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China and PNG in the era of Pacific Rim instability


CHINA’S rise from being the “sick man of Asia” to an emerging super power in the world economy has been phenomenal.

The world over has been intrigued by China’s rise to a point where it is widely accepted that the 21st Century is the Asian Century.

China’s rise has spawned a ripple effect across the Asia Pacific Region where a host of countries are now lining up to take advantage of China’s roaring economic growth and bulging appetite for raw materials.

Papua New Guinea’s own decade of uninterrupted growth can be attributed to its closer trade ties with China where Chinese investment in the country has rocketed to a record level.

China is now PNG’s second biggest trading partner after Australia, however it looks likely that China may take the gold medal in the not too distant future given that the two countries agreed to further enhance their trade ties to increase China’s level of investment in PNG during the recently concluded APEC leaders meeting in Beijing.

What China offers PNG and other developing countries in their journey to economic growth is also encouragement and belief that developing countries can grow to a level comparable with developed nations, provided the government undertakes appropriate reforms.

Obviously, the Communist Party (CCP) being a centralised authoritarian regime ensures that rules are followed. Party members found to be involved in corruption have been dealt with severely by the government, including being executed.

On the other hand, PNG - a democratic country where individual rights are a cornerstone - is beginning to see the ugly side of corruption as it enters its years of plenty.

I believe there is evidence to suggest China is tilting towards democracy, or a form of it. In fact, private enterprises and not government control has been responsible for much of China’s economic transformation.

Although the wrath of capitalism has led the majority of the world’s citizens to believe that it is meant to create prosperity for a minority few at the expense of the mass, it has nevertheless assisted its beneficiaries to create enough wealth and capital that can alleviate poverty in this world.

However, in pursuit of building their national prestige through monopolization of the global market, developed countries have created a “global scarcity power” that has given them the power to create price (price makers) at the expense of the developing countries.

Subsequently, capital created in excess cannot be distributed to poor developing countries to stimulate economic growth all because of developed countries wanted to maintain their global hegemony.

Greed manifested in the form of the “scarcity power” has made capitalism into a system of economy that has led to unequal distribution of wealth/income and subsequently a widening disparity gap between the "haves" and the "have nots".

This aided by the fact that the developed countries of the West unlike most of the developing countries like PNG, have the systems and processes that have allowed them to generate "capital".

At the centre of this is the well advanced property rights system. In my article below I concur with the Economist Hernando De Soto that advocating property rights will allow developing countries to have the means to not only generate "capital" but revolutionise the entire government system.

In other words, formalising the informal economy that is driven via a bottom-up approach where rules/laws for registering businesses, accessing credits and so forth takes into account the "existing social norms".

As an example for PNG’s case, what the government needs to do is amend the ILG Act so that it explicitly states that “land is commonly owned by the clan and any decision regarding its use must be commonly reached”. In addition, there needs to be greater transparency and accountability where ILG executives are accountable to their people.

PNG being at the centre of the Pacific Rim needs to navigate its way towards greater standing in the international scene. Guided by its natural endowment such as gas, gold and oil that is now on demand world over it needs to choose its friends carefully with the intention to create a win-win outcome.

Already its rise spurred on by the PNG LNG Project has attracted interest from US, China, Japan and Korea apart from its traditional trading partners like Australia and New Zealand.  

China's change in leadership will overtime usher in reforms driven by the growing desire of its public to seek greater freedom concerning their personal well being. That means such controversial policy such as the one child policy will come under intense pressure.

Unlike the Tiananmen Square protests of the 1989, the CCP will be tackling this uprising through a more carefully orchestrated approach.

Although, China's leadership may look subtle to the outside world I think this is more due to the fact that it (CCP) is trying to perform a balancing act where it maintains its access to the global market through a peaceful co-existence strategy but at the same time it maintains its hold onto power in China. This is going to be a tough one and eventually something will have to give.

China's growing influence in the global sphere is a result of its willingness to engage with the global community through trade although many critics argue its pegged exchange rate policy (pegging of the renminbi against the US dollar) is creating unequal playing field.

It is clear that this is a deliberate attempt by CCP to prop up its foreign exchange reserves and at the same time combat rising cost of living (inflation) domestically.

To add salt onto the wound the West and especially US have been China's biggest debtor for quite some time now. So far China's backed government bonds in US are already worth trillions of dollars and any decision by the CCP to suddenly request withdrawal of all its bonds before its maturity date could have severe repercussion throughout the US economy. 

In addition, stable/low wage rate for its huge labour force supported by government subsidies in transport, housing, food and other public utilities and factor transfer which involve the transfer of technology, money and labour have been some of the recipe that the CCP have used and are using to curb public dissent against the government.

Yet there are signs that its predominant Confucianism views about the role of the state and its people are coming under immense pressure due to the rise of Christianity which advocates freedom to follow one's conscience to seek God.

In fact, an article by the Economist magazine  that I accidentally stumbled upon a week ago points to the fact there are now a growing number of Christian converts within the CCP and it is becoming clearer that the government control on religion is coming under increasing pressure.

Coupled with this the widespread access to internet is playing a significant role in transferring knowledge to and from China to the World. So while China embarks on a massive campaign to “Confucianise” the world, it will be interesting to see if those countries negotiate or push for more religious freedom back in China in exchange.

Thus, PNG being one of China’s major strategic trading partners needs to put its hands up and voice its support for reforms back in China that would support human rights and protection of religious freedom given it professed to be a Christian country as is enshrined in its constitution.

Frankly, it is its Christian duty to do so. Therefore, whichever angle one looks at China or more specifically CCP’s endeavour to maintain its grip on power by seeking the developed countries sympathy or support, it may come with a big price if the world demands it from her.

However, China has so far shown that it is willing to go alone in pursuit of its ambition without relying on the West. At present it is a major player in the emerging BRICS (block of countries comprising of Brazil, Russia, India, China & South Africa who are some of the world’s dynamic and fastest growing economies) and is willing to establish a separate commerce and financial systems supported by a proposed World Bank styled institution.

Yet, China knows that it needs to maintain, open and expand its trade links into the global markets in order to maintain the resilience of its economy and CCP’s grip on power. If it is not careful its price could be the ultimate downfall of the Central Planning System that Mao Zedong established and Deng Xiaoping craftily turned it into one of the greatest machine that yielded the “Chinese Economic” miracle, the talk of the 21st Century. 


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Jack Klomes

In my opinion China's development could best be defined in this quote, "Open your arms to change but do not let go of your values".

They realised that in order to be able to compete with the West they need to adapt and change but they have not let go of their values.

They controlled what development they wanted to happen in their country pertaining to their interests and values.

They did not allow development to control their growth and dictate their way of thinking!

Bernard Singu Yegiora

Wonderful article!

The CCP has a very interesting structure. Within the party there are different factions. The Princelings who are decendents of the revolutionaries, theTuan Pai faction made up of who joined the party via the communist youth league, the Shanghai gang made up of those who follow Ziang Xemin, and the Tsinghua faction made up of those who graduated from the top uni in China.

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