Shane Leary joins Miles Yu for a conversation on the Chinese Communist Party’s hysterical and hypocritical reaction to Japan releasing wastewater from the Fukushima incident into the ocean, and how this backfired on the Chinese seafood industry. They then discuss the historic expansion of BRICS and what this means for the international system. Finally, Miles offers his thoughts on the continuing downward spiral of the Chinese economy and its political implications for the regime.
Shane Leary joins Miles Yu for a conversation on the Chinese Communist Party’s hysterical and hypocritical reaction to Japan releasing wastewater from the Fukushima incident into the ocean, and how this backfired on the Chinese seafood industry. They then discuss the historic expansion of BRICS and what this means for the international system. Finally, Miles offers his thoughts on the continuing downward spiral of the Chinese economy and its political implications for the regime.
Miles Yu:
Welcome to China Insider, a podcast from Hudson Institute's China Center.
Shane Leary:
It's Tuesday, August 29th, and we have three topics for this week. The first is the CCPs, hysterical and hypocritical reaction to Japan releasing wastewater from the Fukushima incident into the ocean, and how this backfired on the Chinese seafood industry. The second is the historic expansion of bricks by six new member nations and what this means for the international system. And third is Miles thoughts on the continuing downward spiral of the Chinese economy and its political implications for the regime. Miles, how are you?
Miles Yu:
Very good, Shane. Glad to be with you again.
Shane Leary:
Wonderful. Me too. Well, so this past Thursday, Japan began releasing treated radioactive water from the Fukushima nuclear power plant. This is water that was used to cool the damaged reactors after the nuclear accident, which occurred there in 2011. Japan seems to be taking every precaution. They managed to filter out almost every radioactive element except for tritium, a radioactive isotope of hydrogen, which is quite difficult to separate from water. And so for this, they have diluted the water to ensure these levels are low. They've lowered the level of tritium to less than 10 beck rolls per liter. To put this in perspective, the WHO sets the limit for drinking safe drinking water at 10,000 becquerels per liter. So, you know, I'm no expert on nuclear waste, but at least it's clear that according to established standards, they're being quite cautious. They're also releasing this water incredibly slowly.
They have about 1.3 million tons of contaminated water they need to release eventually which is enough to fill 500 Olympic sized swimming pools. And as of right now, they're only releasing 7,800 cubic meters or about three Olympic swimming pools. And that's over the course of two and a half weeks. So they estimate the entire process will take them about 30 years to release everything. Despite their caution, the response from the Chinese Communist Party has been nothing short of hysterical, immediately banning all seafood from Japan, describing the release as a selfish and irresponsible act. The Japanese are actively monitoring samples from sea wildlife and have found no evidence of abnormalities or issues from the release thus far. But despite this China, it seems, has suddenly decided to steward the health and longevity of our oceans. Miles. What's your take on this development? Is this sincerely, environmentally motivated on behalf of the CCP, or is this simply political retribution of some sort?
Miles Yu:
Oh, it's not environmentally based at all. It's not even science based. The Chinese government use issues like this to score a geopolitical point. The Japanese government has been pretty responsible in dealing with this issue. The US government has no problem with this State Department spokesperson said the Japanese headline of this nuclear wastewater release is safe, transparent, and science based unquote. South Korean government does not have a problem with this because they are participating in supervising the release and they're shown the data. There are some localized protests in, in Korea, but it's very small in number and government has no problem. The Taiwanese government is cautious, but has no problem with this because the data is indisputable. The International Atomic Energy Agency, IAEA has no problem. It has approved the Japanese leasing water because the science is there, the amount of tritium in the water contain is way below what's required.
The radioactive element Tritium even meets the WHO standard is way below the WHO standard for drinkable water is one seventh below that. The fanning of hysteria against Japan domestically is very unfortunate. It shows the government really is running out of ideas about anti-Japanese sentiment, create a mass hysteria, a censor, any dissenting, even moderating a voice inside China on this matter. If you say Japanese being responsible, you'll get in trouble. Police will knock on the door. So that's how serious this issue has become inside China. It's ridiculous. And also the government of China unleashed avalanche of harassing phone calls to Japanese public service hotlines, emergency lines. China government acts like a hooligan.
This is a problem if you want to put this thing into perspective. The Chinese government itself runs a lot of nuclear power plants. They also routinely dump wastewater into the ocean. China has about 13 reactors, contains as high as 10 times more radioactive element tritium than the WHO standards. So this is a total hypocrisy. The funny thing is because of the staged hysteria inside China, the real victim of this Chinese government cynical move against Japan, is basically the Chinese seafood industry itself. Japanese seafood export into China is not really that significant because Japanese seafood industry mostly is geared for its domestic consumption. But the entire seafood industry in China right now is devastated. Nobody wants to eat seafood food. It shows you the fundamental difference between two models of governance between China and Japan.
Shane Leary:
The seafood industry in China is taking a hit. Is this due to China's own dumping of, of radioactive materials, or what is the apprehension that's causing this in China?
Miles Yu:
The apprehension is, goes like this, Japan dumped the radioactive water into the ocean, and then that contaminated the ocean current will take to the Chinese water where the seafood will be harvested, put on the Chinese dinner table. In the information environment that is China, you do not have any counterbalancing views. You don't have any science based discussions, government censors all the information it does not want people to see. So in China right now, seafood industries suffer devastatingly. Many seafood restaurants are closing down. And another thing is for some reason some people the urban legend says, you know, salt could mitigate the problem of contaminated seafood. So right now in China, the most coveted item in the grocery store is salt. There's a national craze for buying salt. This sounds very, very bizarre and surreal.
Shane Leary:
The firestorm of hysteria that China has created in an attempt to damage Japan's reputation has backfired. And, and just to highlight the hypocrisy of this a little bit more, I don't think it's hyperbolic to say that there's probably no force in this world at this time, more destructive to our oceans than the Chinese Communist Party. They seem to have no concept of long range sustainability in our oceans resources, overfishing, not just in their own waters, but across the globe. They have the largest deep water fishing fleet in the world with nearly 3000 ships as of 2022, just devastating fisheries across the globe with very little capacity for other countries to not only compete, but more importantly, reign these fishermen in. And so in their case, it's not even the selfishness that they accused Japan of. It's actually just stupidity because if they irreparably devastate these fragile ecosystems, they themselves will not have access to the seafood and delicacies they're currently trawling the world for.
And you've highlighted the, the degree to which they themselves dump radioactive material. If we look at toxic human and industrial waste, which not radioactive is, is certainly profoundly devastating to water supplies. China has already contaminated as much as 90% of its own groundwater with dumping, as well as the improper use of fertilizers and pesticides such that nearly 70% of their rivers and lakes are unsafe for human use. So miles, I mean, have you seen any, obviously this is sort of, you know, hysterical hypocrisy, but have you seen any meaningful measures from the CCP to reduce their impact on their own water supplies or the world's ocean? And if not, I mean, what can we as the US do to play a role in reigning them in?
Miles Yu:
Well, you mentioned something that's very important that is we talk about China being a contaminated in the world. We talk about the air, we we're talking about the water. Yes, it's totally true that China, in a blind pursuit of economic growth almost completely ignored the ecological consequences of its Great Leap Forward style development and policies. And that basically, you know, completely destroyed China’s ecology. But there’s also something else you mentioned that’s very interesting, because China has a long depleted, the ocean life and seafood resources along the shores and is a water near its coast. So China has a global illegal fishing industry that affects most coastal countries in the world as far as even to the Galapagos islands of Ecuador. So this is a global issue. China just doesn't care about international law and let alone ocean resources, sustainability. And I think the there is a lack of global coalition to deal with this this, this Chinese illegal fishing on the global scale. And that's something I can see that in the near future, there will be some kind of a global coalition to deal with this issue, because this is very serious. China's ocean going fleet is illegal de fishing in other people's territorial waters and EEZs along, for example, in Argentina, in Brazil, in West Africa, you know, in Ecuador as well.
Shane Leary:
Next topic. The recent BRICS summit in South Africa garnered quite a bit of attention for a brief refresher for our listeners, BRICS is an international organization whose name is an acronym for the five member countries. That is Brazil, Russia, India, China, and South Africa. And its stated intention is to rival or provide an alternative to Western led forums like the G-7. We've talked about BRICS before Miles, but, if I recall, there's been in the past uncertainty about how serious of an organization it was and the degree to which friction between certain members would inhabit serious cooperation. But with this past summit, there was a rush of interest from nations to join. Before the summit, it represented 40% of the world's population in a quarter of the world's economy. And Xi Jinping we've known has wished to expand this in both China and Russia, but perhaps especially Russia, are desperate to counter the prevailing reputation they have as pariah states by bringing new allies and partners into their orbit.
Dozens of countries have expressed interest in joining. And on the final day of the summit, it was announced that six new countries will be joining BRICS. That is Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates. This is the first expansion of the organization since South Africa, joined in 2010, and is undoubtedly a historic moment. But Miles, I want to ask you, how significant is this development really? Could you speak a bit to what BRICS actually is and does, and whether it presents a real challenge to the US led international order, especially now that these countries have joined.
Miles Yu:
I mean, this is basically effort created some kind of a new block collectively called global South. And China wants to play the leadership role in that coalition. Brex is a very peculiar organization because it has some kind of, you know overt purpose of replacing or at least created an alternative to the G seven G 20, and some other West led political and economic blocks. But unlike G-7, for example, BRICs really lack something that's fundamental. That is, there's virtually no common values upon which to build a coalition. Some of the countries like India Argentina and Brazil, there are democracies no matter how flawed or imperfect they are, but they have a fundamental democratic mechanisms. Other countries, basically they were road countries like Iran, like Russia, like China, you put all those together in a group to counter what they said is a West led group.
I mean, it's going to be very difficult because not everybody in the BRICS organization really is anti-West. Right? So which brings me to the new membership. You mentioned Iran, Saudi Arabia, Egypt, the UAE, Argentina, and Ethiopia. Some countries were just downright opportunist, they'll join it because China has this habit of giving a lot of money. Xi Jinping went to South Africa, and in Johannesburg he pledged $10 billion to the BRICS. And a lot of people were just obviously coveting the Chinese giveaway China acts as if it is now finally in the leadership world, commanding global discourse power. That's illusion. China does not have the credibility to be a global leader. China does not have the credentials to lead the world precisely because it lacks the right kind of value right kind of institution to do.
So. If the world is going to look like China today, and the world is doomed. So not everybody in the bricks wants to see the world to be wrong. Like the Chinese Communist Party is run in China. There's also another dynamic in in inside the BRICS. There's no way CCPs leader claim to leadership will be readily accepted by countries like India, Russia, because there are clash of egos, there are clash of ambitions, there's also clash of agenda. I mean, if China really cared about this global south, that China should support India's membership in the UN Security Council as permanent member. So China and Russia will not let it happen. It's all a collection of a very peculiar countries. Ultimately, I don't think it is going to be able to provide fundamental challenge to the G seven led world economy. You
Shane Leary:
Press a little bit further on this lack of, you know, any sort of moral direction or, or, or shared moral understanding and this lack of leadership you've highlighted. I want to call our attention to a comment. A colleague of ours, Walter Russell Mead, made on a new podcast from Hudson Institute that I would encourage our listeners to check out. It's called arsenal of Democracy, which just launched recently, and I highly recommend it if you're looking for broader commentary on US foreign policy. There, he said, perhaps cutting against our own arguments about China and Russia's status against pariah states that China and Russia are offering a deal to many of the world's elites, in particular in nations that might be more enticing than what the US offers. Whereas we attach certain moral expectations to cooperation and participation. The CCP doesn't care about human rights abuses. They don't care if elites engage in international money laundering operations or if they're involved with cartels or other nefarious organizations, and they won't press these elites to democratize or even work towards more just domestic rule. So I want to ask you, Miles, do you agree with this categorization and how enticing is this really on a broad scale internationally? Would an arrangement like this have enough currency with enough of the world's nations such that China could build an opposing international community on these grounds?
Miles Yu:
Not really. You said, well, I mean, it's it will, it will be very enticing to the elites of various countries. But ultimately it will not be appealing or enticing at all to the people of those countries. China has adopted this kind of approaches to, to approach to many countries, Kenya, Sri Lanka, Malaysia, Angola in each of those countries, when the deal that you're talking about was revealed to the people of those countries, the people raised severe and sometimes violent opposition to the deal, rich by their own elite with Chinese government. So this is a challenge that that China has to face. It is very easy for China to basically capture elites of various countries, but it's almost impossible for China to capture the hearts or minds of the people in those countries. How do deal with China has become inevitably the number one sovereign and political issue that showed up in various countries, elections. Sri Lanka, for example. Malaysia is the same thing. So initially China would claim victory in forcing those countries into China's orbit with deals it disguised in its Belt & Road projects. And in all of the countries, you see strong backlash ultimately to change the policies of this country toward China. I'll give you two examples, right? Malaysia is very important, another one in Sri Lanka. So you can see that emerging in countries like Kenya and many other countries. So I'm not entirely sort of bought by that kind of argument.
Shane Leary:
Well said. Well, for our last topic, we have been covering for some time the downward spiral of the PRC’s economy. And some commentators are beginning to argue that we're not just seeing decline, but perhaps the possibility of collapse between massive youth unemployment, the numbers for which the party has simply stopped publishing, crippling deflation, a crisis in the once booming Chinese real estate market, crushing debt for local governments and devastating demographic issues. And as well deep distrust both from outside corporations and within China. It's hard to see a road to recovery. Miles. Can you give us an update on this? And I just want to ask you, do you think a catastrophic economic collapse is actually possible or perhaps even imminent?
Miles Yu:
Well, let me just look into the, in the logic of Chinese economic model it's fundamentally flawed in certain way. The Chinese economic model looks like a gigantic Ponzi scheme. It goes something like this, right? Chinese system is a socialist system. In other words, the government owns what they call the means of productions, particularly the land. All land is owned by the government. So government basically is able to get some money, particularly the local government, by speculating on land sales. So the government uses monopolistic ownership of land to sell those land to developers through some kind of a scheme. Particularly like a LGFV - which is a local government financing vehicles – and which is the sort of organization that use land, government owned land as a collateral to borrow enormous amount of money from banks and investors, and then give the money to local governments that upon which to build buildings and housing.
This kind of industry has collapsed, and the Chinese real estate industry is exploding. LGFV couldn't pay back the loans they owe the bank and risking default. And the default is on a gigantic massive scale. The total local government debt, mostly facilitated by LGFV is close to $9 trillion. That's about half of China's entire GDP. Okay? So you ask me whether it's going to explode a collapse or not, you can see you can get the easy answer from, from just from that reality alone. Now, the real estate collapse is a very, very big deal that's also adding to the exploding factor Evergrande filed for bankruptcy. This is one of China's largest real estate firms. Two weeks ago, the filed bankruptcy in New York City, 10 days later on August 28th, it resumed trading in the Hong Kong stock exchange.
It lost 86% of its value at the opening, ending up the day as nothing but the junk stock, because ever grand is in debt of $2.38 trillion RMB that's equivalent to $330 billion, right? And then a few days later, another China's huge, gigantic real estate firm also defaulted nearly $20 billion debt. This has a cascading effect. It not only makes a lot of people victims of this this Ponzi scheme, but also fundamentally shatter the confidence of the consumer. So people don't want to spend money if you, if people do not have confidence in the future of the economy, they don't want to spend money that really affected the production. And so the industry is going through a vicious cycle. I think Chinese economy is in big trouble. China is, is trying to look for its own salvation through the international banking system, through private equity and venture capitals. The big ones like BlackRock. Ultimately, I think China had to swallow its own bitter pills.
Shane Leary:
So obviously we don't have a crystal ball, but it seems to me, you know, we can't just consider these economic problems in a vacuum. These have political implications. And we've seen over the past year backlash protests from many Chinese citizens in response to economic issues or in response to, you know, bad healthcare coverage, things like this. But that, that is largely ordinary Chinese citizens. Are we heading towards a point where the economic ramifications are starting to affect the elites? I mean, we talked about going after immigration consultancies. If it has a substantial effect on the elites in China who have benefited largely from China's economic growth up until this point, what sort of political ramifications might that have for Xi Jinping and for the party as it stands?
Miles Yu:
Well, the, the lease in China, they're they have their vested interest and the China has all sort of ridiculous, unrealistic policies that go fundamentally against the international market mechanism. I'll give you one example you mentioned about the crackdown on immigration consultancy. China had this ridiculous currency control that allowed each individual to transfer no more than $50,000 out of China. And that is the Ironclad law. If you go beyond that, you'll be a criminal. Now, there is a very strong trend inside China to immigrate to countries like the United States, and one of the most important way to do so is through investment. Visa type will be EB-5, for example. Now, the minimum requirement for the United States to give an immigration visa for investing in the United States is $800,000. So if you want to immigrate to the United States going through that channel, which is the most popular, by the way, a lot of Chinese won have come to the United States using that $800,000 investment visa category.
Now, that would mean you have to send $800,000 to the United States to get your visa, but you are only allowed to transfer $50,000 a year. So it will have take you about 16 years to get the money out of China. That's why the immigration consultancy say, you know what? I can do it for you through different kind of shenanigans. And so of the tens of thousands of Chinese middle class, well off people who have immigrated to the United States using that visa category, are literally made a criminal. So that's why when the Chinese government goes after the immigration consultancy demanding the consultancy to hand over the case files you can see a lot of people who are immigrated to the United States do not want go back. Now there's also another thing. Many of the people who have immigration visas through investment in the United States, they do not live in the United States. The visa in the United States, passport in the United States is just plan B. So many of those wealthy people, their economic basis are in China. So this is why the Chinese government now are go, is going after those very wealth of people inside China to extract money from, from them without any immunity. That's the scheme. So you can see this all related to politics and policy.
Shane Leary:
Well, Miles, I think that's all the time we have for this week. Thanks so much for taking the time to talk to me, and I look forward to speaking to you next week.
Miles Yu:
Thank you very much.
Shane Leary:
Thanks for listening to this week's episode of China Insider. For Chinese Language listeners, be sure to check out our monthly Chinese language episodes. And for those who prefer written analysis, subscribe to our weekly newsletter, China Digest, the best place to stay up to date on miles analysis and the latest news on China. As always, you can stay up to date on the China Center's activities at www.hudson.org.