Combination of the debilitating pandemic, economic stress and violent flashpoints like Ukraine had put global Sino-centricity on the backfoot, temporarily. Issues like the underlying US-China trade war, Taiwan (with occasional ‘visit led’ dissonance notwithstanding), Belt and Road Initiative (BRI) and its counter, Partnership for Global Infrastructure and Investment (PGII) etc., had to be withdrawn from the headlines as these had been occupied by the current enfant terrible, Vladimir Putin. Almost eight months into the Ukrainian war, with an even more depleted and disempowered Russia on the horizon, the reassertion of China as the principal and sole threat for the ‘Free World’ in the long term is reconfirmed.
Amidst the ensuing mayhem and unrest, the strategic eye on the ball in terms of checkmating the future risks from Beijing are still firmly in place, as validated by the conceptualisation of the ‘Quad Fund’. Recent times have led to a scenario of long disruptions to supply chains across the globe, as many key elements of these are traceable to the Chinese mainland. The reality of the Chinese economic juggernaut in terms of a finger-in-the-pie of virtually any and every major commercial set-up, has dawned. The Chinese interdependence for even the ‘Free World’ has got brutally exposed.
The hard realisation is that isolating China may not be as straightforward as ‘leaving’ Russia was (in protest against the Ukrainian aggression), for many corporations ~ as it wouldn’t just be about potentially abandoning the huge Chinese market, but also about shifting mammoth manufacturing infrastructure and more importantly, inability to access raw materials and components from China, anymore. Unlike Russia, China is dangerously invested into inescapable supply chain, manufacture, and raw materials imperatives.
Long-term planning and implementation strategy to reduce or eliminate dependencies on China must be thought through. Global conflict (as validated by the Ukraine war) is not just about the violence created by weaponry but one which can also be inflicted by economic-commercial means e.g., the Russian blackmail of cutting energy to Europe and forcing a very harsh and prohibitive winter. Preparing for economic-commercial consequences and alternatives is often more complex and takes longer than even physical conflict ~ hence, needs to be planned well in advance.
The ‘Free World’, and the United States in particular, have already initiated a two-pronged approach of subsidies (to incentivise shift of production away from China) and penalties (in the form of punitive tariffs on Chinese materials) ~ but it is a slow haul in impact. Restrictions in terms of technology-information sharing with the Chinese behemoths or markets, is yet another deliberate move. But the impact wouldn’t be immediate, but gradual. It is estimated that it could take up to eight years to move just 10 per cent of Apple’s production capacity out of China (with China accounting for nearly 98 per cent of iPhone production). However, a start has to be made, and it has been actioned.
The announcement to begin manufacturing some of the latest iPhone series in the Foxconn unit at Chennai or moving a percentage of MacBook production and assembly to Thailand, need to be read with that backdrop. The bandied $1 billion ‘Quad Fund’ to invest in strategically important and sensitive industries within the Quad realm is symptomatic and an extension of the same strategic thought. Hypothetically with hardware technology powerhouses United States and Japan, software powerhouse India, and a resource abundant Australia, all under one composite umbrella of Quad ~ it is workable. There are hardly any cross-purpose or competitive competencies within these four dissimilar and geographically spread nations of the Quad.
All are equally bound by, and wary of, the Chinese ‘hand’ or interdependency, within their economic outlay. When juxtaposed with the rival Chinese ‘bloc’ (especially post-pandemic), with a client state in North Korea, a tactical (read unreliable) ally in Turkey, Iran and Pakistan (sentiment of anti-Americanism has its limits) and a clutch of ‘debt-trapped’ third world economies who have been bankrolled by Beijing ~ the idea of a ‘Quad Fund’, with a far more robust base of economies, is well placed to counter Chinese belligerence. Importantly all four Quad countries have a thriving base of ‘Private Sector’ which has shown great amount of alignment, purpose, and direction with their ‘nationalistic’ instinct, with matching decisions to willingly toe their government line in abandoning Russia during the recent Ukrainian crisis. An element of ‘nationalistic’ fervour is palpable in the ‘private sector’, be it in Silicon Valley, industrial hubs of Chennai, Chiba prefecture or Victoria.
It is time to harness the topical mood of the ‘Private Sector’ (along with the Government Sector) to drive home efficiencies, scale, and interdependencies within the relatively large and stable base of the ‘Quad’. Expectedly the Chinese regime is riled and its mouthpiece, the Global Times commented on ‘attempting to use the Quad investment fund to escalate containment of China’. It went on to rail that, “they are all behaviours that distort the laws of the market against the background of political manipulation. The four countries are attempting to pull together a fund and put the goal of confronting China on the table.” As the master of mixing economic-diplomatic-military elements into the sovereign admixture of foreign policy, China would understand the significance of the ‘Quad Fund’ idea, even if it were to only be worth $1 billion initially.
The envisaged fund is the brainchild of Washington DC ‘insiders’ including key diplomats, investors, and private fund managers, with a view to supercharge other parallel efforts in this direction. This could play an additional role to that of the official governmental efforts towards checking technology theft, shoring of critical minerals by Beijing or China’s patented ‘reverseengineering’. While it is still work-in-progress, it could invest in critical resource companies, intellectual property, technology, supply chains or any other sector that offers a strategic edge against China.
It could unleash immense ‘private sector’ potential that is not just driven by commercial objectives, but also has a strategic sovereign interest embedded within. It is still early days, but the ‘Quad Fund’ promises to unleash new energies, commitment, and direction towards checking China’s own ‘military-industrial complex’, and therefore China has taken note and is clearly concerned.
A version of this story appears in the print edition of the October 19 , 2022, issue.