No backing down – United States President Donald Trump and Chinese President Xi Jinping. Photo: Reuters/Carlos Barria
US President Donald Trump and Chinese President Xi Jinping. Photo: Facebook

China’s economic rise has changed the global economic and geopolitical landscape, causing anxiety in the West and countries with which it is having disputes. Some in the US are particularly wary of China’s growing economic and geopolitical clout, accusing it of a neocolonialist policy in Africa, of bullying smaller and weaker neighbors in Asia, of abusing human rights, of instituting “beggar thy neighbor” trade policies, and a host of other “evil” deeds.

Recently, US Defense Secretary James Mattis accused China of aggression in the South China Sea, and Secretary of State Rex Tillerson announced that the US would fulfill its commitment to Taiwan. Some lawmakers even urged President Donald Trump to speed up the process of selling arms to Taiwan amid Panama’s decision to shift diplomatic relations from Taipei to Beijing.

However, at the same time, the US is asking for China’s help in defusing the North Korean nuclear issue and is honoring the “one China” policy.

China’s response to hostile US policy

However, China seems to be even more determined to protect its core interests and expand its global influence. For example, it has persuaded the Philippines and other claimants to territory in the South China Sea to resolve the issue through bilateral negotiations by offering investments and joint development ventures. In May, China and the Association of Southeast Asian Nations reached an agreement on a Code of Conduct to negotiate territorial disputes.

In Africa, China not only invests in the continent’s industries, but also finances infrastructure such as the recently opened US$3.9 billion Nairobi-Mombasa railway.

At a recent forum in Beijing, China’s Belt and Road Initiative gained the interest of 130 countries including the US and Japan, along with seven international organizations. Meanwhile the China-initiated Asian Infrastructure Investment Bank is giving the US-controlled World Bank Group and International Monetary Fund (IMF) a run for the money.

It could be argued that it was US containment postures that culminated in the Chinese pushback. The East and South China Seas were relatively peaceful until, respectively, Hillary Clinton announced that the waterway was a US “national interest” and Japan’s right-wing former Tokyo governor decided to buy the Senkaku Islands, which China calls the Diaoyus, from their “Japanese owners”.

History shows that conflicts between nations are normal, as national interests often collide. China’s economic growth and its global impact rile the US because the former can challenge the latter’s hegemony and national interests. Indeed, many historians opine that it is inevitable that the US and China will fall into the “Thucydides trap”. John Mearsheimer, a prominent University of Chicago scholar, reasoned that China would one day challenge the US as the world’s dominant power and the US was determined to prevent that from happening.

Is China a threat to the US? If one considers the fact that it reclaimed the territories the Cairo (1944) and Potsdam Declarations (1946) ordered  Japan to return to China after World War II, gaining economic and financial clout, and military modernization as a threat to the US or the world, China is guilty as charged.

However, unlike the US, China does not set up “Commands” such as the Pacific Command across the globe to “promote and protect world peace”, bomb countries like Libya that do not toe the US line, mount “freedom of navigation” and “overflight operations” in the South China Sea, or send aircraft-carrier battle groups to intimidate North Korea.

While it is true that China has built islands in the South China Sea and installed military assets on them, it has not blocked any ships from sailing the waters or planes flying over them. Its increasingly powerful economy is the result of the government’s pragmatic policies. By modernizing its military, China is taking a page from Frederick the Great of Austria’s philosophy that “diplomacy without a strong military is like holding a concert without the orchestra”. China learned that painful lesson in 1919: Protests against the League of Nations’ unilateral decision to give Japan Germany’s Chinese concessions were ignored.

Unfairly and unnecessarily treating China as an enemy might be for no other reasons than the following.

Sustaining US hegemony and profits

The US and Britain, particularly the former, intended to dominate the post-World War II global economic, financial and geopolitical orders. Being the more powerful of the two Anglo powers at the 1944 Bretton Woods Conference that drafted the postwar trade and financial architectures, the US successfully got control of the IMF and World Bank, dominated trade policies under the General Agreement on Tariffs and Trade, and became the world’s “central bank” by demanding that its dollar be the global reserve currency instead of the British-proposed supranational currency, the bancor.

America’s determination at world domination remains strong. Former president Barack Obama wanted the US to write the world’s trade rules, his main reason for pushing through the Trans Pacific Partnership and “Asia pivot” policy.

Portraying China as a threat or enemy could also be profitable for US businesses, particularly the military-industrial complex. For example, the $16 billion arms sale to Taiwan under the pro-independence Chen Shui-bian government was said to have earned the industry and its middlemen more than $8 billion.

The lucrative arms trade prompted the military-industrial complex to hire pundits, retired senior government and military officials, set up production facilities across the US, and use the media to fan anti-China rhetoric, shaping public opinion and policies on China.

These efforts were successful, with the majority of Americans having a negative view of China, along with a large number of lawmakers elected to the legislative branch of the US government. Passing large military-spending bills and selling arms to US “allies” and “friends” has become easy and widely supported by the American public.

Diverting attention from policy failures

In spite of all the hype about a  sustainable economic recovery, the US remains trapped in the economic hole that the 2008 financial crisis dug. Over the past nine years, average annual growth rates have been less then 2% because of huge consumer and government debts. According to the World Bank and other organizations, the ratio of consumer debt to household income is nearing 100%, and the public-debt-to-GDP ratio was 103% in 2016.

Neither consumer nor public debt in the US is expected to fall any time soon. The drop in unemployment rates is largely attributed to lower labor-participation rates, with more and more people leaving the labor market. Further, employment growth is largely in low-paying service sectors.

Slow economic growth reduces tax revenues and increases transfer payments, both of which raise the public debt. The expected rises in consumer and government debt will further curtail demand, undermining economic recovery. Private and public consumption account for 85% of US gross domestic product.

Aggressive action unlikely

If the US were to turn its anti-China rhetoric into action, it could be shooting itself in the foot. China is its biggest trade partner: two-way trade was worth $521 billion in 2015. It is also the United States’ largest export market outside North America, worth nearly $110 billion in 2016. That number is expected to rise with a trade agreement recently reached by the two countries.

Further, more than 65% of US “imports” from China are made by US outsourcing firms. China is one of the United States’ biggest investors, estimated at more than $60 billion in 2016. China’s deep pockets could be the answer to Trump’s infrastructure prayer.

In short, the US and China need each other to sustain economic growth.

Trump is unlikely to sacrifice unthinkable losses in economic activities, human lives and property because of the “threat” manufactured by the anti-China crowd and the military-industrial complex. To his credit, he has resumed channels of communication with China to a similar level as  those of the US-China Security and Economic Dialogue framework first established by Bill Clinton.

Trump and his Chinese counterpart Xi Jinping expanded the talks to four dialogues during their meeting at Mar-a-Lago in April. The first will be a diplomatic and security dialogue to be held in Washington on June 28. It will be co-chaired by senior Chinese diplomat Yang Jiechi, General Fang Fenghui, Tillerson and Mattis.

The other three dialogues, on economics, law enforcement and cybersecurity, will be held later.

Ken Moak taught economic theory, public policy and globalization at university level for 33 years. He co-authored a book titled China's Economic Rise and Its Global Impact in 2015. His second book, Developed Nations and the Economic Impact of Globalization, was published by Palgrave McMillan Springer.

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