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Feared or loved

8 May 2020 By Pete Sweeney

China’s soft power is getting a lot harder thanks to Covid-19. Even before the virus first emerged in Wuhan, the nation’s partners were reconsidering their economic and diplomatic ties. Foreign criticism since is only sharpening attitudes in China, while Western disarray is emboldening nationalists in Beijing. That will lead Chinese firms to take a more aggressive approach in overseas markets – and foster more trade friction.

The Chinese Communist Party has never been particularly adroit at making friends; historically its diplomatic support network has been held together by transactions, as opposed to the shared values that define soft power. President Xi Jinping’s “China Dream” aspires to a racial renaissance for Chinese people. Not much scalable value there.

Now the People’s Republic faces its biggest PR crisis since the CCP crushed protests with tanks in Tiananmen Square in 1989 – a comparison drawn inside Zhongnanhai, Reuters reported. Official censorship of doctors’ initial reports of the outbreak has played poorly as the virus spread overseas. This has exacerbated resistance to Chinese presence in international institutions, technology networks, universities and laboratories. Entrenched suspicion has hobbled Beijing’s attempts to redirect the narrative to its containment of the disease.

Yet if China emerges from recession first, as seems likely, it won’t emerge humbler if the West is still floundering. Early revival will validate the “wolf warriors” inside the party that believe financial and military might make right, and the state-driven economic model is working just fine. They’re sick of losing popularity contests played by foreign rules. They have the support of many ordinary citizens who believe China’s time to dominate has come, to hell with its public image.

For all its bluster, the Chinese economic team has tried to rebalance trade and improve areas like intellectual property protection. The obnoxious “Made in China 2025” import substitution programme has been downplayed. This could be easily reversed as cheap stimulus credit flows from government banks to state champions.

Buttressed by a recovering home market, and encouraged by economic hardliners, companies like construction equipment maker Zoomlion or telecoms giant ZTE could tap funds to win price wars for market share abroad, or acquire strategic technology. Indeed, Chinese exports defied plunging overseas demand to rise in April. A China that’s diplomatically alienated yet economically triumphant will be even harder to get along with.

(This is part of a series of insights from Breakingviews columnists examining how the Great Lockdown to halt Covid-19’s spread will affect business, finance, economies and markets.)


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