All I want for Christmas is Huawei


I started 2019 with a research note about The Asian Century, concluding that within ten years we would all be in the Belt and Road Initiative, whether we liked it or not. Not a year later, the Belt buckle is straining while the Road is longer with many more winding turns than the Chinese ever expected.

The pushback started before 2019 of course, but it has intensified this year. And the focus hasn't been only on China's massive mining, engineering and construction firms which are central to the BRI, but its telecoms champion Huawei and its ship operators Cosco as well as its manufacturers shipping goods to the US.

In January, the US Justice Department charged China's telecoms champion Huawei with 23 counts pertaining to theft of intellectual property, obstruction of justice and fraud related to its alleged evasion of US sanctions against Iran. The row intensified with arrests that looked like hostage taking on both sides, then President Trump effectively banned Huawei from the US in May on grounds of national security, with his executive order, "Securing the Information and Communications Technology and Services Supply Chain".

US allies around the world reviewed their relationships with Huawei as they found China's own rules about how its companies operating overseas had to effectively act as arms of the State security apparatus to be unpalatable. Not that such rules had bothered them when there was money to be made.

As Western attitudes to China have hardened, so have others - India decided not to join the Regional Economic Cooperation Partnership that China has been pushing so hard in order to achieve its aim of a trillion dollars of trade with ASEAN by 2020.

The unease over dealing with China has spread beyond politics this year. China stopped broadcasting Arsenal Football Club matches this month after Mesut Ozil, a Muslim Arsenal player, tweeted his concerns about China's activities in Xinjiang home to the Muslim Uighurs. The German club Bayern Munich cancelled its co-operation with the Chinese league over the same issue. It might seem trivial but it isn't: football is a trillion dollar global entertainment business. China has poured money into its league, attracting star players and coaches from the glamorous European and Latin American leagues. Football is, as Russia and Qatar know, a great soft-power propaganda tool. But maybe China is scoring an own-goal by letting football and politics get intertwined.

China's leadership may be nonplussed about the West's emergent concern for the Uighurs when the US and its allies have spent a trillion dollars bombing the Uighurs' coreligionists in Central Asia and the Middle East. But of course it isn't about the Uighurs, it's about the West's distaste for the pre-eminence of the unaccountable Party in all aspects of Chinese life. It's about the West being nonplussed by circular Chinese logic that goes: if the Party runs the State for the benefit of the People, then everything the State does can only for the benefit of the People. The same cognitive dissonance can be found in China's dealings with Hong Kong's democracy movement.

Deglobalisation is expanding beyond trade; in 2020 the trade war between the US and China will become a culture war between the West and China with two sides lining up behind the Chinese and the Americans. We are moving into a new version of the 19th Century great game with the Great Powers exercising control over their spheres of influence. This time the territory extends beyond the physical world and into the cyberspace of military, industrial and communications technology - and into secular life too.

The Take-Away

There are so many realms in which the West and China can increase or reduce co-operation. Shipping has already been proven to be 'fair game' with the US sanctions on Cosco, plus related sanctions on Iran and Venezuela. The global shipping industry relies so much on China for demand growth that we have to keep our fingers crossed that political interference is kept to a minimum next year, especially with the mammoth issues around regulation to keep us all awake at night.

Still, we might decide that there is no point worrying about what we can't manage, so if you aren't having Christmas lunch with your Senator, Congressman, Party Cadre or State Minister, I hope you have some time to relax before 2020 gets started.

Merry Christmas and Happy New Year from all of us at Shipping Strategy Ltd: Mark, Mary, Mike, Nigel and Peter.

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