China: The wager US lost

Donald Trump, as early as his election campaign in 2016, had already proclaimed aloud the observation that his predecessors had refused: the United States had lost a battle with China. The whole strategy of his administration is to slowdown China’s development. 

The Taiwanese economist Lang Xianliang mentioned part of the problem on his Weibo account: “Many people wonder why there is so much tension between the United States and China. The heart of the problem lies in China’s growing technological capabilities: especially the huge advance in 5G that has created unprecedented fear and anger in the United States. Since the Second World War, the United States has relied on advanced technology and a financial system to dominate the world. It will defend itself like crazy if its position is challenged. Before analysing the current tensions, it is useful to look back at American strategies in the past. »

Openness is good for America: Europe and the Marshall Plan

The United States wanted to take advantage of globalisation with China, as it had done with Europe and part of the world after the Second World War.
In 1945, the United States had a GDP that represented more than 50% of the world’s GDP ( 60 to 70% according to some estimates), held two thirds of the world’s gold reserves, was responsible for 90% of world production in the automobile, shipbuilding and aeronautics industries and also had an enormous technological lead. Faced with a devastated Europe, they set up a Marshall Plan to turn Europe around and sell their merchandise. The strategy worked well. 

Warming relations

With the warming of Sino-American relations under Nixon, the idea gradually sprang up to do the same thing again by “helping” China to set up a market economy, to see the opening up of China and democratisation of the country. An idea that is naively transplanted to other countries with a simple equation that often works: democracy = open markets = turnover for American groups and political influence.
Deng Xiaoping’s trip in 1979 was an important step in a great cooperation.  Bush Sr., who experienced Beijing on a bicycle in the 1970s, is considered a linchpin in the normalization of Sino-American relations. Kissinger found him too “soft”. After June 4, 1989, he did his best to maintain relations between the two countries. He came under criticism for his “allegiance” to Beijing. 


China’s rise to power

Bush Jr., preoccupied with the fight against terrorism, did nothing consistent to counter the rise of the Chinese economy in the first decade of the 21st century. U.S. consumers were able to enjoy cheap Made in China products while the Chinese government financed U.S. debt with its huge foreign exchange reserves. It was called Chinamerica.
The subprime crisis did not increase the vigilance of the White House against the rise of the Chinese rival and Obama’s two terms in office did not show a great offensive.

Growing opposition to China’s ascent

Over the past 15 years or so, opposition to China has grown and grown: China is the sole beneficiary of this deal. The Sino-American marriage no longer works, investment in American treasury bonds is no longer enough, the trade deficit is colossal. On top of that, China is catching up with the US.

And Trump arrived

2016 signed the alarm bell for demon-globalisation, with the election of Trump. Europe has given birth to Brexit. A few days after his election, Trump gathered the bosses of high-tech companies at the Trump Tower. In response to Trump’s question, “What can I do for you? ” a unanimous answer was summed up as follows: “The biggest threat is the theft of our intellectual property by China.” Gradually, U.S. officials in their vocabulary add more and more “Chinese Communist Party” and use the word China less and less. They have nothing against China and its people, but they blame the CCP, which is unreliable and is accused of all evils, according to their statement. S. Bannon, a former White House strategist who works with a controversial dissident, billionaire Guo Wengui, is quite active on this issue.

From low profile to more ambition

On the other hand, the end of the first decade saw a more confident China abandoning Deng Xiaoping’s line of keeping a low profile (韬光养晦*). With Xi Jinping, the tone is rising and ambitions are being displayed with the construction of the Silk Roads, numerous shareholdings in strategic ports abroad, military bases abroad, the replacement of the dollar in certain trade agreements. Enough to irritate the hawks in Wahsington.

China hasn’t said its last word

The U.S. government’s observation is simple. Past leaders have made a bet: China’s opening would be beneficial for the business of American companies, but the trade figures speak for themselves and show a great imbalance. Trump simply wants to make a readjustment.  The first stunt with the trade agreements signed in January 2020 gives a victory for Washington, but China has not said its last word. China’s strategy is much more refined and is not questioned every four or five years with each new election; it is a long-term strategy.

China seems to be emerging less weakened from the health crisis. Is year 2020 a turning point in relations between the two economic giants or will the contradictions “settle down”?

*韬光养晦, tāo guāng yǎng huì
Hide your talents and rest in the dark, lay low in the shadows, keep a low profile.

Articles on Chinese-American relations here et here.

26 May 2020

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