According to a recent Pew poll, 53% of Republicans consider China as an “enemy” as against 43% who see them as a “competitor”. Only 20% of Democrats see China as an enemy, as against a majority of 65% who see them as a “competitor.” But the jury is still out on how the US views China.
The Joe Biden administration says that it is in the process of formulating its China strategy. In the meantime, it continues to maintain the hardline stance of the Donald Trump administration. In fact, there is a great deal of pressure from the Republican Party to prevent any significant change of policy or any rollback in the penalties Trump’s team imposed in terms of tariffs and bans on exporting technology.
Pressure is now building up from a section of the Democrats as well. Last week, House of Representatives speaker Nancy Pelosi called for the US and world leaders to boycott the 2022 Winter Olympics. Many feel that she is reflecting the views of the Biden administration, which is keen on not getting outflanked by the Republicans on this issue.
Right now, the only area in which Congress seems to be adopting a bipartisan approach is China. Outcompeting China is an area in which both parties agree. Om April 20, Chuck Schumer, the Senate majority leader, unveiled the “Endless Frontier Act” aimed at promoting domestic critical technologies through basic research. This is co-sponsored by Republican Senator Todd Young. The anchor of this legislation is a $100 billion funding for the National Science Foundation to create a new technology directorate.
On April 21, the Senate Foreign Relations Committee chaired by Democrat Bob Menendez approved the Strategic Competition Act of 2021, which will channel more aid to Africa, Latin America to counter China’s financial aid to these countries, provide greater funding for US tech industries, strengthen the US International Development Finance Corporation to compete against Chinese institutions.
These two Bills are likely to be melded together to make for one comprehensive anti-China legislation, but the support that both Bills have been getting suggests that there will be a strong legislative push to the new US policy on China.
Michael D. Swaine, the well known American Sinologist, has called these moves a “de facto declaration of cold war on China by the US Congress”. Criticising what he says was the “demonisation” of China, he has called on the Congress and the Biden administration to take up “a more balanced, fact-based approach to China” that not only looks at the threats and challenges, but also the opportunities that China presents. More than anything else, he believes that such legislation could put off US allies and friends who will feel that the US is pushing for a “win or lose cold war with China”.
Decoupling cost the US too
Though the Trump administration shifted US policy from engagement to competition with China, there has been criticism that the Trump approach was confusing and incomplete. After all, in January 2020, the US and China signed a significant trade deal which only came apart on account of the stress generated in US-China relations because of the COVID-19 pandemic. Actually, the Trump “decoupling” cost the US some.
In a recent article, former US diplomat Chas Freeman noted that American farmers have lost most of their $24 billion Chinese market, US companies have had to cut profits and wages and raise prices for American consumers, and almost no jobs have been re-shored back to the US. By 2025, the US can expect job losses topping 320,000 and a GDP that is $1.6 trillion less than what it would have been otherwise because of its China restrictions.
A recent report of the Rhodium Group says that FDI between the US and China fell to $15.9 billion on account of the COVID-19 pandemic and the US-China tensions. Interestingly, completed Chinese FDI to the US showed a slight rise to $7.2 billion in 2020 from $6.3 billion in 2019. Chinese venture capital also showed a slight increase to $3.2 billion in 2020 from $2.3 billion in 2019. As far as the US is concerned, both its FDI and venture capital to China declined.
For the present, the Biden administration is maintaining the restrictive policies imposed in 2020, but a great deal depends on how the China issue is playing out domestically in the US. In early April, the US Department of Commerce added seven Chinese supercomputing companies to its Entity List. The Biden team has called for a more systematic and coordinated action with allies to screen investments from China, impose export controls and consider human rights issues. This could actually see more predictable restraints and some loosening up of investment and trade issues in non-sensitive areas.
So far, the Biden inclination has been to see China policy in terms of strategic competition with China. The joint statement following the visit of Japanese Prime Minister Yoshihide Suga to Washington DC in mid-April was important for their call for “peace and stability” in the Taiwan Straits, but also the decision to invest together in areas like 5G, AI, quantum computing, genomics and semiconductor supply chains.
The US also categorically assured the Japanese that the US-Japan Treaty of Mutual Cooperation and Security applied to the Senkaku islands, which the Chinese claim, and this guarantee includes the entire gamut of US capabilities, “including nuclear.”
But the big challenge could well be Taiwan, with American military leaders saying that they believe that Beijing could attempt a forcible take over of the island, sooner, rather than later. Though these views have been dismissed as alarmist, they do provide a flavour of the situation today.
China has itself to blame
In great measure, China itself is to blame for its predicament. Take the case of the Comprehensive Agreement on Investment (CAI) with Europe. This was agreed to at the end of 2020 despite the problems in Hong Kong and the criticism of Chinese actions in Xinjiang and done over US objections.
But the Chinese decision to sanction a number of European MPs and scholars in March 2021, has gotten the EU Parliament’s back up. The Chinese action was ostensibly in reaction to the European/American sanctions on a number of Xinjiang officials. But where the Europeans targeted relatively junior Xinjiang officials, the Chinese went for the jugular and sanctioned Reinhard Butikofer, a prominent member of the Greens Party and four other Members of European Parliament, 2 Dutch, 1 Belgian and one Lithuanian MPs and some well-known scholars and research institutes.
As a result of this, the European Parliament has suspended the process of ratifying the CAI. More trouble could be headed China’s way as polls suggest that the Greens could play an important role in the German government after the September elections. Observers say that there is a perceptible hardline shift in European views of China.
Tensions swirl around the Indo-Pacific region and it is up to responsible leadership in Washington and Beijing to ensure that they do not reach the point of confrontation and war. The fate of Hong Kong has served as a warning as to how things can change in the region. Taiwan has been facing increasing Chinese assertiveness and could compel the United States to take a stand, though as observers have noted, as of now the position remains ambiguous.
Manoj Joshi is a distinguished fellow, Observer Research Foundation, New Delhi.