Daily Management Review

Everyone is Afraid of China, Even Putin


This is dawn of a new economic order - so said Paul Mason in his monumental article published in the British newspaper The Guardian. This author has published a book “Postcapitalism” in late July. He argues that the capitalist dogma is going away, giving place to an economic model based on partnership, which is moving forward due to information technology. But long before capitalism will have been gone, if it ever goes away, the world will have to deal with other problems of the second decade of the XXI century: the rise of Islamic fundamentalism in the name of ISIS, China's expansion, a new threat to Russia, destabilizing Eastern Europe, the cracks in the Western ideals due Greek debts and the financial crisis in the US in 2008.

Despite the signing of a third agreement for the aid package to Greece, no one believes that they managed to overcome the basic structural economic problems of the euro zone. There were also voices claiming that China has been falsifying data on the growth of the economy, and it feared that the economic downturn in China take on a momentum global consequences. Against this background, questions about the real motives of actions, taking place behind the scenes of the economic events, were aroused. In those years, when the growth rate of the Chinese economy has slowed from 10% to 7%, according to official figures, there has been a very important external event. China has emerged from isolation and began to seek the friendship of the world, resorting to soft power - money.
Recently there was a statement worthy of discussion, that China wants to take over the world to provide jobs for hundreds of millions of Chinese. In the statement, there is nothing new or original, but if you put it in the right geopolitical context, it will be more significant than the expansion of Japan to the West in the 1980s.
It is alleged that the Chinese will do anything, by legal and illegal means, using real and false data to make up a positive picture for the world and to break into new markets. They fear that the slowdown in economic development would not allow millions of new workers' hands, appearing each year, to find a job. This expansion threatens the countries competing with Chinese exports, such as Japan and countries in the world with the dominant political and military point of view, that is, the United States.
However, not only the West and Japan feel in danger. China also believes that it is threatened. As a result, a struggle between the two blocs is unfolding of the geopolitical scene. United States, India, Japan, and a few smaller countries have formed one block. The second block is China. Russia, apparently, is a third party in this conflict.
Recent minor territorial disputes between China and Japan have played against Japanese Prime Minister Shinzo Abe, whom the media called nationalist. Japan, even with the support of the United States, is unable to counter China neither in economic, nor in the military sphere. And here goes India. One of the most economically promising (theoretically) countries, democracy, ethnic diversity, a young population, with the advantage of language knowledge (nearly everyone speaks English) has been struggling to get ahead for many years. Today, India has become an important strategic partner of the United States, serving as a counterweight to China, for what it receives support from Washington and Japan, which also relies on the United States.
One of the reasons that the US is very worried that Germany would refuse approving the deal to help Greece, is not connected with the possible collapse of the euro zone, but possible opportunity for China to gain a foothold in Europe. Germany originally intended to support the deal, but bluffed for Angela Merkel to tell taxpayers about the pressure exerted on Greece.
The threat of Greece to seek help from Russia was from the category of funny jokes. Behind the scenes, there were real concerns of recoursing to China. An Irish economist and expert David McWilliams wrote a detailed proposal and explained how exactly the Greeks may ask China for help, creating industrial base of China in Europe as a revenge to Germany. This article seemed humorous, but backstage sources told us that they laughed at Europeans and Americans, not at Chinese.
Russia, too, was in an undesirable position. Vladimir Putin makes bellicose statements against the West and the United States, but, in fact, fears that China will shift to the east borders of Russian territory. It does not give a reason for optimism to Ukraine and the Baltic republics, that are within reach of the Russian artillery. However, this geopolitical scenario should be considered too.
Weak and small Greek economy has become the face of the European crisis. It is no coincidence. Such weak countries like Greece, may be holes in the fence to infiltrate Europe for China. The Chinese are buying properties in Greece (Piraeus port) and Spain (empty airfield). Any investment consultant would advise them against investing in such projects. Nevertheless, it seems that Beijing considers those important acquisitions, despite the price.
At the moment, Spain and Greece are probably glad the Chinese intervention, because the situation in Europe is quite heavy. However, according to one theory, few people are speaking about which, they have reason for concern, related to changes in sentiment in Germany.
Germany has spent the last 60 years humbly apologizing to all over the world, and they paid a lot of money for it - told a senior economic source outside Europe. However, the new generation does not want to repent and pay, as did their fathers and grandfathers. The problem is not in Greece with its small economy, but in France. If Germany and France have created the euro zone and maintain it, how is it that the Germans work more and earn less than French people? This can result in the German revolt.
At the same time, the German rebellion have more than one side. The statement "We are not going to pay for the European slackers" has a high price. In their high wisdom, Germans have thought that the euro zone should be established. Foundations, laid with the help of rehabilitation programs in the 1950s, combining the eastern and western parts of the country, the reforms of the 1990s and later, plus the single currency, turned Germany into a major exporter and one of the most stable and economically prosperous countries in the world. The surplus on the current account, that is, the balance of trade and investment in 2014, amounted to 7.6% of GDP, and in dollar terms it is the largest in the world. Therefore, it supports the euro zone economic power of Germany and, by provoking others to oppose it and break up the block, Germany runs the risk of suffering the strongest of all.
The basic problem is that countries such as Greece, Spain, France and Portugal will not be able to thrive in a world where competition and economic growth became sacred values. Of course, they cannot do it in the European Union, where, on the one hand, the Germans work and pay taxes as if it is a sacred tradition, and France put barricades when someone suggests that it is a good idea to increase the 35-hour working week and burn cars with the appearance of new competitors in the taxi. When one believes he pay the most, we cannot say how long this balance will be kept. Perhaps the Greek crisis - this is the price Europe should pay to understand it.

source: themarker.com