China will exploit Covid pandemic cynically

LONDON: “Never let a serious crisis go to waste”, said the Italian father of political philosophy, Niccolo Machiavelli, 500 years ago. With these words writ large in his playbook, China’s President Xi Jinping is preparing to exploit the paralysis created by the coronavirus, the virus which China itself unleashed around the world. The Chinese economy is reported to be up and running again, while other countries battle to hold back the tide of illness, death and economic destruction. Ironically, Beijing is set to be the big winner from the pandemic which itself created.

Rarely one to miss an opportunity, President Xi has used the chaos to reinforce his belief in the superiority of China’s political system, both to its 1.3 billion population and more broadly to the world. Continuously pumped out by the state media, the narrative is simple: “Look how we achieved something special. It was painful, but unlike the lethargic United States our quick and effective action broke the back of the infection. Hundreds of millions of our people sacrificed their jobs, their savings and their freedom to buy the rest of the world valuable weeks. But see how the messy, selfish western democracies, such as America, Britain, Italy and Spain, have squandered that precious time and betrayed the Chinese people’s sacrifice. Look at the thousands of unnecessary deaths unleashed on their populations by their leaders’ slow and pitiful response. This clearly shows that our one-party state is superior, more efficient and therefore more benevolent than the selfish, wicked American and western democracies.” Of course, there’s no mention that China was the cause of the outbreak.

Supporting the messages are propaganda images of aircraft full of Chinese medical equipment destined for countries around the world. “Look how kind and benevolent is our great nation to our friends in need”, is the accompanying message. All consignments, of course, fly the Chinese flag and Chinese ambassadors are prominent when the deliveries are handed over to grateful recipients. Using the pandemic, China is advancing its Health Silk Road to assert global leadership, conducting diplomatic overtures to leaders across Europe, Latin America and Africa as it deploys the medical equipment and aid. Greatly assisted by President Trump’s self-harming withdrawal from international institutions, China’s soft power is in full blast, unchallenged by an alternative vision of moral leadership.

It’s not unusual to see China quick to exploit situations. What is becoming increasingly clear today, however, is the growing potential for China to exploit, in a sinister way, commercial opportunities provided by the current coronavirus crisis. Sensing this danger, the European Union’s Competition Chief, Margrethe Vestager, warned member countries last week that the pandemic has made a number of companies extremely vulnerable to Chinese takeovers. The pandemic has provided the perfect smokescreen and the ideal moment for China to launch politically sensitive boardroom coups.

European companies have long been in the sights of rival Chinese, but the sharp economic downturn caused by the coronavirus outbreak and subsequent steep falls in share prices across the continent have increased the potential for overseas bids. “People are more than welcome to come to do business in Europe”, Vestager said, adding that “this should not be done with unfair competitive means”. To counter this threat, she recommended that regulations be quickly drawn up by the EU to act as a deterrent and suggested that individual member countries should consider buying stakes in their vulnerable companies, currently trading at rock-bottom prices, in order to stave off the threat.
For many years, China has attempted to transfer high-tech knowledge and expertise from the West, sometimes legally, frequently not. If you want an example, take a look at the case this week of the high-tech company Imagination Technologies. This company was originally founded in Britain in 1985 and makes microchips, which are used in products including Apple smartphones. Last year it was the 10th most prolific UK-based filer of patents in the European Union and overall controls 30 years’ worth of valuable semiconductor patents. Several of these related to cyber technologies, particularly those able to identify various forms of cyber-attack, which will be especially valuable to China. In 2017, Imagination Technologies was bought for £550 million by the private equity firm Canyon Bridge, a US based company licensed and regulated by US law. Canyon Bridge’s main investor has been revealed to be China Reform Holdings, a Chinese state-owned company, which has now re-domiciled the company to the Cayman Islands. Consequently, it is now no longer a US-regulated entity. Last week, China Reform Holdings attempted to seize control of Imagination Technologies by a boardroom coup under the cover of the current pandemic. The company is still physically located in Britain, and it was only in the furore resulting from resignations by its UK chairman and board members because of the attempted takeover did the matter come to the attention of the British government, which quickly intervened and caused the attempt to fail.

Imagination Technologies was sold three years ago when markets were trading normally. Today, because of the current crisis, there’s a huge number of companies around the world, many of them high-tech, which are in dire need of a cash-injection just to exist. These will be in the sights of that great predator with deep pockets, China. Just last Tuesday, the International Monetary Fund said that it expected the economies in advanced countries to contract by 6.1% this year, with only China and India experiencing positive growth. In 2021, China will have growth only 1.4% less than predicted 6 months ago, before the pandemic, so it will be in an incredibly strong position to prowl around the commercial world looking for bargains to snap up. After all, if you run a business in severe financial difficulty and a Chinese businessman turns up at your door with a sack full of cash, you are unlikely to turn him away. Thousands of businesses will be in the same position and be prone to Chinese takeover.
When written in Chinese, the word “crisis” is composed of two characters. One represents “danger” and the other represents “opportunity”. The world has experienced the first character, a gift from China. Get ready for China to exploit the second.