to the eight countries, some emerging countries be allowed to attend the meeting. President Chirac sent his advisers to then-Chinese Ambassador to France Wu Jianmin and invited Chinese Communist Party leaders to attend the G8.
In December 2008, French President Nicolas Sarkozy met the Dalai Lama in Poland. China suspended its summit with the EU, at a time when France was serving as the rotating EU president. On the eve of the G20 summit in London in April 2009, the relations between the two countries took a major U-turn. China and France issued a joint communiqué, stating that France fully recognized the importance and sensitivity of the Tibet issue, reiterated its adherence to the one-China policy, and held that Tibet is an inseparable part of Chinese territory. Shortly thereafter, the Chinese president met with France’s President Sarkozy. China announced that it would send trade and investment delegations to France.
Whereas the close relationship between China and France had a strong political component, the Sino-German ties were based more narrowly on mutual trade benefits.
Mao Zedong specifically issued instructions on the relations between China and Germany. He pointed out that unlike the United States and Japan, Germany does not have a special relationship with Taiwan, and that it is unnecessary for Germany to publicly acknowledge the “one China” policy. China and the Federal Republic of Germany established diplomatic relations on Oct. 11, 1972. That was not long after U.S. President Richard Nixon’s visit to China in February 1972 that signaled a change in the way the western world would regard communist China.
The Sino-Germany trade volume was only $275 million soon after diplomatic relations were established. It then grew year by year with bilateral economic exchanges. The Sino-German diplomatic relationship warmed up parallel to the growth in bilateral trade until the 1989 Tiananmen Square massacre. As a result, Germany placed sanctions against China. However, due to the economic needs of both sides, bilateral relations began to ease in the early 1990s. In 1993, the German government decided not to approve the sale of submarines to Taiwan and put forward a China-centric Asian policy.
In 2002, China surpassed Japan to become Germany’s largest trading partner in Asia. In 2010, Sino-German bilateral trade volume reached U.S. $142.4 billion, 500 times over the level at the initial establishment of diplomatic ties. It accounted for nearly 30 percent of the total trade volume between China and the EU. As of August 2011, Germany set up more than 7,000 enterprises and 7,500 investment projects in China, amounting to over U.S. $18 billion. Germany also exported nearly 16,000 technologies to China, with a total contractual value exceeding U.S. $50 billion, accounting for 38 percent of the total technological contracts that China introduced from EU. China is one of the most important export markets for German machinery, automobile, chemical, and other key industries.
Germany’s major areas of investment in China include automotive, chemical, power generation equipment, transportation, steel, and telecommunications. Most of the areas are productive projects involving high technologies. 1,700 subsidiaries or representative offices were established in China by German companies, including Volkswagen, Siemens, BASF, Daimler, BMW, Bayer, and other large companies. They all are wholly owned companies or joint ventures in China. Germany also participated in the Shanghai subway project, stages I and II, the Guangzhou subway project, Xiaolangdi and the Three Gorges water conservancy project, the Jiangsu Tianwan Nuclear Power Plant, Nanjing YPC petrochemical integration projects, among other projects. China imported electrical and mechanical equipment, railway, automobile and shipbuilding and other transportation equipment, chemicals, optical, and medical equipment from Germany while exporting electrical appliances, machinery and equipment, textile raw materials and manufactured goods, chemicals, and toys.
Compared to other European countries’ involvement with China, Germany stands out in a number of ways. Germany is the country with the largest technology transfer to China; Germany had the most investments in China; Germany also provided the largest development assistance to China among the European countries.