CAIXINMEDIA

The Power Couple - US-China Relations At A Crossroads

Xi and Obama
Xi and Obama
Montage by Bertrand Hauger
Chen Qin

In November, both the U.S. presidential election and China’s change of leadership took place. They were the two most watched events of the year. China’s transfer of power within the party has become increasingly institutionalized. Meanwhile, America’s history of democratic election is deep-rooted and continues to play a fundamental role in its national and social dimensions.

As the superpower and the emerging power, which are also the world's first and second largest economies, the development of Sino-US relations will have a direct impact on the global strategic and economic situation. The high-level changes of leadership provide an excellent window of opportunity for the development of their bilateral relations.

Where will the two countries’ anointed leaders take Sino-US relations?

Recalling their recent high-level declarations, it is foreseeable that the changes in leadership will not lead to significant changes in the two countries’ foreign policy towards each other. America will continue to shift its focus eastward, to an Asia-Pacific strategic center of gravity. China will keep its goal of “ building a new type of relations between major countries,”, as the guideline in its relation dealing with the US.

Obama chose Asia as his first stop for foreign visits in his second term. On November 20, when meeting with China’s Premier Wen Jiabao at the East Asia Summit in Cambodia, he said that US-China cooperation is critical to the security and prosperity of the Asia-Pacific region, and the world. The United States hopes to continue strengthening the two countries’ relations.

In a letter congratulating Xi Jinping on his election as the General Secretary of the Central Committee of China’s Communist Party at the party’s 18th national congress, President Obama pointed out that Xi had paid a successful visit to the U.S. in February this year, noting that the two parties had constructive discussions on the future US-China relationship. Obama says he looks forward to the close cooperation with Xi Jinping, and the bilateral relations with China will no doubt be central to his second term.

The U.S.-China relationship is both a cooperative and a competitive one. It has always been a consistent policy of the United States to improve its competitiveness, through a balance of all the factors, while promoting cooperation, said Thomas Donilon, the national security advisor to the White House.

On China’s side, the 18th Congress mentioned “promoting the establishment of a long-term, stable and healthy development of a new type of relations among major powers” and “seeking its development while promoting in common that of the others.” This pursuit of stability will probably set the tone for the new generation of Chinese leaders in their collective handling of Sino-U.S. relations.

In the Chinese wording, the core of “the new type of relations among major powers” is characterized by “mutual respect, mutual benefits and a win-win partnership.” This concept was first formally launched in the China-US Strategic and Economic Dialogue held in Beijing last May. In the context of both nations’ power contrast and changes, the two countries have undergone a notable evolution at the diplomatic level in recent years.

Since 2005, China and America have held six rounds of strategic dialogues. And since 2009, four China-U.S. Strategic and Economic Dialogue have been held. In both President Hu Jintao's visit early last year and Xi Jinping’s visit this year to the United States, they have both reached consensus with America on working together to build a China-U.S. partnership.

In his meeting with the U.S. Defense Secretary Leon Panetta in Beijing last September, Vice President Xi stated that the Sino-US relationship has made positive progress in recent years. The dialogues, exchanges and cooperation have in fact reached a new level. He referred specifically to the facts that President Hu Jintao and President Obama have reached a critical consensus on the construction of the Sino-U.S. cooperative partnership, and the exploration of the set-up of a new type of relation among major powers.

We can look back on the Sino-U.S. relation over the past 30 years, and say that a growing mutual dependence has largely eased conflict, balanced competition and increased cooperation. China is the United States’ largest creditor. The two countries are each other's second largest trading partner. China is the world's largest exporter while America is the world's largest importer. All in all, the aspects of their relations are too numerous to mention.

At some point in the future, the largest intersection of two nations will be opportunities and challenges provided by the United States' decision to turn its focus towards Asia.

While America shifts its strategic center of gravity eastward and China maintains a rising momentum, the recent tensions in the Asia-Pacific cannot be denied. In particular, there have been twists and turns in China's neighborhood. The Diaoyu Islands issue continues to simmer and has led to anti-Japanese riots at home. The ASEAN countries with a stake in the South China Sea issue are getting tougher in their stances. Though the United States emphasize that it will not take sides over the sovereignty issues, America plays a balancing role to ease the tension.

The biggest uncertainty of the future Sino-U.S. relation development, however, lies in the absence of mutual strategic trust. The United States has repeatedly said that its return to Asia is not about taking aim at China, and that it welcomes a rising China. At the same time, China also repeats that it won't seek hegemony, but rather a peaceful rise. Still, somehow both sides often seem to talk past each other.

Historically, it hadn’t been easy for powers like Germany and Japan to rise. Rising countries are bound to feel repression from the existing big powers, whereas the big powers will look to contain the emerging powers for fear of being overtaken. There exist huge differences in political system and culture between China and the United States. It will therefore naturally take even longer for them to adapt to each other’s new role.

For the newly anointed leaders, reducing speculation from the other side while focusing on much needed domestic reforms would probably be the best response.

What America is most concerned with is whether a rising China is following the rules. In America’s view, only if China rises within established international systems can it be called a “peaceful rise” because America has a dominant position in these systems and it is the rulemaker.

It is precisely because the Unites States realizes that China's rise is inevitable, and that China is having more of a say in international institutions, that America has both looked to balance China’s rise, and push China to accelerate its pace in joining the international systems.

In the past, China has taken a less assertive role in its relations with America and its participation in global affairs. However, with the rise of China, the future of Sino-U.S. relations will largely be in China’s hands. As its scientific, technological and military strength develops, much will be riding on how China develops its human resources and conforms to the trend of globalization to become a “responsible power.”

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Economy

Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.


Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

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