China continues to be the world’s foremost advocate for commercial and financial connectivity on a global basis. The very essence of the Belt and Road initiative is designed to maximise the win-win potential of cooperation between nations and continents on a level that has not yet been realised in spite of high technology giving peoples and nations the ability to interact as never before.
The increasingly holistic trade war launched by Donald Trump against multiple nations including and especially China has not changed China’s ethos. In many ways, Trump’s turn back to protectionism has encouraged China to create networks of inter-connected nations whose economic fortunes can be mutually improved through respectful rules based win-win cooperation across the multiple countries participating in the Belt and Road initiative.
However, for too long, certain elements of Chinese society have mistook the positive virtues of cooperation for the vices implicit in inter-dependence. This is a reality that has now been openly acknowledged by Huawei Ren Zhengfei in a candid discussion streamed live throughout the world. Ren stated, “We did not expect they [the US] would attack us on so many aspects“. He likewise characterised the US embargo on Huawei as being stronger and more pervasive than he initially anticipated.
Ren cautioned viewers that he anticipates major revenue drops over the next two years but that by 2021 he anticipates that Huawei’s fortunes will recover. He further stated:
“We cannot get components supply, cannot participate in many international organisations, cannot work closely with many universities, cannot use anything with US components, and cannot even establish connection with networks that use such components”.
As Ren calmly issued his statements with an eye to the long view, Donald Trump may have been smiling as the head of one of China’s major companies and in many ways its most internationally prominent brand has conceded a temporary defeat at the hands of a trade war for which the company was self-evidently ill-prepared.
Like many companies, Huawei had failed to consider the possibility that a country as powerful and with as large a market as the United States would one day cease being largely cooperative and start acting in a hostile manner. With hindsight, Huawei could have and should have had the foresight to realise that just because cooperation between the two-superpowers would result in the best win-win results for the wider world, it could never be fully assumed that Washington’s policy makers would share this view in perpetuity. In other words, Huawei’s fault lies in the fact that its corporate leadership assumed that its major trading partner would adhere to logic rather than to the hostility motivated by the worst emotions that are part of the human condition.
In this sense, a prominent rubicon has been crossed. A major Chinese company has admitted that whislt cooperation is ideal, inter-dependence can lead to a major (however temporary) setback. Of course this is bad for the world as it will prevent the best possible 5G service at the best prices from being delivered to ordinary consumers who have been robbed of their market place freedoms by the trade war.
The silver lining however is that as China pivots its erstwhile mass production manufacturing base to an economy predicated on high quality development in pursuit of forming a moderately prosperous society in all respects, there will be no further delusions about reality. The lesson derived from an objective examination of reality is that Chinese companies should never again place themselves at the mercy of foreign entities under the false assumption that win-win conclusions will be as desired by a foreign entity as they are by Chinese companies.
In this sense, Donald Trump has taught China a valuable lesson. In a world in which nations are capable of being turned towards the largely irrational policy of hyper-protectionism, it is wrong to assume that such nations will avoid protectionist policies even if logic dictates that they are not sustainable. As such, the nation that seeks ever more open and ever freer trade must simultaneously prepare for times when self-reliance will become necessary due to developments beyond the borders of one’s country and hence beyond one’s control.
As such, Huawei and by extrapolation other Chinese businesses have learned sooner rather than later that the inter-dependence trap is far more dangerous than the imagined debt trap that liberal propagandists try to defame China with on a regular basis.
As Confucius said:
“When it is obvious that the goals cannot be reached, don’t adjust the goals, adjust the action steps”
This is clearly the attitude taken by Ren which makes it clear that Huawei is in safe and flexible hands. It is unfortunate that it has taken an era of global commercial conflict to demonstrate the importance of self-reliance in major economic spheres. But it is better to learn such lessons sooner rather than later. Clearly, for China, the lesson has been learnt.