Chinese leaders can ride the summer tide at Beidaihe summit

Steven Keithley says China's positive outcome in the Iranian nuclear agreement and the relative health of its economy give officials meeting in Beidaihe every reason to be in a good mood

PUBLISHED : Sunday, 02 August, 2015, 9:12am
UPDATED : Sunday, 02 August, 2015, 9:12am

As China's leaders adjourn to Beidaihe, "retreat" might seem a more appropriate word. After all, the Shanghai Composite Index fell by 200 basis points last month, and last week saw its biggest one-day decline in eight years. News outlets declared that the biggest bubble of this millennium had burst, and that China's economic boom was over.

Yet, in the global context this summer, China may emerge the geopolitical and even economic victor.

Although chaos lingers, compared to Greece - this summer's leading economic morass - Beijing's interventions to fix rates, suspend initial public offerings and prohibit short-selling - which sent Shanghai on a rally back above 4,000 points - have cut a contrast demonstrative of resilience and strength. Nothing indicates that similarly successful actions will not be taken to mend last week's decline.

Further, what commentators fail to comprehend is the minor role markets play, constituting just one-third of China's gross domestic product. Elsewhere, China's economy is dominant as ever, with a state-run corporation announcing a US$23 billion bid for Micron, and multinationals recognising the solidity of China's long-term fundamentals in increasingly important industries, such as financial technology.

While journalists dwell on market-related pessimism, they neglect to consider the impact of this summer's biggest story - the Iranian nuclear framework, a deal from which Beijing may be the sole unequivocal benefactor.

China's economic woes are overstated, and it has emerged from this decade's most important geopolitical agreement as the only party unscathed

The primary benefit is obvious. The deal secured the free flow of oil China had been working towards, and betting upon, for years. Not only does China no longer need to limit imports (as in 2012-13), but Beijing can proceed with the "Peace Pipeline" project to connect Iranian gas fields to Pakistan's distribution network and feed into the US$45.6 billion Pakistan-China economic corridor announced in November. Considering oil imports from Iran broke records in June without that infrastructure, the potential for the world's second-largest oil consumer seems immeasurable.

This deal could also not be any better politically for China. Although nowhere as notable as US Secretary of State John Kerry, Chinese leaders shaped the framework, cementing China's participation in international negotiations, at least in West Asia. Beijing had tried to assume that role during overtures among the Taliban, the US and Afghanistan, but a reluctance to upset Pakistan undermined President Xi Jinping's geopolitical capital. But with this deal, China gets that "glory" and inches closer to becoming a diplomatic power broker, which is instrumental to Xi envisaged "New Silk Road".

In contrast, the other parties have lost much more than they've gained. In Washington, President Barack Obama angered both political parties by going to the UN first, and alienated Israel and Saudi Arabia, two major allies, by accepting "Iran-friendly" terms. In Tehran, President Hassan Rowhani opened a potentially cataclysmic divide between internationalists and hardliners. And in the European Union, Greece's problems discounted almost all the capital the Iran deal should have delivered.

Thus as the summer ends, optimism, not concern, should abound at Beidaihe. China's economic woes are overstated, and it has emerged from this decade's most important geopolitical agreement as the only party unscathed. If anything, Chinese leaders should remember Lao Tzu words: "When you realise there is nothing lacking, the whole world belongs to you." Given this summer's events, it well might.

Steven Keithley is an alumnus of Georgetown University's Asian Studies Programme and a former researcher for Pulitzer Prize-winning columnist George F. Will at The Washington Post