Improving the Incentives for China

 I read an article by Mark Ross and Michael Keane with keen interest that explains clearly how the Russia and China business models are strategically linked.

Russia wants to provide China with petroleum and grain via a land bridge.

China wants a more efficient way to fuel its factories and people as an alternative to the sea on which it is 60% dependent.

The trouble is, Russia doesn't own Ukraine, the breadbasket. That is why Russia invaded Ukraine.

China is providing humanitarian relief to Ukraine as a hedge. If China joins Russia with military assistance, then China will be shunned by the free world customers on which it also depends.

While authoritarians rule both China and Russia, the nation-states are different culturally and economically. Their shared deficiency is the abuse of human rights. 

In negotiating with China, the opportunity for improvement is significant.

Poland has already begun to improve the trade route to China via the Black Sea.

"Poland's biggest port, the Port of Gdansk, has signed a letter of intent with the Ukrainian Sea Ports Authority to open up a new alternative transport corridor between the Black Sea and the Baltic."

https://www.maritime-executive.com/corporate/new-black-sea-to-the-baltic-trade-route-deal

"The new communication route connecting China with Ukraine, launched in mid-January, is the first step in pushing Russia out of the transit of goods from the Great Wall to the Eiffel Tower.

The old Silk Road, Wakeham Corridor (Lensnmatter, CC BY)

Just one month after signing the Ukrainian-Chinese memorandum of January 15, the containers were at the Ukrainian port of Chornomorsk. The railway and sea route passes through the territories of Ukraine and then Georgia, Azerbaijan and Kazakhstan before arriving in China.

The route is part of the so-called New Silk Road, and it provides an alternative for cargo from Ukraine to these markets. It means that Ukrainian and European goods will reach Central Asia even if Moscow imposes sanctions."

https://www.obserwatorfinansowy.pl/in-english/macroeconomics/ukraine-joins-the-silk-road/

Thwarted are Russia's desires and ambitions before accomplishing its military mission. There is no win-win in this situation for China.

Alternatively, the U.S. can do much more to improve strategic relationships with China. When I worked with Chinese students from Bao Steel Company, I suggested a strategic relationship between their raw steel production and American companies that produced finished products. The quid-pro-quo balance ensures that both parties benefit, and the U.S. Department of Trade should pursue that model with greater purpose and precision by the U.S. Department of Trade.

The challenge is to meld industrial and trade policy with free-market capitalism (regulated capitalism). The capitalist model does not work to achieve the needs of our democratic republic that is to balance economic, social, and environmental responsibilities.

Please read my book: Regenerating America with Sustainable Economics to understand the whole story.