Long before Donald Trump seeks re-election to redeem his humiliating defeat to Joe Biden in the 2020 Presidential Election, Beijing knew the strategic competition between both nations will be a long war. Even if China has zero interest to compete with the U.S., the Americans simply cannot take the risk as they have been the economic and military superpower for so long.

 

It would be a waste of time to convince the United States that China does not seek to replace its hegemony with a Chinese hegemony. Even if Beijing wanted to stop growing to prove to Washington that China is not a threat, it can’t. The sleeping “Red Dragon” has been awakened by none other than the White Man. Worse, the U.S.’ own policies of arrogance and aggression make China’s rise even easier.

 

Since the 1950s, the U.S. has been endlessly bombing, sabotaging and overthrowing governments around the world. And since 1776, America has been at war 228 out of 245 years – 93% since the nation was founded. Only 17 years were peaceful. On the contrary, except forced to intervene in the Korean War and Vietnam War, China has never involved in other major wars since 1950s.

In fact, China was hardly a global power in the early 1950s. It was a large and poor country – its annual gross domestic product per capita was less than US$60 (yes, just sixty bucks), thanks to a stagnant and state-controlled economy which was relatively isolated from global trade. Four decades later, cumulative foreign direct investment reached nearly US$100 billion in 1994.

 

Still, China minds its own business and kept growing its economy and power, rising to unprecedented heights. Today, its economy has grown almost twenty-fold to become the world’s second largest, just behind the United States. It is a global leader in manufacturing, technology, and science. Its influence spans the globe, from Asia and Africa to the Middle East and Latin America.

 

Not bad for a country where prior to the 1978 reforms, nearly four in five Chinese worked in agriculture. Yet, China remains focused in growing its economy – and military for self-defence. Had Soviet Union been this powerful, it would have gone to war with Europe. If the U.S. is China today, it would have invaded South Korea, Japan, all the countries in the Southeast Asia, and of course Taiwan.

But the Chinese didn’t go to war like the Americans. Instead, it is playing the long game as it understood the U.S.’ theory of victories, where it centres on comprehensively undermining China’s rise while preserving U.S. global pre-eminence. Using the Cold War and “peace through strength” strategies, it seeks to force China to accept a subordinate role in the U.S.-led global order.

 

To maintain its superiority, the U.S. has unleashed various weapons in its toolbox like trade war, tech war, sanctions, tariffs, Section 301, Quad, AUKUS, and whatnot. Heck, the Biden administration has even authorized US$1.6 billion propaganda funding in September for the State Department and USAID over the next five years to subsidize news media and civil society to counter China’s rising power.

 

China’s approach to outgrow and outsmart the U.S. has been to indirectly draw countries away from the U.S. orbit through trade and investments such as the signature Belt and Road initiative (BRI) to develop infrastructure and trade links across the world. By investing in infrastructure projects across Asia, Africa, and Europe, Beijing is creating a network of countries economically tied to China.

Its latest achievement – a massive deepwater port in Peru – is making the United States losing sleep. When President Xi Jinping attended the Asia-Pacific Economic Cooperation summit in Lima  last week, the 31st APEC Economic Leaders’ Meeting was just the appetizer. The main dish was the inauguration of the port of Chancay operated by Cosco Shipping Ports.

 

An investment to the tune of US$1.3 billion by Beijing in its first phase, the Chancay project would generate US$4.5 billion in annual revenues and create more than 8,000 direct jobs and reduce the logistics costs of the Peru-China route by 20%. President Xi called the 15-berth, deepwater port, as a “21st century maritime Silk Road” and part of China’s Belt and Road Initiative, its modern revival of the ancient Silk Road trading route.

 

The first ship was due to set sail from Chancay next week, transporting Peruvian fruit to China. It is just the beginning as the motivation for developing the megaport was access to neighbouring Brazil, where a new railway line worth a staggering US$3.5 billion is planned to carry Brazilian exports such as soybeans and iron ore to the port. Brazil is the top seller of soybeans to China.

It was not a coincidence that while Brazil’s 2023 soybean exports reached a record of 3,744 million bushels (up 29% from the previous year), the U.S.’ shipments declined 14% to 1,789 million bushels in the same period. The United States and Brazil are major competitors and together supply over 80% of soybean global exports, while China accounts for about 60% of total soybean imports.

 

Thanks to Trump’s trade war with China during his first term in office (2016-2020), Brazilian soybean exports to China peaked at 82% in 2018, whereas the share of American soybean exports to China plunged to just 18%. Last year (2023), Brazil had record soybean exports, but the United States’ shipments declined to just half the Brazilian soybean export volume.

 

In January 2019, in anticipation of a long term trade war with the U.S. regardless of future U.S. presidents, the state-owned Cosco Shipping Ports acquired 60% of the Chancay port from a Peruvian polymetallic miner (Volcan Compañía Minera) for US$225 million. Located 58 km in the north of the Peruvian capital of Lima, Port of Chancay is a strategic location where it has easy access to the economic centre of Peru.  

Port of Chancay is a natural deepwater harbour with a maximum of 16 meters water-depth and is capable of satisfying the needs of mega vessels. The construction of Chancay Terminal includes multi-purpose terminals, container terminals and related infrastructure facilities. Crucially, Chancay Terminal is the first terminal project invested by Chinese companies in South America.

 

As expected, the US$3.6 billion project, seen as a key South American Pacific hub, has faced opposition from the U.S. and Europe for fear of China’s increasing influence in Latin America. In March, 2024 – under pressure – the National Port Authority (APN) of Peru revoked the exclusivity rights previously granted to Cosco, saying that the decision was prompted by the entity’s lack of legal authority to grant such privileges.

 

However, in June, days before Peruvian President Dina Boluarte’s visit to China to meet Chinese President Xi Jinping, Peru transport ministry formally asked a judge to cancel the revocation of the exclusive rights, after Congress approved changes to Peru’s ports law that paved the way to ensure Hong Kong-based Cosco Shipping would have exclusive rights to operate the terminal it is constructing.

That has raised alarm bells in Washington. Like a broken record, the U.S. was extremely upset that it could not stop the Chinese from spreading its influence in its backyard. Using the same playbook, warmongers like General Laura Richardson, who has just retired as chief of US Southern Command, warned that Chancay can be used to handle Chinese warships.

 

She has accused China of “playing the ‘long game’ with its development of dual-use sites and facilities throughout the region”, even argued that Chancay could be used by the Chinese navy and for intelligence-gathering. In truth, the U.S. can’t admit that it is losing ground in Latin America, and the Chinese have overtaken the economic superpower to become the largest trading partner of countries like Peru.

 

But the U.S. has no one to blame but itself. It has been absent from Latin America for so long, Washington is now paying the price for years of indifference towards its neighbours and their needs. It was only when China started turning a once-sleepy Peruvian fishing town into a logistical powerhouse set to transform the country’s economy that the U.S. panics and throws tantrums.

China’s appetite was not only Brazilian soybeans and Chilean copper, but beyond the trades of other commodities from Chile, Ecuador, Colombia and Brazil that would pass through the mega-port on their way to Shanghai and other Asian ports, which will cut shipping times from 35 to 23 days. It’s all about economy, business and trade, not about military as falsely claimed by the U.S. warmongers.

 

There’s another reason why the port is a brilliant infrastructure project. It creates an alternative channel to ship Chinese products to the U.S., bypassing the 60% tariffs that Trump has vowed to impose on China-made products. The trick – use the Chancay port’s nearby industrial parks as a “bathing base” to relabel or repackage their goods and ship them to the U.S.

 

There are many ways to skin a cat. And transshipment – a method used by Chinese suppliers to export goods to the U.S. by shipping them to a nearby country for processing or repackaging before being sent on to the U.S. – can easily avoid high tariffs. This is how both Chinese and European companies send their goods into Mexico, add some value to become “Made in Mexico”, and export to the U.S. under the USMCA Free Trade Agreement.

Likewise, to evade Trump’s first round of trade war, Chinese companies had aggressively ventured into Vietnam to assemble semi-finished products, slapping “Made in Vietnam” stickers, and the products successfully entered the U.S. and Europe. Since the 2018 onset of the US-China trade war, Chinese manufacturers have used Vietnam and Mexico as logistics hubs to avoid an extra 25% U.S. tariff.

 

It was the same trick when the West tried – and fail – to sanction Russian oil after Vladimir Putin invaded Ukraine. Underestimating the severe impact on the economies of America and Europe, it had triggered inflation and skyrocketing oil prices instead. The economic and financial sanctions were hurting the Western countries more than Russia.

 

As gas prices in Europe skyrocketing after Russia slashed supplies to its biggest market, at the same time, Russia’s giant state-owned energy company Gazprom boosts natural gas shipments to China. Thereafter, China would repackage the natural gas as Chinese LNG (not Russian LNG) to bypass sanctions, and voila, both Beijing and Moscow laughed all the way to the bank selling re-labelled Russian LNG to Europe

But will the new Trump administration impose extra tariffs on goods coming from Peru which originated from China? Not necessarily because the U.S. has a trade surplus of US$8.45 billion in 2023 with Peru. A businessman, Trump tends to start a trade war with countries that have a trade surplus with the US, such as China and Mexico, but rarely complains about South American countries.

 

Even if Trump wants to do it anyway, Chinese companies can always send their goods on a merry-go-round – travelling to Japan, South Korea, Malaysia, and Indonesia – before departing for Chancay port. Not only this scheme can help China boost trade ties with neighbouring countries, but also trick the U.S. trade tariffs.

 

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November 23rd, 2024 by financetwitter

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