Advancing Economic Freedom Is An Antidote To ‘Corrosive’ Chinese Capital

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A recent study of Center for International Private Enterprise examined the patterns, trends and characteristics of Chinese capital flows to six Southeast Asian countries, and what it found were disruptive effects on the governance and economy of recipient countries.

The countries examined were Cambodia, Indonesia, Malaysia, Myanmar, the Philippines and Vietnam. The center shared its findings in a report titled “Mitigating the Governance Risks of Investing in Southeast Asia”.

The study analyzed official data, as well as transaction-based data for China’s financial commitment (foreign direct investment, aid, and trade loans) with these countries. The report of the center noted that “a growing body of evidence indicates that many forms of capital emanating from authoritarian nations are having a corrosive effect on democratic institutions and private enterprise in recipient countries.”

According to the Washington, DC-based center, what it called “corrosive capital“Is money,” whether public or private, which lacks transparency, accountability and market orientation “and” exploits governance gaps to influence economic and political developments in countries beneficiaries ”.

In other words, corrosive capital led by authoritarian power undermines the rule of law and economic freedom, threatening democracy.

In fact, as documented Research of the Heritage Foundation, the Chinese government has targeted vital geostrategic choke points around the world, such as countries in Southeast Asia and the Horn of Africa, for the Belt and Road Initiative loans. Route “from China.

Private equity is essential, but the corrosive and non-transparent nature of lending practices facilitates corruption both in China and in recipient countries.

More than ever, it is essential to shed light on the complex structures and networks of The opaque model of Chinese state capitalism and decode what my colleagues at Heritage have called the “connections between entrepreneurs, businesses, state-owned enterprises, the Chinese military and the Chinese Communist Party.”

By making the lending policies and practices of China’s Belt and Road Initiative an explicit topic of discussion in bilateral and multilateral policy dialogues, Washington can refine its counter-approach by consistently promoting a more high transparency and rule-based transactions.

One of the immediate and practical steps towards this goal is to produce an annual report on China’s Belt and Road Initiative and its strategic implications and consequences, such as recommended by the Heritage Foundation. Creating a database designed to track and document initiative projects would be a powerful and informative tool.

Fundamentally, deepening a network of vibrant market economies – underpinned by the rule of law, responsible government and open markets – would foster substantial partnerships between countries that transcend economic ties.

At the heart of such a network, which can advance and maintain a peaceful rules-based international order and ensure widespread economic growth, is the task of advancing economic freedom.

Washington is unable to give countries the political will they need to transform their economies according to the principles of economic freedom. However, by getting involved at critical levels, the United States can ensure that its concerns and advice are taken into account.

The current coronavirus pandemic provides a necessary reminder that free market capitalism is the fundamental foundation of a free and prosperous society.

As heritage researchers have noted:

Strategic competition with China cannot be overly watched. It will be a long and complicated fight without a clear historical analogy.

The COVID-19 crisis may be the sting Americans need to prepare for this fight. But we cannot overreact in the moment and set precedents that will actually undermine this effort in the long run.

We must build on the fact that China will remain and grow as a global economic and diplomatic presence.

Indeed, in what must be a long-term strategic effort, the United States must mobilize its resources and commit to a long-term commitment to meet the challenges posed by China, now and in the future. .


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