“The most important issue for our nation and the world in the 21st century is the United States’ response to the global ambitions of the Chinese Communist Party.” US Attorney General William Barr unlocked a defining code to the current state of the world on July 17.
The United States wants to defeat the Chinese economy. It is up to China to rise above it. Judging from Barr’s message, if China wasn’t globally ambitious, the US would have lost the basis for such a response.
To be clear, China is globally ambitious. China wants to reach the “commanding heights of the global economy”, as evidenced by clear policy directions such as “Made in China 2025”, “AI Vision 2030”, the imminent launch of a sovereign digital currency and “China Standards 2035”. All this spells aspirations for superiority.
The US response to such global ambitions is neither an endorsement nor a position of neutrality but, rather, a position in which defeat of the competition is the aim. Barr’s speech was a clear demonstration of raw state power by the world’s incumbent hegemon.
Barr used the words “superior” once, “superpower” once, “replace” three times, “dominate” or “domination” four times, and “coup” twice in his speech. He described China as a “near-peer competitor”.
The complex relationship that defines this century is therefore reduced to a kindergarten level of clarity. China is not allowed to replace the US and “win the contest for the commanding heights of the global economy”. The economy may not be the be-all and end-all, but it is clearly the end goal of the current policies.
Let’s ignore other subjects for a moment and, instead, remember James Carville’s famous 1992 line, “it’s the economy, stupid”. This year, China will close roughly another 9 per cent of its GDP gap with the US, having already pulled within two-thirds of US GDP in 2019. Looking at a post Covid-19 world, China is on a more resilient path of economic ascension.
It is understandable that the world’s predominant economic power wants to win an economic war against China, but how? One way is for the US economy to rise faster than China’s. The other is to stifle China’s rise.
It is hard to see any major technological breakthrough on the horizon in the US that would induce a significant economic take-off. Until that happens, the second-best strategy for the US is to damage the Chinese economy.
Some of China’s hi-tech companies are under siege. TikTok and WeChat have been put on the White House 45-day banned list on August 6. Trump administration officials have also suggested that Chinese companies listed in the US should be delisted by January 2022 if they cannot comply with the Securities and Exchange Commission’s audit requirements.
Sifting through more than 70 years of the People’s Republic of China’s history, every period in which the Chinese economy has thrived has been accompanied by deeper liberal market reforms. Every major round of liberal market reform has unleashed enormous amounts of economic vitality.
Greater market liberalisation will therefore put China on a more robust economic growth track, pushing the nation towards the commanding heights of the global economy even faster than current projections.
The US, in principle, wants to see a more liberal China. In practice, though, it will benefit from an illiberal China by winning the economic war.
Ultimately, it is better to defeat an enemy without having to fight, rather than winning every battle, according to ancient wisdom. Thus, the most expedient way of winning for the US would be to derail the liberal market reform process in China.
The US is pointedly targeting some of the best Chinese technology companies, which are the very fruits of liberal market reforms over the past four decades. Rather than targeting the state-owned sector, which categorically represents Chinese state interests, the US has chosen to target the most vibrant parts of the private sector in China.
The destruction of the most dynamic, productive parts of the Chinese economy would leave China weakened. However, in this economic war, China is no longer an easy opponent.
The US will win if it can change Beijing’s mind on market reforms and economic liberalisation. By targeting the best of China’s private companies, a domestic voice that speaks the language of self-reliance and a self-sufficient domestic economy could become increasingly prominent. That would be the ideal situation for the US, because an economically closed China would only slow the nation’s rise.
The US will win without a fight if Beijing becomes inward-looking. China has experienced economic closure at various periods of its history. At no time has that served its interests well. The Chinese economy will continue to shine only if Beijing commits to greater economic openness and globalisation.
To me, “the most important issue” of the 21st century remains half asked and half answered by the US. The full picture may become apparent only with the US response to a global order in which China has already reached the top spot in global economic power.
Dr Shirley Ze Yu is a political economist, an Asia fellow at the Ash Centre for Democratic Governance and Innovation and a former Chinese national television (CCTV) news anchor