The Sino-US Fallout: China Strikes Back

30.08.2018

Chinese leaders seem to have been wondering whether the Trump Administration is a first-order threat to Beijing, the answer is now becoming quite clear. Once convinced of living in a zero-sum world, one’s strategic choices are becoming simpler, and they are now hardly disposed to make concessions on substantial issues to Washington, such as the Korea nuclear issue. 

For many decades, China had demonstrated little interest in multilateral relations, acquiring a reputation as “G-1” country. In the new century, China is gradually turning multilateral, but at the same moment, the United States is reverting back to unilateral positions. The neo-Jacksonian trend represented by Donald Trump has changed geopolitical configuration in Asia. China is always a convenient scapegoat for whatever ails America, but at this moment, the bilateral tie between the two countries is facing a major crisis unseen since the end of the Cold War. 

The United States-China relationship, at this particular juncture of history, is the world’s most important bilateral relationship. That relationship is vital for maintaining global order, for preventing the widespread proliferation of nuclear weapons and to continuing global economic growth. Yet, after a promising start at Mar-a-Lago, US-China relations have gone badly off the rails and now are teetering above the abyss. The real prospect of bloodshed in either the Taiwan Strait or the South China Sea continues to flare up, a trade war that threatens to destroy world's trading system has started and could have tragic consequences.

Chinese leaders seem to have been wondering whether the Trump Administration is a first-order threat to Beijing, the answer is now becoming quite clear. Once convinced of living in a zero-sum world, one’s strategic choices are becoming simpler, and they are now hardly disposed to make concessions on substantial issues to Washington, such as the Korea nuclear issue. Indeed, China will certainly strike back, because Xi Jinping cannot afford to appear weak under the US bully. And unfortunately for the United States, China's position in the trade dispute has turned out to be much tougher than many in Washington have assumed. 

Chinese strategists seem to have been expecting the US-China trade disputes for decades. Indeed, projects such as the “Belt and Road Initiative” were designed as a strategic hedge, preparing for the United States to isolate China. Beijing has had a few successes already – though it is too early to predict definitive results. 

At the same time, moreover, Chinese leaders have been trying to “transform” the Chinese economy from export-led growth model to domestic demand-driven economy and services. Exports now make up less than 20 percent of Chinese GDP, compared with some 36 percent a decade ago. These broader trends suggest that Beijing will have more cards up in its sleeve in the trade war and will not yield to American demands anytime soon. China’s economy could even benefit from a trade war as it may accelerate the trends toward this transformation. As an authoritarian regime holding world’s largest hard currency cash reserves, Beijing is better positioned to survive a financial crisis than the United States. 

The real puzzle for Chinese leadership is whether the neo-Jacksonian trend in the US can last. As Trump is facing increasingly more personal crises. China has to start thinking of post-Trump policies that can somehow put the relationship back on track.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.

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