U.S. tightens exports to China’s chipmaker SMIC, citing risk of military use
Next year, the trade conflict could look like a playground scrap compared to what lurks just over the horizon.
Relations between China and the United States have deteriorated at the same rate as the world’s second-largest economy in 2019.
Incessant talks, or roughly 14 rounds of discussions, have probably generated enough hot air to keep the lights on in Beijing’s trendy district of Sanlitun.
But while the outlook of a mini trade deal dims then glows, a broader Cold War-style confrontation is looming. The signs are ominous.
So far, their rivalry in the high-tech sector has sparked new levels of hostility, while diplomatic rhetoric has increased over the South China Sea. Human rights have also become an open sore in Hong Kong’s push for greater democracy by the protest movement and the Muslim detention camps in the Xinjiang region.
“In early October 2018, US Vice-President Mike Pence delivered a searing speech at a Washington think tank, enumerating a long list of reproaches against China,” Yan Xuetong, the dean of the Institute of International Relations at Tsinghua University, said in his seminal paper, The Age of Uneasy Peace.
“The tone was unusually blunt – blunt enough for some to interpret it as a harbinger of a new Cold War between China and the United States. Such historical analogies are as popular as they are misleading, but the comparison contains a kernel of truth,” he continued.
“The transition will be a tumultuous, perhaps even violent, affair, as China’s rise sets the country on a collision course with the United States over a number of clashing interests,” Yan added.
One sphere of influence will be technology linked to President Xi Jinping’s grandiose Belt and Road Initiative, which was launched in a fanfare of state-media hype in 2013.
Epic in scale and shrouded at times in controversy akin to a game of loans, it has become an extension of Beijing’s global ambitions.
Crucial to the program are strands of ‘New Silk Road’ superhighways connecting China with 70 countries and 4.4 billion people across Asia, Africa, the Middle East and Europe in a maze of multi-trillion-dollar infrastructure projects, including a web of digital links.
At the heart of the project is a high-tech platform to showcase, and expand, China’s prowess. It will include 5G, AI, or artificial intelligence, and the BeiDou Navigation Satellite System, the nation’s answer to GPS.
Spare capacity from state-owned conglomerates and innovation from private sector juggernauts will be funneled into overseas projects. Symbols of the country’s growing economic and research might.
“The Digital Silk Road has become the focal point of the BRI as controlling the flow of data becomes increasingly important for shifting the balance of geopolitical power in China’s favor,” Andrew Kitson, the head of technology research, and Kenny Liew, a technology analyst at Fitch Solutions, wrote in a report earlier this year.
“The Chinese government has sought to build out telecoms infrastructure across BRI member/partner states by championing local technology companies and leveraging state-owned banks to fund construction projects. Besides the ‘Digital Silk Road,’ China has also launched a ‘Spatial Information Corridor,’ consisting of Chinese-backed systems of communications, positioning, and observation satellites,” they continued.
“Chinese enterprises, which were already present in most markets along BRI routes, have jumped at the opportunity to accelerate their expansion plans, boosted by additional state support,” Kitson and Lieu added.
Right in the vanguard will be Huawei, a telecom giant and the second-largest smartphone manufacturer in the world.
While a pariah in the US, the company founded by former People’s Liberation Army officer Ren Zhengfei is forging ahead of its Western rivals Ericsson and Nokia. Nearly half of the group’s 65 commercial deals for ultra-fast networks are with European customers, despite its alleged links with Xi’s government.
“The Chinese government, together with state-owned banks, will continue to extend loans to both Chinese companies and governments of BRI member states to fund the deployment of telecoms infrastructure across the BRI,” the Fitch Solutions study said.
“State support has allowed these Chinese companies to enter many new markets and offer subsidized prices, edging out competing telecoms equipment suppliers such as Ericsson and Nokia. In many developing BRI markets, the deployment of communications [systems] at the lowest cost will take precedence over any fears of Chinese telecoms gear potentially being weaponized,” it added.
But the technological showdown is just one thread of a more extensive debate about “values.”
The pro-democracy protests in Hong Kong have increased tensions between Washington and Beijing with Xi’s ruling Communist Party accusing the US of interfering in “domestic issues” as it tightens its grip on the former British colony.
In response, the US has warned China it could impose sanctions for human rights abuses in Hong Kong. Calls for tougher action will also grow after leaked government documents highlighted the magnitude of the security crackdown in the Xinjiang region.
Official Chinese internal papers, which ran to 400 pages, revealed that Xi ordered Party officials to act with “absolutely no mercy” against separatism and extremism, The New York Times reported at the weekend.
Human rights groups had earlier pointed out that more than one million Uighurs, and other mostly Muslim minorities, had been rounded up in a network of internment camps across Xinjiang.
In a 2014 speech made after Uighur militants killed 31 people in a train station in southwestern China, Xi called for an all-out “struggle against terrorism, infiltration and separatism” using the “organs of dictatorship,” and showing “absolutely no mercy,” the Times reported.
“The Chinese government’s cruel, bigoted treatment of Muslims and ethnic minorities is a horrifying human rights violation,” Elizabeth Warren, one of the leading Democratic candidates for the 2020 US Presidential race, tweeted when asked about the Xi papers. “We must stand up to hatred and extremism at home – and around the world.”
Another flashpoint is the South China Sea. Both nations have become embroiled in a war of words over Beijing’s “attempts” to militarize disputed reefs and islands.
Talks between Defence Minister Wei Fenghe and Defense Secretary Mark Esper illustrated the depth of feeling aroused by the issue on the sidelines of an ASEAN ministerial meeting earlier this week.
“[The US must] stop flexing [its] muscles in the South China Sea and [and should] not provoke and escalate tensions [in the region],” Wei said, according to his spokesman Wu Qian.
His comments came after Esper reiterated Washington’s line that Beijing was using “intimidation” in one of the world’s vital waterways to “advance its strategic objectives.”
In the meantime, the trade spat drags on into a second year as the phase-one mini deal shrinks by the day. At this rate, US President Donald Trump and Xi will probably be in rocking chairs before the second round is signed off.
“The phase one deal, at least in its current form, will barely scratch the surface of the deeper problems underlying the US-China conflict … at an ideological level, the two hold quite different views,” Henry Gao, of the Singapore Management University and a professor at the Shanghai Institute of Foreign Trade, told the Lowy Institute in Sydney.
Above, the dark clouds are gathering just over the horizon.