Chinese researchers are advising the Chinese Communist Party (CCP) on measures to prepare for US sanctions on China in the event of a war with Taiwan, Reuters reported on Friday last week.
“Researchers warn that China’s much larger economy and dependence on foreign technology and commodity imports mean that sanctions on China would be more impactful than those imposed on Russia following that country’s invasion of Ukraine,” the report said.
One researcher said that China should “accelerate the promotion of yuan pricing of commodities such as lithium.”
Another researcher said that China should “blunt sanctions by increasing its economic links with the US and its allies.”
More interdependency would make sanctions a more costly prospect, which would give cause to refrain from such punitive measures, they argued.
With so much of the world’s goods still being manufactured in China, sanctions would mean that the cost of almost everything would go up significantly. Voters in the US and elsewhere would protest, lobbyists would pressure Washington, and opposition lawmakers would seize on the chaos to sow further division in society. China would also ramp up disinformation campaigns.
“Partly in response to this, the EU and US have sought to de-risk and diversify supply chains and on-shore production of chips. But these policies would take time to bear fruit,” the article cited Peterson Institute for International Economics in Washington senior fellow Martin Chorzempa as saying.
This is the crux of all issues related to China and its relationship with democracies. Regardless of whether there is war in the Taiwan Strait, the more interdependent the US and other democracies are with China, the more autonomy those democracies lose. The CCP would always seek to buy off lobbyists and lawmakers, and manipulate policies in a way that favors China, while lawmakers who would show resolve to remove Chinese influence would face fierce resistance from a public fearful of inflation.
The only way forward is for democracies to significantly reduce interdependence with China. Doing that would require an accelerated time frame on moving companies and their manufacturing out of China, which might be possible through a US-EU alliance that would share the costs of moving supply chains, and would implement free trade between alliance members.
Manufacturing in China is about 5 percent cheaper than manufacturing in the US, and Beijing increasingly makes it unfavorable for foreign companies to operate in China through policies such as requiring customer data, trade secrets and technology transfers.
The governments of the US and European countries should facilitate the exit of companies from China by providing incentives like tax breaks and subsidized energy costs, while penalizing those that choose to remain in China through tariffs and other measures. One of the major challenges in convincing companies to move away from China is going to be the growing value of private consumption there, which is now worth US$6 trillion annually, making it a larger market than that of the US.
Taiwan also plays a crucial role in shifting supply chains away from China, and as the country most at risk from Chinese aggression, it also acts as an important role model in making that shift.
Taiwan, the US, EU nations and other democracies must cooperate to form a strong economic alliance to act as a bulwark against Chinese expansionism and hegemony. Only through decreased interdependence with China can democracies truly be strong and remain autonomous.
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