Is Beijing bracing to crash into a Western wall?

At its annual National People’s Congress and the Chinese People’s Political Consultative Conference, Beijing presented all sorts of lofty concepts aimed at propelling China’s faltering economy to new heights. However, in doing so, President Xi Jinping and consorts will find a foreign barrier in their path.

For a long time, the West gave China every opportunity to advance economically and politically. America and Europe assumed that Chinese citizens would naturally demand and gain more freedom once their prosperity and contacts with the West increased.

The expectation was that, by being incorporated into the liberal world order, China would also be infected with the democratic “virus.” This seemed to be the case initially, but from the time Xi succeeded Hu Jintao, Beijing has tightened the reins. Tentative democratic experiments disappeared, and the Chinese Communist Party centralized power. 

In the words of Peter E. Harrell in Foreign Affairs “China’s economic transformation was making Beijing more, not less, authoritarian.”

It is a bit of a chicken-and-egg story, of course, but the U.S. started taking a tougher line against China, particularly from Obama’s second term onwards, by gradually deploying economic weapons more often. For example, Obama threatened sanctions over intellectual property theft, and under Trump, America went significantly further by starting a trade war. Biden subsequently continued Trump’s line against China; some concessions were made here and there, but in other areas, Biden went even further than Trump.

Rather than a decoupling strategy, the U.S. has opted for a three-pronged de-risking approach: increased investment in strategic importance at home, intensified controls on exports of services and goods that could make China (and other) opponents stronger against America and stricter screening of foreign investors.

Also, the U.S. is no longer beating around the bush in terms of its objectives vis-à-vis China. The ambassador to China recently said, “They want to become and overtake the United States as the dominant country globally. And we don’t want that to happen. We don’t want to live in a world where the Chinese are the dominant country.” 

America will never say to China, “Go ahead, come sit next to us on the throne and we will accept each other’s differences and make the best of it.” Conversely, China will — even if it says it doesn’t — strive to ultimately knock America off its throne if it sees the opportunity.

The past offers little reassurance. Harvard professor Graham Allison detailed how often emerging and incumbent powers went to war with each other over the past five centuries. In 12 of the 16 cases studied by Allison in which a newcomer challenged the old guard, the parties clashed.

Political scientist Michael Beckley pointed out that the more than two dozen rivalries between great powers over the last two centuries ended only because one of the two could no longer continue the fight or because the two united against a common enemy.

Researchers at Rand reached similar conclusions: Since 1816, there have been 27 instances of rivalry between two great powers, of which 19 ended in war. In other cases, the two found each other in their fight against another or the battle turned into the Cold War.

So, the historical data offer little hope that Beijing and Washington will put aside their disagreements. What they consider their vital interests clash too much and too hard and are firmly entrenched in their respective political systems, geographical positions and historical experiences.

Although tensions have eased somewhat, the differences of opinion seem too vast to reach a lasting détente:

  • The biggest pain points are mostly zero-sum issues: Taiwan can remain independent or be governed by Beijing; the East and South China Seas can remain freely accessible international waters or become Chinese waters, et cetera.
  • Both states favor an entirely different design of the international system, as is evident in the struggle for control within old Bretton Woods institutions and the alternatives Beijing is setting up for these institutions.
  • China’s attitude toward the outside world is largely determined by two traumatic experiences. This, first of all, concerns “The Century of Humiliation” due to the aggression of foreign countries interfering in China from 1839 to 1949. The second trauma was the collapse of the Soviet Union, which made Beijing wary of the risk of the party losing control. As China shares land borders with 14 countries — by no means all friends — Beijing seeks substantial security buffers, which explains its territorial conflicts with India and its desire to dominate in the East and South China Seas. Ninety percent of China’s trade and most of the oil it imports is transported through those waters.

Not just America but many other countries have become more suspicious of China. For example, the European Union and its member states have become significantly more stringent in approving Chinese investments, and Western companies are becoming more cautious about production in, and dependence on, China.

The world is, and will be, less of an immense economic playground for China. We see this, for example, in China’s collapsed foreign direct investment, which is now at levels seen in the 1990s.

In all likelihood, China will increasingly struggle to boost its economy through additional exports and may struggle with technological development, as Western countries and companies are less inclined to cooperate in this area.

However, the issue is not as clear-cut as it may seem:

  • The decline in foreign direct investment is largely due to foreign companies repatriating profits they had parked in China because domestic interest rates are more appealing. Furthermore, China is further along in its development from an emerging market to an industrialized market. At this stage, it typically relies less on foreign investment and expertise.
  •  It will prove extremely difficult for the West to even partially decouple from China. The country currently accounts for 60 percent of electric vehicle sales worldwide, leads the wind and solar energy industry, is by far the largest supplier of refined rare metals and accounts for half of all industrial robots installed worldwide.
  • Although two-thirds of European CEOs have plans to reform their supply chains in the next few years, only two percent plan to pull out of China.
  • The now well-known Belt and Road Initiative already includes over 140 countries. Furthermore, China has bilateral or regional free trade agreements with 28 countries that combined account for 40 percent of China’s exports, and it is in negotiations for 10 more agreements. The relevant countries combined account for just under five percent of China’s exports. China’s exports to its free trade agreement network are currently higher than the combined worldwide exports of the Netherlands and Japan (number four and five in the exporter rankings). One last fact illustrates China’s trade position: China’s trade with Belt and Road countries is larger than that with the U.S., Europe and Japan combined. In short, should the already more or less crippled World Trade Organization collapse altogether, China will have a sound backstop strategy in place.   
  • The past shows that countries are willing to go very far in their willingness to trade with opponents. The United Kingdom was even willing to do business with Germany during World War I. 

China will not have it any easier in a world where mistrust and hostility towards Beijing have increased greatly. However, this should not be exaggerated because, in many respects, China has a very strong position in relation to the rest of the world that won’t change from one day to the next.

Andy Langenkamp is a senior political analyst at ECR Research and ICC Consultants.

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