How has China achieved this charismatic status of the Global Market Power, in such a quick time frame?
By Nazarul Islam | USA
China has created history repeatedly through its success in science, technology, industrialization and military superiority. In a short span of six decades following independence, this hard working nation has emerged as a global superpower. This week, President Xi Jinping hosted Vladimir Putin and Kim Jong-un at a major military parade in Beijing, highlighting a growing axis between China, Russia and North Korea—and reminding American strategists that even as America’s strategic rivals are coming together abroad, the United States remains dangerously dependent on them for its supply chains at home.
There is no question that China, now emboldened by visible shows of geopolitical unity with Russia and North Korea, represents the most significant national security threat to the United States.
On the other side of this planet, America has moved transform itself rapidly if it desires to become strategically independent from the Chinese—particularly in matters of critical technologies and commodities, as well as offer alternative products to compete against China.
China’s fast paced Market power has weaponized. Imagine a dominant company which uses its influence to unfairly manipulate markets, eliminate competition, and extract excessive profits at the expense of consumers, workers, and smaller businesses. This behavior, also known as an “abuse of dominance” or monopolization, is targeted by antitrust and competition laws in the United States.
How has China achieved this charismatic status of the Global Market Power, in such a quick time frame? My first thought is China has effectively used market access as a political tool.
China systematically pressured foreign businesses that rely on the Chinese market to align with its political agenda. The threat of losing market share or facing consumer boycotts is often enough to create an environment of self-censorship. This can be compared to a situation when Marriott and The Gap had quickly apologized after their company officials referred to Taiwan as a separate country.
For countries that act against China’s interests, Beijing has the ability to restrict trade and tourism. For example, after Norway awarded the Nobel Peace Prize to a Chinese dissident in 2010, China retaliated banning imports of Norwegian salmon.
Today, China dominates the global supply chain for critical minerals like gallium, germanium, and other rare earth elements. By restricting the export of these materials, China can drive pressure on the countries dependent on them for use in strategic industries such as semiconductors and batteries.
In today’s world, China leverages foreign companies’ need for market access to pressurize them into transferring valuable technology and proprietary information. This is very likely to advance China’s own technological capabilities while weakening foreign competitors.
China’s Unreliable Entity List (UEL) is a mechanism established by the Ministry of Commerce (MOFCOM) to take retaliatory measures against foreign entities—whether a company, organization, or individual—that engage in actions endangering China’s national security, sovereignty, or development interests, or those that disrupt normal Chinese transactions or apply discriminatory measures against Chinese entities. Entities on the UEL can face a range of penalties, including restrictions or bans on import/export activities, investment in China, and the entry of relevant personnel into China. China.
The UEL can restrict or ban trade and investment with foreign companies that allegedly endanger China’s national security. While primarily used against U.S. defense contractors selling arms to Taiwan, its use has expanded to target non-defense companies that comply with foreign laws, such as a U.S. law protecting against forced labor.
Passed in 2021, the AFSL allows China to impose countermeasures on individuals and organizations that support foreign sanctions against China. It gives China a legal basis for retaliating against foreign measures concerning issues like Hong Kong, Xinjiang, and Taiwan.
China can use regulatory reviews to target foreign companies. For example, in 2023, China initiated a cyber-security investigation into U.S. chipmaker Micron after the U.S. tightened export controls on semiconductor technology.
Chinese officials have the ability today to force companies to sell assets at a low price or their products could be placed on ban, through contrived regulatory actions. In 2017, after South Korea deployed a U.S. missile defense system, China forced the Lotte department store chain to sell its assets in China.
China can impose sudden import bans on a country’s agricultural products, as it did to Australia after Canberra called for an independent inquiry into the origins of COVID-19.
What are the strategic goals of China’s weaponized market power? By inflicting economic pain, China aims to discourage criticism regarding its policies on human rights, territorial disputes, and other sensitive issues.
Economic coercion is used to advance China’s geopolitical ambitions and intimidate countries that cooperate with its rivals, particularly the U.S.
The repeated use of coercion tactics has created a chilling effect, leading foreign governments and companies to preemptively self-censor and avoid actions that might anger Beijing.
By increasing other countries’ economic dependence on China, the country has enhanced its ability to wield leverage for future negotiations.
Key methods for weaponizing China’s market power include Predatory and exclusionary tactics.
A dominant firm temporarily sells goods or services at an extremely low price, sometimes below cost, to drive smaller rivals out of business. Once the competition is gone, the firm raises prices to supra-competitive levels.
Large corporations buy out smaller, innovative competitors to eliminate future threats and prevent them from developing rival products. This allows the dominant firm to maintain its technological and market control.
A powerful company can create exclusive contracts with suppliers or distributors, effectively locking out competitors from essential resources or markets. In other cases, they may simply refuse to supply rivals with critical inputs, leaving them unable to compete.
A dominant company can tie the sale of a desirable product (one with high market power) to a less popular one. This forces customers to purchase the whole bundle, and can prevent competitors from selling the less-popular item on its own. Microsoft was once fined by the EU for illegally bundling its media player with its Windows operating system.
Does China believe in Control over prices and quality of their products?
With little or no competition, a monopolist can restrict supply and set prices much higher than they would be in a competitive market. This enables transfer of wealth from consumers to shareholders and disproportionately harms low-income households.
Without competitive pressure to improve, any dominant business entity has little incentive to innovate or improve product quality. This has always led to market stagnation and provide consumers with fewer choices and inferior goods.
As a dominant buyer, a firm can use its power to force suppliers to accept lower prices or poor terms of trade. A firm can also use its position as a major employer in an industry or region to suppress wages and worsen working conditions.
On the issue of China’s political influence and manipulation, it is understood that more is good for everyone.
Firms with significant market power and profits can use those resources to lobby for favorable laws and regulations, influence public policy, and secure political power. This allows them to further entrench their market position and weaken potential antitrust enforcement.
Large companies in China have used their scale of influence to promote or sell their products. For example, large food companies can pay supermarkets to place their items at eye level, for customers reminders and tech companies can pay for sponsored search results to appear at the top of a page.
Some countries with significant economic influence can use their financial systems as a foreign policy tool. The U.S., for instance, has weaponized its own financial system by imposing sanctions, freezing assets, and limiting access to payment through their global transfer through their foreign nanciak systems like SWIFT.
How does China exert its Control over data and platforms?
Technology platforms like Amazon and Meta can use their massive user base to create a feedback loop where their service becomes more valuable as more people use it. This makes it difficult for new rivals to compete. These firms also collect massive amounts of user data, which gives them a competitive advantage in influencing user behavior.
Dominant platforms can create restrictive agreements with app developers to prevent them from offering their products on rival platforms. Google, for example, was once fined by the EU for using its Android operating system to restrict competitors.
China has effectively weaponized its immense market power, as both a manufacturing hub and a consumer market, to achieve its political and economic goals. Its methods include leveraging market access, supply chain dominance, and legal and regulatory tools to coerce foreign companies and states into compliance or to retaliate against perceived slights.
There is no question that China, now emboldened by visible shows of geopolitical unity with Russia and North Korea, represents the most significant national security threat to the United States.
America therefore realizes it needs quickly to become strategically independent from the Chinese in critical technologies and commodities, as well as offer alternative products to compete against China.
Washington needs to ensure that it has secure and unfettered access to important equipment and materials—especially in the realm of telecommunications, semiconductors, rare earth minerals, and pharmaceuticals—to ensure it does not rely at all on the Chinese Communist Party.
Recognizing the strategic importance of cutting-edge technologies, the Chinese have sought to dominate the telecommunications and networking equipment sector. Through the Chinese state-owned firm Huawei, the Chinese government has maintained artificially low prices among other tactics, with an eye towards infiltrating Huawei-made equipment into 5G and networking infrastructure throughout the globe.
The first Trump administration have wisely banned the use of Huawei equipment in the United States. This is attributed to the fact that Huawei is a Chinese defense entity, and spent considerable time and resources to persuade US allies and partners of the intelligence threat posed by using Huawei equipment in their networks.
The United States rightly highlighted the potential for back doors that Huawei and China by extension would be poised to exploit to steal data and secrets.
Huawei has nevertheless continued to strengthen its position as a cost-effective, high technology company backed by the full force of the Chinese Government. This is why it has been imperative for the United States to build up strong domestic alternatives.
The US government took a step in the right direction earlier this year when it approved Hewlett Packard Enterprises’ (HPE) purchase of Juniper Networks, which went into effect in July following a US government antitrust review.
A handful number of US Senators and a former DOJ official criticized the move, but the reality is that the combination of the two companies gives the new HPE greater scale to compete against Huawei, which should help the United States compete for global influence in digital infrastructure. This is why the intelligence community reportedly itged the DOJ to move it forward.
With the addition of Juniper’s product line, HPE will offer an alternative vertically integrated stack for the full range of networking solutions to global customers. As the new company integrates, HPE may be able to better position itself to compete against Huawei in valuable European, Asian and South American markets. It will be able to offer the highest quality products and expertise—without Huawei’s nefarious integration with the Chinese government.
China has also succeeded in monopolizing the processing of rare earth metals as well as the production of rare earth magnets. Its control of this vital sector of the global economy has already come to haunt the United States. In April, after President Donald Trump moved to impose tariffs on Beijing, the Chinese government retaliated by essentially halting the export of rare earth magnets.
The risk to the US economy was significant; American companies scrambled to find scarce alternative suppliers of the magnets, and the Ford Motor Company was forced to temporarily close a manufacturing unit in Chicago after one of its suppliers ran out of magnets needed to manufacture cars.
After the United States and China negotiated a trade truce. Beijing resumed its exports—but notably left them in place for US defense firms. Nor is there any guarantee that China could not resume its embargo at some point in the future, with potentially disastrous effects.
China dominates the rare earth industry, producing approximately 90% of the rare earth magnets used in advanced technologies and large manufacturing sectors such as cars, electronics, and renewable energy. Due in part to its weak environmental protection laws, China also controls 90% of the world’s rare earth mineral processing capacity.
China has wielded its power in rare earth metals in the past, embargoing exports to Japan in September 2010 following an incident near the Senkaku islands. That early export freeze was a harbinger of things to come; it sent a signal to the West that China was prepared to weaponize its dominance in this field to achieve desired policy outcomes.
The Trump administration has rightly recognized the US vulnerability in rare earths and is seeking to improve America’s strategic position in mining and processing rare earth minerals, as well as fabricating rare earth magnets. The partnership between the US Department of Defense and MP Materials, announced in July, is a welcome development in the establishment of an indigenous rare earth metal supply chain.
The Trump administration has pointed America’s national security strategy with regards to supply chains in the right direction with its policy towards China. It should next implement additional policy measures, in close coordination with the Congress, to build safe and secure supply chains over which the Chinese Communist Party has no influence.
Read: Questioning the Concepts of Cosmology
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The Bengal-born writer Nazarul Islam is a senior educationist based in USA. He writes for Sindh Courier and the newspapers of Bangladesh, India and America. He is author of a recently published book ‘Chasing Hope’ – a compilation of his articles.
