Over the past year, China’s foreign policymakers have been scrambling to cope with growing friction with the U.S. How is it that differences over trade have ballooned to include a battle for global high-tech dominance, as reflected in the conflict over Chinese communications technology giant Huawei?
The perception that China is working hard to overtake the U.S. through any means possible is taking hold in Washington, including among members of Congress. This is leading to growing calls in the U.S. for the need to hold China in check across a range of areas, including technology related to national security. The confrontation between the two superpowers, often referred to as a “new cold war,” has grown into a tangled mess that will be difficult to straighten out.
Clearly, Beijing was too optimistic in its assessment of the situation. A year ago, Chinese officials were hesitant to use the term “trade war,” instead describing the developing tension between the two countries as little more than trade friction that could be resolved with relative ease. It was only after last summer, when Washington slapped retaliatory tariffs on Chinese imports, that it dawned on the leadership in Beijing how serious matters had become. The row has dealt a further blow to a Chinese economy that was already slowing.
The antagonism is rooted in structural factors, some of which are related to Chinese domestic politics. A year ago, Chinese paramount leader Xi Jinping was reappointed president under the newly amended constitution, which has abolished the traditional limit of two five-year terms. Xi also broke with the long-standing practice of choosing likely successors from among the younger generation and installing them in top leadership positions. Theoretically, Xi can remain head of the Chinese Communist Party, military and state for life.
China, operating under a longtime authoritarian regime, may very well become more powerful than the U.S. sooner or later, changing the world order. Alarm over this notion has spurred America into action, leaving Beijing no choice but to make sincere efforts to assuage those fears. The trade talks can play an important role in this respect.
Chinese Foreign Minister Wang Yi told a press conference that “China and the U.S. don’t have to be rivals,” calling for cooperation. But the Chinese side has few concrete strategies for making amends. Meanwhile, a U.S. undersecretary of commerce involved in the trade talks warned that any agreed-upon measures need to be reciprocal, fair and equal, apparently referring to a mechanism the U.S. side wants to create to ensure that agreements are executed. It is clear that a gulf still exists between the two sides.
A Chinese draft law on foreign investment has provisions meant to ensure fair treatment of foreign-owned enterprises and thereby facilitate economic reform and stable growth in China. Beijing is also preparing for massive purchases of American goods. While these efforts deserve some credit, it will take more than that to heal the rift.
Chinese policymakers will be making a strategic error if they devote their efforts to working out stopgap measures aimed at reaching deals at the current trade talks. For real progress to happen, they need to drastically overhaul their overall policies toward the U.S., including in the areas of diplomacy and national security. The two countries must avoid an escalation of a dangerous new cold war, which would chill the global economy. Both sides need to make compromises.