China, Economic, Government, Politics, Society

Essay: The West can no longer be complacent with China

CHINA

WHEN Xi Jinping was a child, his father – then, a high-ranking government minister – fell out of favour with the founder of the People’s Republic, Chairman Mao.

As part of his family’s humiliation, Xi, as an eight-year-old, was paraded on a school stage in a metal dunce’s cap. The audience raised their arms and shouted, “Down with Xi Jinping!” Even Xi’s mother was forced to join in the chanting.

Later, Xi was sent to be “reformed” in an impoverished, rural commune.

Earlier this week, in an extraordinary reversal of fate, that humiliated schoolboy was affirmed as the most powerful man in China since Mao when the People’s Congress in Beijing rubber-stamped a constitutional amendment. In effect, it abolishes the legal limit of two terms on China’s presidency. Xi is now the country’s leader in perpetuity – or as some might have it, dictator.

With cunning ruthlessness, he worked his way through the ranks of the party that treated his family so abhorrently, from local to national politics, and saw off rivals while establishing political and popular support with his war on corruption. And as a former peasant who toiled hard labour in the fields, his “man of the people” credentials have done him no harm.

He has already decreed that his own name and ideas are written into the nation’s constitution, as “Xi Jinping Thought” – an honour he shares only with Mao. We in the complacent West would do well to wake up to the vaulting ambition of the leader of the world’s most populous state. The lingering question now is whether power will go to his head.

We have become used to expansionist threats and sabre-rattling from countries such as Russia and North Korea, but we don’t really expect it from China, which is traditionally insular and inward-looking. It is, after all, the country that built a Great Wall around its borders to keep out foreign influences.

Xi is intent, however, on reversing that centuries-old trend. China has established itself as a global player in trade, is massively expanding its military and now wants global political influence to match. In some ways, this can benefit the West. For example, Xi has put pressure on North Korea’s unstable leader, Kim Jong-un, to halt his erratic missile tests and even to roll back Pyongyang’s nuclear programme. Donald Trump’s boastful remarks recently of a diplomatic breakthrough (with arms talks to come), would have been impossible without Xi’s influence.

If the world becomes a safer place in the short-term as a result of this new willingness on China’s part to play the role of a global power-broker, we should all sigh a sense of huge relief. But as this week’s declaration reveals, Xi isn’t interested in the short-term. His plans are for the much longer-term. He certainly has had several opportunities to get the measure of Trump: First at a meeting last April in Florida at the President’s Mar-a-Lago resort, later at the G20 talks in Hamburg, and then again when the two met in Beijing last November. Whilst they did seem to hit it off on strategic issues, the relationship between them is a strange one. Neither will feel comfortable in a partnership of equals.

President Trump has already asserted his independence by announcing serious trade restrictions on Chinese steel and other imports. Yet, China is not only a major trading partner of the US, but a colossal underwriter of American debt. The government in Washington could not function without borrowing hundreds of billions, financed largely by Chinese loans. If China withdraws that support, in direct retribution for Trump’s trade blockade, what will happen to the US economy?

And, if Xi stops applying pressure on North Korea, what happens to Trump’s much vaunted peace talks? The Chinese President has manoeuvred himself, not just into one commanding position, but into a whole array of them.

It is not only America that is suddenly uncomfortably aware of Chinese strength. India, too, is eyeing its immense neighbour with unease after Xi sent China’s new navy into the Indian Ocean. This none-too-subtle display was prompted by a dispute over international policies concerning the Maldives. China, which has committed huge investment into developing its naval fleet, knows the world will take notice of a fleet of modern battleships. Meanwhile, across Eurasia, Xi has been the driving force for a new Silk Road linking China’s factories to Western Europe via Putin’s Russia, making Moscow the willing junior partner of Beijing.

All this confirms Xi Jinping as the most powerful and ambitious man in Chinese politics since the death of Chairman Mao more than 40 years ago – with one significant difference. Mao wanted to break completely with China’s cultural past – the hallmark of the bourgeoise – Xi has a different strategy and wants to celebrate it.

XI is determined to restore the country’s links to its heritage and arts by fostering a new creed of nationalism in place of Communism. Chinese artworks and treasures, which were scattered to the winds during the Cultural Revolution of the 1960s, are being brought back from the West by Chinese multimillionaires who see themselves as nationalist champions. Xi’s own wife, Peng Liyuan, a singer who entertained the troops after the Tiananmen Square massacre in 1989, is at the forefront of this movement.

From the arts to geopolitics, trade wars to nuclear peace talks, Xi seems to have thought of everything. His carefully constructed powerbase may have one weak point: If he is president for life, then the ambitions of the country’s rising stars below him could be thwarted. That would risk political stagnation and infighting.

But for now, the West cannot risk complacency, especially now that China is controlled by the Thoughts of President Xi. If Mao gave China independence, and former leader Deng Xiaoping rebuilt the economy, then Xi is dedicated to making it a force to be reckoned with once more.

 

Standard
Britain, Economic, Government, Politics, Society

Britain’s bright future

BREXIT

IT was twenty-five years ago to the day, on September 16, 1992, when Britain crashed out of the European Exchange Rate Mechanism (ERM) – the prelude to the euro. John Major’s government was humiliated, the pound was devalued overnight by 15 per cent and most economists predicted a protracted slump.

Yet, what happened? The lower pound led to a surge in exports and just three years later the economy was booming.

Following the Brexit result, a similar devaluation of pound sterling has happened and all the indicators are that it’s having the same effect, with figures published over the last few days showing that exports have risen by 9 per cent in the last year.

Despite this, not a day goes by that the BBC, Financial Times or Confederation of British Industry don’t paint an apocalyptic picture of Britain’s future outside the EU. These organisations are constantly talking this country down at the very time it’s crucial we should be showing unity.

For people like Sir James Dyson, arguably Britain’s greatest living entrepreneur, and for many other dynamic business leaders, Brexit is not a problem. It’s a massive opportunity.

Standard
Business, Economic, Government

HMRC investigating some £25billion in unpaid taxes

TAX AVOIDANCE

BIG businesses could be forced to pay up to £25billion of underpaid tax in a major crackdown on avoidance.

Some of Britain’s largest firms are being investigated by HMRC for potentially dodging £24.8billion of VAT, corporation tax and national insurance payments last year.

It is enough to fund the NHS for nearly three months.

The investigations highlight the scale of efforts by powerful companies to avoid paying their fair share.

HMRC’s probes have snowballed as public anger at fat cat greed grows. The amount of suspected uncollected tax from the year to March is 14 per cent higher than the previous 12 months.

It is 31 per cent more than two years earlier.

Law firm Pinsent Masons, which uncovered the figures, say this means the taxman’s large business directorate is taking a more zealous approach. But tax investigations are the first stage in a tug of war between the exchequer and business and there is no guarantee the money will ever end up in Government coffers.

If HMRC experts have suspicions, they can examine a company’s books and then amass enough evidence to demand it pays up.

But many firms refuse and appeal the decision, leading to lengthy wrangling in the courts. Pinsent Masons said: “HMRC is broadening its horizons and putting in a far wider range of transactions under scrutiny. We are seeing an increasing number of challenges to arrangements that would previously have been regarded as routine and perfectly acceptable.

“The figures represent the amount of tax HMRC considers is underpaid. Not all its investigations will actually result in more tax being paid.” It follows a harder stance on tax from the Treasury after a string of scandals including last year’s Panama Papers debacle, when it was revealed that thousands of well-known figures around the world were stashing their money in offshore havens.

In November, Chancellor Philip Hammond announced plans to raise an extra £2billion by 2020 through a crackdown on tax avoidance.

The law firm said the anti-avoidance efforts were aimed at squeezing employers so ordinary families did not feel the pinch.

“The Treasury faces an unenviable choice – either cut public expenditure and services, or squeeze taxpayers for more money.

“Increasing tax revenue through investigations is often the more politically palatable option, particularly when the focus is on large businesses.

“However, HMRC is putting the affairs of more and more companies under the microscope as a result, increasing the costs for those businesses.”

A so-called “Google tax” was introduced in 2015 to try to stop large firms shifting their cash to overseas havens, and big businesses will soon be ordered to publish their strategies for limiting payments to the revenue.

Around two-thirds of all large companies are under investigation at any one time, and disputes can drag on for decades.

The amount eventually handed to the authorities is typically half of what was initially calculated and asked for.

Big firms handed over a record £49.5billion of corporate tax in the last fiscal year, up 12 per cent on the previous 12 months.

A HMRC spokesman said: “Tax under consideration is not tax owed or unpaid, it’s an estimate of what might be at stake if we didn’t investigate.

“By effectively enforcing the rules, HMRC has since 2010 brought in £53billion that would have otherwise gone unpaid and collected over £8billion from large businesses last year alone.”

Standard