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China has squandered a once-in-a-lifetime opportunity

Following the COVID-19 pandemic, China had the potential to become the world’s development bank, central bank, and medical provider. President Xi Jinping’s leadership has missed a historic opportunity and maybe reveal its true character by opting for aggressive attack over enlightened kindness.

NEW DELHI, INDIA — Until recently, China attempted to emulate the United States as a hegemon, gradually combining its expanding military force with soft power. However, China appears to have squandered its chance to create a strong competitor to, if not outright overthrow, the existing world economic order fashioned by the United States following World War II.

For China, all of the elements of success looked to be falling into place. It started the Belt and Road Initiative (BRI), a transnational infrastructure investment initiative to define a post-Bretton Woods world headed by China, much like the US Marshall Plan did for the post-World War II order. China also aggressively pushed the renminbi as an international currency, convincing the International Monetary Fund to include it in the basket of reserve currencies that underlie Special Drawing Rights (the IMF’s unit of account) considerably earlier than was justified.

China also attempted to assume leadership of international organizations, of which it presently controls five. It pushed to have a stronger voice in existing institutions like the World Bank and the International Monetary Fund. When it was stopped, it formed its institutions, such as the Asian Infrastructure Investment Bank and the New Development Bank.

China could have provided poorer countries affected by COVID-19 with more open markets in terms of commerce. It could have also increased the production of critical medical supplies to combat the coronavirus, such as face masks, testing kits, protective equipment, and ventilators while ensuring their high quality and offering to make them available to any country via the World Health Organization at reduced prices.

Such a generous engagement would have demonstrated China’s willingness to compete with US-led institutions. While enforcing the BRI, it could have renounced its character as a usurious lender. While providing short-term dollar liquidity may have been at odds with China’s longer-term global goals for the renminbi, the self-control demonstrated by this decision could have generated greater trust in China, boosting the renminbi’s chances.

China’s recent moves, on the other hand, have harmed its worldwide objectives. The geographic scope and intensity of the Chinese regime’s belligerence are well known, with Xinjiang, Tibet, Taiwan, Hong Kong, India, the South China Sea, the Philippines, Australia, Europe, the United States, and Canada among the ever-growing list of targets. Instead of being clear about COVID-19’s roots, China has encouraged the WHO to join in with its obscurity.

The mystery is why China prefers violence to magnanimity or even just inaction. After all, China’s current leaders are likely to regard the United States as a weakening power that will eventually relinquish the hegemonical position that China aspires. If that’s the case, today’s Dengian policy would be to wait for the US to weaken, much as Deng Xiaoping, the father of China’s reforms, urged geopolitical patience until China became stronger 40 years ago.

The puzzle’s obvious solution is Chinese President Xi Jinping and the government he represents and works to establish. However, significant components of China’s previous strategy, such as the Belt and Road Initiative and the renminbi’s reserve currency position, were Xi’s distinctive gambits. So, what’s causing the shift?

Perhaps China’s leaders are seeing the world through the eyes of a victim once more. Since the early 1800s, they believe, the mighty West has kept a weak China in check. The regime believes it is time to remedy previous injustices now that the roles have been reversed. China now prioritizes settling its boundaries and returning to the glory days of the Middle Kingdom, with Xi’s aggressive insecurity replacing Deng’s serene assurance.

For the rest of the world, a darker option is that China is looking outside its borders and seeking historical justice. Repressive, dictatorial governments are wired to believe exclusively in the currency of terror and hard power. In this view, Xi is simply reverting to type, following his idol Mao Zedong’s dictum that political power emerges from the barrel of a pistol, both inside and outside. As a result, China’s recent aggression may not be a flaw but a component of its strategy to dethrone the United States.

The American historian Barbara Tuchman famously described the change in geopolitical influence from the United Kingdom to the United States during World War I in her book The Guns of August, stating that a powerful America became an enfeebled UK’s “larder, arsenal, and bank.” China could have achieved something akin to the US-led global order after the COVID-19 epidemic by becoming the world’s development bank, central bank, and medical supply.

China has missed a historic opportunity and maybe revealed its true character by opting for inciting violence over enlightened compassion. China appears to feel that soft power is only for weak democracies. Scorpions are venomous reptiles that sting, and the international community must respond.

The epidemic of COVID-19 provided China with an opportunity to solidify its plan of rebuilding the global economic system on its terms. It’s worthwhile to think about the possibilities.

For starters, China might have unilaterally declared a moratorium on all debt repayment owed to it as the world’s largest long-term creditor to low-income countries. It could’ve gone even further. China’s lending terms — interest, grace period, and maturity – are far more onerous than those offered by the World Bank and its concessional lending arm, the International Development Association, as Scott Morris and his colleagues at the Center for Global Development have demonstrated. China might have stated that this wedge would be removed.

In addition, China might have offered free short-term financing – renminbi and dollars – to developing and other economies experiencing significant capital outflows. One irony of the post-2000 world is that China, with its $3 trillion in dollar reserves, is the country most positioned to offer dollar liquidity. The People’s Bank of China might have extended exchange lines to all its counterparts in the developing countries.