As I recently wrote, US-China ties, following Biden’s recent call to Xi, are unlikely to see any major improvement and progress from what has been a tit-for-tat trade war for the past several years. In fact, the recent visit of the US Treasury Secretary Janet Yellen has done more than anything else to prove the fact that the US-China ties, regardless of who occupies the White House, will continue to be shaped by great power competition, a competition that is less about the two countries’ economic interests but more about where they stand vis-à-vis each other and in the global political hierarchy and how shifts in that hierarchy are driving tensions. In addition to this, China’s specific economic realities are also driving policymakers in Washington crazy. In fact, during her visit to China, Yellen revealed this craziness quite, obviously.
Yellen’s charge sheet, for instance, included an American fear about Chinese foray into “new” industries. To quote Yellen:
“China has long had excess savings, but investment in the real estate sector and government-funded infrastructure had absorbed much of it. Now we are seeing an increase in business investment in a number of “new” industries targeted by the PRC’s industrial policy. That includes electric vehicles, lithium-ion batteries, and solar…
China is now simply too large for the rest of the world to absorb this enormous capacity. Actions taken by the PRC today can shift world prices. And when the global market is flooded by artificially cheap Chinese products, the viability of American and other foreign firms is put into question”.
This statement obviously shows Washington feels it is unable to compete with what Yellen called China’s “excess capacity” and “cheap” Chinese products. More importantly, since the Chinese have the money, it is beyond comprehension as to why Beijing would not use this money to invest in “new” industries. Washington wants the Chinese to leave that industry only to the West to exploit, although it remains that the reason why the West is unable to compete with China in this “new” industry is that the US itself has underinvested in it. The Chinese might simply be out-investing the Americans.
According to recent findings, only two of 44 vehicle assembly plants in the US were dedicated to making only electric vehicles in 2020. China, on the other hand, accounted for about 44% of electric vehicles manufactured, with about 4.6 million units in both production and sales during the decade, between 2010 and 2020. Biden promised more investment in this industry. The original plan was to invest US$174 billion. However, only US$15 billion has made it to the industry.
Because Washington is finding it extremely hard to compete with China, the best the former can do is push China into military conflicts. This is why we see Washington pumping more and more weapons into Taiwan as a means to entice China. Recently, China sanctioned two subsidiaries of the US military contractors General Atomics and General Dynamics for their arming Taiwan against China. Senior executives of these entities have been banned from entering China and their assets have been frozen. A statement from Beijing said that this militarization of Taiwan amounts to “seriously interfering in China’s internal affairs and undermining China’s sovereignty and integrity”.
The key reason why China has retaliated is that it understands the US’ inability, or unwillingness, to keep the issue of economics separate from military conflicts. Beijing understands that the US continues to arm Taiwan to create a Ukraine-like scenario where a continuous push for making Ukraine a NATO member – and thus enhance its military capacity vis-à-vis Russia – drove Moscow’s military operation. Subsequently, the US and NATO forces became involved in the conflict that they see as their best shot at pushing Russia back to the margins of global politics. Policymakers in Washington, by arming Taiwan, are also pushing China into a corner where it might be forced to take military measures to protect its vital national interests.
While it is possible that China, using non-military means, might succeed in frustrating US attempts to ignite an actual military conflict, there is little denying that Washington simply does not have the capacity to block China’s ability to dominate the global market of “new” technologies. Surely, for instance, China’s exports to the US have declined due to excessive tariffs, but China continues to be the single largest producer of electric vehicles. Who’s buying them? Granted that China’s exports to developed markets (the US, Europe, Japan and Australia) have not significantly risen during the past few years, it is also a fact that Chinese exports to the Global South (including Russia, the Persian Gulf States, Central Asia, South Korea and Taiwan) have roughly doubled in the same time period. That is an unprecedented shift in world trade patterns. How can the US reverse this pattern, that is, if it can do this at all?
A key mechanism driving China’s domination is the trade infrastructure it has built in the last decade or so. Riding on the wings of its massive Belt & Road Initiative (BRI), China has spread its presence across the globe – something the US was and still is unable to match, primarily because it does not have, and has failed to come up with, a comparable trade plan to compete with China. In the past decade or so, Washington has developed some plans. But some of them, like the TPP, collapsed due to Washington’s withdrawal and some others, such as the India-Middle-East-Europe Economic Corridor, are yet to take off. This failure has nothing to do with what China has been able to achieve in the last two decades or so.
Washington now finds itself unable to reconcile with this deficiency, which is why policymakers in the US see China as a permanent adversary that will inevitably establish its dominance at their country’s expense. This zero-sum mentality can only drive conflict and not normalisation.
Salman Rafi Sheikh, research-analyst of International Relations and Pakistan’s foreign and domestic affairs, exclusively for the online magazine “New Eastern Outlook”