The folly of trying to curb China’s rise

Attempts to curb China’s rise did not begin with Donald Trump, nor are they likely end with his administration as long as the “communist” nation is in a position to challenge US economic, technological and military hegemony. Perhaps because so much at stake for the US, no administration or Congress will allow any nation to acquire that position. It was the Soviet Union at the end of World War II, Japan in the 1980s, and now it is China. Who knows which nation will be targeted in the future?

Former president Barack Obama initiated the “pivot to Asia” policy, planning to place 60% of US military assets in the Asia-Pacific region, the purpose of which was to bottle China inside the “first island chain.” Shortly afterward, he secured the Trans-Pacific Partnership, the purpose of which was to keep China from “writing the world’s trade rules.” Neither Obama policy succeeded in containing China. The opposite, in fact, might be true in that China seems to be able to push back US intrusion and might have grown stronger in light of its economic, technological and military achievements.

Though annual growth has slowed to around 6%, largely because of falling external demand due to Trump’s trade wars, the Chinese economy has still fared better than any other major country’s this year. India’s GDP growth has fallen particularly hard, from more than 7% to around 5%, according to World Bank figures. The Bank expects the US, European Union and Japanese economies to grow by around 2% or lower in the coming years if the US-China trade spat does not end soon.

Furthermore, an increasing number of countries, including staunch US allies such as the UK, are embracing China by participating in its Belt and Road Initiative and defying American pressure not to use Chinese telecom products in their 5G (fifth-generation technology) rollouts.

On the military front, China displayed an impressive array of advanced conventional and nuclear weapons at its 70th-anniversary parade in October. Though they might not be as lethal or advanced as those in the US arsenal, America and its allies could suffer unthinkable losses of human lives and property should US politicians push the two countries into a war.

Trump has signed the Hong Kong Human Rights and Democracy Act into law, perhaps betting that China will do nothing or might even capitulate to the Hong Kong protesters’ demands

And there is no end in sight to Washington’s anti-China policy. Trump has signed the Hong Kong Human Rights and Democracy Act into law, perhaps betting that China will do nothing or might even capitulate to the Hong Kong protesters’ demands. But if the US follows through with the threats outlined in the legislation, the Chinese government will most likely institute tit-for-tat countermeasures, because the Chinese public would not only support it but demand it.

But there is an irony to the US policies in that they hurt American businesses and the people of Hong Kong more than China. The many US businesses in the Hong Kong Special Administrative Region (SAR) are already hurting their future in doubt because of the prolonged period of violent protests. The US legislation will only embolden the protesters to become more violent, a stance that the mainland would not likely allow for long. Should Beijing intervene, Hong Kong will be on the edge of an abyss, wiping out the future of its youth and destroying US business prospects.

China, on the other hand, would suffer Western condemnation and possibly sanctions, but as with the Tiananmen Square incident, it will not only recover but might even emerge stronger, simply because the protests and the US legislation in reality have nothing to do with democracy or human rights. What’s more, Western businesses would not likely give up the increasingly lucrative Chinese market.

It could indeed be argued that the US might be shooting itself in the foot, risking its own economy and dragging the world down with it.

But the bleeding does not stop there. According to a recent Bloomberg report, Chinese companies buy more than 65% of the world’s US$480 billion worth of semiconductor products each year. The largest chip vendors (Qualcomm and others) happen to be in the US, explaining why the Trump administration is issuing licenses to companies selling chips to China. In fact, barring ZTE from buying US chips almost killed these China-reliant companies, prompting the administration to soften its stance.

The fact of the matter is that American companies’ decisions to focus on China have largely been motivated by the huge profits to be made, not because they love the country. No country can produce products as efficiently or buy as much from major US firms as China, bringing enormous economies of scale and expanding America’s economic and employment prospects. In this sense, it could be argued that the “conniving commies” are providing, and not eating, America’s lunch.

If they lose much or all of their access to the Chinese market, corporates such as Boeing, Dell, Apple, General Motors are others are unlikely to be as profitable as they are today. Before Boeing was hit by the 737 Max safety issue, for example, China accounted for around 25% of the company’s commercial-aircraft business.

Indeed, the Federal Reserve expects US GDP growth to fall to 0.4% or even less in coming years if the trade war and Congress’ ideologically driven policies against the Asian giant do not end. The Fed’s assessment is based on falling investment and stagnating consumption, which together account for 80% of gross domestic product.

China, on the other hand, might suffer less damage than the US from the trade war because of its huge domestic market and the growing number of countries participating in its BRI. China’s overall two-way trade increased by around 4% even though exports to and imports from the US declined in 2018, according to Chinese government statistics. China’s domestic investment and consumption rose by 5% and 7% respectively in the same period, according to the China National Bureau of Statistics.

In geopolitics, the Trump administration’s “Indo-Pacific” strategy of containing China might be dying, because neither Japan nor India has any appetite to confront China seriously. In addition to being their biggest trade partner, China has nuclear weapons. So allying with the US to counter the Asian giant could lead to self-destruction economically and geopolitically, explaining why Australia and Japan are rebalancing their relationships with China.

These are compelling arguments to suggest that China cannot and should not be contained. However, common sense and logic are viewed as liabilities rather than assets because the majority of the US population really believe Communist China is “evil” and responsible for America’s problems. To gain public support, some politicians from both the Democratic and Republican parties try to outdo each other in demonizing China. Furthermore, giving up its global dominance or even having China (or any other country) as an equal could be extremely costly to the US economy.