This episode explores illusions about China's ambitions related to expanding military and economic power. How have such illusions been perpetuated by Germans and Europeans in order to maintain profit for companies? And what does a realistic assessment of China's current ambitions of global economic dominance, military might and technological supremacy, mean for the recalibration of European political, economic and security options?
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Glossary
Green transition
(16:37 or p.5 in the transcript)
The green transition means a shift towards economically sustainable growth and an economy that is not based on fossil fuels and overconsumption of natural resources. A sustainable economy relies on low-carbon solutions that promote the circular economy and biodiversity.For companies, the manufacturing industry and municipalities, the green transition can mean investments in clean energy production, circular economy solutions and hydrogen technology, and the introduction of different kinds of new services and operating models. Low-carbon roadmaps and sustainability strategies drawn up by different sectors are an important part of this package. What the green transition means in daily lives includes, for example, phasing out fossil oil heating and shifting to electric cars. For the society as a whole, it can mean different kinds of incentives and subsidies for these and legislation that supports the green transition. The green transition also means questioning individual consumer habits and ways of thinking, e.g., using machines and appliances that consume less electricity or being ready to pay more for products manufactured that cause less emissions.source
Shalini Randeria (SR):Welcome to “Democracy in Question”, the podcast series that explores the challenges democracies are facing all over the world today. I'm Shalini Randeria, the rector and president of the Central European University in Vienna, and senior fellow at the Albert Hirschman Center on Democracy at the Graduate Institute, Geneva. After the summer break, I'm now back with the fourth episode of season seven of “Democracy in Question.”
Today, I focus on the European Union’s relations with China. Their economies are inextricably intertwined but the Chinese Communist Party-driven capitalism and authoritarian rule poses a stark alternative to the European model.
My guest is Janka Oertel, who heads the Asia program at Europe's leading think tank, the European Council of Foreign Relations. Her powerful and highly readable book in German titled "The End of the China Illusion"[i] comes out today. It makes a compelling argument to cast aside the blinkers that have shaped German and European treatment of China as a partner in business, trade and technology, more recently also, in combating climate change. I discuss with Janka why in her opinion China should be seen instead as a serious competitor, one, who also poses a threat to liberal democracies.
Based in Berlin, Janka Oertel previously worked as senior fellow in the Asia program at the German Marshall Fund where her main areas of interest were Trans-Atlantic China policy, Chinese foreign policy, and security in the region. Her publications have dealt with EU-China relations, U.S.-China relations, security in the Asia Pacific, Chinese foreign policy, and climate cooperation. She has testified on EU-China relations before the U.S. Senate Foreign Relations Committee and also the German Parliament. With 15 years of scholarship on China, Janka clearly deserves to be recognized as one of the best-known experts on it in Germany and in Europe. But she thinks it's impossible to be an expert on China given the size and complexity of the People's Republic, where just too much is happening too fast and often quite unexpectedly. So, she quite modestly prefers to say she's just an observer of China.
Janka's timely and provocative book cautions us against taking at face value the official Chinese rhetoric and self-representation as a pragmatic, peaceful partner that aims to neither expand its military nor economic power. She urges Germans and Europeans to shed their illusions about China that have proved highly profitable so far for companies in the short term. Based on a realistic assessment of China's ambitions of global economic dominance, military might, and technological supremacy, she suggests it's time to recalibrate European political, economic and security options.
The Chinese leadership aggressively advocates an alternative model of state capitalism under Communist Party control, along with, also, an alternative political ideology, which is certainly attractive to many in the global South. The demonstrative strengthening of ties with Russia after its war of aggression against Ukraine should alert us to a veritable new geopolitical systemic rivalry. And yet, is it realistic, for example, to jettison altogether partnership with China on questions of climate crisis? In which areas could Europe decouple its economy from China fast enough? And what new partners would it be able to turn to? Why did Europe either overlook or turn a blind eye to China's steadily growing military and economic power? Isn't it just too late to counter Chinese hegemony, not only over crucial global supply chains, but also in South China Sea?
Welcome to the podcast, Janka. And I'm really pleased to be interviewing you on the day that the book comes out. Many thanks for joining me from Berlin today.
Janka Oertel (JO): Thank you for the invitation, Shalini. It’s a pleasure to be here.
SR: Let's begin with some recent news about China's economic troubles. Deflation in its economy will cause not only domestic problems but will have international repercussions given the high interdependence with business, production, and trade between the European Union, the U.S. and China. High youth unemployment is so problematic that the government has stopped publishing figures on this. The real estate bubble seems to have burst. It'll not only deprive local and regional governments in China of an important source of revenue from sale of land and taxes, but major real estate firms like Evergrande have filed for insolvency, bankruptcy protection in the U.S.
Given that the Communist Party's legitimacy has depended and continues to depend to a large extent on its promise to deliver economic growth and material well-being to its population, how will all of this affect its fortunes domestically? And will these pose affect the attractiveness of the success of the Chinese economic model, straight-driven capitalism and the service of the party in other parts of the world?
JO: Thank you for the question. I think it's a very complex one, and we could probably do an entire podcast just on this very first question. But let me split it in half as well. Let's talk about what is the input legitimacy and output legitimacy that the Chinese Communist Party has. What is the kind of legitimacy that it needs? And then the other bit is, how does that create attractiveness outside of China. On the first bit, in the book, I make an argument that we tended to have overestimated the output legitimacy needs of the Communist Party, and that under Xi Jinping, we should readjust our assessment of that.
That does not mean that the Chinese Communist Party is not striving for economic development. It has since Mao. It has always seen this as one of the key features of the system, that it needs to deliver. It needs to also deliver prosperity and wealth within the parameters of what the Communist Party delivers. But it has always been also an ideological dimension. And for us here in the West, it was easier to see the Party through the lens of the output legitimacy and say, “Well, they need to make money because otherwise, this thing will totally fall apart.” Because that allows us to stay within our own sort of intellectual framework.
And what Xi Jinping is demonstrating us right now is that there is a huge willingness within the Communist Party to say, “Well, actually, you know, some of this striving for wealth we regard as something that is very Western and that we don't think is the right thing to do. We think our focus should be on strengthening our country, strengthening our autonomy, strengthening our interactions with other parts than the West. And we actually think that this struggle period is this kind of the phase in which a country needs to go through hardship to come out at a better point.”
That that is also defined by economic troubles and it's not just the willingness to be able to consume more and everyone having a car. That is not the raison d'etre of the Communist Party. It kind of drives it back to a really ideological core where it is also about, what are we actually striving for? What is it that matters for us? What are the core values that we put at the heart of our existence and are driving a much harder ideological message here? And that means that Xi Jinping's leadership is willing to put political gains and political advantages over economic output.
I think the most striking examples are particularly in the technology sector, where Xi Jinping has been willing to eradicate billions with a strike out of the market by decisions that are saying that a company cannot have their IPO and they are under regulatory surveillance now. And they will have to pay a massive fee because he does not believe in the accumulation of wealth in individual hands because he's also observing what is happening in Western countries where Facebook, Google, Amazon, individual wealth of individual companies and people create alternative power centers outside of the existing kind of government structures. And that is a challenge to the party as well.
I think it's a bit more complex than just saying as long as the party delivers wealth and cars for everyone, and as long as the children are better off than their previous generation, the party will be fine. This is at least not how the party sees it. Whether that will hold, that's a different story, but their narrative currently is a different one. And this brings us to the attractiveness to the outside world. There are two dimensions to this. One is, China has unarguably been one of the most successful development stories that is still very attractive for many countries out there.
This doesn't mean necessarily that one always draws the exact same lessons from that as well. So, it is just as the Chinese Communist Party has been observing the downfall of the Soviet Union and said, “We're not going to make those same mistakes as they did. You know, we're going to make sure that this doesn't happen to us.” Other countries are going to take inspiration from what China is doing and is going through now and make their adjustments. I think the jury on the Chinese economy is also still out because we are seeing a phase that is incredibly problematic and ishitting a structural problem here where they're sort of running out of their options.
The old model doesn't work anymore, just throw money at it, just build some infrastructure. If you're running out of houses to build, coal power plants to construct, and roads to kind of drive through the country, then at a certain point, you have to rethink how you structurally build economic wealth and growth or growth in general. But there is huge potential, for example, in green energy and in green technologies in general. If we look at the electric vehicle market and see the dominance that Chinese companies have achieved over such a short period of time. If we look at the wind energy sector where dominance of Chinese companies is looming incredibly large.
But if we also look at developments in quantum and AI, etc., I don't think that this system has run out of options yet. And I think we should be very careful inassuming that the Chinese economy is hitting a wall and we'll be standing there laughing and saying, "Ha! Look, your model didn't work after all." I don't think it's that easy.
SR: You've made an argument in the book that what contributed to China's prosperity was a win-win kind of mode which the German and the European firms had, and also that the firms themselves profited enormously in the short run from their production in China due to low wages, to a large domestic Chinese market. And because all that seemed to be going so well in a partnership mode, national governments in Europe and the EU itself maybe mildly criticized grave human rights violations in China, but they continued doing very profitable business.
What is really surprising is how oblivious these governments and the EU were to the risks of the enormous dependence on China, for example, in the pharmaceutical sector, which became so evident during the COVID pandemic, and also the fact that these national governments and Brussels failed to stop China from strategically acquiring control of critical infrastructure, such as ports all over Europe, as well as small medium-sized firms, which gave it so much control of supply chains. I think it might be interesting to hear from you, why did governments overlook the steadily growing economic power, but also the dependence?
JO: So, we could make a very cynical argument here, a cynical capitalist argument that the governments are in the end driven by company interests as well, and that it's much more about the output legitimacy and how you deliver economic growth in the end because you need to be voted into office again. But I think it is deeper than that. It is not as cynical. I do think that many German, and I'm speaking mostly about Germany in the book, the many German administrations believed in change through trade. They believed that this was bringing us closer together. They believed that from the times of Helmut Schmidt when he was meeting Mao, to the times of Angela Merkel when she was speaking about innovation cooperation in Wuhan in 2019 when that was already a speech that to our ears, as China watchers, seemed awfully out of touch and out of sync with reality.
I think what we believe in was informed by our own understanding of how modernization has worked, how we have "won" the Cold War, of how our own identity is built on the success of the Western model, that we are almost a bit drunk by our own success and now we're waking up with this massive hangover and seeing, “Hang on, you know, something that we did while we were drunk is now giving us a huge headache to deal with.” And this has been a process that just takes a very long time, particularly while business is still good.
All of these things are easy to shift when things go bad. We've seen how quickly the German government can move when there is a threat that all gas supplies will be cut very quickly, then all of a sudden, we move. It's unimaginable that Germans would develop that speed and efficiency in that amount of time normally. The threat and the pressure was really high, and it was really obvious to societies as well that we just need to act on this.
But while German companies are still making good money in China, are still selling cars, are still selling chemicals, while small and medium-sized enterprises think this is an enormously good place for innovation and research collaboration, it's really hard to say, “Well, but in five to 10 years’ time, you know, they're eating your lunch right now, this could become a difficult thing.” You're becoming the Cassandra. You're becoming someone who wants to talk down the German economy. You're becoming someone who wants to talk about de-industrialization and doesn't believe in the success of the German industry and the kind of potential and the strength that the German industry has.
So, I think it's really hard as a sell, politically. I don't think in the analysis level this German administration right now doesn't understand the problem. There is an understanding of what we are seeing. It's just, what the hell do we do about it, is the big question. And this is being made a lot harder by the fact that there is large German business and lobby and industry pressure to just keep things the way they are for just a little bit longer. They also know that time's up. There's always the question, how do we replace the Chinese market?
People ask me “Where is Volkswagen supposed to sell 40 percent of their cars now?” And then you can say, “Build your kind of logic on the imaginary extrapolation from a current reality that is already not existing anymore and an imaginary growth rate in China that gives 5, 6, 7, 8 percent growth and your market share is growing in that.” But if we look at what's really happening, we're talking about 2 to 3 percent growth, and we're talking about an ever-shrinking amount of the share that European companies will have in that market.
So, if you extrapolate from that actual reality, not the imaginary reality, which is the nicer one and sells probably better for your shareholders as well, then you come to a very different conclusion. That means your share is going to shrink, you are going to make less money anyway. So you better start diversifying now while you're still in a position of relative strength. And I think this is the kind of realistic conversation that we need to have here in Germany. It's not about cutting something off that we would otherwise have, it is about dealing with the reality of a shrinking export market in China and a shrinking market share in China anyway. And we better start constructing our economic strategies around this reality.
SR: In which areas do you think that German and European economies could decouple from China? And then the question would be, what new partners could it turn to? Because decoupling from Russia where also the general slogan was “Wandel durch Handel”, change through trade, and we fell on our noses with Russia. The decoupling from Russia has meant turning to the Middle East to regimes which are no less authoritarian. And the question here is, could one decouple? In which areas, and fast enough? But the dependence on both rare earth critical raw materials for the green transition, which Europe needs and has decided that it will implement, this will be a problem.
JO: I mean there are lots of problems with this, in general. We built a structure, a globalized structure around this and we have embedded China so deeply in our economic system that any disruption to that would create a massive issue. And I also think that's part of the realistic conversation we need to have, is to say, “No, this is all going to go well. We just diversify a little bit, we de-risk some of this, and then we'll all be all right and we can go back to business.” I think that's precisely the problem that we're having right now, that we're not having a real societal conversation about what all of these changes will mean because we keep the illusion alive that things could stay the same.
And I think that's my main problem with this argumentation that we're having at the moment, is you cannot tell German people, societies across Europe that everything will be all right, that there's just a tweak to the system, and that it's not an actually systemic challenge that we're facing here that has the potential to disrupt global markets and that has the potential to lead also to military confrontation. And I think this is where we have to look a little bit closer into what is really happening. China feels under siege, whether that is realistic or not. China is preparing for a potential military confrontation with the United States, not necessarily out of its choosing, but because it regards it as a possibility on the horizon within the next few years, and therefore prepares itself and its structures around that.
It makes itself less dependent on the world, and it tries to create asymmetric strategic dependencies on the Chinese market. If one of the things that is part of our de-risking strategy, the way we want to, we don't talk about decoupling. But the way in which we want to de-risk our China engagement is to say we want to reduce asymmetric strategic dependencies that we have. And then the Chinese side would like to grow asymmetric strategic dependencies. And then we say here in Germany, “Well, we want this to be industry-led because industry knows best what the risk situation is like.”
I don't think companies are in the position, and it's not fair to put them in the position where they have to make political choices, where they have to say, “This is better for Germany or for the German society or for Europe.” That's not the job of a company. That is the job of a politician. And this is where I think politicians are shying away from the responsibility of making that political decision and selling at home why it needs to be this way.
So, de-risk short-term risk. You mentioned dependencies in the medical supply chain. I think antibiotic supply is a really good example of that. This is something that has huge potential to disrupt our societies. If we are in a situation where supply is cut off deliberately or disrupted, through other means and we don't have antibiotics to cure our children in Germany, then the societal pressure will be very high for the German government. This will be immediate. Now, on rare earth, that's a more long-term risk to de-risk. If we wouldn't have the delivery of solar panels for six months, you probably wouldn't have riots on the street. It would be bad for the green transition, and it really needs a solution, but it's something that needs to have a slightly more long-term focus.
And a lot of these things are happening right now. They're just not happening at the adequate speed and with the adequate European approach because everyone's fighting for themselves in Europe at this juncture, where the only thing that really works would be to closely cooperate around these questions and strategically think through whether it makes sense to pour 50 million euros into the chip industry in Germany to make the perceived risk reduction a bit higher and feel safer in Germany and feel better for the car industry. Or whether it would've made sense to do that in Poland and support it with German taxpayers’ money to also see that you can benefit from European integration at a time where there's an election coming up, to do this in Lithuania they have actually desperately wanted chip manufacturing in their country. Does it make sense to have it there because it creates an extra layer of security through economic means?
Right now, what we are creating is a situation in Europe where Germany can afford these sort of de-risking strategies that cost a lot of money and other Europeans can't. And that creates a situation in which we weaken Europe where we need a strong Europe.
SR: Let's stay with the green transition for a moment. What I see is a dual strategy of the Chinese government. It remains the second largest carbon emitter worldwide after the U.S., it continues to increase its use of fossil fuels. And at the same time, it's investing extremely fast and heavily in renewable energy. So, contrary to the argument that many have made that we need China as a partner in combating climate change, you argue it's much more realistic to see China as a rival.
Could you just explain why you think we really need to see this as a competition in the field of even climate change? And what position has China taken in various international fora on climate negotiations? Because I think China is at least making the right noises about wanting to invest in financing climate justice initiatives in low-income and vulnerable countries. And that could be a good strategy if it's trying to position itself as a global rival to the West.
JO: Correct. And I think it's probably the most counterintuitive thesis in the book. It's probably the one that people find very controversial and they're like, "Hang on, don't we all agree that climate change is a global problem and that we need all sorts of partners for this, and that we will partner with everyone, and we will try our very best to do this?" Stepping back a little bit from this, when I started working at ECFR and I'm traveling through Europe a lot and I talk to diplomats all over the place in Europe, and I always ask them, because we still have unofficially a strategic partnership with China since 2003. We have a strategic partnership agreement. And then we have this sort of slight cop-out version of the partner-competitor-rival where everyone can see whatever they want to see, and we can sort of slot everything in there. It makes us all feelcomfortable, and even the Chinese are okay with it in the end. So, we found the language that sort of works for everyone.
And so we have these things in parallel where we say we have the partnership, we emphasize that China is still a partner. And then you ask people,"Where? Just name a few examples so that I can understand what are the areas which you think our interests overlap so much that we're partners." Every time I ask, everyone says climate change. And it was just a moment of slight resistance in my intellectual soul that was saying, “If everyone agrees, something's wrong here.”
It's this actually just a fake argument that's being made because we would like to preserve this as an area for cooperation. Now, it's obviously true that without China reducing emissions, we will not be able to stop global warming. That's a fact that we can't argue with. The question is just, how is this served after the Paris Agreements when we have goals that we have set? When Xi Jinping has set goals for China 2030-2060 goals for peaking of carbon emissions and for zero-carbon emissions? I think this is something that is underestimated. The fact that Xi Jinping personally went to the UN General Assembly to state these goals means that in a system like China they have to deliver on this. This is now an effort that is a whole party effort. This is a whole of government effort. And decarbonization is really important. Also, because China is already feeling the impact of climate change quite massively, look at floods, droughts, the vulnerability of their coastal regions. No one needs to teach China that they need to understand that climate change is a difficult problem, and we all should understand that we need to hold hands, kumbaya, and make this happen together.
What is needed for reducing global warming is cutting emissions, and emissions-cutting is a domestic process. And we know that, in Germany, in Europe that's the hard bit. The hard bit is turning this into your domestic reality. You're not partnering with anyone on that. You are making the decisions politically to cut the coal production in your country, to put renewable energies in the grid, to invest in battery technologies. These are domestic decisions that are being taken by domestic governments in Europe, sometimes at the European level, but this is not done as a cooperative endeavor.
And so, I don't understand why the logic that we have in all other areas of the kind of interaction with China, where we are competing for market shares, where we're competing for who is the most innovative in these areas, who will have the best technologies, and who will have the better story to tell as well? Why particularly in the space of climate change that is so existential not only for the Communist Party but for the rest of the world, but all of these logics would not apply. Quite the opposite is true. They apply even more so. It is more important for China to achieve these goals. And they need to do this from multiple perspectives.
And this is where the dual strategy comes in, to do this at their own pace and not be told what to do and not create conditions where they force their own hand. What they would like to do is set goals that they can achieve, and at the same time, be able to flexibly react to, for example, a not-good economic situation where just the building of coal plants creates jobs and growth in a region where it's not even about powering them actually.
Now, that doesn't mean that China is going fast enough in terms of decarbonization right now. For achieving the goals that we want to achieve, China needs to move faster. I just don't think that this is particularly served by creating a condition where we say, “We would really like you to act faster. Can we partner with you on this and help you how to do this?” But rather by creating market pressures that are creating incentives for Chinese companies to push for this where it makes economic sense to move and act faster because it creates economic benefits.
And this is where a race to the top on green technologies can be really a good story to tell. Precisely, in this area, trying to get better and trying to be faster would be really good for the rest of the planet as well. So, I'm just arguingfor a sort of mindset shift and saying, let's look at this realistically and see what's going on. I certainly think that none of our measures should be stopped just because China isn't acting in a certain area. At the same time, we should keep the pressure of our own actions up.
SR: Let's turn to China's military and expansionist ambitions, because as you argue in the book, Europe has believed too long in the Chinese leadership's rhetoric of its peaceful intentions. Now, of course, from an Indian perspective, the Chinese claim that it never started a war or that it has never had territorial expansionist ambitions rings very hollow to say the least. But we won't get into the India-China story. Could you say something about the kinds of global military ambitions that you detect in Chinese military strategy? Because if I were to play devil's advocate on this, Janka, I would say, why is it not legitimate for China to have an interest in control over maritime security in its own neighborhood?
JO: Oh, it's absolutely legitimate. The counter argument, for example, where Chinese have built their bases in Djibouti and other places now is always, the Americans have 800 bases all over the world. They're all over the place. And why would this not be legitimate? And if they can ship around in the Indo-Pacific, why can't we around the coastal region of Alaska?
And that's not the point I'm trying to make. The point I'm trying to make is just that there are consequences of this for Europe. And Europe needs to think about this from their own perspective of what would that mean. What does a security order in the Indo-Pacific mean that is dominated by Chinese military? What does a security order globally mean where China dominates supply chains? We can't say it doesn't matter. I do think it matters. And I think the answers can be very different for different regions, and it can be very different in terms of what constitutes a threat potential for European interest and what doesn't.
The fact that we have a serious collaboration in the defense sector between China and Russia is something that is certainly putting people in central and eastern Europe at unease. They don't think that that's a particularly funny situation that the Chinese capabilities are also strengthening the Russian war machinery. China and Russia are able to conduct joint drills and maneuvers as far as Alaska, but also going to Japan while Biden was visiting there.
These are all things that are going on simultaneous to the war in Ukraine. It tells you something about also the priorities of Russia in terms of how important it is to demonstrate that they're working with China in these areas.It's been something that we have put aside and basically said, “Yes, all legit, all fine. None of this will challenge U.S. military dominance. And even if it does, that won't have anything to do with our own security interests.”
And I think we're seeing it in the cyber dimensions already where it has a direct impact. We should just start asking these questions about what are problematic developments that we don't want to see happening. And this is what we see in the United States at the moment where there is a discussion about, what kind of technology can we still export to China if it can be used in the military realm, in dual-use technologies but also in advanced weapons that could potentially be used in a military confrontation against us?
This is the perspective of the United States. And I think that's a very realistic assessment of where we are. And this is not about keeping China down. The question is, do you want to actually contribute your technology to accelerate a development that could be potentially detrimental to your own interest?
That's the assessment in the United States. From our perspective in Europe, if we say, "Well, we want to have nothing to do with this, so we will continue to export these technologies to China, even if our allies in the region, Japan or Korea or the United States or Australia say, 'Well, actually, it's not in our interest either if they have this,'" then I think it's a good moment for Europeans to reflect and to say, "Our actions have consequences and the way we construct our economic relationship with China may have potentially security implications for our partners on the ground, and therefore, we should at least consider that there might be something we need to change about this."
If China has global interests, it has also global ambitions. And it needs to protect its personnel and its interests, not just in the region but across the globe. We can see what's happening that in military development, this is a building of a global army, and that's completely legitimate, but we need to create channels that keep that safe, communication open, the ability for the U.S. and China to have a proper military dialogue with each other. And none of these conditions are currently met.
SR:Let's stick with the question of the recent strengthening of ties between Russia and China, which you just mentioned. Of course, the increase in cooperation between them is likely to prolong the war against Ukraine, but what it also shows, I think, is really a demonstrative display of strength and support for highly nationalistic autocratic rule, which is being explicitly showcased as an alternative to Western liberal democracies. So, in your view, it would be a mistake to consider that there's a fundamental difference between China and Russia in this regard.
What then is the future, do you think, of this relationship? How will it play out in the international stage, for example, in Africa where both countries have strategic interests and as we are seeing now with the crisis in Niger, etc., many African countries are leaning towards Russia. Both China and Russia have private armies and security companies of their own on the African continent as well.
JO: It's to me one of the most fascinating relationships because I do think that here in Europe, we're still underestimating the potential and the seriousness of the collaboration that is currently taking place. One of the arguments that is often thrown at me when I say, “You know, we should take that seriously. There's really something going on there between the two sides,” is, “But look at the historical differences the two sides have. Look at how many times Russia has invaded, raided, abused Chinese territory, stole Chinese territory, raped Chinese women.”
You know, the Northern Chinese region has been a region of instability for a long time over centuries because it had a neighbor that it couldn't trust. It was a really difficult relationship. But thensometimes you want to be a bit cynical, and sitting here in Berlin, I would say, the Franco-German relationship hasn't been one of sunshine over the past few centuries as well. We have looked through very dark times. We are neighbors and we have found a modus operandi with each other that is now based on friendship and is based on a very positive relationship.
And to assume that the Chinese-Russian relationship cannot evolve just because it had a bad past is, I think, a bit arrogant from a Western perspective to say, “Of course, they can never get along because they have a bad history. We can transcend these things, but China and Russia can't.” I think China and Russia can as they're demonstrating right now. And that doesn't mean that there are not deep wounds, particularly in these border regions, deep wounds that will continue to exist there, but there is a logic from the Chinese side that is very striking and that is, this relationship will not go away. We're neighbors, we're going to be here. So, it is always better to be in a position of strength than in a position of weakness when we approach Russia.
And therefore, the current situation is creating a significant imbalance that favors China, that makes Russia weaker in comparison to China. And therefore, this is in China's security interest. It is a bit weird to assume that China would run to Europe's assistance because it has so much interest in the Europe relationship when it has a border region that it needs to deal with as well and other security interests that it cares about.
When Russia invaded Ukraine, that was just shortly after China and Russia had issued this joint statement on the fourth of February 2022. And that's a striking statement that has a very comprehensive plan for the collaboration. It stakes out very high ambitions and goals. It says something about global order, it pushes back against NATO expansionism. It says that Russia should support China when it comes to Taiwan. But it is a very, very important document.
And only shortly after we have the invasion, and the immediate reaction in Europe was, "Well, now China has made a mistake with that statement. They will roll that back quickly. Now they will see the true Russia here. They will see that this is certainly," and that's my favorite sentence, “Not in China's interest. This cannot be in China's interest.” And then you look at the past year, you go through an entire year in which the relationship between the two sides has become even closer, where it has been demonstrated by the Chinese side how important they rate that, with a state visit by Xi Jinping to Putin that was not necessary, with multiple week-long visits of the defense minister in Russia to just give support, also diplomatic support to this Russian regime, with 80 percent growth of trade between the two sides, Chinese vehicles being exported to Russia like they've never done before, a dependence being created at a rate that is just astonishing.
And even then, like six, nine months into this, the logic is still, “Well, but China will mediate.They will bring Russia to their senses.” Can we please start talking about what is really in China's interest here? I'm not saying they have an interest in war and bloodshed in Ukraine. That's wrong. They would prefer a positive economic relationship with Ukraine, which is an important trading partner of China as well. The first Chinese aircraft carrier was a product from Ukraine as well. The Varyag was something they imported from Ukraine and then built their own first aircraft carrier as well.
So, the post-Soviet time collaboration between China and Ukraine was quite significant. And the Ukrainian government trying to keep a positive relationship with China as well. But it's just not as easy as we try to make it out, that because there is also an interest in ending the war, that it would do everything it can and sever the relationship with Russia for that. It just makes an argument that is incredibly Eurocentric, and it stems from our own security interests and our own wishes and projects them into the Chinese leadership. And I just don't think that that's particularly clever.
SR: Janka, let me close by asking you to address something that puzzles me about China. One not only expects democratic regimes to deliver economic progress. But many argue that their failure to curb growing inequalities also fuels the rise of authoritarian forces within these societies. But why does enormous economic inequality not produce popular discontent and disillusionment with an autocratic regime in China, although half of the country’s citizens earns less than 10 dollars a day.
JO: It's still a massively developing country. We now have the Communist Party saying, that they want to drive up consumption, but they don't want to do it at the cost of creating a kind of valuelessAmerican style consumption-focused society. But the potential formiddle-income growth in China is still enormous and there's an enormous potential in the domestic consumption area. And so, when you know that the global economy is in disarray, this is part of the dual circulation logic that Xi Jinping has given up.
We’re going through different phases with the Communist Party. We've gone through phases where inequality was rising even faster between the different parts of society, but where the general growth level was still very high. So, it creates a certain degree of content or happiness as well in terms of where the general direction of travel is.
But now for the first time under Xi Jinping, he had put a focus on common prosperity, on narrowing that gap that was emerging between the super-rich and the super-poor in China. He sees that as a source of potential instability for the Communist Party as well. But they haven't found the right tools for that yet. So, we have sort of a schizophrenic situation where we talk at the same time about China's demographic problems, about not having enough workers in the future, but at the same time also about 21 percent youth unemployment.
There is a short-term and a long-term challenge here that we're looking at. And so, you have a lot of college graduates that can't find jobs. At the same time, you have this long-term demographic challenge. You have a huge question around the role of women in society, how much empowerment, how much can you roll back, how muchdo you focus on traditional patriarchal values now because they stabilize also the demographic development because you want to encourage people to have more than one child.
You want to have stability through family structures, through marriage, etc. And you want to make sure that you don't have these generations of individualists coming because ideologically that is a problem. I don't think we can understand everything, but thinking about China is to understand that the party makes mistakes. They correct mistakes as well, but they also make mistakes all the time.
But this idea that we sometimes have in the West, that there's this master plan and someone is sitting there and just checking off boxes and they have this all figured out for the next 15 years and know exactly what they're doing, it's just a really an ability within the leadership to readjust when things are not working out so well. And I think what we're seeing right now is a phase in which these readjustments, these little tweaks to the system are not necessarily producing the intended results. And that is not to the satisfaction of the party.
The news that they don't want to read is that China's economy isn't doing well. But that doesn't mean that they will throw everything else overboard and now embrace Western-style liberalism and capitalism because that actually seems to be working better. And I think that's an important structural element to look into, that there will be a huge effort in telling the story, in telling the story also to their own people, making sure that there's a consistent narrative that works.
And then you can justify 180-degree turns. And I'm sure that the party is able to do a lot of that. It has proven over the past decades that it isable to justify a hardcore capitalist growth model under communist rule. And it is able to dial it back and dial it down.
But I would not be so sure in the West to say, “We'll just watch this. You know, we'll watch this from afar.” The consequences of whatever way China chooses are going to be incredibly large for us as well. Under Mao Zedong, there were a lot of experiments done to the Chinese people and the Chinese economy from the Great Leap Forward to the Cultural Revolution, ideological experiments, economic experiments.
Actually, the party itself acknowledges that as one of its darkest days as well. But all of these developments had absolutely no consequences for us. They were taking place in China, they were sort of insulated from the world, and they had no impact on us. Whatever will happen in China in the next 15 years, whatever it is, will have an impact on us.
SR: Many thanks, Janka for this wide-ranging and thought-provoking discussion on China that calls for a realistic reassessment. It questions not only Chinese rhetoric, but it also questions our own illusions about the country.
JO: Thank you, Shalini. It was great fun. China-watching is quite the topic at the time.
SR: The most important lesson we have learned probably from Janka today is that many of our most fundamental assumptions about China need urgent revision. The Communist party, under Xi’s leadership, seems to be successfully navigating the ongoing slump, subordinating the imperative of economic growth to ideological priorities. For many developing countries, China still remains very much the model to be emulated, both politically and economically As Janka points out, China’s quick road to prosperity also depended on Western (European) companies, as well as governments, willingly, and somewhat short-sightedly, investing heavily in China, forging partnerships, outsourcing production and supply chains. German political leaders, in particular, she thinks, seem to have succumbed to the benevolent illusion of lasting mutual benefits, and possibly also of achieving political change through trade, which, incidentally, was the same foreign policy mistake they also made in the Russian case. German companies, in her view, have simply been too reluctant to acknowledge the pressing need to decouple gradually from the Chinese market or realize threats China can and will pose to European economies soon.
The truly dangerous delusion, in her view, is that merely tweaking, here and there, our dense web of dependence on China, would be enough, so that everything could go on as before. China for its part is proactively seeking to decrease its dependence on the West, while increasing its sovereign power, its military strength and technological capacities. European states have neither demonstrated sufficient resolve for a successful delinking wherever possible. Instead, the EU has continued to insist on the rhetoric of partnership with China even where logic would dictate more competition and a primary focus on domestic capabilities, such as in the area of climate change.
The much-discussed security threat of China’s military ambitions also needs to be reframed as a structural risk – a risk for supply chains, for energy, for infrastructure, rather than simply to be seen as a hawkish narrative about expansion or potential armed conflict. At the same time, however, the EU must clearly consider the security implications of its trade and economic partnerships with China, in order to prevent the transfer of critical technological know-how, which could be turned into weapons against its own interests, or the interests of its allies and partners in the region. This has become even more urgent today, in the light of the war in Ukraine, where China has so far stood steadfastly by Russia. The joint partnership of these two powers, which are neighbors, also extends to other developing countries, or the recently announced expansion of BRICS, and it represents a challenge to Europe that it can only underestimate at its own peril.
China is still a developing country. Half its population earns less than 10 dollars a day. So the regime is rightly focused on growth aimed at the domestic market while distancing itself from a Western model of hedonistic consumption by emphasizing its own ideological superiority. The Communist Party makes mistakes but also tries to course-correct. It remains to be seen how successfully it can overcome its economic bottlenecks and demographical challenges. But whatever’s China’s future path of economic development, it will have important consequences for the rest of the world.
This was the fourth episode of season seven. Thank you very much for listening. Join us again for the next one with the Nobel Prize-winning American economist, Joseph Stiglitz. I'll ask him how lack of economic opportunity and inequalities erode democracy and create disaffection among citizens. How can we change course to build equitable democracies given the many interests involved in keeping alive the status quo?
Please go back and listen to any episode you might have missed. And of course, let your friends know about the podcast if you're enjoying it. You can stay in touch with the work of the Central European University at www.ceu.edu, and the Albert Hirschman Centre on Democracy at www.graduateinstitute.ch/democracy.
[i]Oertel, J. (2023). Ende der China-Illusion: Wie wir mit Pekings Machtanspruch umgehen müssen. Piper.