RUTHFULLY YOURS

The Wuhan virus has ended the game China has been playing for the past three decades to rise from Marxist-rooted poverty to the world’s biggest manufacturer.  Virtually all of the world’s advanced economies and many of the less developed countries now realize that China is not a trustworthy partner.  Donald Trump may have been the first world leader to call the Chinese out, but he now has plenty of company:

With a series of high-level summits culminating in a visit to Germany in the fall by President Xi Jinping, this was supposed to be the year of Europe-China diplomacy. Instead, Europeans are warning of a damaging rift.

Diplomats talk of mounting anger over China’s behavior during the coronavirus pandemic including claims of price gouging by Chinese suppliers of medical equipment and a blindness to how its actions are perceived. The upshot is that Beijing’s handling of the crisis has eroded trust just when it had a chance to demonstrate global leadership.

“Over these months China has lost Europe,” said Reinhard Buetikofer, a German Green party lawmaker who chairs the European Parliament’s delegation for relations with China. He cited concerns from China’s “truth management” in the early stages of the virus to an “extremely aggressive” stance by the Ministry of Foreign Affairs in Beijing and “hard-line propaganda” that champions the superiority of Communist Party rule over democracy.

China’s leaders used tactics that it learned the hard way more than three centuries ago, when it tumbled from millennia-long status as the “middle kingdom,” incomparably more powerful than any rivals, to a helpless victim of more powerful foreigners, able to impose their will on and extract vast wealth from it.  Virtually all Chinese people are marinated in the history of its decline and impoverishment at the hands of the West.  The two Opium Wars led to the forcible opening of China to untrammeled trade, including the mass importation of opium, one of the few products that found a ready market there.  Britain conveniently was able to produce opium in its Indian colony and sell it to the Chinese, who sought escape from their misery.

One of the keys to Western dominance of China was the creation and growth of a class of Chinese merchants who worked with the foreigners, making huge fortunes as their nation declined into poverty and subservience.  They were called “compradors” (“Mǎibàn” in Chinese) — a term originally from Portuguese, meaning “buyers” — and are reviled in Chinese culture as traitors who sold out their country.  Some became so wealthy that they even helped finance railway development in the United States.  I still recall the lectures half a century ago of John K. Fairbank, widely regarded as a “dean of Sinologists,” informing me that the Chicago, Burlington & Quincy Railroad (“The Burlington Route”), a system I had traveled on extensively as a child, was built in part with capital coming from a major comprador in Canton (called Guangzhou by today’s China).

Compradors in British Hong Kong (photo from Ph.D. dissertation of Kaori Abe).

So it should be no surprise that when China plotted its rise by a return to the world trading system and membership in the World Trade Organization, it devoted major attention toward the cultivation of compradors in the West.  It succeeded at this task so brilliantly that it took a pandemic health catastrophe to even begin to question the legitimacy of these modern compradors.

Le Smith has done us all a service by documenting the cultivation of China’s most valuable compradors in the USA, Senator Dianne Feinstein and her husband.  An excerpt from a must-read article Smith wrote for Tablet Magazine:

No one represents the marriage of American policy toward China and doing business with the PRC better than Feinstein. Her promotion of trade with China to advance the interests of her constituents turned into apologetics on behalf of the Communist Party, as it aided her political ascent and augmented her husband’s portfolio. In October, USA Today listed Feinstein as the sixth-richest member of Congress, with a net worth of $58.5 million — a sum that vastly understates her actual wealth. Richard Blum, her husband, is himself worth at least another $1 billion.

When Feinstein was first elected to the Senate in 1992, Blum’s interests in China amounted to less than $500,000. She was named to the Senate Foreign Relations Committee in 1995 and by 1997, according to the Los Angeles Times, “Blum’s interest had grown to between $500,001 and $1 million.”

In 1994, Blum’s company, Blum Capital, had entered a joint venture to found Newbridge Capital, specializing in emerging markets, including Asia. Blum said in 1997 that less than 2% of the approximately $1.5 billion that his firm managed was committed to China. He held a $300 million stake in Northwest Airlines when it operated the only nonstop service from the United States to cities in China. In 2002, Newbridge was negotiating to acquire 20% of Shenzhen Development Bank.  After some rough seas, it paid $145 million for an 18% share two years later, marking the first time a Chinese bank came under control of a foreign entity.

Feinstein says that Blum’s business in China had no effect on her foreign policy or trade positions regarding the country. “We have built a firewall,” she said of her relationship with her husband. “That firewall has stood us in good stead.”

Yet the record shows that the marriage between Blum’s business and Feinstein’s political career is a very close one. Journalists from Feinstein’s home state’s two largest media markets, Los Angeles and San Francisco, covered that relationship thoroughly and often quite skeptically throughout the 1990s and early 2000s. The fact that relationships that should have come under serious scrutiny have rarely been portrayed in anything other than a favorable light—the New Yorker breathlessly reported in a 2015 profile that China’s former President Jiang Zemin had spent Thanksgiving as a guest at the Blum-Feinstein home in San Francisco—reveals the extent to which the American elite has subscribed wholesale to the unproven theory that business with the Chinese Communist Party was good for America.

Feinstein was but one of many:

The idea that there was something inherently virtuous about helping Chinese companies make money at the expense of their American rivals became so prevalent in Washington that it barely raised eyebrows when one-time Democratic vice-presidential candidate Joe Lieberman, whose political brand was his supposedly unimpeachable rectitude, joined former Senate colleague Norm Coleman, a Republican, to lobby for ZTE, a Chinese telecom firm with reported ties to the Chinese intelligence services and military.

China also learned the hard way about the uses of debt to render a country helpless. That’s the strategy behind its trillion-dollar Belt and Road initiative. But that’s a story for another time.