Need To Know: April 8

Tokyo’s empty Shinjuku District

British Prime Minister Boris Johnson remains in an Intensive Care Unit with Covid-19 as the United States recorded the most number of deaths in a single day from the virus. In a new poll out today, 81 percent of Americans say their lives have been disrupted either a great deal (33 percent) or a fair amount (48 percent) by the situation.

We try to take the long view here. But it’s clear China’s relationship with the West, and the US-China relationship in particular, will not be the same after this pandemic. What remains to be resolved is how different it will be. That recognizes there are strong forces that pushed the American-Chinese economic relationship together to begin with.

From the American perspective China is a 1.3 billion person market with a large, educated and cheap workforce. For China, the U.S. is the largest economy in the world by far and the preeminent source of modern techniques and technology.

However, it’s estimated as many as 250,000 Americans may die and trillions of dollars in damage has been done to the U.S. economy. At least 6 million people have lost their jobs. Economists predict up to 20 million jobs could be lost and that the unemployment rate could jump to 15 percent by the end of April. Both losses in Europe may be higher. Fury is rising. There are already calls for Beijing to make reparations — a historically loaded word.

And it’s not just coming from politicians. The American Council on Health and Science in an article with the provocative title, “Our Relationship with China Should Never Go Back to Normal” said:

“Ultimately, China is to blame. Even if bad luck played a role -- and it certainly did -- China's actions have exacerbated the crisis and put the world in a position in which bad things are likelier to happen. That is why, for at least four particular reasons, China deserves the largest share of the blame:

(1) Wet markets. The long-standing practice of wet markets — in which live animals, some exotic, are butchered in front of eager customers — set the stage for the pandemic. Millions of people coming into regular contact with both living and dead animals is simply asking for a virus to jump between species.

(2) Poor regulation. Chinese food safety standards are essentially non-existent. According to CNN in 2015, nearly "half of Chinese food-processing plants fail to meet internationally acceptable standards." Fraud is common.

(3) Coverups. China has a long history of covering up infectious disease epidemics, such as HIV and SARS. whistleblowers were silenced. And we now know that China covered up the coronavirus outbreak for at least three weeks. 

(4) Global disinformation campaigns. Worse than a coverup, China is now trying to re-write history. ProPublica reports that thousands of fake or hijacked Twitter accounts spread disinformation and attack the Chinese government's political opponents. One official blamed the outbreak on the U.S. military.

It's time for the world to face reality: On the global stage, China is at best criminally negligent and at worst a malevolent force.”

In our last update, we mentioned further U.S.-China economic decoupling and foreign companies choosing (or being required) to move operations out of China. If at a bare minimum travel between China and the rest of the world becomes more difficult, that’s another good reason to relocate plants.

A Chinese ship sank a Vietnamese fishing boat then detained its crew near the disputed Paracel Islands in the South China Sea.

Vietnam released footage showing a large Chinese ship chasing and ramming one of its fishing boats that then went under near an oil rig in contested waters in the South China Sea.

The oil rig is near the Paracel Islands — deep into China’s so-called nine-dash-line claim, which extends far down the coasts of Vietnam and the Philippines and would give China sovereign rights over nearly 80% of the South China Sea. The UN Convention on the Law of the Sea (UNCLOS), essentially called China’s claim ridiculous and outrageous when it ruled in favor of the Philippines on 14 of 15 claims against China in 2016.

For Vietnam, this underscores the country’s current strategic dilemma: trade is proximity and prosperity and China is a huge trading partner very nearby. China also demands its smaller neighbors kow-tow to it.

Vietnam needs foreign friends like the U.S. and Russia. It especially needs the U.S. to help it unlock its economic potential. But that would require legal reforms the Communist Party is reluctant to undertake.

And it doesn’t change that in terms of security, the U.S and Russia are very far away and China is very near.

South Korea’s government struggles with the same problem in an even rougher neighborhood. While Vietnam’s efforts to break out of its box are thwarted by being a dictatorship, South Korean leaders are prisoners of history

The catalyst for that preface … The United States and South Korea failed to reach a defense cost-sharing deal this week, meaning 4,000 South Korean employees at U.S. military bases went on unpaid leave because funds ran out.

The two sides are deadlocked over U.S. demands that South Korea sharply increase the amount it pays to offset the costs for stationing American troops in the country.

President Donald Trump had demanded a fivefold increase to about $5 billion per year, although U.S. negotiators have said they reduced that demand to an unannounced amount.

Seoul, meanwhile, is believed to have offered to go as high as 10 percent. South Korea’s budget for this year is US$422 billion, of which US$41.3 billion is for defense.

For both sides, every dollar they save is a dollar they have to spend somewhere else.

Strategically, the Korean peninsula sits like a dagger pointed at Beijing, of which Beijing is obviously extremely aware.

It’s why Mao sacrificed a million Chinese troops in the Korean War. It’s also why China will never abandon the unpleasant Kim regime in Pyongyang; North Korea is a 300 mile long tank trap.

If rising China wants subservience from its neighbors generally, it will particularly demand it from South Korea. Ultimately, China has no more pressing national security concern than South Korea.

If Seoul doesn’t want to bow to Beijing, it has no greater national security concern than keeping Washington very close. Anything else fundamentally misunderstands the nature of the Chinese Communist Party.

Yet, South Koreans are ambivalent about their relationship with the U.S.. However overbearing America can be at times, you would think the U.S saving it from the Kim’s in the Korean War would underscore the bad alternatives.

The same recognition should give Seoul more impetus to repair its tortured relationship with Japan, which is not the Japan that occupied Korea for 35 years. But South Koreans and their leaders are more focused on their past than the future.