January 26, 2018

Mintz Group Partner Testifies on China’s Market Power Before USCC

Courtesy of USCC

Randy Phillips, a Mintz Group partner and head of the firm’s Asia operations, was a lead-off witness at a January 25 hearing of a congressionally mandated commission on China focusing on that nation’s One Belt-One Road infrastructure megaproject, encompassing more than 50 countries and costing up to $8 trillion.

Phillips, a 28-year CIA officer whose last job was station chief in Beijing, said that Chinese President Xi Jinping is using the initiative as a leading edge in his strategy to promote China as committed to free and fair trade, open-minded, “a credible leader for 21st-century globalization,” and “the possible backbone of a new international order.”

“Watched in Awe”

Many global business executives, China experts and trade diplomats have “watched in awe” as Xi has promoted this questionable story line, Phillips testified. They are “people well-steeped in the effects of China’s highly protectionist policies at home, thus finding it amazing that they were listening to Xi’s anti-protectionist rhetoric abroad and wondering if the world had been turned on its head,” Phillips said at the hearing of the U.S. – China Economic and Security Review Commission.

“This is magnified by the fact that the vast majority of U.S. and European observers involved in the region believe that China under Xi has been closing, rather than opening, doors to trade and investment, and acelerating on a path towards isolation, insulation, illiberalism and more government controls.”

“Scrambling for the Cash”

So far, Phillips said, Xi’s efforts have largely been successful. He sees a “dividing line” between the China-skeptical U.S. and Europe, on one side, and the developing nations of Asia and Africa that would benefit from China’s money and attention. They are “relatively unfazed” by China’s predatory economics, but have “instead focused on scrambling for the cash.”

Xi’s plan is to recreate the ancient Silk Road trading routes through Central Asia – by building railways, roads, warehouses and new factory towns — and thereby both diversifying its energy supplies and massively building up China’s often restive, heavily Muslim western provinces.

Xi also plans to finance ships, ports and possibly canals in places as far flung as Thailand, Pakistan, Sri Lanka, Africa’s eastern seaboard, and Greece. The plan is a centerpiece of Xi’s statement at China’s 19th Party Congress that the surging nation must “grasp the historic opportunity.” According to Phillips, “it is arguably China’s most audacious effort yet to try to engineer growth, and reaffirms the grip and control China’s government has over major assets in the economy.”

“Best Supporting Actor”

Even with all that Chinese spending, the project “does not provide a level playing field for Western multinational corporations to compete with Chinese firms,” even those making extraordinary efforts to market themselves, Phillips said.

At most, they will be relegated to “sub-contracting roles to leading Chinese enterprises, particularly in the services sector such as commercial insurance, consulting, logistics, technical services provision, etc.,” he said. He added that it amounts to competing in “the ‘best supporting actor’ category.”

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