August 10, 2021 | Infrastructure to Counter Autocracy

The Biden administration views domestic investment as the key to countering China and autocracy more broadly. Will this plan work?

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Today the US Senate passed the $1 trillion bipartisan infrastructure bill in what many pundits have declared a domestic win for the Biden administration. Many US lawmakers see it as a message to Beijing that "democracy can deliver."

The bill underscores the geopolitical calculus driving US domestic policy, namely: proving that democracy actually works in the face of rising global and domestic authoritarian tendencies. During his first press conference in March, President Biden said “It is clear, absolutely clear ... that this is a battle between the utility of democracies in the 21st century and autocracies.”

Is the Biden adminisration’s $1 trillion bipartisan infrastructure bill the key to proving the viability of the American political system? It’s likely too soon to tell. The tangible impact of the infrastructure bill on the US economy will likely be limited in the short-term:

Mark Zandi, chief economist at Moody’s Analytics, estimates the infrastructure package will raise the economy’s productive capacity by about 0.04 percentage point. So rather than the 1.9% rate at which the U.S. economy can sustainably grow, according to  CBO estimates, output could expand 1.94%.”

(Paul Kiernan, “Infrastructure Bill’s Boost to Economy Is Likely to Be Limited”, Wall Street Journal)

It seems the bill itself is more representative of a strategic shift in Washington. This shift is likely based on a recognition of the dual threat of external geopolitical adversaries combined with the domestic rise of a form of right-wing authoritarian populism.

The bill also represents a shift away from the Trump adminstration’s vision for the United States’ future. A vision that viewed China as the primary threat to US interests and values, yet also one that failed to formulate strategy to strengthen the United States’ ability to compete with China in the 21st century.

For the Trump administration, fomenting a rapidly escalating confrontational relationship with China was an end in itself. The prevailing belief (that continues to exist among GOP lawmakers) is that once the China threat is eliminated, all of the core threats to US national security will dissolve.

The Biden administration is preserving many aspects of the Trump administration’s China policy. Yet, even if the policies themselves are the same (for now), the underlying rationale to the Biden administration’s approach appears to more readily embrace a positive vision for the US future.

Secretary of State Tony Blinken accentuated this postive vision during a speech yesterday at the University of Maryland.

Exerpts from Blinken’s speech:

“Our domestic renewal and our strength in the world are completely entwined, and I'm here to tell you that we could be doing better. That is the hard truth. We're falling behind where we once were in the world, and our rivals, slowly but surely, are pulling close behind us. In some areas they're already ahead of us.”

“Nothing would put to rest faster their specious argument about America's best days being behind us, than if the United States made serious investments in our domestic renewal right now. It's a lot harder to say a country is in decline when you're watching it become stronger, more effective, more united before your very eyes.”

The United States still has a lot to prove.

The broad consensus among Chinese leaders is that the United States is trapped in a terminal state of national decline. In his new book, Rush Doshi addresses China’s understanding of the United States’ dominant role in global affairs and he outlines ways “American leaders can begin to reverse the impression of US decline”:

With a constructive China policy that strengthens the United States at home and makes it more competitive abroad, American leaders can begin to reverse the impression of US decline. But they cannot stop there. They must also find affirmative ways to rebuild the solidarity and civic identity that make democracy work. An effort to stress a shared liberal nationalism… has been part of our civic culture and can be again.

Doshi, Rush. The Long Game (Bridging the Gap) (p. 334). Oxford University Press. Kindle Edition.

It’s unclear how China will perceive the United States’ newfound drive to pursue an American vision of “shared liberal nationalism.” It will take years or decades to know when when these kinds of investments can begin to bear fruit.

Questions:

  • To what extent is the Biden administration’s bipartisan infrastructure bill a domestic political victory versus a legitimate plan to build a comprehensive national vision?

  • Assuming some members of the US Republican Party endorse some degree of autocracy, to what degree is the Biden administration’s commitment to countering autocracy domestically focused?

  • Is China mistaken to view the United States as being trapped in a terminal state of decline? If so, how could this outlook backfire should the United States regain its footing?


Recommended Reading and Content

China’s New Nationalism (Alec Ash; The Wire China)

Today, Party patriotism in China and its popular expressions show more striking similarities to Trumpism — an ideology that Steve Bannon explicitly called a “kind of nationalist movement.” Indeed, it is only a code switch between China’s “alt-left” nationalism and that of alt-right America. Both have co-opted social dissatisfaction, especially in young men, into a glorious promise of national rejuvenation. Both are formed by environment, but comprise more thoughtfully held views than critics give them credit for. And both are to be dismissed or underestimated at our peril.

Renowned Chinese Academic Yan Xuetong: 'China Will Work To Foster An Ideological Environment Conducive To Its Rise, While Opposing Western Values' (memri.org)

"China's post-pandemic foreign policy is just beginning to take shape. The Chinese government has always adjusted its policies to changing domestic and foreign conditions, following Deng Xiaoping's practice of 'crossing the river by feeling the stones.' The future is no different. However, the context for these adjustments will be a fundamentally altered global landscape in which U.S. unilateral decisions, as well as the various alliances and issue-specific coalitions it leads, will no longer be as viable as they once were."


Current Events

US-China Relations

Secretary of State Antony Blinken: ‘Domestic Renewal’ Needed Through Infrastructure Investments

“Our domestic renewal and our strength in the world are completely entwined,” Blinken said. “And I'm here to tell you that we could be doing better. That is the hard truth. We're falling behind where we once were in the world, and our rivals, slowly but surely, are pulling close behind us. In some areas they're already ahead of us.” 

Authoritarian governments are pushing the narrative that the United States is in decline, and that their systems can better meet the needs of the future, Blinken said. 

“Nothing would put to rest faster their specious argument about America's best days being behind us, than if the United States made serious investments in our domestic renewal right now,” he said. “It's a lot harder to say a country is in decline when you're watching it become stronger, more effective, more united before your very eyes.”

Infrastructure on track as bipartisan Senate coalition grows (Associated Press)

After weeks of fits, starts and delays, the Senate is on track to give final approval to the $1 trillion bipartisan infrastructure plan, with a growing coalition of Democrats and Republicans prepared to lift the first phase of President Joe Biden’s rebuilding agenda to passage.

Infrastructure Bill’s Boost to Economy Is Likely to Be Limited (Paul Kiernan; Wall Street Journal)

The bipartisan infrastructure bill is unlikely to have a big impact on growth in the next few years, economists say. Longer term, though, investments in highways, ports and broadband could make the economy more efficient and productive.

The short-term boost to growth will be relatively limited for two reasons, economists say. For one, the bill represents just $550 billion in new spending—compared with nearly $6 trillion that Congress has approved in the past year-and-a-half to battle the Covid-19 pandemic and its economic fallout.

China-US trade war: American retailers claim tariffs on Chinese goods hurt business during pandemic (Sarah Zheng; South China Morning Post)

United States retailer associations have argued that US tariffs on Chinese products are hurting business, in the latest call on President Joe Biden’s administration by domestic business groups to resume trade talks with China.

Seven trade groups – including the National Retail Federation (NRF), the American Apparel and Footwear Association (AAFA), the Consumer Technology Association and the Toy Association – filed a brief to the US Court of International Trade on Monday to support businesses and workers negatively affected by the series of escalating US tariffs imposed on most Chinese goods.

South China Sea: US and China spar over ‘biggest threat’ in disputed waters (Laura Zhou; South China Morning Post)

China has faced “no consequences” for ignoring rules in the South China Sea, US Secretary of State Antony Blinken said at the latest UN maritime security summit, as the two powers blamed each other for stirring up tensions in the flashpoint region.

Joining the United Nations Security Council’s maritime security meeting via video link, Blinken took aim at what he called “dangerous encounters between vessels at sea and provocative actions to advance unlawful maritime claims” in the South China Sea, the resource-rich waterway where China’s extensive claims have been contested by Southeast Asian countries including Vietnam, Malaysia, Brunei and the Philippines.


China Economy

Evergrande: Monetary Loosening The Only Way Out (Anne Stevenson-Yang; Forbes)

The latest bad news for Evergrande was a bond selloff Thursday following news that a Guangzhou court has consolidated a number of creditor lawsuits against the company. The consolidation on one hand staves off brush fires for Evergrande by enabling cash to flow from one part of the company to a part that is experiencing a liquidity crisis, like the one that recently had about $20 mln in deposits frozen last month by a Guangdong bank. On the other hand, the move is ominous: it means that the court wants to get a bird’s eye view of Evergrande’s roughly $2.3 trillion Hong Kong dollars (about $300 billion U.S. dollars) in liabilities. And then will want to do something about it.

Evergrande poses an insoluble problem for government money managers. Evergrande itself is never going to meet its obligations. The only solution is to hand it money. And that means that a loosening cycle for the Renminbi must begin.

Powerful Provinces: How Regional Political and Economic Power Correlate in China (Damien Ma, Ruihan Huang; Macro Polo)

Like most large, decentralized countries, politics are mainly local in China too, and political power flows through its 31 provinces and regions. But that political power is far from equally distributed and doesn’t always favor provinces with the largest economies.  

We found the correlation between provinces’ economic strength and political power shifted depending on the leadership that was in power. Based on an original Regional Political Power Index (RPPI), combined with provincial economic indicators, we estimated the correlation between the two from the Jiang Zemin to the Xi Jinping era (see Figure 1).  

Covering the 14th to 19th Central Committees (CCs), the RPPI essentially traces the rise and fall of provinces’ political power over 30 years. It provides further quantitative evidence for the regional coalitions that have dominated Chinese elite politics since 1992 (see detailed methodology below). 

Private equity firms revise China strategy as regulatory crackdown widens (Kane Wu, Julie Zhu; Reuters)

Private equity firms are rethinking their strategies in China as a widening regulatory crackdown on some of the country's hottest sectors forces investors to scout for bets in other industries that they hope will be less vulnerable to sudden policy changes.

Private equity (PE) and venture capital (VC) funds are pivoting away from data-heavy, consumer-facing internet companies to sectors including semiconductors and renewable energy, industry executives said.

China anti-graft body criticizes business drinking after Alibaba scandal (Reuters)

China's Central Commission for Discipline Inspection, its top anti-corruption agency, has criticised what it called a "disgusting" culture of business drinking following a sexual assault scandal at e-commerce giant Alibaba Group Holding Ltd (9988.HK).

"In the incident, an unhealthy dynamic in a working environment, a disgusting drinking culture, a lack of transparency when reporting issues together exposed pervasive, deeply rooted unspoken rules," it said in a notice on its website.


China Domestic Politics

Do we really need to worry so much about Chinese nationalism? (Kaiser Kuo; SupChina; 2017)

We live in an age of rising nationalism, and this is most certainly cause for concern. Nationalism is a potent ideology: It tends, as the late Cambridge philosopher Ernest Gellner once observed, “to prevail with ease over other modern ideologies” in the places where it takes root. Nationalism — distinguished in its current usage from the more innocent “patriotism” by its identification of an enemy, by its zero-sum mentality, and by its stridency — is an isotope that, however volatile and unstable, nevertheless has a long half-life and lasting toxicity.

Before he governed China, how did Xi Jinping govern Zhejiang? (Yang Liu; Xinhua News; Beijing Channel)

As The Governance of China is presumably flying off the shelves across the world, this newsletter offers some literature that goes further into the past, a collection of political essays Xi Jinping penned while serving as the top official of Zhejiang province.


Photo by Chris Briggs on Unsplash