The China Conundrum

It seems that Steve Bannon has carried the day. The China hawk has been claiming a civilizational struggle that would pit the US against China is only a matter of time. Now the rumblings presaging this brawl are shaking after the collapse of US-China trade talks, which during normal times would have meant failure to lower tariffs. In contrast, the failure of these talks has led to trade barriers going up where before there were none. The hawks pushing the agenda likewise believe China is a strategic competitor and are bent on foiling what they see to be its high-tech power play, “Made in China 2025.” Made in China 2025 is a set of goals China’s central party has set for the country to meet by 2025. These goals include advances in quantum computing, AI, semiconductors, communication networks, and other high-tech manufacturing goods that the party views as central to China’s national interest. Publishing the goals was a mistake, in retrospect. Publishing “Made in China 2025” gave national security hawks an excuse to consider where the US’s power comes from, realize it comes from technological advantages, and see clearly that China stands to likewise gain a whole host of advantages if it were to succeed in its 2025 goals. Moreover, China’s advantages would challenge American hegemony.

Whereas previous administrations have tip-toed around China because the crowds of wealthy insiders they were surrounded by benefited from incorporating China into international trade networks, Trump, like the mob boss he aspires to be, recognizes that the up-and-coming gangster in the other neighborhood might one day challenge his leadership. In the theater of international politics where “the strong do what they can, and the weak suffer what they must” (Thucydides), he has decent instincts at least. It remains an open question whether he has the foresight to envision a successful long-term strategy for dealing with a country that will step-by-step appear as a genuine competitor to the US, or even the staying power to execute whatever his strategy is now. China’s claim that it should be treated more like a developing country than a developed country crumbles under scrutiny, as the world’s second-largest economy it contains at least a few Germanys. This being the case, the future US-China relationship should be based on equal rules; if a Chinese company wants to do business with US entities, it should be allowed to do so under whatever rules China reciprocates to the US. Since there are a whole slew of rules restricting what foreign businesses can do in China, the US should have similar restricting rules. Washington agrees, at least for now.

The larger question is what the long-term relationship between the US and China will look like. As of now, the forecast is cloudy. No one has proposed a longer-term relationship that many people are getting behind. We’re not the first country to deal with a potentially eclipsing power (see Graham Allison’s “Thucydides’ Trap”). As the current hegemon, we have choices to make. For example, more than a century ago the UK dealt with the rise of the US differently than how it dealt with the rise of the Germany Reich. In each case, the UK had a choice–compete or co-opt. It chose the latter when it came to the US and has benefited greatly from its century-long alliance. In contrast, it chose to compete against the Prussian state, vowing to German Empire’s naval buildup ship for ship. The US now faces a similar choice with China, shall it co-opt or shall it compete? The main argument for co-opt, namely that as China became richer it would become more “like us,” have not been supported by much of the available evidence. If anything, China’s economic success has solidified support for an authoritarian and Orwellian state. Perhaps this 21st century fallacy will go the way of the 20th century’s belief that “when goods stop crossing borders, soldiers will.” Integrated economies were thought to be a vaccine against a general European war. The Great War smashed that illusion, and cracks have long appeared in our fantasy that capitalism leads to democracy and human rights.