China is the world’s biggest emitter of greenhouse gases. China is the world’s biggest manufacturer of solar panels. China has the world’s biggest population of any country. The list goes on. Whatever China does affects the world. We won’t solve the climate crisis without China.
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Chinese Communist Party 100 Years
China is frequently in the news.
Last month the Chinese Communist Party celebrated its 100th Anniversary with a defiant speech from President Xi Jinping.
“Beijing will never allow any foreign force to bully it, and anyone attempting to do so will find themselves on a collision with a great wall of steel forged by over 1.4 billion people.”
“China won’t accept ‘sanctimonious preaching’ from others”
Whatever China does affects the world, so what’s going on? This week I’ve been able to talk to China specialist Jason Szeftel. I started by asking how he became involved in China.
Jason Szeftel Interview
Anthony Day:
I'd like to know a bit more about your background with China, but having said that... That's as important as part of the interview probably. But anyway, where does your interest in China stem from and how have you been involved?
Jason Szeftel:
Oh, wow, yeah. So the interest goes back basically as far as I can remember when I was really young and probably around 9/11, probably the early wars in the Middle East and the 2000s, I was thinking, "Wow, the United States and the United Kingdom are willing to go mess up whole regions of the world. They don't seem to know what's going on in these places." And I just remembered in the back of my mind, I was thinking, "Wow, this giant country is modernising and entering the modern world." And I just became fascinated by it.
Jason Szeftel:
Peking University
So over 10 years ago I studied Chinese in college. I got a scholarship to study in Beijing in Peking University. So I was there. And that was actually where I was doing... It was the early 2010s so sustainable development was very big in the universities. It was a big topic after the financial crisis about building back in a more resilient fashion. So I was very much influenced by that.
Jason Szeftel:
And yeah, there I was studying Chinese transportation systems, agriculture systems, energy systems, all that stuff. And then I was in and out of China from 2010 to 2015, and then I've been actually involved in global development around the world since then. I was a development lawyer and I worked in global administration stuff. And that's where it took me.
Anthony Day:
Greenhouse Gas
All right. Good. Well, I did send you a few questions or a few headlines. And my angle of course is climate change. And with China being now the largest emitter of greenhouse gases, what China does is going to determine whether we actually solve the climate crisis or not. On the other hand, you've written an essay which suggests that the Chinese economy is in trouble and I don't know whether that's going to actually affect its plans. I don't know whether that's at the back of them aiming for 2060, rather than 2050 like the rest of the world. What's your take on that?
Jason Szeftel:
Chinese Economy
Yeah. So the Chinese economy, one thing that's always important to keep in mind is that the Western world offloaded a lot of its climate burden and environmental challenges to China during the 1990s and 2000s. So all the most polluting industries in the world set up shop in China. And that's actually the original reason why things like rare earth metals and all that is done and processed in China.
Jason Szeftel:
China Decarbonise
So China's challenge in trying to decarbonize and just transform its economy is very, very, very tough. It really is. And it's the sort of thing that would have been much easier maybe in 2008, 2005, 2011 even, when there was a lot more capital sloshing around the country. Now things are much tighter. So it's a real challenge transforming the grid, transforming the automotive sector, cement, metals, everything. It's huge.
Jason Szeftel:
Emissions Offshore
And that's something... So I live in California. I always think it's so amusing people in California love to talk about our green bonafides, but a lot of the things that we did to improve the world we just sent to China. We don't do recycling in California. We just send it to China. We don't do a lot of cement. We don't do a lot of... All this stuff, it just happens in China. So the rubber hits the road there, right? You have to actually get rid of it and improve it and transform the processes.
Jason Szeftel:
Low Cost Manufacture
And will China do it? It's kind of a challenge because they have these industries due to cost. So the cost of these industries, they're cheap. Their ability to produce all these goods and services just very cheaply is what got them their position. And so if they want to transform everything, do all this research and development, it's going to raise the cost. And that's something they're looking at very, very heavily.
Anthony Day:
Okay. Well, if it's going to raise the costs, but if they've actually cornered the market by taking things away from the US and other industrialised nations, are they still going to be able to control the market and therefore pass those costs on?
Jason Szeftel:
Humanitarian Values
Yeah. That's the real challenge. There looks to be a lot of suggestion in the West that that's probably not going to happen and China seems to be realising that. So the solar panel industry is just a great example. So I think 80% of the panels installed in the US are from China. 66% I think of all panels manufactured are in China. And the green energy supply chain in China is one of those places where a lot of our values intersect and conflict. Humanitarian values, forced labor... Because everything built in Xinjiang is infected with forced labor. It's a very unsavory sort of thing, but it's known and it's definitely true. So do we expand panel production at the expense of all the people in Western China?
Jason Szeftel:
Re-shoring Industry
And these values are really conflicting at a time when economic nationalism is really on the rise all around the world. So will we expand panel production, turbine production, but give all of that to China during the process? It doesn't seem likely. It seems like there'll be a push to have a lot of the industries more nationalised, more regionalised, especially when most "green jobs" in the US for example are really construction installation jobs that aren't deep long-term things. It helps you with the build-out, but then there's no continuous industry behind it if you don't have the entire supply chain or some part of the supply chain at least in your country.
Anthony Day:
So do you therefore think that the US will attempt to pull back some of the basic manufacture? And are there other signs that Biden has got that in view at all?
Jason Szeftel:
Biden Economically Nationalist
Yes. I think that's definitely the case. I think that both Trump and Biden are far more economically nationalist than any president we've seen this millennium. And Biden is actually even more of a economic nationalist than Trump. We don't hear about it as much because it doesn't quite fit the narrative of these transformed policies, but things are really heating up on that front. There's so many Chinese companies and so many industries that are being targeted. And you can target Chinese industries for any reason at this point. And it is cover to both bring manufacturing back to the United States and to target various parts of the Chinese economy and their technology base. So they're using it. They're definitely using it.
Anthony Day:
Rare Earth Metals
Yeah. Okay. Now, one of the things that I've read about rare earth metals is that the major supply... I mean, there's a lot in Africa, but there's a major proportion of the supply in China. And one of the reasons why it's in China and that the mines in the United States have been closed down is the production of these minerals is an incredibly polluting process and nobody in the United States wants to take liabilities for the pollutions involved. The Chinese have a different attitude, I believe, and they will tolerate a certain amount of pollution. Is that your reading of things?
Jason Szeftel:
Offshore Processing
Yeah, that's true. The rare earth industry is one of those industries that is... Particularly the processing of rare earth metals is very, very environmentally destructive, damaging, and that was... Well, to China, especially in the nineties and 2000s, it was willing to take that industry and didn't really care about what happened to the environment and it really cornered the market. And the US was willing to offload it for a cheaper cost product and without any of the environmental damage. It's like what we were talking about earlier, where a lot of the ways we improved the environment was just by sending the problems elsewhere.
Jason Szeftel:
Strategic
And that's how it got to China right now. And then China in the last 10 years has really used rare earths as a strategic sort of tool. Once it realized it had this market, realized how important it was for US military systems, electronic systems for Japanese systems, it started to use it.
Jason Szeftel:
And the truth is I think the rare earth thing is kind of overblown at this point. The real thing is they're not actually rare. They're everywhere. They're all over the United States, they're all over Western Europe. The issue is just this processing issue. It's just that the damage and the cost of doing it... And the US Defense Department is now pretty heavily invested in trying to reshore, onshore this industry. And so I think in the next five years it probably will be... There'll be a much more diverse supply of these metals.
Jason Szeftel:
Defence Angle
Because again, they're not hard to find or to mine. It's just nobody wants to do the dirty and actually process them. So there's I think two major mining operations that are coming online in the US maybe the next two, three years, one in California, one in Texas, and they're still sending the different metals to China for processing, but we'll see. You probably need some improvements in the actual processing technologies or you'd need some sort of leeway from the EPA or something. Most likely you'll see a Defense Department sponsored, "Hey, we need these. It's a little bit more polluting, but the strategic value is just too great at this point."
Anthony Day:
Okay. Well of course this reshoring of rare metals and other manufacturing processes is going to affect the economy in China. And how do you think China will react to that?
Jason Szeftel:
China’s Reaction
China's got a lot of challenges with this issue of just industries that it is really dependent on for its employment, for advancing up the value chain, the global value chain in all sorts of industries. It's very dangerous if all of these industries start to move away from China. And there were a couple of things pushing in that direction, even before COVID, even before all the nationalism. There were higher input costs, so there was higher wages, even higher energy prices in China. All of that was pushing some production mostly towards Southeast Asia, towards Vietnam, stuff like that.
Jason Szeftel:
But the pressures now, these strategic pressures, competitive pressures, the animus against China, all of this is moving things much quicker than they would have. And also obviously the COVID fears about production, localised production, and having to get masks from China and all of that. So China's very worried about this.
Jason Szeftel:
Keeping the Chinese people busy
The challenge for China is that it both needs all the industries it has, and it needs the industries of the future. Because there's 1.4 billion people. You can't automate everything because what on earth are these people going to do? Well, maybe they're going to start going on long walks together, millions of people through the countryside, right? This is a nightmare situation for the communist party. So it really wants all the old industries and the new ones. And that's tough. That's a tough sell for the rest of the world. "Well, what are we all supposed to do?" And China's lost a lot of its ability to slink in the shadows like in the 2000s and mid 2010s. It was still able to do its thing. Now there's so much focus on it that it's really struggling to find out what to do.
Anthony Day:
Secrecy
One of the criticisms that came out at the time when COVID started and the outbreak was identified in Wuhan was that China buries bad news. China has an obsession with secrecy. Now, of course, you're aware that there's been a problem with a nuclear plant in Taishan, which is very significant because... For Europe anyway. Because we are building three plants to that design. They're not completed yet. But if the Taishan plant is defective, then there are going to be an awful lot of questions asked over some very big and expensive projects. Now the engineering company, the European engineering company which is involved, has gone through in some detail and said this is a routine operation and there's nothing to worry about. But the trouble with China and its attitude to secrecy means people are not going to believe that, doesn't it?
Jason Szeftel:
Taishan Nuclear Plant
Yeah, I think you're right. The problem in Taishan was very uncomfortable for a lot of people and definitely for the joint venture partner, the French energy company. When you're dealing with some of these secretive Chinese state companies and you have deals with them, it is very difficult to coordinate messaging, to get everyone on the same page, because often the Chinese are focused on their domestic market. And by that I mean they're focused on convincing the Chinese people that everything is good, things are getting better, and that this... Political scientists like to call it performance legitimacy.
Jason Szeftel:
No Democracy
So China doesn't have electoral processes, doesn't have democracy, but it can say, "Hey, we're bringing the goods." And anytime things mess up, whether it's COVID, whether it's the Wuhan lab or whether it's a wet market or whatever, whenever something goes wrong, China's communist party looks incompetent. It looks weak. It looks buffoonish... Or even the stock market problems in 2015 in Shanghai. All this is very dangerous for a party that relies on this perception of its extreme competence. It's the legacy state of a 5,000 year people, right? Civilisation has the wise forethought of generations behind it, right? There's a whole narrative and there's a whole very important image that you don't want to break. And it is a real challenge when, like you said, these technologies... I think it's a Franco-German technology at the heart of the new-
Anthony Day:
Yeah. It's French.
Jason Szeftel:
Yeah. It's a real challenge. And the nuclear industry doesn't have economies of scale. Every single project is a massive capital project. You really don't want this in that industry. Of all industries, you don't want it. It has so many problems. So yeah, it's a challenge. We'll see what they do with the disclosures and that, but it looks like the problem wasn't terrible so that's good. It actually doesn't seem like it was that big a problem.
Jason Szeftel:
Joint Ventures
But I think you're really right that after Fukushima, after all these things, then after Wuhan with the sense of secrecy, this opacity, it's very uncomfortable for many people and discomforting. And I think it's just going to get worse. There's a lot of joint companies in China. For a long time they were forcing companies to work with a national partner so China would get the technology, would get the experience. It would be able to move up the value chain. And that already was having problems. But if you already have this, if you have this greater opacity and you have more intrusions of the actual communist party in these companies... For a long time the party itself was behind the scenes. Now it's really coming to the fore in a lot of companies. There are party cells, party groups, party meetings, party committees. And it's a very different world in a lot of ways. So I think a lot of companies aren't quite sure what they're dealing with even.
Anthony Day:
Opposition?
Right, right. You say the government suffers loss of face if we have things like the Wuhan problem and other things like that, but is there any credible opposition to China? We see it as a one party state. I think it is, isn't it?
Jason Szeftel:
[crosstalk 00:15:21].
Anthony Day:
Nobody's going to overthrow the government, are they?
Jason Szeftel:
No Opposition
You're a hundred percent correct. There is no functional opposition to the communist party, but what they fear isn't another party. What they feel is mass chaos. Mass chaos, like the sort of stuff you need apocalyptic Hollywood movies to envision. That's what they're really fearful of. And that's what all Chinese states, Imperial or otherwise, have always feared. So that's why they actually spend more on internal security than they do on external defense, on their military. They're spending more trying to make sure no Chinese people rebel or people in Xinjiang or Tibet or wherever, than they are preparing to fight the US military.
Anthony Day:
Surveillance
That's incredible. Really is, isn't it? Yes. Yes, I've heard they've got cameras. They've got nearly as many cameras as we've got in the UK and people have got identity cards of course. Well, the deal is they get a good standard of life if their government do what it likes. That's for everybody except the minorities, I believe.
Jason Szeftel:
Minorities
Yeah. Since the Qing dynasty the Chinese government has been more or less a multi-ethnic empire under various things. That was the official ideology and the minorities they've tried to bring into the fold, but minority peoples in China are basically poorly assimilated conquered peoples. That is the more true way to look at it. The minority rhetoric is stuff that's from old 20th century socialism, communism, and those battles.
Jason Szeftel:
But yeah, in general the Chinese people... And really a lot of minorities as well. They are supportive of the communist party. This is something that is very hard for us with our Western, liberal, individualist values to really absorb. But if you took a poll... Which you can't obviously take a poll in China. They wouldn't allow this because they wouldn't want to see what would happen. But I'm pretty confident that a healthy majority of the country would approve of the party. They would approve of it.
Jason Szeftel:
Technical qualifications
And the party is... It has a lot of very competent people. I don't want to sound here like I'm supporting them or complimenting them. But for example there's so many more people with technical degrees in the communist party than there are in Western governments. The US and the UK are great examples. It's all lawyers. It's all politicians. There's no actual technical degrees. In China it's very different. They've worked very hard to try and make a technocratic elite. It's an old ideal there. So there is competence there, but there's just challenges that are so much bigger than a lot of places on earth. And personally, I believe it's much bigger than 95 million bureaucrats are going to be able to handle, but the people know, like I was saying earlier, that the chaos, the fear of chaos, the worry of what could happen is so much worse in their view.
Jason Szeftel:
Nervous about unrest
I think it tends to get worse as Chinese regimes... As things get more difficult they start to get more rigid, more defensive, more intolerant, more nervous. And so you get more social controls, more surveillance, all of that. So towards the end it's a bit of a tension. People start to more and more feel like, "Oh, this is getting tyrannical, more and more tyrannical, what do we do?" But the fear of chaos has always in the background. So they choose...
Jason Szeftel:
But it's tough. It's so tough for people in the West. It's one of the things I've been talking about so much, is just this sense that there actually is support for them is very hard for us to comprehend, but they are able to do very big projects that people wish we could do. I think a lot of people in this environmental sustainable development world wish the US or the UK or Europe could engage in these massive projects to change the environment to improve the prospects for climate change. And so that's one of the tensions too.
Anthony Day:
Belt and Road
Meanwhile, despite all the challenges that may be within the country, they are expanding with the Belt and Road Initiative, with investments in Africa. I heard the other day that quite apart from the fact that the Chinese have an investment in the nuclear power station we mentioned in the UK, they're also now buying up schools in the UK. There's been a lot of controversy both in the US and the UK about Huawei and telecommunications infrastructure. So they're certainly spreading their influence outside their borders. And is that going to continue?
Jason Szeftel:
Chinese Influence
Yeah. The heyday for the Chinese spreading their influence around the world was probably 2012 to 2015. That was really when all the companies in China were saying, "All right, let's go. Let's go big. We're going global. We're the national champions. We're going to become the global champions." But things started to cut back when in 2015, 2016, they started to have massive capital flight out of China, started having real economic issues when they were opened up too much, when these companies started to buy trophy properties in New York and London and all this, and the party decided to clamp down and keep the capital in China.
Jason Szeftel:
Over-production
But what we see a lot of now is just what you mentioned. There's the Belt and Road Initiative, which a lot of it is really to keep over-producing in all these industries to sustain their production. So China's built more deep water ports than anyone ever. So what do they do with the deep water industry when they've filled every nook and cranny of the Chinese coast? You build them all over the rest of the world. You build them in Africa, you build them in Sri Lanka, you build them anywhere.
Jason Szeftel:
So A) it's a port. Maybe in the future we'll have it as a giant military base or something, but right now it also keeps people employed. It prevents these industries from collapsing. And so you see a lot of that. In Karachi where there's nuclear plants, power plants all over the world. A lot of this is to just keep everything humming. Like we were saying... I don't know where you mentioned what I'd written, but there is problems in the Chinese economy and keeping everything humming as much as possible like we were saying... They want all the present industries and all the future industries to keep going, but that's a challenge.
Jason Szeftel:
Neo-colonial
So you see that. You see this overproduction and trying to scale it across the world with the Belt and Road Initiative. And then you just see straight up neo-colonial resource grabs. That's a lot of what you see in Africa. It's just like, they'll build a port with a single road, a single trunk line to a single spot where there's one resource or good or metal or whatever. And they'll just ship it right back out. That's the definition of a neo-colonial process. And I saw a map actually recently of just all of their projects, infrastructure projects in Africa, are exactly that. It's pretty crazy.
Jason Szeftel:
So those are the two things. Managing the overproduction, so sending it around the world. That was what they did in a sense in the 2000s, just all the products that we bought. They couldn't sell as many... I mean, everything. Mattresses, electronics, whatever, just in China. They need to send it all around the world. And it's still the same thing. China is hoping for a consumer economy to support everything, but its industry is so big now. Like we were saying, all these industries, it out-competed or flooded the market... Out-competed everybody with subsidies, taxes, whatever it was. And now they have to keep it all afloat. 30% of global manufacturing is done in China at this point. And it sounds impressive. It sounds very amazing. But keeping that system humming, it's just very difficult.
Anthony Day:
5 Years On
Jason, that's fascinating. Now I'm going to put you on the spot. What will China look like in five years time?
Jason Szeftel:
Surveillance
Well, if it's a steady state thing, no real major problems and crises occur... Major crises. I think you'll just see more of an extension of what we see now. So there'll be a lot more surveillance technologies. And you mentioned a couple. You mentioned the ID cards and stuff, but things are very, very intense in China now with surveillance. So they do gait analysis. They have biometric markers. They're doing emotional analysis with AI and your face to see what your emotional state is when you walk around the city, when you walk around to buildings. They have just a complete comprehensive set of all sorts of pretty scary facts and features about people that can correlate. They can see who you are when you have a mask. They can see where you've been. They know everyone you've ever contacted through social messaging, through media. They can delete or remove any of your digital presences or communications whenever they please, et cetera, et cetera.
Jason Szeftel:
It's very intense. And the best way to keep the communist party alive is to lower the cost of controlling its population. And AI and all the technologies we're seeing, all these surveillance technologies, they are the greatest thing that's ever happened to a state like China where can it can... I know this sounds very callous, but it lowers the per capita cost of social control and population control.
Jason Szeftel:
Social Credit Score
And even better it can help people internalise these controls. So something like a social credit score... I know starts to sound very Minority Report, very big brother. And again, horrifying to us and I agree with that. It's just... Might as well present people with what's going on. Basically if you behave well, you do everything right, you say the right things, you do the right things, you can get cheaper plane tickets. You can get more swipes on your dating app. You can get all sorts of things versus if you're caught jaywalking on a camera, your credit card scores go down, maybe you can't book a train to somewhere, et cetera, et cetera. There's going to be all these micro incentives to control behaviour.
Jason Szeftel:
Behaviourist
It's a behaviourist... That old psychology school. Behaviourist look at what to do with people. And that's probably the key thing. I think there's some books that have come out about surveillance state and surveillance capitalism. It's really something people should keep their eye on because this is more present in the West also than we want to believe. It's not quite in the state's hands, but these technologies exist. And so they're being used behind the scenes. They're correlated in all sorts of ways, typically for profit, but we're going to see a lot of this just as China does it. Unfortunately it's there doing these things. So it's the world we live in.
Anthony Day:
Well, that's a really scary note to end on. I never thought we'd come to that to be perfectly honest. But Jason, thank you very much for your time. That's been really interesting. I'm sure that the listeners to the podcast will be delighted or interested. And wow, thank you again for taking the time to come and talk to us about China. Certainly going to make us think. Certainly is.
Jason Szeftel:
Thanks, Anthony. It was a lot of fun.
Jason Szeftel. After we finished he said, “But there’s a lot more!” Thanks Jason, I hope to have you back on the Sustainable Futures Report later in the year.
You can find Jason’s articles, videos and his podcast on his website, which is at https://www.jasonszeftel.com/.
And that’s it…
…for this week. Before I go let me thank my patrons once again for their continuing support. The Sustainable Futures Report has no advertising, sponsorship or subsidies, so your monthly contributions help to cover the cost of hosting the podcast and of transcribing interviews like this so the full text can appear on the website. You’ll usually get each episode a few days earlier than the general public. I’m always open to your suggestions and ideas. You can sign up to be a patron at http://www.patreon.com/sfr. I hope to see you there.
I’m Anthony Day.
That was the Sustainable Futures Report.
Until next week.
Sources
https://www.cnbc.com/2021/07/01/china-ccp-anniversary-xi-speaks-at-100th-anniversary-of-communist-party.html
