Escalating tensions between China and the United States suggest that the possibility of a new Cold War, both economically and technologically, is no longer just rhetoric but is becoming a reality. US Secretary of State Antony Blinken’s recent visit to China is unlikely to alleviate these tensions, as it was merely a short-term effort aimed at stabilizing bilateral relations before the US presidential election in November. The pessimistic outlook remains unchanged, and we could witness severe competition in the economic and technological spheres, disruption of technology collaboration, and even military confrontation.
Back in 2017, I predicted that the future China-US relationship would be characterized by an economic and technological Cold War. Today, what I termed as the “semi-Cold War” era has become a stark reality, albeit different from the military confrontation between the US and the Soviet Union. And my optimism in declaring that the future course of China-US relations would not follow the same path as the Cold War between the Soviet Union and the US might have been misplaced.
The coexistence of China and the US as great powers, each with its own distinct path to development, faces more challenges now than ever. There is a clear indication that the US has crossed the red line that Beijing has warned about. Before Blinken’s departure for China, the US Congressional Research Service released a report titled “Taiwan Defence and Military Issues” for Congress, revealing that 41 US military personnel were assigned to duty in Taiwan. This breach of the commitment made by the US in 1979 when the two countries normalized bilateral relations is a significant concern.
Furthermore, the US has deployed medium-range missiles in the Philippines for the first time since the Cold War, prompting China to accuse Washington of aggravating tensions. Military drills conducted by the US and the Philippines in the South China Sea, beyond the 12 nautical miles of territorial waters of the Philippine coast, have also contributed to the escalating situation.
Despite China’s defensive posture in handling China-US relations, recent developments are alarming. China intends to prevent hot spots in the Taiwan Strait and the South China Sea from derailing its relations with the US. Beijing has adopted a clear strategy in managing the complicated relations through its “Three Nos” policy: no decoupling, no confrontation, and no war, following the heated meeting in Alaska in March 2021 between the top diplomats from the two countries.
However, the current trend in China-US relations is on a path of continued deterioration, even in economic and trade aspects. The Chinese side accuses the US of not keeping its promises, and that the true intention of the US to decouple from China is evident through its actions.
The US has actively sought alternatives to China for its supply chain, promoting friend-shoring or nearshoring. This involves moving companies closer to preferred markets or friendly countries, where supply chains can be less susceptible to geopolitical tensions. Mexico, for example, has surpassed China as the US’ top trading partner and destination for foreign direct investment by US firms, according to the US Bureau of Economic Analysis. These efforts can be seen as a form of “semidecoupling”, where the two countries decouple when possible while still collaborating in necessary areas. The US-China decoupling is indeed costly and risky, but it is a reality.
The battle has now expanded to a new front. US Treasury Secretary Janet Yellen, who is viewed as dovish within the Biden administration, warned of China’s massive export wave of electric vehicles and solar panels during her visit to China in April. She even lectured China on the need for greater consumption within China’s borders and claimed that China’s production “overcapacity” was threatening competitors worldwide. However, the US itself is ramping up its plans to subsidize its clean energy industry with trillions of dollars. This will only heighten economic competition and inflame trade tensions, particularly in green industries where cooperation between the two countries is vital for addressing global warming.
The actions taken by the US have raised suspicions in Beijing about Washington’s intentions. First, the US has imposed barriers on importing Chinese products in the advanced manufacturing sector.
And second, it has taken steps to restrict China’s access to American high technology, competing for dominance in key technological sectors and impeding China’s progress in high-tech industries. According to a high-tech entrepreneur in Shenzhen, US investors have either sold or are in the process of selling their shares in China’s high-tech companies, such as advanced computer chips, quantum information technologies, and artificial intelligence.
The tech Cold War began in 2019 when the US placed Huawei on the Entity List, restricting its access to American suppliers. This was followed by the US’ chip war against China in 2022, where the US aimed to boost its own chip production while imposing sanctions to hinder China’s drive for self-sufficiency in this critical industry.
Escalating tensions and a focus on perceived threats have created a precarious situation where both sides prioritize security concerns over development and collaboration, potentially leading to a disaster for which the world is ill-prepared
The tech Cold War has intensified the geopolitical rivalry and escalated to new fronts. During Blinken’s visit to China, US President Joe Biden signed a bill that will result in the nationwide ban of TikTok unless it is sold to a non-Chinese company, intensifying the tech war against China. Now, DJI, the world’s largest drone camera maker, also faces the threat of a US ban. The US government has placed DJI on a list of companies “suspected” of having ties to the Chinese military, and its 2024 defense budget mentions the possibility of a ban.
The future trajectory of the tech Cold War remains uncertain, but the US crackdown on Chinese high-tech companies and its restriction of China’s access to cutting-edge technology will likely become more severe.
However, an even more concerning episode is evolving. Prior to Blinken’s visit to China, the US reportedly prepared to impose sanctions on certain Chinese banks and cut them off from the global financial system over “concerns” of their involvement in trade with Russia. If these sanctions are implemented, it could trigger a financial war with significant ripple effects on the global economy and US-China relations.
Currently, the Biden administration’s position appears relatively restrained, possibly influenced by concerns about the impact of policies on Biden’s reelection bid, despite their provocative demands and the threat of sanctions. However, it is important to note that the US policy toward China could become more hawkish, regardless of whether Biden or Trump wins the election. Anti-China sentiment prevails in the current US political climate, and the perception of China as a threat dominates US politics. Escalating tensions and a focus on perceived threats have created a precarious situation where both sides prioritize security concerns over development and collaboration, potentially leading to a disaster for which the world is ill-prepared.
The author is associate vice-president at the University of Hong Kong, and the founding director of HKU Institute for China Business.
The views do not necessarily reflect those of China Daily.
