The Bloomberg China network
Michael Bloomberg’s China baggage is too heavy for the White House
Michael Bloomberg is running for the Democratic nomination for president of the United States, and there could not be a worse choice.
The business of the New York City billionaire (yes, another one) gets significant revenue from its financial and data services in China. He is deeply enmeshed with that country’s business and government networks, and it shows.
Bloomberg claimed in September, on a PBS show, that Chinese leader “Xi Jinping is not a dictator. He has to satisfy his constituents or he’s not going to survive.” Bloomberg said, “even in governments that are not what we would call a democracy, there are lots of stakeholders with vested interests, and they have an impact.”
Bloomberg all but admits that China is not a democracy. So, what is it if not a dictatorship? A stakeocracy? Vestocracy? Bloomberg is breaking new ground in political science. But he will find his patch to be very rocky terrain.
What should not be in doubt is precisely what Bloomberg denies.
China is a dictatorship.
Xi Jinping, who reformed the Chinese constitution in 2018 to make himself general secretary for life, leads all of China’s most important political bodies and committees, and has terrorized and imprisoned Chinese elites with an “anti-corruption” crusade that leaves his closest political allies untouched. Given China’s massive economy and military, Xi is now one of history’s most powerful dictators, and arguably today’s most powerful individual.
Bloomberg promotes a made-for-China strategy on global warming
Bloomberg also claimed on PBS, to the redoubtable Firing Line host Margaret Hoover, that “China is doing a lot” to combat global greenhouse emissions. In fact, China is the world’s biggest producer of emissions. Even on a per capita basis, China’s emissions are growing so rapidly, they exceeded the world average in 2005, Europe in 2011, and are fast gaining on the United States.
When asked how the U.S. should stop China’s growing emissions, Bloomberg said it should “lead by example”, assuring the PBS audience that, “if we can show that we can do it, their people can go to their government and say, ‘if America can do it, why can’t we do it?’” The U.S. has in fact been “leading by example” since approximately 2007, when emissions started dropping on both an absolute and per capita basis.
Bloomberg did not explain how China’s people would convince its government of anything much less a decrease in emissions, without getting thrown in prison.
In 2015 a Chinese film by Chai Jing on air pollution called “Under the Dome” got more than 150 million viewers within just a few days of its release.
Then it was censored.
When asked about the film at a press conference, Premier Li Keqiang promised the government would do more to combat air pollution. But, 2015 was a low point in China’s emissions, which have since then only increased.
Bloomberg buys into China’s win-win rhetoric
If Bloomberg wins, he would arguably be the most pro-China president since an avalanche of such presidents following Richard Nixon, who fatefully opened the American economy to the country in 1972. That decision, along with the decision to let China into the United Nations in 1971 and the World Trade Organization (WTO) in 2001, led to the gradual political sidelining and deindustrialization of the U.S. as corporations moved their manufacturing to China, and countries around the world switched their diplomatic allegiance from Taiwan to the mainland.
After the economic opening in 2001, China’s GDP skyrocketed and in 2014 took first place globally from the United States when measured by purchasing power parity. PPP measures not just the dollar-value of GDP, but how much it can buy in products and services like bread and steel. That economic growth has in turn fueled a Chinese military expansion that is impeding the United States and allies’ defense of territory and freedom of navigation in the South and East China seas.
Bloomberg generally ignores China’s growing military and diplomatic power, instead focusing his claims on how benefit can be derived from China’s growing economy. In a 2008 Newsweek article, he wrote that a “growing Chinese economy is good for America”. He continued, “we have a stake in working together to solve common problems, rather than trying to browbeat or intimidate the other into action.”
Here he broadcasts China’s “win-win” rhetoric against “zero-sum” thinking. But in his many comments on China, Bloomberg does not adequately address the zero-sum thinking of China’s own leaders who argue that the Chinese autocratic system is superior to liberal democracy. Neither does he adequately address how China’s growing economy fuels its global military power projection, or the ongoing praxis of Maoist ideology that lauds the power of the Chinese Communist Party (CCP) as growing from the barrel of a gun.
China demonstrated the relevance of this violent ideology as recently as 1995 when it occupied Mischief Reef, and 2012 when it seized Scarborough Shoal, both maritime features near the Philippines.
Bloomberg ignores China’s military expansion
Despite Bloomberg’s considerable experience in China, he has made no significant comment on the country’s remarkable military expansion. U.S. military capabilities relative to China have steadily deteriorated since at least 2010. This is especially evident when looking at how the U.S. would fare in a war near China, for example over Taiwan or the South China Sea.
Between 2015 and 2017, China launched almost 400,000 tons of naval vessels, approximately twice the tonnage produced by U.S. Naval shipyards. In 2018, China’s navy reached 300 ships, exceeding the U.S. Navy by ten ships. In 2019, China launched a Type 052D Destroyer every 18 weeks, and a Type 056 Corvette every 6 weeks.
The U.S. Navy still exceeds the Chinese navy in tonnage. Most Chinese warships are smaller frigates and corvettes, compared with a U.S. reliance on much larger aircraft carriers, cruisers, and destroyers. But the latter, often in formations called Carrier Strike Groups (CSGs), are highly vulnerable to China’s DF-21D nuclear-capable “carrier-killer” missiles. The DF-21D entered the People’s Liberation Army (PLA) arsenal in 2006 and in 2013 was tested against a ship target approximately the same size as contemporary U.S. aircraft carriers. The longer-range DF-26 nuclear-capable missile was unveiled in 2015 and likely tested against a maritime target in 2017.
While China’s frigates and corvettes can travel only shorter distances than do American destroyers, the frigates have travelled as far as the Gulf of Aden, and the majority of naval friction between the two countries is over freedom of navigation closer to China in the South and East China seas.
The Chinese navy is further advantaged by supersonic long-range YJ-18 anti-ship cruise missiles (ASCMs) that outrange slower U.S. Harpoon anti-ship missiles, making the U.S. destroyers that execute freedom of navigation operations highly vulnerable in one-on-one combat. As the balance of naval power in Asian seas shifts to China, it has acted more boldly. For example, the PLA Navy (PLAN) has shadowed all U.S. Navy surface ships in the South China Sea since October 2015.
None of this seems to matter to Bloomberg, who does not publicly recognize the extent of China’s military power, much less how China’s military expansion depends on its economic expansion. Instead, he apparently accepts China’s economic growth as a “win-win” outcome for all.
Bloomberg internationalizes China’s currency
On the heels of China’s trade-fueled economic expansion, Bloomberg has mustered support for and achieved very specific economic openings to China. In particular, he seeks expansion of “trading, clearing, and settlement of RMB in the United States”, the goal of a little-known but well-connected organization he leads, the “Working Group on U.S. RMB Trading and Clearing” (RMBUSAWG). Members of RMBUSAWG include several Chinese financial institutions, including the Bank of China (BoC), CITIC Group (formerly the China International Trust Investment Corporation), Agricultural Bank of China (ABoC), China Merchants Bank (CMB), the Industrial and Commercial Bank of China (ICBC), and the China Bank of Communications (BoCom).
In 2017, Bloomberg won a “Special Award For Advancing RMB Internationalization” at a China General Chamber of Commerce (CGCC-USA) gala in New York. CGCC-USA is the American branch of the CGCC. According to Bloomberg’s biography on the gala literature, “Since November 2015, Bloomberg has served as the Chair of The Working Group on U.S. RMB Trading and Clearing. The objectives of the Working Group are to identify, evaluate, and recommend opportunities to develop and expand the trading, clearing, and settlement of RMB in the U.S. As a result of its recommendations, the first RMB clearing bank in the U.S. was designated by [the] People’s Bank of China in September 2016.”
Further RMB trading and settlement will substantially expand China’s economic and political power globally. It could enable the replacement of the U.S. dollar as the lead global reserve currency, putting China’s yuan, or renminbi (RMB), in its place. This alone could be worth trillions of U.S. dollars to China as it prints, virtually and literally, money to fill increased global demand for commerce and investment in renminbi. All else equal, that demand would come at the expense of the U.S. dollar and other global reserve currencies like the Euro, British pound, and Japanese yen.
In 2019 (Q3), the currency composition of official foreign exchange reserves in U.S. dollars was $6.75 trillion USD, $2.19 trillion in Euro, $612 billion in Japanese yen, $485 billion in British pounds, and only $220 billion in Chinese yuan. If Bloomberg has his way, the renminbi share of these reserves will increase, decreasing demand for the other reserve currencies. This will impose inflationary pressure on them.
RMB internationalization would also kneecap the ability of the United States to impose economic sanctions on China and its allies Russia, Iran and North Korea, as the power of those sanctions depends on the ubiquity of the U.S. dollar in global markets. Taken far enough, and renminbi internationalization would give China the same power to impose unilateral economic sanctions that the United States enjoys today. The economic value to China of renminbi internationalization could be in the trillions of dollars. The political value of extrication from the threat of U.S. economic sanctions, and the new tool of unilateral Chinese economic sanctions, would be incalculable.
Bloomberg pumps Chinese government bonds
Bloomberg LP is also helping the Chinese government market its $13 trillion bond market to global customers. China’s bond market is the third largest globally, after the U.S. and Japan. In 2018, Bloomberg LP added over 300 Chinese government and state-owned enterprise bonds to its Bloomberg Barclays Global Aggregate Bond Index, greasing the skids for approximately $150 billion USD of new international investment into China’s market.
Chinese investments would make 6 percent of this Bloomberg index, and the renminbi would become the fourth-largest currency component. In addition to straight government bonds, Bloomberg LP added bonds from China Development Bank (CDB), a subunit of the People’s Bank of China known as the Agricultural Development Bank of China, and the Export-Import Bank of China.
The Bloomberg LP decision to expand Chinese government bonds in its index, along with inclusion of mainland Chinese stocks in the MSCI Emerging Markets Index, built momentum for other such inclusions, like the 2019 connect of Chinese stocks in London and vice versa. If J.P. Morgan and the Financial Times Stock Exchange (FTSE) follow Bloomberg LP’s lead, the moves could jointly add as much as $275 billion of inflows to China, and further increase the renminbi share of foreign reserves globally. In the case of MSCI, this inclusion was allegedly coerced by China, which used the threat of regulatory denial of business.
Bloomberg has cited both his inclusion of Chinese bonds in his index, and the RMBUSAWG, as evidence that China is opening its markets. But increased global investment in China helps China more than it does the world, as China can use such investments as economic hostages to leverage yet more gains.
Bloomberg is arguably gaslighting global investors when he makes them believe that it is they, not the Chinese, who are in greatest need of investment in China. This would fit the argument, made in the South China Morning Post, that the Chinese economy is a giant Ponzi scheme. It would also fit the lack of transparency found among Chinese companies. Ponzi schemes lack transparency and typically seek to appear exclusive, when in fact they are starved for cash.
Could China compensate Bloomberg for his pro-China positions?
Bloomberg’s economic policy prescriptions are so China friendly that should Bloomberg become president, or should a Democratic candidate influenced by his campaign contributions become president, Beijing might assume that American tariffs on China would end. Those tariffs in just the first half of 2019 cost China approximately $35 billion in exports, so could come to a total of $70 billion for all of 2019.
Given that China is profiting from up to hundreds of billions of dollars’ worth of new investment and RMB internationalization from Bloomberg LP actions, and it could profit more through Bloomberg’s likely cancellation of tariffs, there is no guarantee that China would not seek to encourage or even compensate Bloomberg for the relatively miniscule, from a business standpoint, $1 billion he plans to spend on the Democratic campaign. Bloomberg has already spent $463 million in just three months of primary campaigning.
The planned expenditure could make the entire field of Democratic candidates more China friendly, as Bloomberg announced his intention to spend the billion regardless of whether or not he wins the nomination. Bloomberg’s actions could be seen as punishment by Beijing proxy against Trump for his aggressive economic approach.
Such an interpretation would be consistent with China’s carrot-and-stick approach to international diplomacy of both the political and economic variety. China granted Trump and his family new trademarks shortly after his election, a likely attempt at influence. We should not take the same risk with Bloomberg, who the Chinese Communist Party (CCP) could easily and legally compensate by increasing Bloomberg’s business revenues in China. As Bloomberg LP is a privately-held company, any new China revenues would be largely opaque to the public, as are his existing China revenues.
Bloomberg’s China network
Bloomberg’s pro-China sentiments and campaign for the presidency are particularly concerning given the network of Chinese business and political interests in which he finds himself.
Bloomberg’s links to China are obvious given his close cooperation with the China General Chamber of Commerce in New York (CGCC-USA), his company’s business with Chinese entities, his leadership of the aforementioned RMBUSAWG, and his Bloomberg New Economy Forum (NEF), which invited approximately 400 officials and executives from 60 countries to Singapore in 2018, and to Beijing in 2019. The Singapore event was originally planned for Beijing as well but switched due to the trade war and another economic meeting.
Bloomberg billed his NEF as having a focus on “China as an emerging power and how we all work together.” According to the Financial Times, Bloomberg’s NEF is “aimed at connecting global business leaders with the Chinese elite.” Bloomberg told the FT, “We do make a little bit of money out of it. It certainly pays for itself… the biggest benefit is you build a better relationship with your customers,” as sales of Bloomberg terminals in China are “growing very rapidly”.
This illustrates how Bloomberg can see something political, that is, “how we all work together”, as having a primary benefit that is to improve a relationship with customers and sell product, in this case Bloomberg terminals.
At the 2018 Bloomberg NEF, Bloomberg praised keynote speaker Wang Qishan, Xi Jinping’s hatchet man in the latter’s “anti-corruption” crusade. Bloomberg said Wang Qishan was “the most influential political figure in China and in the world.” Bloomberg was buoyant about the future of U.S.-China relations. He called the trade war “short-term stuff”.
Former U.S. secretary of state Henry Kissinger, an adviser to the Singapore event and known among China analysts to have relatively pro-China views, alluded to the chance of forum participants to rub shoulders with Beijing’s elite. He told the FT that: “The fact the meeting is taking place in Beijing is a positive sign and a sign China remains interested in a dialogue.” He said the Chinese leadership was “pleased with this process” and the forum would provide western business leaders with an opportunity to meet with China’s economic and political leadership. Bloomberg has described Kissinger as his “very close friend”.
The Singapore event was co-hosted by Zeng Peiyan, former vice-premier of the Chinese government’s powerful State Council, and current chairman of the China Center for International Economic Exchange, a “think-tank with Chinese characteristics.” The State Council is one of the three most powerful elements of the Chinese government, the other two being the PLA and the Chinese Communist Party (CCP). Zeng has also been a speaker at the China-U.S. Exchange Foundation (CUSEF) and was vice chairman of the Boao Forum, known as “China’s Davos”.
CUSEF is a registered foreign agent in the United States that was founded by Tung Chee-hwa, vice chairman of the Chinese People’s Political Consultative Conference (CPPCC). CUSEF has cooperated with the PLA and uses the same public relations firm as does the Chinese embassy in Washington.
Over the two years of its existence, Bloomberg NEF has included Tung Chee-hwa, as well as vice chairman of the Foreign Affairs Committee of the National People’s Congress Fu Ying, billionaire CCP member Jack Ma, and government-linked companies and organizations like Didi Chuxing, Alibaba, Tsinghua University, Tencent, the China Center for International Economic Exchanges (CCIEE), and the Center for China and Globalization (CCG). Wang Huiyao, a member of China’s powerful State Council, leads the CCG.
Western organizations and individuals known for pro-China positions took part in Bloomberg’s NEF, including billionaire Ronnie Chan’s Asia Society, Brookings, Eurasia Group, former Australian prime minister Kevin Rudd, president of the European Central Bank (ECB) Christine LaGarde and former U.S. Treasury secretary Henry “Hank” Paulson.
Bloomberg and the China General Chamber of Commerce
Michael Bloomberg’s NEF followed upon his frequent prior collaboration with the China General Chamber of Commerce USA (CGCC-USA), an influential organization with headquarters in New York City led by Bank of China USA President Chen Xu. The organization has many Chinese corporate members, and some U.S. corporate members that seek more access to Chinese markets. The Chinese corporate members are frequently U.S.-registered businesses, nonprofits or subsidiaries, as is the CGCC-USA. The CGCC-USA has satellite organizations in Chicago, Houston, Los Angeles, San Francisco and Washington DC that each have broad area responsibilities that together cover all 50 states.
The organization seeks greater market penetration for Chinese firms in the United States, something that Bloomberg supports along with greater U.S. investment in China. At the CGCC-USA 2014 gala, Bloomberg opined: “In the years ahead, the more that we are able to open our capital and our labor markets to each other, and the more that we collaborate on trade and technology, the better off both our countries will be.” He promoted China’s pet projects in the speech, like high-speed trains and Shenzhen, a city near Hong Kong lauded as a high-tech innovation hub. Shenzhen threatens to replace Hong Kong, which retains some freedoms due to its history as a British colony, as a financial center in Asia. During his 2014 speech, Bloomberg belittled change in Washington D.C. as “at the pace of a steam engine rather than of [a] modern train”.
He did not mention some of the companies that have supported CGCC-USA, including a subsidiary of AVIC International, a Chinese aeronautics defense contractor whose helicopter in 2016, for example, challenged U.S. naval forces in the South China Sea. AVIC’s helicopters can carry anti-ship missiles (ASMs) that threaten U.S. ships. Celebrating with such companies at a black tie gala stateside is not exactly presidential.
Also supporting CGCC-USA in 2017 was China Energy Finance Corporation (CEFC), listed as a “Gold Sponsor” at a gala where Bloomberg received the “Special Award For Advancing RMB Internationalization”. In March 2019, Patrick Ho, head of an NGO fully-funded by CEFC China Energy, was sentenced to three years in prison for charges related to a multi-million dollar scheme to bribe African leaders via contacts made at the United Nations.
Bloomberg’s China business
Bloomberg LP, of which Bloomberg has an 88 percent stake, has approximately $10 billion in annual revenue. The company opened its first offices in China approximately 25 years ago and has extensive clientele in China. Bloomberg LP has approximately 800 employees in Hong Kong and another 200 in mainland China. The company has a total of 20,000 employees. If the ratio of employees to revenues is any indication, Bloomberg LP could get approximately 5 percent of its revenues, or $500 million annually, from China (including Hong Kong).
Bloomberg LP clients and those who benefit from its products in China include China’s Ministry of Finance, and several state-owned enterprises, including the People’s Bank of China (PBoC), COSCO shipping, CHALCO Aluminium, China Construction Bank (CCB) and China Development Bank (CDB). CDB was CEFC’s largest creditor in 2018.
Bloomberg LP has enjoyed increasing terminal sales in China, a welcome reversal for the company, which Beijing punished in 2012 after Bloomberg News published details about the alleged wealth of Xi Jinping’s family. Chinese government officials reportedly responded by instructing state owned enterprises to cease purchasing Bloomberg data subscriptions from which Bloomberg LP gets substantial revenue. China also blocked the Bloomberg website and stopped issuing visas to Bloomberg reporters.
After a second controversial article Bloomberg News suspended the reporter, Michael Forsythe, who was then hired by the New York Times. Bloomberg admitted self-censorship of Bloomberg News in 2014. He told CNBC: “In China, they have rules about what you can publish. We follow those rules. If you don’t follow the rules, you’re not in the country. In every newspaper or news organization and television station and computer system [they] follow the rules.”
More frequently now, Bloomberg News carries analysis by relatively pro-China personages like Henry Kissinger, Stephen Schwarzman, Ronnie Chan and Hank Paulson. Schwarzman is the billionaire CEO of Blackstone Group, which has extensive business in China. He has publicly supported Bloomberg’s “logic and reason” against other candidates in the Democratic primary.
Bloomberg’s experience in China illustrates the ability of Beijing to turn a company’s profit up and down at will and explains why he might lie to the public that “Xi Jinping is not a dictator.” If he breaks the rules in China, and that includes breaking the rules as to what he says in public even if he is not in China, he loses money.
The danger to democracies that allow their politicians to be encumbered by such conflicts of interest should make Bloomberg’s candidacy a non-starter. Laws should be enacted to make it impossible for Beijing and other authoritarian powers to influence democracies via politicians beholden to China’s money.
More from Anders Corr
- China's coronavirus crisis and the cult of censorship
- Divide and Conquer: China's illiberal influence in Afghanistan
Anders Corr holds a Ph.D. in Government from Harvard University and has worked for U.S. military intelligence as a civilian, including on China and Central Asia. The views and opinions expressed in this article are those of the author and do not necessarily reflect the official editorial position of LICAS News.
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This article was published Feb. 28, 2020.