Communist China is infamous for leading an “axis of evil” composed of itself, Russia, Iran, North Korea, and, arguably, Venezuela and Burma (Myanmar). This axis is terrorizing its own citizens and those of neighboring countries.
However, to evade the U.S. sanctions and tariffs imposed on the axis, Beijing appears to prefer what might be considered “second-tier” axis partners, especially Mexico and Vietnam, but also Thailand, Egypt, Malaysia, and Hungary. China invests in this second tier to manufacture abroad for shipment or transshipment of exports, including what should be tariffed as mostly Chinese goods, to the United States and allies.
Chinese investment in the second tier allows Chinese companies to continue producing for export to the United States and our allies despite tariffs and sanctions, while rewarding authoritarian regimes that are reasonably close to Beijing politically and diplomatically, even if they are not as close as the first tier.
This Chinese Communist Party (CCP) strategy makes sense from its own malign perspective, given that Chinese investment in the United States and allies would be at risk of confiscation in a war scenario, and the first tier is already under U.S. sanctions or tariffs, and so are sub-optimal from the perspective of Chinese export-oriented investment.
That leaves countries sitting on the fence, between U.S. allies and the original first-tier axis countries, for Chinese export-oriented investment. From a CCP perspective, the best of these middle countries to serve as conduits for investment and trade targeting the United States and allies are those that are ideologically closest to Beijing: the second tier.
First-tier axis countries, on the other hand, are optimal for China to import from, given that existing U.S. and allied sanctions or tariffs make them so desperate to sell. This gives Chinese companies bargaining leverage that results in billions of dollars of discounts from global market prices, most importantly in the energy markets for oil and gas. It also incentivizes the CCP to push countries from which it imports to violate international laws and norms, so they get sanctioned, join the first tier, and are forced to sell to China at a discount.
By Anders Corr
