Inflation is hurting American consumers while the Biden administration is obsessed with foreign policy. Image: Screengrab / iStock

In April, I was invited to speak about the US-China bilateral relationship. For the title of the speech, I chose, “Pushing China’s head under water won’t make American great again.” Recent developments suggest that an updated title would be, “Pushing China’s head under water will hasten America’s own demise.”

There are two reasons for fine-tuning my title. First, the United States’ deliberate tactics to obstruct China’s growth and expansion have failed miserably while inflicting more hardship on Americans. The American people are paying a ghastly price for Washington’s obsession with China. 

Second, priorities of America’s foreign policy are not making any sense. The most recent example is the announcement by President Joe Biden that the US will contribute $200 billion to the G7 pool of funds to compete with China’s Belt and Road Initiative (BRI).

It’s hard to tell where Biden is going to find the money. Even if all Group of Seven nations contribute their share of funds, it’ll be even harder to figure out to how they can implement BRI-like projects in the developing world. Most probably they would have to subcontract work to China, which knows how to implement it.

On top of Biden’s dream of grandeur, he is sending billions’ worth of arms and weapons to Ukraine to prolong the conflict with Russia. Bipartisan approval is easy when it comes to making war.

By contrast, to relieve the inflationary pressure on the American domestic economy, Biden is proposing to forgive 18 cents per gallon (4.76 cents per liter) of federal tax on gasoline for the three summer months. 

Wow. Billions to compete with China and Russia and an 18-cent discount for the American motorist. In California, a gallon of gasoline has gone over $6 ($1.59 a liter). Saving 18 cents per gallon from a fill-up will barely cover the cost of a cup of coffee. 

In the US, prices of everything are going up; inflation looms. Nay, inflation at 8.8% is already the highest in 40 years. Soon the American motorist won’t even get a cup of coffee from his gas-tax saving. 

Biden does not deny that Americans are facing inflation. He blames the inflation on Russian President Vladimir Putin and the war in Ukraine. He urges the American public to endure this “for as long as it takes” in order to defeat Putin – hardly encouraging words.

Of course, most American people are not aware that it has been the US-led North Atlantic Treaty Organization that baited Putin over the decades into the war with Ukraine. Washington has since congratulated itself for successfully mounting a proxy war – getting Ukrainians to fight the Russians. 

Defense Secretary Lloyd Austin even explained that the war meets the objective to wear down the strength of Russia – albeit at the expense of Ukrainian casualties and property.

Having successfully pushed Russia into invading Ukraine, NATO celebrated with a summit at the end of June where Sweden and Finland were formally inducted as new members. 

At the same time as having pushed Russia into a closer relationship with China, the organization accused China of not condemning Russia and therefore not standing with NATO.

NATO is afraid of China

At this NATO summit, Australia, New Zealand, Japan and South Korea were invited as observers, as a signal that NATO’s expansion plans now include the North Pacific. Just to make sure nobody misses that intention, for the first time NATO identified China as a potential adversary and a “systematic challenge.”

So, what constitutes China’s threat to the security of NATO members? Apparently it is the fact that China has dominated manufacturing of goods at prices that the West cannot compete with. China’s GDP continues to grow, and that makes NATO members nervous.

The West led by the US has repeatedly accused China of violating “rule-based international order.” The most recent action by the Biden White House was to impose sanctions on goods made in Xinjiang, alleging human-rights abuses there.

In response, China, on the day after the conclusion of the NATO summit, announced the placement of an entire order for 292 commercial jetliners worth more than $37 billion with Airbus, the European consortium, and none to Boeing, the other major maker.

This was a harsh, attention-getting message from China in response to Biden’s endless innuendos and baseless insults and a signal that China is ready to play hardball. All of Beijing’s past diplomacy seems to be misinterpreted by Antony Blinken et al as being soft. 

The Blinken team in the State Department seem to think they can cherry-pick issues to work with China on the one hand and otherwise castigate Beijing with a recitation of imagined violations of international rules. No more, says Beijing.

Boeing recently made a market projection that China’s future demand for passenger jetliners was 8,700 planes worth $1.5 trillion over the next 20 years. If the US is determined to decouple from China, Boeing faces a bleak future in China. 

China offers EU partnership

China’s other message is to the countries in the European Union, many of which are members of NATO. The Airbus order reaffirmed that China can be a major economic partner and poses no threat to the security of the EU.

Inflation in the EU is rapidly getting out of control because of the war in Ukraine and the US-imposed sanctions on Russia. If Biden thought he was driving a stake into the heart of Russia’s economy, he miscalculated. Putin turned around and pegged Russia’s energy exports to the ruble. Consequently, the value of the ruble against the euro has reached a seven-year high. 

The artificial shortage in world oil caused by the US sanctions on Russian oil has not hurt Russia. It makes money selling its oil to China, India and other buyers at higher prices. Concurrently, the US and UK as oil exporters are also making money because of the shortage they created. 

However, major nations in the EU, especially France, Germany and Italy, are energy importers and they are beginning to question the wisdom of following the US leadership, which seems to work in favor of the US and UK at the expense of the EU.

Such doubts were accentuated when Ukrainian President Volodymyr Zelensky recently announced that his country needs aid to the tune of $5 billion per month to survive and keep operating. On top of refugees, shortages of staples, and inflationary pressures, the EU leaders have to worry as to whether Uncle Sam will pick up the tab or pass it on to the EU.

The world is beginning to see the difference between currencies based on assets and the American dollar based on the “full faith and credit” of the US government, in other words, the Federal Reserve’s printing press.

Central banks of various countries are beginning to lighten their dollar holdings in favor of other reserve currencies, the most popular being China’s renminbi. According to the International Monetary Fund, the US dollar’s share of total global currency reserves has fallen to its lowest point in more than two decades.

To take advantage of the availability of Russian oil at favorable discount, India entered a rupee-to-ruble deal and get around paying in dollars. For the first time, India also bought coal from Russia with the Chinese renminbi.

BRICS as another pole

While the G7 and then the NATO summit meetings took place in Europe, it was China’s turn to host the BRICS summit, which it did virtually. At the 2022 summit, Beijing invited many non-member countries as observers. 

Formed in 2009, BRICS consists of Brazil, Russia, India, China and South Africa. It is not a military alliance but is meant to promote collaboration for peace, security and global economic development. Compared with the G7, BRICS has three times the population but only about 70% of the G7’s GDP.

At the 2022 summit, Argentina and Iran formally applied to join BRICS. Adjusted for purchasing parity, the GDP for BRICS+ would surpass the G7. And there is a proposal afoot to create a new global reserve currency based on a basket of BRICS+ currencies as an alternative to the US dollar.

Rather than going around the world collecting military allies and imposing sanctions on countries that do not wish to align with the US, China invites partners to collaborate on mutually beneficial basis.

Since it was initiated in 2013, China’s Belt and Road Initiative has launched more than 13,000 projects in 165 countries valued at nearly a trillion dollars. Most of the BRI projects have to do with upgrading badly needed infrastructure, which leads directly to a boost in the recipient country’s economy.

There is now a high-speed rail linkage from China through Central Asia to Moscow and on to Rotterdam on the Atlantic coast. Twenty-five out of 31 Latin American countries are participants in the BRI, as is most of Africa.

At the just-concluded Group of Twenty summit, the divide between the US-led Western bloc and China, Russia and the non-aligned members of the G20 became quite clear. The summit concluded without the usual group photo of smiling state leaders and no joint declarations expressing optimistic steps for the future.

The Biden administration and the US Congress remain convinced that the way to suppress China from making economic progress is to deny it access to American technology and knowhow.

As all nations know well from their own development history, among them Japan and the US, borrowing and copying from more advanced nations can only be a beginning. Unless they can build from there and innovate and originate their own breakthroughs, they will always be me-too laggards.

Every year, China graduates eight times as many students in STEM (science, technology, engineering and math) than the US. These human resources power developments in high technology. 

The more pressure the US exerts to stifle China’s advance, the more determined the Chinese will be to find their own technical advances and skirt around American roadblocks. In some fields, China has caught up with and even surpassed the US. 

China is already the world leader in electric vehicles and the battery technology for the EVs, in fifth-generation and the future 6G in telecommunications and quantum computing, just to name a few examples.

China’s latest aircraft carrier has an electromagnetic catapult system on par with the one on USS Gerald R Ford, the newest US carrier. China has demonstrated a hypersonic missile while US manufacturers are still tinkering with theirs. 

Despite the US-mounted trade war that “punished” Beijing with tariffs on imports, China has continued to expand exports and the trade surplus with the US has actually grown rather than lessened. The real impact was to raise the cost of living for the American public. 

The US has wasted a lot of energy and resources trying to suppress China’s rise. It hasn’t worked, and it won’t work in the future. With four times the population, China’s GDP exceeding that of the US is inevitable. If on the other hand the US should succeed in provoking a conflict with China, the Americans will rue that day, and most likely so will the world. 

Can US and China find common ground?

The only sensible course of action is to collaborate with China and find mutually beneficial outcomes. As Asia Times recently urged, “there is a wide field for potential cooperation that would benefit both countries and give the United States more room to back out of the stagflation trap in which it finds itself presently.”

On the sidelines of the G20 summit in Bali, Blinken held a five-hour conversation with Chinese Foreign Minister Wang Yi. The purpose was to pave the way for a future meeting between Biden and Chinese President Xi Jinping. 

The tone from Blinken was that US would like to restart a friendlier and more positive bilateral dialogue. China’s reply was that this is easy to do. To begin, all the US has to do is to recant all the lies, disavow the nasty rhetoric and stop blackening China.

Whether Blinken and Biden will see the wisdom of non-confrontation and choose win-win outcomes in place of zero-sum results remains a question. Maybe we’ll know more after the two leaders meet.

Dr George Koo retired from a global advisory services firm where he advised clients on their China strategies and business operations. Educated at MIT, Stevens Institute and Santa Clara University, he is the founder and former managing director of International Strategic Alliances. He is currently a board member of Freschfield’s, a novel green building platform. Follow him on Twitter @george_koo.