Published: 14:27, May 17, 2024
The three-dimensional US battle
By Li Wei

Washington seeks to contain China through tariffs, curbs in technology and capital


After defining, in 2017, China as its primary strategic competitor, the United States launched a trade war against the Asian power the next year, starting a new round of major country competition. Since then, Sino-US competition has become the defining feature of the international landscape.

During the Barack Obama administration, the US carried out a series of actions to cope with the fallout of the global financial crisis and contain the rise of China, which were continued by the subsequent Donald Trump administration and intensified by the Joe Biden administration. After Biden took office, the US has launched three “wars “against China to hold back its industrial development and technological upgrading and to revive US manufacturing.

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The first is the tariff war. By raising the barriers for mid-to-lower end products from China to enter the US market, the US government has tried to undermine the price advantage of “made-in-China” products and make them less attractive to US consumers. In addition, the US has joined hands with its allies to take protectionist measures targeting China in a bid to grab the market share of Chinese products.

One prime example is the US’ crackdown on China’s telecommunications giant Huawei. Under the pretext of so-called national security concerns, the US teamed up with some of its allies to ban 5G equipment provided by Huawei, aiming to erode the Chinese firm’s market share or even shut its products completely out of Europe and the US.

The second is the technology war. The technology war is an escalated measure of the US to hobble the development of China’s advanced manufacturing and its industrial upgrading. The US’ tech war against China is being waged on two fronts. On the one hand, the US is trying to suppress China’s tech progress by placing Chinese high-tech companies on its “Entity List” for export controls; and on the other hand, it has erected barriers to Chinese companies’ investing in the US by tightening the review processes. The two-pronged approach is designed to prevent China from accessing cutting-edge technologies and pushing for Sino-US tech-decoupling.

The third is the financial war. Although the US has until now stopped short of starting a full-scale financial war against China, it has been seeking to prevent Chinese firms from acquiring US capital — first, by creating barriers for Chinese listings in the US stock exchanges; and second, by directly impeding US investment in China via the issuing of executive orders.

In short, the US has waged three wars against China to force a transfer of industry and supply chains and prevent China’s industrial upgrading, part of wider efforts to suppress the perceived rival and preserve the US’ global hegemony.

Looking ahead, the evolution of the international order will be to a large extent shaped by China-US competition, which will play out in three realms.

The first is diplomacy.

The Sino-US competition in the diplomatic field is mainly unfolding on three fronts. The first is the competition in the international system. The US’ dominance in the international system is reflected in its control over rules, personnel and policies. The Sino-US competition in the diplomatic field revolves around the fight over dominance in the international system, which exacerbates the contest in the international governance system.

The next front is the competition for market share. The size of their market is a key factor determining the competitiveness of enterprises. As the global trade system is paralyzed, both China and US will race to sign regional free trade agreements to expand their overseas markets.

The third is the competition for energy security. With the critical mineral resources used for clean energy production gaining increasing importance, the US is doubling down on diplomatic efforts to secure key raw minerals.

Overall, US diplomacy is based on its military alliances system, which is relatively exclusive and rigid. In contrast, China’s diplomacy is founded on a global network of partnerships that focus on cooperation, which is more open and flexible. In the future, the Sino-US competition in diplomacy will be fundamentally a fight between China’s network of partnerships and the US-led alliance system.

The second battlefield of China and US is in the realm of capital.

The US’ political system, plagued by party strife and political polarization in recent years, has impaired the nation’s taxation capacity and led to fiscal instability, as evidenced by the “fiscal cliff” repeatedly faced by the US government.

To make up for the fiscal deficit, the US government is forced to raise funds from the financial markets via issuances of treasury bonds. Financial hegemony allows Washington to draw capital from across the world, enjoying a steady stream of funding.

In comparison, China has a highly efficient and sophisticated taxation system, which enables the Chinese government to accumulate wealth at home. However, China’s financial system is different from that of the US. As a result, Chinese enterprises are unable to raise funds overseas on a massive scale. In this sense, the status of Hong Kong as an international financial center is crucial for the Sino-US competition in the capital realm.

The third field for Sino-US competition is technology, which is unfolding in two dimensions. One is competition in tech innovation and the other in tech application.

On the one hand, the US’ domestic tech innovation ecosystem has largely retained its vitality. The country is still a leader in global tech innovation. On the other hand, due to massive industrial transfers and the decline of its manufacturing sector, the US’ capacity for tech application and industrialization has been weakened.

The US is experiencing “deindustrialization” against the backdrop of economic globalization owing to the lack of tech application scenarios. Hence, the US’ tech innovation can be described as “innovation without industrial support”. This is why the country is promoting a modern industrial strategy centered on “friendshoring” and “reshoring”.

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Meanwhile, the US is trying to make up the deficiency in application scenarios and bolster its innovation capacity through international tech cooperation.

By comparison, China boasts a strong industrial foundation and a complete industrial ecosystem. Some Chinese companies have achieved significant results in seeking progressive tech innovation.

China’s active industry clusters also provide a robust support for its tech innovation. But on the other side of the coin, China is still lagging behind the US in basic science and in its appeal to global talents.

The Sino-US competition is set to be a long-term battle.

The author is deputy dean of the School of International Studies, professor of international relations and director of the Center for American Studies at Renmin University of China. The author contributed this article to China Watch, a think tank powered by China Daily. 

The views do not necessarily reflect those of China Daily.