Pandemic Impact on China’s Global Expansion: Delayed, but not Derailed

by Christopher R. O'Dea
Wednesday, December 9, 2020

Whatever the final verdict on China’s intent with respect to coronavirus research and the nature of its complicity in the release and spread of SARS-CoV-2, the pandemic is likely to delay, but not derail, China’s global initiatives to expand its economic leverage and political influence.

To be sure, the pandemic crystallized global discontent with China’s heavy-handed diplomacy, one-sided economic dealings, and coercive, if formally legal, overseas investment practices. The world is aware that China tried to suppress key information about how the virus spread; bought up medical supplies and protective equipment before the rest of the world was aware of how infectious the new virus was; and in typically heavy-handed style, had its diplomats pressure foreign officials to make favorable statements about China as the virus spread, or accuse countries that criticized China’s handling of the virus of racism and xenophobia. That left China with a credibility gap, and opinion polls now show record-high distrust of China around the world.

To ensure regime survival, the Communist Party of China had to show strength internally, and recent aggressiveness on the border with India, in the South China Sea, and with respect to Hong Kong likely helped create the impression that the pandemic had not weakened China on the world stage. Countries stood firm against China’s aggressions, imposing sanctions, engaging troops in battle, and conducting military flyovers, and extended freedom of navigation operations. The U.S. even announced unequivocal support—after a long silence—for the 2016 ruling that China’s claim to ownership of most of the South China Sea has no valid legal basis.

But these situations had deeper roots, and the reactions to China were not directly related to the pandemic. While time-consuming for the CCP leadership, these are tactical delays. Its authoritarian use of tracking technology enabled China to rapidly stem the outbreak at home, enabling China to recover its strategic sea legs more quickly than most other countries.

The most likely outcome is that countries will seek to ensure that any arrangements with China include terms to protect their own interests against Chinese coercion. China wasted no time showing it will flex its economic muscles to punish countries that criticize its handling of the pandemic. Since Australia in May called for a public investigation of the origins and spread of the coronavirus, China has levied an 80% tariff on Australian barley, suspended imports of Australian beef, and opened an investigation into Australian wine exporters.

Australia’s case holds a lesson: As things stand, China has sufficient economic leverage to prevent countries from taking meaningful actions to investigate its role in the pandemic, and even were China to be found negligent or criminally liable for the origination or spread of the virus, the U.S. and the free West may not be able to compel China to pay any legal judgements or restitution.

China’s economic leverage rests on one major capability that other countries lack: Logistics. Little noticed as China became the world’s manufacturing base, Chinese state-owned companies simultaneously built a global network of ports, shipping routes, container handling terminals, and transportation facilities, orchestrated by digital communications, security, and logistics software run on Chinese-operated networks.

Admiral Raymond Spruance once wrote that a sound logistics plan is the foundation for every successful military campaign. As the architect of the island-hopping campaign that led to the defeat of the Japanese Empire in the Pacific Theater of World War II, Spruance oversaw the creation of a seaborne logistics fleet that made innovations in vessel-loading and artificial harbor construction in order to prove the military with everything from food and medical supplies to fuel and ship repair services as Spruance captured one island chain after another.

Today China is engaged in its own island-hopping campaign, and Chinese superiority in commercial maritime logistics affords the Middle Kingdom a significant strategic edge over the Free West. The ongoing trade conflict between the U.S. and China is the first post-globalization conflict, and it differs from prior great-power conflicts in one critical respect: the economic domain is the primary battlespace. As it did in so many manufacturing industries, China has reverse-engineered the logic of conquest. Rather than seeking to subdue an adversary and its allies by military means as a prelude to imposing political control and reaping the economic rewards of the conquered territories, China has acquired the rights to control, and often to build and finance, the facilities that are essential to the ongoing operation of the globalized economy.

The post-globalization world consists of four major islands—Eurasia, Africa, North America, and South America—and Chinese port and shipping SOEs have established China’s commercial logistics network on each one of them. General William T. Sherman’s march to the sea used a standardized railroad network and telegraph wirelines in the first military campaign that employed new electronic communications in tandem with new transportation technology. China is using its 21st-century version of a standardized maritime transport network and wireless digital communications to march inland from the sea.

The pandemic illustrated the severe consequences that can result from disrupted supply chains. Australia is under economic attack, and China’s thinly veiled threat to cut off the supply of pharmaceuticals made almost exclusively in factories in China demonstrated the strategic folly of having outsourced essential manufacturing to an adversary’s territory. Moving production back to the U.S. will take time, and other countries may not be willing or able to become self-sufficient in medical, technology, or other key industries.

But the supply of many essential products is now based in China, and the supply chain that delivers those goods runs across a Chinese-controlled logistics system—countries in which China runs the critical ports and commercial logistics networks may hesitate to take any actions or support any policies that criticize China or challenge Chinese economic capacity.

China has built its supply-chain power opportunistically. Using coercive means, China has acquired long-term contracts that by nature bundle governance powers with the rights to operate infrastructure, often from countries unwilling or unable to afford the investments required to upgrade their ports to modern standards. The recent resistance to aggressive Chinese actions reveals growing awareness that doing business with China is a win-lose proposition.

The strategic question, then, is whether the U.S. can consolidate the incipient ill will towards China’s coercive approach to international economic and political affairs into an organized alliance with a positive agenda suited to the long-term challenge of building a post-globalization supply chain for the Free West—and do so before China learns to adapt its approach, mend fences with wary countries, and start turning them from strategic economic holdings of the Chinese state into political allies of the Chinese people.