There’s an old saying that fools and their money are soon parted. By extension, a foremost question when making or holding an investment should be: Will you be able to sell it? Put another way, what’s the risk that you might not be able to sell at any price?
In this light, why does the Canada Pension Plan Investment Board have a whopping 11 percent of its assets invested in China, meaning in effect in China’s war machine? Wouldn’t that be like having 11 percent of the Canada Pension Plan (CPP) invested in Germany in, say, 1938? Yes, money was being made there, so businessmen were advocating appeasement. They learned of the risk the hard way. But it was worse than that. American and British technology contributed mightily to the buildup of the German armaments industry.
To an even greater extent, China has captured the corporate imagination of Western democracies, along with our money and technology. Who still has to be told that what the regime in Beijing can’t get legally they simply steal—especially technology for military application? There are reports of foreign investment in joint ventures that have led to investors getting squeezed out once the Chinese partners have the technology and infrastructure to go it alone.
Sure, there’s been a lot of money made in China and no doubt opportunities abound for making more. But at a flick of the switch, China’s Central Bank could impose exchange controls, making it impossible to get money out. There are already anecdotal reports that moving large amounts of money out of China is difficult or almost impossible. Smart people, notably in Hong Kong, are pulling out of the country in droves and taking their money with them. That’s when they can even get a passport.
We already know that Canadian citizens can’t leave if Beijing decides to prevent their departure. Who needs a reminder that they include Michael Kovrig and Michael Spavor, held in terrible conditions? How can anyone at the CPP even go and look at investments in China without wondering whether he or she will be next?
It’s generally accepted that the Western democracies should not be buying anything produced by slave labour, or by those working in equivalent serfdom. That’s why we don’t want to buy cotton or anything else produced by Uyghurs held in camps in China’s Xinjiang. Then there’s also the theory that we should not be enabling the technology with which the Chinese regime abuses human rights. Given our technological interdependence, and the single-mindedness of the Chinese Communist Party, it’s impossible to distinguish between objectives.
There’s a vital question in the frontispiece of the book by Peter Navarro, “Crouching Tiger: What China’s Militarism Means for the World.” Navarro quotes Professor John Mearsheimer, who wrote in 2004: “The question at hand is simple and profound: Can China rise peacefully? My answer is no.”
For half a century, Beijing has been pushing its influence worldwide, and expanding China’s territory into India and the South China Sea. It’s hardly in question that Taiwan will be next, following the integration of Hong Kong. We have to credit Xi Jinping’s China with a degree of smarts superior to that of Hitler’s Germany. China’s approach is to accrue enough economic and military strength to make overt war unnecessary. Navarro calls it salami-slicing, meaning encroaching by any and all means short of serious hostilities.
Former U.S. president Richard Nixon’s rapprochement with China was based on the proposition that economic development and interdependence would lead to the improvement of domestic conditions, the emergence of a peaceful and prosperous member of the world community, and a lessening of international tensions. However, Nixon was fundamentally mistaken on important counts. The Western world benefits from low-cost production of all kinds, but it’s not only that the West benefits from low-priced knick-knacks. China has become a core supplier for the top end of high tech, conspicuously including Boeing, General Motors, and Apple. That came about as a result of displacing innovation and manufacturing in the Western democracies. So what happens if these multinationals can’t repatriate their profits? What happens if all that foreign investment simply gets nationalized without compensation?
The Western democracies face many foundational challenges, notably including a failure to deliver decent education, skills training, and rewarding employment to the wider population. That’s the other side of the coin when it comes to evaluating our relationship with China. So my questions are these: Why does the CPP finance our overtly belligerent competitor? And what happens if those investments become worthless?
