Like his immediate predecessor, Joe Biden is committed to a distinctly anti-China global strategy and has sworn that China will not “become the leading country in the world, the wealthiest country in the world, and the most powerful country in the world… on my watch.” In the topsy-turvy universe created by the Covid-19 pandemic, it was, however, Jamie Dimon, the CEO and chairman of JP Morgan Chase, a banking giant with assets of $3.4 trillion, who spoke truth to Biden on the subject.
While predicting an immediate boom in the U.S. economy “that could easily run into 2023,” Dimon had grimmer news on the future as well. “China’s leaders believe that America is in decline,” he wrote in his annual letter to the company’s shareholders. While the U.S. had faced tough times in the past, he added, today “the Chinese see an America that is losing ground in technology, infrastructure, and education — a nation torn and crippled by politics, as well as racial and income inequality — and a country unable to coordinate government policies (fiscal, monetary, industrial, regulatory) in any coherent way to accomplish national goals.” He was forthright enough to say, “Unfortunately, recently, there is a lot of truth to this.”
As for China, Dimon could also have added, its government possesses at least two powerful levers in areas where the United States is likely to prove vulnerable: dominant control of container ports worldwide and the supplies of rare earth metals critical not just to the information-technology sector but also to the production of electric and hybrid cars, jet fighters, and missile guidance systems. And that’s only a partial list of the areas where China is poised to become dominant in the foreseeable future. Here’s a likely scenario.
The digital yuan versus the (missing) digital dollar
Within the broad headline of the globe’s “second-largest economy,” China has already either surpassed the United States or is running neck-and-neck with it in certain specific sectors.
With a global smartphone market share of 20% in the second quarter of 2020, China’s Huawei Technologies topped the charts, marginally exceeding South Korea’s Samsung, and well ahead of Apple, according to the International Data Corporation. This happened despite a concerted drive by President Donald Trump’s administration to damage Huawei that culminated, in May 2020, with Washington barring companies worldwide from using U.S.-made machinery or software to design or produce chips for that company or its entities from that September on. Nonetheless, with a 47% share of China’s booming 5G smartphone market, Huawei topped the list there while it kept up its investment in future-oriented, cutting-edge technologies and basic research to the tune of a striking $3 billion to $5 billion annually.
Broadly speaking, China continues to make impressive strides when it comes to developing its information and communications technology sector. Its Fintech (Financial Technology) report, published in October 2020, showed that an estimated 87% of Chinese consumers used fintech services. With a vast mobile-payment system that hit $29 trillion (200 trillion yuan) worth of payments in 2019, China is shaping up to become the globe’s first “cashless society” and its largest financial-technology ecosystem by the end of this decade.
Less than 10% of Americans use mobile payments, which means a similar scenario for the United States is nowhere on the horizon. With mobile transactions in China already accounting for at least four out of every five payments and more than half the value of all non-cash retail payments, that country is poised to leave the U.S., a comparative laggard in fintech, shackled to a cash-dominated system.
In their relentless drive for innovation, the Chinese authorities started pushing the development of a digital currency in certain regions in August 2020. Their specific goals were to make daily life easier for citizens and digital payments more secure. While non-bank payment platforms like Alipay and WeChat Pay required users to link to bank accounts, a digital wallet with an e-currency deposit could be opened with a unique personal identification — a driver’s license or a mobile phone number — enabling the un-banked population of China to embrace the digital world.
As a result, the People’s Bank of China became the first major central bank to issue a virtual currency. A broader roll-out is expected for the Winter Olympics in Beijing in February 2022, which will give the digital yuan international exposure.
This has alarmed the Biden administration. Officials at the Treasury Department, the State Department, the Pentagon, and the National Security Council are frantically trying to comprehend the potential implications of a virtual yuan system. They are particularly eager to understand how it would be distributed, and whether it could be used to bypass Washington’s international sanctions as applied to Iran. What distresses some American officials and experts is the notion that someday China’s virtual yuan could replace the U.S. dollar as the world’s dominant reserve currency.
At the Federal Reserve, Chairman Jerome Powell insisted that the central bank was involved in a large-scale research and development project on a possible future digital dollar, though pointing out that such a project could only be launched via a law that would have to be passed by a deeply divided Congress. In short, irrespective of the future of China’s virtual currency, a digital dollar is not likely, not in the near future anyway.
Building infrastructure (or not)
As for recent economic history, even a cursory look at the performances of the United States and China in combating the 2008 financial meltdown tells a striking tale.
China made an indelible mark in meeting that financial challenge. Its government sharply increased its infrastructure spending, resulting in higher imports that helped counter flagging global demand. While this move increased Beijing’s debt, it also helped build a foundation to further transform the country’s economy into a productivity-led growth model. A decade after that great recession, according to the World Economic Forum’s Global Competitiveness Report, China’s infrastructure ranking jumped from 66th place to 36th place out of 152 countries.
Although infrastructure building on a large scale requires significant upfront investment, it’s guaranteed to yield productivity gains in the long run. Time and cost savings for commuters, improved market access, healthier competition, increased exchange of ideas, and enlarged innovation capacity, all aided by modern infrastructure, are a springboard for economic development.
During the decade following the 2008 crisis, the number of Chinese cities with metro services jumped from 10 to 34 and 1.1 million kilometers of highways were built, raising the total to 4.8 million kilometers. The length of its high-speed rail system shot up by 52,000 kilometers to 132,000 kilometers. Introduced on the eve of the 2008 Olympics in Beijing, it’s now by far the world’s longest system, accounting for two-thirds of the globe’s high-speed rail. Its advances in information-and computer-technology were equally impressive. On average, mobile-phone subscriptions came to exceed one per person — about the same as in the United States.
High-speed rail (of which the United States has none) reduces journey times, while linking dense urban areas with less crowded cities. In doing so, it allows for a more balanced distribution of labor and business development without sacrificing the benefits of an increasingly urbanized economy. Economies of scale in turn mean that productivity rises as rail usage increases.
Little wonder, then, that President Barack Obama and his team promoted the $787 billion American Recovery and Reinvestment Act of 2009 as an infrastructure-building program in response to the 2008 economic crisis. In reality, however, only $80 billion, a tenth of the money Congress sanctioned, would be devoted to actual infrastructure. Of that, about a third was spent on roads and bridges, improving about 67,600 kilometers of roads and 2,700 bridges. The program also included investment in modern infrastructure like smart grids and broadband development.
In 2010, Obama announced what was to be the “largest investment in infrastructure since the Interstate Highway System,” the creation of a high-speed rail network that would rival China’s. More than a decade later, the only visible progress is a much-delayed and still incomplete 275-kilometer Central Valley California line from Bakersfield to Merced. And in the Trump years, when essentially no government money went into such projects, “infrastructure week” became a standing joke. President Biden seems determined to rectify this, but how successful he’ll be with his $2 trillion infrastructure proposal in the face of a rigidly divided Congress remains to be seen.
For its part, the Chinese government combined its program of rapid infrastructure development with upgrading of the labor force. It did so by implementing an educational system that stressed science, technology, engineering, and math, known as STEM. By achieving higher productivity in this way, the government planned to compensate for a projected shrinkage in its work force.
To promote STEM, the government issued guidelines in 2016 to create a national development strategy aimed at advancing China to the forefront of innovative countries by 2030. In February 2017, the Ministry of Education officially added STEM education to the primary-school curriculum. Since then, encouraged by official policies, schools in both the public and private sectors have implemented such programs.
In 2019, the government allocated 100% of its research funding to top universities to the ones that concentrated on STEM disciplines. By comparison, South Korea allocated 62% of such funding that way. By contrast, U.S. universities ranked in the top 100 maintained a greater balance in funding among STEM fields, humanities, and social sciences.
In October 2019, three of China’s biggest mobile-phone carriers launched advanced 5G services, giving it the world’s largest 5G mobile network. A year later, the Wall Street Journalreported that China had more 5G subscribers than the U.S., not just in total but per capita.
Given the ubiquity of smartphones, the news that America seemed to be losing the tech race to China was widely noted. Mostly ignored, however, was the extent to which the U.S. had become vulnerable to Chinese pressure in international trade.
In testimony before Congress in October 2019, Carolyn Bartholomew, chairwoman of the U.S.-China Economic and Security Review Commission, revealed that at least two-thirds of the world’s top 50 maritime container ports were directly owned and managed by the Chinese or supported by that country’s investments (up from roughly 20% a decade ago). These included terminals at major American container ports in Los Angeles and Seattle. When it came to such ports, it led the world with seven of the 10 largest ones.
A year earlier, officials at the state-owned China Ocean Shipping Company, one of the globe’s largest container shipping lines, acknowledged that the company had connected its routes along what was officially called the Maritime Silk Road, linking regional markets in West Africa, Northern Europe, the Caribbean, and the U.S. to form a more comprehensive and balanced globalized trading network. “By owning and/or operating a network of logistical nodes across Asia, Europe, and Africa, China can control a significant portion of its inbound supply chain for essential commodities and outbound trade routes for its exports,” Bartholomew explained. “In the event of conflict, China could use its control over these and other ports to hinder trade access to other countries.”
In the manufacturing sector, China finds itself in a privileged position by virtue of its special mineral deposits, called rare earth elements. A group of 17 rare earth metals, including lanthanum, cerium, yttrium, europium, and gadolinium, often called “industrial gold,” are critical components of such high-technology and clean-energy products as wind turbines, solar panels, and electric cars, because of their magnetism, luminescence, and strength. They are also used in a wide variety of weapons from jet fighters to nuclear submarines.
Unsurprisingly, in recent years, there has been a rapid rise in the demand for these minerals in advanced economies. They are dispersed in low concentrations and are costly to extract from ore, an industry in which China has invested a great deal since the 1970s.
According to the U.S. Geological Survey, in 2020, China accounted for 58% of rare earth minerals production, down from around 90% four years earlier, as the United States and Australia boosted their own mining of them. Still, as of 2018, the United States imported 80.5% of its rare earth metals from China. In May of that year, the Trump administration added these to a list of minerals deemed critical to American economic and national security. And in July 2019, it declared them “essential to the national defense,” which freed up resources for the Department of Defense to take action to secure a domestic rare earth production capability.
Even if the mining of these ores increased in the U.S., refining them requires specialist technology and trained personnel as well as high upfront investment. Due to the lack of these in the U.S. so far, China continues to enjoy a near monopoly in processing the ore, with the raw material containing the prized metal mined outside China shipped to the Chinese sites. The refining process also generates large amounts of radioactive waste and pollutes the environment. As a result, developed countries usually opt for getting the refining done in emerging economies.
All in all, when you view the globe in the throes of a once-in-a-century pandemic, you find an authoritarian state, wedded to centralized planning, initiating programs with long-term benefits for its citizens and seeing them through. You also see a politically riven democratic republic operating primarily on an ad hoc basis.
The stark truth is that an American president cannot even bet on his policies, however laudable or otherwise, surviving his four-year term. Trump’s succession after the Obama era illustrated this dramatically, as has that of Trump’s successor, Biden. When judged purely on the basis of final results, centralized planning clearly beats short-term programming, even if it is viewed with a mixture of derision and condemnation by the Western governments that Biden is attempting to co-opt to challenge China. The reality of our moment: that country is now rising on a distinctly wounded planet.
This article has been republished with permission from TomDispatch.
Dilip Hiro is a leading expert on the Middle East and South Asia. He is the author of Sharing the Promised Land: A Tale of Israelis and Palestinians (Interlink), Between Marx and Muhammad: The Changing Face of Central Asia (HarperCollins), Neighbors, Not Friends: Iraq and Iran After the Gulf Wars (Routledge), War Without End: Rise of Islamist Terrorism and the Global Response (also Routledge), Iraq: In the Eye of the Storm (Nation Books), Secrets and Lies: Operation "Iraqi Freedom" and After, The Iranian Labyrinth: Journeys Through Theocratic Iran and its Furies, Blood of the Earth: The Battle for the World’s Vanishing Oil Resources and, most recently, After Empire: The Birth of a Multipolar World (all Nation Books).
President Joe Biden delivers remarks on his economic vision Wednesday, March 31, 2021, at the Carpenters Pittsburg Training Center in Pittsburgh. (Official White House Photo by Adam Schultz)
There’s no question that war leaves behind its lingering destruction. This includes both harm to people and to the environment. As the world marks the second year of Vladimir Putin’s illegal invasion of Ukraine, we must reflect on the impact of war on Ukraine, the resiliency of its people and global response to resolving the issues of bomb contamination.
Roughly one-third of Ukraine's territory is contaminated. This is the size of an average country in Europe. Ukraine is currently experiencing the worst environmental disaster in terms of soil pollution per unit of time.
Toxic elements such as lead, cadmium, arsenic, and mercury leach from ammunition and weapons into the soil. If potential areas of contamination are not identified and recorded in time, harmful substances can enter the food chain and become carcinogenic. This threatens global food security and export opportunities. Failure to act now could result in the deterioration of human health.
Prior to the war, about 400 million people worldwide relied on Ukraine for their food supply making this a large-scale problem. Spent ammunition and chemical weapons can contaminate soil for decades or longer. Land is not a renewable resource. Soils and their fertile layer are formed over thousands of years. Just 1 cm of soil is formed in 200-400 years, and 20 cm in 5,000-6,000 years. Military operations that take place for 2 years like in the case of Ukraine can destroy what has been formed over thousands of years.
Contaminations left behind from war are nothing new. We know this from wars in SE Asia, conflicts in the Middle East, Africa, and the list goes on. It’s no surprise then that at least 50 countries are impacted by landmines and other explosives. The good news is there are solutions to the long lasting impacts of conflicts like unexploded ordnance on humans, all living things and our planet.
One example is a project called “Assessing farmland and ecosystems damage in north-eastern Ukraine from the Russian invasion” (UA-UK-CH) led by this article's co-author Dr. Olena Melnyk. This project is a joint initiative with researchers from Ukraine, England and Switzerland aimed at enhancing the capacity for mapping, environmental monitoring, and managing the effects of war-induced damage on Ukraine's agricultural land, utilizing existing networks of scientists and field-based analysis to safeguard food security. The first component of the project involves gathering ground truth data on the damage inflicted on Ukrainian farmland, which is then utilized to analyze the extent of soil pollution and calibrate remote sensing data.
The second component focuses on developing an application for mapping farmland to document hazards and contamination and prioritize land for production and remediation.
The third aspect involves building up “citizen science” by training non-combatant experts to inspect and analyze contaminated farmlands and contribute to land mapping efforts.
The fourth component aims to facilitate the decontamination and remediation of Ukrainian lands to restore agricultural productivity while promoting post-war environmentally friendly agricultural practices to ensure sustainability and climate neutrality. This project will enable Ukrainian farmers to avoid dangerous areas and prioritize the land for targeted decontamination. The data collected from this research project will help inform government agencies, civil societies and other stakeholders.
The United States is the largest funder of global humanitarian demining. Since 1993, the U.S. has provided at least $4.2 billion to over 100 countries from Laos to Ukraine. Funding is invested in activities such as bomb clearance, victims’ assistance and explosive risk education.
Environmental research like the UA-UK-CH in Ukraine has proven to be necessary and important to the future of soil rehabilitation post conflict. This should be a norm and donor countries, funders, academic institutions can leverage the future findings from Ukraine and leverage it as a model that can inspire research in other war impacted countries — especially 50-year-old legacy contaminations in Laos, Cambodia and Vietnam—where no study has been done.
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Judge Nawaf Salam, president of the International Court of Justice (ICJ), speaks during a public hearing held by ICJ to allow parties to give their views on the legal consequences of Israel's occupation of the Palestinian territories before eventually issuing a non-binding legal opinion in The Hague, Netherlands, February 19, 2024. REUTERS/Piroschka van de Wouw
The gulf between the United States and the rest of the world — in particular the Global South — on the Israel-Palestine conflict remains sharp and wide.
This was demonstrated yet again at The Hague last week, where the International Court of Justice (ICJ) is hearing a case triggered by a U.N. General Assembly (UNGA) resolution in December 2022 seeking an advisory opinion on the “legal consequences” of the Israeli occupation of Palestine.
The case has taken on even greater significance in the current context of Israel’s military action in Gaza and the West Bank. The Israeli assault (in response to Hamas’s October 7 attack) has led to around 30,000 Palestinian deaths and widespread destruction of homes, mosques, churches, hospitals, and community centers with seemingly no end in sight. A BBC investigation at the end of January found that between 50% and 61% of the Gaza Strip’s buildings had been destroyed or damaged in the war, while over 80% of the population had been displaced.
This case also comes on the heels of last month’s ICJ hearing in a separate case brought by South Africa alleging serious violations of the 1948 Genocide Convention by Israel in its current assault on Gaza. In that case, the ICJ issued a provisional order that Israel’s actions in the current war against the Palestinians could plausibly be considered genocide. Other Global South states have initiated measures at the International Criminal Court. Overall, states representing close to 60% of the Global South’s population have either directly or indirectly backed international legal action on Palestine, as our previous analysis showed.
Last week’s proceedings were the early stage of the UNGA-triggered case, in which the oral arguments focused on whether the court has jurisdiction over the matter. Of the 49 countries and three international organizations (the League of Arab States, the Organization of Islamic Cooperation, and the African Union) that argued before the court’s judges — the most of any case in the ICJ’s history — only four argued that the court lacked jurisdiction and should therefore not render an opinion: the United States, the United Kingdom, Hungary, and Fiji.
Although this round of argumentation centered around the question of the court’s jurisdiction, the representatives who spoke on behalf of their respective countries presented their view of Israel’s occupation as well as current and past military activity in Palestine. Cuba went as far as to explicitly argue that Israel’s military aggression in the current war amounts to a “genocide.” Several others, including Bolivia and Chile, argued that the occupation violates international law, and should therefore end.
The extent to which this issue resonates across the Global South is evident in the fact that Indonesia, the world’s fourth-most populous country and a U.S. partner, so strongly supports the Palestinian cause that the country’s foreign minister, Retno Marsudi, left the G20 Foreign Ministers’ Meeting in Brazil to personally present Indonesia’s argument before the court. She argued that Israel’s “unlawful occupation and its atrocities must stop and should not be normalized or recognized.” Indonesia sees Palestine as the last unresolved issue of decolonization, which it is mandated to oppose according to its constitution.
Bangladesh spoke of violations of three basic tenets of international law: the right to self-determination; the prohibition to acquire territory by force; and the prohibition of racial discrimination and apartheid. Namibia also cited apartheid in its arguments, while The Maldives spoke of appropriation of water resources for Palestine, among other things. The African Union, collectively representing 54 African states, described “an asymmetrical situation in which an oppressed people is confronted with an occupying power.”
Other Global South states arguing in favor of the ICJ’s jurisdiction in this case even called out the United States by name. Guyana, for example, said that the U.S.’s argument fails because the U.S. wrongly claims that there is an ongoing peace negotiation between Israel and Palestine, therefore leaving no legal authority for the ICJ to deliver an opinion on this issue.
Algeria also explicitly said that this case not only stains Israel’s image, but also hurts that of the United States, as the U.S. government continues to support Israel despite its continued violation of international law.
Fiji was the only Global South state in the hearings to broadly align with Israel and the United States in its arguments. It argued that a two-state solution could only come about when (Palestinian) terrorism ended. It also stated that Israel had not agreed to the case, the ICJ approach circumvents the Oslo process, and the information available to the court was one-sided. Additionally, Zambia struck a cautious tone, supporting a two-state solution but also saying that a solution should not “squarely blame one party.”
The deep opposition to U.S. and Israeli positions was not just confined to the Global South. Most core U.S. allies in the Global North were also opposed. For example, France argued that Israel’s settlements in Palestine are illegal. France also asked the court to render an opinion on the extent to which the Palestinians have suffered damages, and asked that the court consider how much restitution or compensation is appropriate for the damages suffered by Palestinians under Israeli occupation.
Even the United Kingdom — the lone core U.S. ally aligned with American and Israeli positions in the case — called out Israel’s occupation. The country’s representative stated that although the UK opposes ICJ jurisdiction in this case, in part because the scope of a fact-finding mission would be too broad in the context of an ongoing conflict, Israel’s continued and expanding occupation of Palestine is illegal under international law.
China and Russia, the two great power rivals of the United States, both supported the majority opinion, arguing in favor of the ICJ’s jurisdiction in the case and against Israel’s occupation of Palestine.
This comes as growing security, economic, and political ties are being formed by the Chinese and Russians with states across the Global South. The Russian mercenary group known as the Wagner Group — recently rebranded as Africa Corps — has tapped into strong anti-Western sentiment to form military and security ties with states across central and west Africa, largely replacing unpopular and outdated U.S. and French security projects in the area.
Both China and Russia are also leading members of BRICS, in which they are in a de facto coalition with leading middle powers of the Global South looking to plug existing and major gaps in the current international system as well as prominently project their voice on the global stage.
Washington’s isolation on Palestine may not have mattered much if we were still in a unipolar world. But with relative power slowly diffusing away from Washington, the United States may benefit from shifting its policies and bridging its position with the rest of the world on the highly emotive issue of Palestine that is causing enormous human suffering and already beginning to destabilize the wider region.
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Janet Yellen, United States Secretary of the Treasury. (Reuters)
On Tuesday, U.S. Treasury Secretary Janet Yellen strongly endorsed efforts to tap frozen Russian central bank assets in order to continue to fund Ukraine.
“There is a strong international law, economic and moral case for moving forward,” with giving the assets, which were frozen by international sanctions following Russia’s 2022 invasion of Ukraine, to Kyiv, she said to reporters before a G7 meeting in San Paulo.
Furthermore on Wednesday, White House national security communications adviser John Kirby urged the use of these assets to assist the Ukrainian military.
This adds momentum to increasing efforts on Capitol Hill to monetize the frozen assets to assist the beleaguered country, including through the “REPO Act,” a U.S. Senate bill which was criticized by Senator Rand Paul (R-Ky.) in a recent article here in Responsible Statecraft. As Paul pointed out, spending these assets would violate international law and norms by the outright seizure of sovereign Russian assets.
In the long term, this will do even more to undermine global faith in the U.S.-led and Western-centric international financial system. Doubts about the system and pressures to find an alternative are already heightened due to the freezing of Russian overseas financial holdings in the first place, as well as the frequent use of unilateral sanctions by the U.S. to impose its will and values on other countries.
The amount of money involved here is considerable. Over $300 billion in Russian assets was frozen, mostly held in European banks. For comparison, that’s about the same amount as the entirety of Western aid committed from all sources to Ukraine since the beginning of the war in 2022 — around $310 billion, including the recent $54 billion in 4-year assistance just approved by the EU.
Thus, converting all of the Russian assets to assistance for Ukraine could in theory fully finance a continuing war in Ukraine for years to come. As political support for open-ended Ukraine aid wanes in both the U.S. and Europe, large-scale use of this financing method also holds the promise of an administrative end-run around the political system.
But there are also considerable potential downsides, particularly in Europe. European financial institutions hold the overwhelming majority of frozen Russian assets, and any form of confiscation could be a major blow to confidence in these entities. In addition, European corporations have significant assets stranded in Russia which Moscow could seize in retaliation for the confiscation of its foreign assets.
Another major issue is that using assets to finance an ongoing conflict will forfeit their use as leverage in any a peace settlement, and the rebuilding of Ukraine. The World Bank now estimates post-war rebuilding costs for Ukraine of nearly $500 billion. If the West can offer a compromise to Russia in which frozen assets are used to pay part of these costs, rather than demanding new Russian financing for massive reparations, this could be an important incentive for negotiations.
In contrast, monetizing the assets outside of a peace process could signal that the West intends to continue the conflict indefinitely.
In combination with aggressive new U.S. sanctions announced last week on Russia and on third party countries that continue to deal with Russia, the new push for confiscation of Russian assets is more evidence that the U.S. and EU intend to intensify the conflict with Moscow using administrative mechanisms that won’t rely on support from the political system or the people within them.