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• US and China: edging towards a new type of cold war?

Matt Pottinger, a senior White House official, delivered a searing message to China this week in a video later posted on YouTube. Speaking in pitch-perfect Mandarin, he praised Chinese historical figures who supported democratic ideals and helped in the 1940s to write the Universal Declaration of Human Rights, which remains a bedrock for liberal values today.  “The cliché that Chinese people cannot be trusted with democracy was . . . the most unpatriotic idea of all,” said Mr Pottinger, the US deputy national security adviser. He lauded the Chinese who keep the flame of liberty alive today, including 20 Catholic priests who “refused to subordinate God to the party and the millions of Hong Kong citizens who peacefully demonstrated for the rule of law last year”. Beijing’s reaction was withering. “Mr Pottinger thinks that he really understands China but from this speech it seems that he does not really understand China . . . because he holds a virulent bias against China,” said Hua Chunying, a spokesperson for China’s foreign ministry. It might be tempting to see this latest round of US-China sparring as short-term opportunism. Facing historic job losses and behind in the polls, US president Donald Trump has moved to blame China for his administration’s struggles in responding to coronavirus. 

“This is worse than Pearl Harbor. This is worse than the World Trade Center. There’s never been an attack like this,” Mr Trump said of the pandemic this week. “It could have been stopped in China. It should have been stopped right at the source, and it wasn’t.” He has claimed that the virus came from a Wuhan lab.  For Beijing pointed barbs at the US are part of a broader push to shift the narrative away from the cover-up in the early weeks of the outbreak. The announcement on Thursday that trade talks between the two countries were still on track was also a reminder that the substance of superpower relations can often differ from the rhetoric. Yet this week’s bad-tempered spat was just one of many between Washington and Beijing in recent months that highlight a crucial new reality. After more than 40 years of “engagement” between the US and China, the two superpowers have been unable to bridge the ideological gulf that separates them. A global pandemic might have served as an occasion for more co-operation: instead, it has only made the divide more obvious. The two countries now stand on the brink of what Jean-Pierre Cabestan, a political science professor at the Hong Kong Baptist University, calls a “new type of cold war” — a phrase that several analysts are beginning to use. While this new era of geopolitical rivalry may differ in important respects from the US-Soviet Union tensions between 1947 and 1991, irreconcilable differences in political values and strategic ambitions are eviscerating trust.

Both the pace at which the global economy recovers from the pandemic and the shape of globalisation that survives the crisis will be determined in part by the growing competition between Washington and Beijing. “The level of trust between China and the US is at its lowest point since diplomatic ties were first established in 1979,” says Wang Huiyao, president of the Center for China and Globalization, a non-government think-tank in Beijing. Military conflict was not likely and ties could still be repaired if wise actions were taken. “But the risk is that the boom years of globalisation will be over and we might see the global system breaking into two parts,” he says. “That would greatly slow down global growth and developing countries would have to side with one of the two camps.” In truth, the deterioration in US-China ties began long before the pandemic and even before the Trump presidency.

Evan Medeiros, formerly the top Asia adviser at the US National Security Council during the administration of Barack Obama, says that a fundamental shift in the relationship has taken place. “American interests now diverge [from China’s] more than they converge on a broad set of issues and the areas where we could potentially co-operate are shrinking,” he says. Chen Zhiwu, a finance professor at the University of Hong Kong, says China’s return towards communist orthodoxies since Xi Jinping became president in 2013 has had a crucial impact. “The root cause [in deteriorating relations] is the fundamental difference in ideology between the US and China,” he argues. “Between 1978 and 2012, the Communist party put aside its communist roots and focused on developing economic strength. Once China succeeded economically, the CCP went back to refocus on its original intentions [of building socialism].”

China’s ties with the US for most of the past 40 years have been founded on an inherently unstable equation. Each side was willing to play down ideological differences and strategic tensions in order to benefit from economic co-operation. For decades, this bargain delivered impressive commercial gains; China’s annual gross domestic product expansion has averaged just over 9 per cent since 1989, making it the prime locomotive for global growth. The levels of commercial interdependence that flowed from this growth provided the main glue in the relationship. Tens of thousands of US companies set up business in China and bilateral trade last year amounted to $541bn. US carmakers, such as GM, sell more cars in China now than they do in the US. About 370,000 Chinese students study in America, including many offspring of Beijing’s political elite. But as China’s economy grew, so did its ambitions. It showed progressively less willingness to accept US global leadership and began to carve out geographical spheres of influence.

One critical breach of trust came after Mr Xi told Mr Obama in 2015 that China would not build military fortifications on several artificial islands in the South China Sea, Asia’s maritime thoroughfare. But just over a year later, satellite photographs showed that Mr Xi had lied; large anti-aircraft guns and other weapons systems had been deployed on the islands. Another trigger behind hardening US official attitudes was the rounding up of the US spy network in China starting in 2010, according to former US officials, who declined to be identified. At least 30 spies are reported to have been executed in the sweep, leaving US officials “shell shocked” by the accuracy of Chinese counter-intelligence. The Chinese have been heavily critical of US military actions in the Middle East, while Americans are wary of China’s power projection in the Indian Ocean, Africa and elsewhere, partly through its Belt and Road Initiative. Many in Beijing blame the tensions on the insecurities of a superpower in decline: in Washington, they fear the overconfidence of a great power on the rise.

American reaction--

All this has helped create a bipartisan consensus in Washington towards getting tough with China that is now extending to the broader public. A Pew Research Center survey in March found 66 per cent of Americans now have an unfavourable view of China, up nearly 20 percentage points since the start of the Trump administration and the most negative rating since the survey started in 2005. More than 60 per cent saw China’s power and influence as a “major threat”, expressing particular concern over cyber attacks and pollution.

While the US-China commercial relationship provided ballast to the relationship for many years, corporate opinion towards China has also turned more negative as a result of claims of intellectual property theft. This in turn has helped foment decisions by Washington to impose tariffs on a range of Chinese goods, triggering a 20-month trade war that was put on hold in January with a truce deal that remains extremely fragile. In one indication of the speed at which the US-China relationship is changing, the Rhodium Group, a New York-based consultancy, estimates that total Chinese investment into the US fell to $5bn last year, down from a recent peak of $45bn in 2016, when Chinese companies were much more free to acquire US counterparts. Joe Biden, the presumptive Democratic challenger for the White House, might avoid the confrontational language of his rival, but analysts say both candidates are likely to compete to be toughest on China as they approach November’s election. In a sign of further potential stress, the Trump administration and lawmakers on Capitol Hill have been considering other moves against China, including more stringent export controls, curbs on investment flows and limits on integrated supply chains between the two countries — all in the midst of a deep global recession. Mr Trump had also threatened to “terminate” the January trade deal with China, which could lead to a new flare-up in tariffs, because of scepticism over China’s willingness to honour its pledge to buy billions of dollars of American goods.  “If we hadn’t taken the gloves off before, we both certainly have now,” says Bonnie Glaser, a China expert at the Center for Strategic and International Studies, a Washington-based think-tank, of this week’s disputes. 

No decoupling--

Whether or not such measures materialise will probably depend on the interplay between China hardliners and moderates within the administration, pressure from the business community, and Mr Trump’s own political calculations heading into his re-election campaign. There were signs on Thursday that the trade pact remained on track. Robert Lighthizer, the US trade representative, and Steven Mnuchin, the Treasury secretary, held a conference call with Liu He, China’s vice-premier, on Thursday night to discuss the implementation of the “phase one” agreement. “Both sides agreed that good progress is being made . . . and fully expect to meet their obligations under the agreement in a timely manner,” the USTR’s office and Treasury said in a joint statement. Mr Cabestan says that even if the relationship comes to resemble elements of the cold war, it will be a much less drastic division than during the days of the Soviet Union. He says pressure from American companies — particularly in industries such as semiconductors that depend on Chinese demand — will not allow anything close to a complete “decoupling” of supply chains. But even if this aspect of US-China ties can be stabilised, some observers predict continued tension, with nationalist sentiment and recession enabling hardline positions in both countries. “It will be extremely hard to anchor the deteriorating relationship again in this maelstrom,” says Mikko Huotari, executive director at Merics, a Berlin-based think-tank on China. “Strategic competition will remain the dominant paradigm. The question is whether it tilts toward permanent and all-out hostility.