The implications of US President Donald Trump’s heavy-handed approach across the board vis-à-vis China runs even deeper than the aggressive actions taken against the leading Chinese tech companies, with potential for much more serious consequences.
In August, the US National Counterintelligence and Security Center issued a statement to the effect that the intelligence community assessed that “China prefers that President Trump – whom Beijing sees as unpredictable – does not win re-election.”
Trump wears this as a badge of honor as it reinforces his self-image as being tough on China, while claiming that his Democratic challenger Joe Biden would be too soft when dealing with China if elected president.
The reality is more complicated.
The Trump administration’s response to the Covid-19 pandemic has reinforced existing views among Chinese leaders that the US is dysfunctional and it is well along the path to decline. Moreover, many Chinese officials now see Trump as a key catalysts of an acceleration of that decline.
As such, according to comments made to Hong Kong’s South China Morning Post by Robert Daly, director of the Kissinger Institute at the Wilson Center, “Chinese nationalists will therefore favor President Trump’s re-election even though they find his administration obnoxious. China’s interest in the presidential election is not to promote the victory of a particular candidate, but to see American democracy further discredited.”
China not a competitive threat to the US?
While some in China may be anticipating the decline of America, many Americans do not see China as a competitor that can overtake the US.
Writing in The Atlantic this year, Matthew Kroenig, a professor in the School of Foreign Service at Georgetown University in Washington, DC, argued that the US would outcompete China because of the inherent advantages of open societies when it comes to facilitating “innovation, trust in the financial markets, and economic growth…. Autocratic systems simply cannot match this impressive array of economic, diplomatic, and military attributes.”
Biden conveyed a similar sentiment in his characteristically more down-to-earth style in remarks at a campaign stop in Iowa in May: “China is going to eat our lunch? … They’re not bad folks … but guess what, they’re not competition for us.”
This is a shortsighted view of the world. China is already competitive across more sectors than most people may realize.
In a seminal article in The Atlantic, “The Thucydides Trap: Are the US and China Headed for War?”, renowned Harvard professor Graham Allison relates how he has consistently asked his students to predict the year in which China would be the global leader in 20 different categories, from manufacturing, to exports, savings, destination for foreign direct investment and holder of foreign reserves to sales of autos, smartphones, and luxury goods as well as Internet usage, fastest supercomputers, etc.
He reported that his students were all surprised that China had already surpassed the US in all of these categories, and that was five years ago, in 2015. China’s competitive positioning has only improved since then.
Still waiting for China to collapse
Some China experts in the US go further, claiming that the Chinese system is on the verge of collapse.
Gordon Chang appears regularly on Fox News as an expert commentator on China matters, and invariably he is introduced as the author of the book The Coming Collapse of China. What viewers are not told is that Chang published that book in 2001, confidently predicting that the Chinese government would collapse in five years, 10 years at the outside.
Like gold bugs who have been predicting a steep devaluation of the US dollar for the last decade, Chang eventually may be proved right, or at least China may, as is the case periodically with other major economies, experience an economic hard landing, which Chang and others who have made similar prognostications can claim as belated vindication.
Or will the US falter first?
However, gold bugs who are bearish on the US dollar recently received some highly credentialed support for their position when Yale economist Stephen Roach predicted that the value of the greenback could fall as much as 35% by the end of 2021 because of “the rapid deterioration in macroeconomic imbalances in the United States, the ascendancy of the euro and renminbi as alternatives, and the end of the aura of American exceptionalism that has given the dollar Teflon-like resilience for most of the post-World War II era.”
Other commentators note that China has been waiting and preparing for just such an opening. Mao Zedong reportedly forecast the collapse of the “capitalist monetary system with the dollar as its prop” half a century ago (although, to be fair, the Mao quote from August 1971 also references the late US president Richard Nixon’s economic policies at the time, claiming that these would not be sufficient to extricate the US from the coming financial and economic crisis).
In any event, China is clearly playing the long game.
In a small-scale panel discussion between a former senior Chinese government official and a senior trade expert from the US in 2018 in Beijing, the retired Chinese official indicated that China was in the process of transitioning from an export economy to an import economy in order, among other reasons, to increase the circulation of the yuan around the world so that the yuan can be positioned as an alternative global currency.
And as noted previously, if the dominance of the US dollar as the primary currency of international settlements is diminished, so too is US influence.
By their nature, predictions are inherently suspect and notoriously inaccurate, and if we have learned anything from all the unanticipated changes wrought by the global pandemic, neither the US nor China should be overly confident that it alone will thrive while the other struggles or declines.
But the comments above do reflect evolving conditions and often mutual misperceptions and attitudes which must be acknowledged and addressed in a clear-eyed manner in order to get this most important relationship right.