- The question is not when or whether the US and China will decouple. Decoupling has already begun, and the questions now are how deep it will go and how smoothly it will be carried out.
- As Beijing has flexed its muscles in Asia and around the world, the US – along with much of the West – has stopped trusting Chinese leadership to act in good faith. Once participants in China’s rise, Western nations now see it as adversarial.
- “Decoupling is not a monolith,” one expert said. “You can have decoupling of manufacturing and tech but not trade in general.”
- This is a competition. And Americans have the choice to retreat into fear and isolation or to meet it with renewed energy, engaging our allies. It is a choice between rejuvenation and decline.
- This is an opinion column. The thoughts expressed are those of the author.
- Visit Business Insider’s homepage for more stories.
The United States and China are breaking up. It does not matter whether a Republican or a Democrat occupies the White House.
Though the two world powers have spent years trying to make a mutually beneficial relationship work, trust has disappeared, making cooperation untenable. Now the two sides are on course to restructure their relationship â€” not a total divorce, but an uncomfortable period of distancing in which new boundaries are created.
And new boundaries in this relationship mean new boundaries for the world.
The US and China are decoupling â€” a term used by experts to suggest an economic, diplomatic, and technological split between the two countries. It is not a question of “if” or “when.” It is happening now.
So the real questions looming over the future of the US and China are how deep this rift will be and how messy of a transition we can expect before a new relationship comes to fruition.
Some issues, like climate change, could bring the two powers together on the world stage. In other areas, especially technology, cooperation will no longer be possible.
For China this antagonism marks the end of an era in which the Western world was fully cooperating with its growth project. It will now face more pushback in its quest to become the world’s most dominant power.
For the US this is the beginning of a competition. The government has been slow to reorient itself to the reality of China’s rise under President Xi Jinping, but now we must begin a new American project in terms of defence, intelligence, and diplomacy.
There are different ways to engage this challenge. If America meets it with fear and faces China alone, the conflict has the power to push the country into decline. If the US marshals the strength of its allies and meets China with a strength that can be built only at home, it has the power to reinvigorate us.
Either way, there is no going back.
A people crisis
There is no greater illustration of the potential depth of this rift than the US and China’s recent controversy over the most basic (but crucial) thing two nations can exchange: their people.
Over the summer the FBI charged four Chinese researchers with visa fraud, alleging they lied on visa applications and were still active members of China’s People’s Liberation Army while researching at universities across the US, including Stanford, Duke, and Indiana. In a release announcing the arrests, the Department of Justice said the researchers were trying to “take advantage of the United States and the American people.”
These do not seem to have been incredibly canny spies, according to government documents. One person allegedly cracked under questioning from Customs and Border Protection. Another allegedly tried to delete documents from hard drives the government later found. One was forced to take refuge from US authorities in the Chinese Consulate in San Francisco.
According to the DOJ, all of these people had plans to take what they learned back to China and perhaps never return to the US. One researcher was even told to make a note of the layout of the laboratory where they worked so researchers in China could build a replica, according to the FBI documents. All of these people allegedly had similar missions.
Now that these researchers have been arrested, China, of course, would like its people returned home. The US would like to keep them for prosecution. Even under cooperative circumstances this would be a complicated diplomatic situation, and the US and China are far from cooperative circumstances.
According to recent reports, China over the summer tried to press the US toward its position by warning that unless its citizens were returned, US citizens might no longer be safe in China. In September the US State Department issued a travel advisory, alerting Americans intending to travel to China that they might be targeted so local authorities could “gain bargaining leverage over foreign governments.” If China’s moves sound like a North Korea-style rogue-state threat, that is because they are.
But this was also not the first time we’ve seen Beijing use these sorts of threats recently. In 2018, China detained two Canadians in retaliation for Canada’s arrest of Meng Wanzhou, the CFO of the Chinese tech giant Huawei. Adding to the complexity, the Canadians arrested Meng only because they were complying with a US extradition request. The US was seeking Meng for an investigation into Huawei that ultimately resulted in formal accusations of trade theft and lying about doing business with Iran and North Korea in violation of US sanctions.
As for the two Canadians sitting in jail in China â€” the former diplomat Michael Kovrig and the businessman Michael Spavor â€” they have been charged with espionage but have not been able to contact the Canadian Consulate or any attorneys.
You only get to a people problem like the one the US and China have after a great deal of distrust has built up. Last year China passed security legislation that has effectively ended democracy in Hong Kong, bringing the former British territory under its political control 27 years earlier than it had said it would. That followed sickening reports of cultural genocide in the Chinese province of Xinjiang, where the Chinese Communist Party is holding Muslim minorities in concentration camps. And then, of course, came Beijing’s mishandling of the novel coronavirus, which has unleashed poverty, suffering, and death around the world on a massive scale.
China’s decisions have triggered a major shift in perception. The West no longer thinks capitalism will naturally turn China into a democratic, open society. And in the US, a distaste for Beijing under Xi is seemingly the only thing Republicans and Democrats can agree on. Their constituents share that distaste. A survey conducted over the summer by Pew Research Centre found that 77% of Americans did not trust Xi to act in good faith.
As so often happens when relationships are in crisis and boundaries must be redrawn, the US is starting to question whether it ever truly understood China’s intentions. From the US perspective, China â€” especially under Xi â€” has been trying to enjoy the prosperity and respect of running an open, democratic society while operating like a closed, authoritarian society.
“The root cause of the current tensions in the relationship is China’s longstanding strategy of only selectively ‘coupling’ with the United States and systematically controlling the access of Americans to Chinese society,” Terry Branstad, then the US ambassador to China, wrote in September, about a month before he stepped down from his post.
If selective coupling defined China’s opening to the US, selective decoupling will most assuredly define its closing. This is the new US-China relationship, and it is terrible.
Meet the new China, same as the old China
From China’s perspective, the West â€” especially the US â€” is standing in the way of its destiny. China is determined to become a superpower that produces modern technology envied around the world. And the ruling Chinese Communist Party has already laid out the plans.
By 2025 the country is supposed to be a leader in global technological development, by 2035 a leader in setting technical standards. By 2049, the CCP wants the country to have a “world class” military in the form of an expanded People’s Liberation Army.
But Beijing is not perfect, and even the best laid plans are thrown off course. This makes it more useful to understand China not by looking at its future, but its past.
The history of China’s relationship with the world is one of opening and closing. It is a history of accepting outside capital and culture and then (sometimes violently) rejecting it. This is a cycle that goes back hundreds of years before President Richard Nixon’s opening of China in the 1970s â€” the time when China forcefully reentered the American economic and geopolitical consciousness.
This cycle of opening and closing also corresponds with China’s power. History has shown that the country gains influence when it opens and loses that influence when it closes. The geographer Jared Diamond laid out this cycle of power in his seminal work “Guns Germs and Steel.” Diamond argued that China’s decline started in the 15th century, when a power struggle between two imperial factions resulted in the self-destruction of its powerful navy. The country then turned inward, ceding power to the outward-moving Western world, which was colonising the Americas.
This opening-and-closing cycle has also deeply influenced the US-China relationship. While the US was opening up to the world at the turn of the last century, China was chafing under the aggression and influence of the West. In 1881, the Qing dynasty ended a nine-year educational mission to the US by calling its students home. It was afraid the students were turning into “foreign ghosts,” becoming too Americanized. This was not lost on the Americans. At about the same time, The New York Times wrote: “China cannot borrow our learning, our science, our material forms of industry, without importing the virus of political rebellion.” This should sound familiar.
We’ve even seen the two countries experience a violent and hostile breakup before. In 1900, while Vice President Teddy Roosevelt was dreaming of America as a global power, China was dealing with the Boxer Rebellion â€” a violent movement to kick out foreigners that resulted in the armies of eight countries invading Beijing. Roosevelt, who would be president by the time the rebellion was put down, referred to the Chinese as “poor trembling rabbits.”
It was a ridiculous statement. Beijing had been overwhelmed with force, and wanted to be free of Western influence. Plus, while Americans like Secretary of State John Jay thought they did China “a great service” by negotiating a treaty to keep China open to the West, China was very aware that fear and racism were keeping its people out of the US. The Chinese Exclusion Act, which had passed in 1882, was strengthened in 1902.
In 1905, when Alice Roosevelt, the president’s daughter, went to China with US Secretary of War William Howard Taft, she found the city of Guangzhou covered in posters mocking her. In 22 years China’s civil war would begin, the Communists would win, and Mao Zedong would shutter China to most of the planet.
Xi, the most powerful leader China has seen since Mao, and the other top brass in the Chinese Communist Party are aware of this history â€” both with the world and the with US in particular. They know that for China to gain power and wealth it must remain open to the world in some measure, but what the world is coming to understand is that this new ploy at openness â€” while necessary â€” comes with limits and tensions.
The Chinese economy is the second-largest on the planet, but it is also an economy that is not self-sufficient. To become a self-reliant economic engine, Beijing has been trying to invest in an economy of the future. Those investments have begun to pay off, but the transformation is not yet complete.
Despite the country’s population of 1.3 billion, household consumption â€” that is, the value of all the goods and services purchased by people in a country â€” in China is only about 40% of gross domestic product. By comparison, household consumption makes up 70% of US GDP. That means despite the country’s size, its people don’t have that much purchasing power compared with other advanced economies. And even though China’s private sector contributes more to GDP growth, the biggest companies in the country are still owned (or quasi-owned) by the government.
This means China’s economy is still powered mostly by its role as a factory to the world. It also still has millions of people to lift out of poverty. And it is still in the midst of a debt hangover that accumulated following the 2009 financial crisis â€” a particularly troublesome problem for Beijing.
Instead of suffering through the global financial crisis in 2009, China’s banks started handing out credit freehandedly, and that debt is still a drag on the country’s financial system. Last year the country experienced a mini banking crisis, which it was able to bring under control by taking aggressive action.
To bring rural China into the 21st century, to leapfrog over all this debt, to develop cutting-edge technology, and to become an unstoppable world power, China needs significant economic growth. This means the country cannot close off completely as it did in the past, because it is dependent on the outside world for survival.
So this time Beijing is trying a kind of quasi-closing by creating a sphere of economic and political influence all to its own, one that will not suffer any criticism from outsiders for any reason â€” not human-rights abuses, totalitarianism, or theft. For a long time the Western world was a willing participant in Beijing’s massive economic project, but Xi’s moves to bolster this sphere of influence have complicated that picture. The Western world does not trust China, and without trust business is simply not the same.
Where we part
A former US diplomat who spent their career in East Asia told me the West had tried to make it clear to China that the problem wasn’t that it was gaining power; it’s how it was doing it. But Beijing has not received this message, or simply doesn’t believe it. We know that because of the “wolf warriors.”
Under Xi, China’s diplomats have engaged in something called wolf-warrior diplomacy (a reference to a popular Chinese action-movie franchise). It is a hyperaggressive, jingoistic style of diplomacy that has turned off other countries. For example, China’s wolf warriors have accused Canada of white supremacy, and in April China’s embassy in France published a false story saying French workers at nursing homes were abandoning their posts during the pandemic. In a briefing with the Australian government this month, a Chinese official handed over a list of 14 grievances including negative reporting about China in Australia’s independent media.
“China is angry. If you make China the enemy, China will be the enemy,” the official said.
This is not how you win friends and influence people. It’s how you close your economy and antagonize the world.
The US has been most aggressive about cutting China out of its economy, and not just by putting tariffs on Chinese goods. The real action has been in technology, where the US has started reviewing business deals with Chinese participants, created a blacklist of companies subject to US export restrictions, and required US companies to get a licence to do business with key Chinese tech companies like Semiconductor Manufacturing International Corporation, China’s most advanced manufacturer of computer chips.
Washington is also set to pass legislation that would bar Chinese companies from listing on US stock exchanges if they fail to submit to the US Public Accounting Oversight Board’s audits for three years in a row.
“The decoupling of the tech world is creating a new reality for China in which it has no choice to begin contingency planning for its own technology,” Lee Miller, the founder of China Beige Book, an economic surveyor, told me, adding that the US and the world had “a stranglehold on China’s ability to progress in certain next-gen technology because they create the inputs, and what Beijing is realising now is that they can’t have these vulnerabilities any longer.”
Do not expect this to change much from a Trump administration to a Biden administration. Yes, President Donald Trump’s team has acknowledged it is trying to go hard on China in the economic and technological spaces before President-elect Joe Biden takes office, seeking to “box his team in” on a range of issues such as auditing Chinese companies and US investment in Chinese companies with ties to the Chinese military.
But there is actually little evidence to suggest Biden and his team have strong feelings against these policies. For example, Biden has said he’s not going to remove the tariffs the Trump administration put on China right away and is also touting an “America First” economy. Biden’s disagreements with the Trump administration are less about what it has done with China and more about the toothless, haphazard ways it has done it.
In the face of these stricter rules from the US, China maintains that it is attacking only when it is attacked. Beijing is adamant the country is a faithful adherent to international laws and norms.
In a recent talk with the Brookings Institution, Robert D. Williams, the executive director of the Paul Tsai China Centre at Yale Law School, described China’s approach to international law as “selective revisionism.”
“Beijing wishes to be seen by the international community as being in support of international law,” Williams said. There are “reputational incentives” for it to do so, he added.
Chief among those incentives is that countries do more business with countries they trust. Beijing knows that business could suffer as international trust in China dissipates. Given this grim prospect, Xi has become even more adamant over the past few weeks about reviving the Mao-era principle that China must be “self-reliant,” and the Chinese government is pushing an economic concept called “dual circulation.”
Dual circulation essentially means China will continue to push for economic growth through investment and activity with the outside world but will also emphasise trying to build up the Chinese consumer at home. This has always been a goal, but the timing of this emphasis is also in part a reaction to a world less willing to play ball with Beijing.
This shift to an uncooperative mindset with China isn’t necessarily something that happens all at once, though. It’s not as if a curtain will fall one morning and the West’s relationship with China will be wildly changed. These things take time.
For example, Mixin Pei, a professor of political science at Claremont McKenna College, cautioned me not to think that the world’s muted response to China’s passage of the Hong Kong security law means the country would not face repercussions for that decision. It was an act that massively eroded trust in China’s ability to act in good faith, he said, and that lack of trust will factor into thousands of decisions made around the world for years and years to come.
In the past four years, the US has been closing too. The Trump administration has lashed out at its friends and violated norms (especially in trade) it created. It has reneged on promises and dipped out of treaties. It has been unpredictable, immature, violent, and unreliable. It can no longer be trusted to respect the rule of law. Its commitment to its stated values â€” like rules-based interactions between countries and human rights â€” has looked feeble. It is a country that is acting its age, not its power.
When Trump and his administration talk about China they often lie â€” as when Secretary of State Mike Pompeo kept pushing the conspiracy theory that the coronavirus was made in a lab in Wuhan, China. Their exaggerations make them sound afraid of China. Their attacks â€” like labelling TikTok a national security threat and then trying to strike a deal for a friend of the administration with the sale of its US unit â€” reek of corruption, cronyism, and weakness.
In Beijing this has given rise to the theory that the US is a declining power. Beijing is, after all, familiar with the correlation between openness and influence, closing and decline.
The difference, though, is that in the US one leader cannot call all the ships home, as in 15th-century China. Despite Trump’s attempt to “hereby order US businesses to leave China” last year, corporate America’s decisions remain independent of the government. These are the benefits of a democratic system.
“The separation of the two economies and the deglobalization elements are here to stay no matter who is president,” Miller said. “Where Trump is seduced by soybean purchases, Biden will be seduced by climate promises. But the overall thrust of the relationship is going to get worse and worse because the US has woken up to China being a competitor and an adversary. Decoupling is not a monolith. You can have decoupling of manufacturing and tech but not trade in general.”
Biden’s approach to China is sure to be more multilateral, working with US allies to try to get China to behave in a more predictable manner. Already Biden’s national security advisor in waiting, Jake Sullivan, has spoken out aggressively against China’s aggression toward Australia.
Yes, a Biden administration will most likely try to find common ground on climate change and with arms treaties. But it is also less likely to give Wall Street folks with relationships in China a seat at the negotiating table, as the Trump administration did amid trade-deal negotiations.
“Why, for example should it be a US negotiating priority to open China’s financial system for Goldman Sachs,” Sullivan wrote in a piece he coauthored in Foreign Policy back in February.
This question is a departure from old thinking â€” from the belief that a capitalist China is a more democratic China. None of this suggests Biden would be a China dove. There are no more China doves in Washington.
“Consensus has changed, but there’s still three groups,” Democratic Rep. Rick Larsen of Washington said during a chat with fellow lawmakers hosted by the Brookings Institution last month.
“There’s the punishers, the decouplers, and the salvagers,” he continued, adding that he saw himself “in the salvaging role,” which he defined as “trying to salvage something out of this relationship that is very important but is certainly competition.”
The consensus on the chat with Larsen was that the US needed a more “nuanced” approach with China, as Nan Whaley, the mayor of Dayton, Ohio, put it. Gov. Asa Hutchinson of Arkansas agreed.
“You can’t have a zero-sum game where some parts of the country win and other parts of the country lose,” Whaley said. “There’s no solve for that.”
If that sounds to you like a US problem, not a China problem, that’s because it is. It is one of a laundry list of issues the past four years of populist politics (in name, at least) and the long months of the coronavirus pandemic have laid bare before the US. The China competition is coming, but within that there is a choice. We can compete with a China as a declining power that closes its doors and points the finger at others for its ills, or we can compete as a resurgent power that invests in itself, teams up with its allies, and faces China with new vigour. Trump represented the former vision, Biden the latter.
In parts of the government, this is already happening. Larsen pointed to a renewed effort to innovate foundational technology within DARPA called the Electronics Resurgence Initiative as an example. Over at the State Department, the Policy Planning Office recently issued a report, “Elements of the China Challenge,” that called for a reemphasis of American democratic values at home and the strengthening of alliances abroad to meet this moment.
In September, the House Intelligence Committee, chaired by Democratic Rep. Adam Schiff of California, finished a deep dive into the intelligence community’s readiness for competition with China. It concluded, in sum, that we’re not ready to face what Schiff called “the defining foreign-policy issue of the coming decades.”
The past few decades of focusing resources on fighting terrorism around the world have left the US without a clear understanding of how Beijing thinks and acts, according to the report. One thing, though, is certain, Schiff said: “Beijing seeks to build a world where its ambitions are unchallenged, and individual needs are subservient to the state.”
As I said, there are no more doves in Washington.
“What the US is doing is making it easier for others to throw up their walls, because the US used to be a bridge builder,” Pei of Claremont McKenna told Business Insider. “But what China is doing… also makes it easier for Japan and the EU to build their own walls.”
I asked Pei whether he was worried the world might split in two, divided digitally by the internet. Half the world might be on China’s closed internet, reading Chinese-approved media on Chinese hardware. The other half might be on the internet we know in the Western world â€” an internet we consider open.
Pei countered my question with another one: Why stop at two internets? China has taught the world how to close its society digitally. Perhaps India might want to do the same. Really, any nation could. There could be three or four internets. There could be more.
We are now in a moment when countries â€” not just China â€” feel they can test the limits of boundaries we thought the world order set years ago. Moments like this open global relations up to an endless stream of dangerous possibilities. Where we go from here is uncharted, volatile territory, and the world we create will be beyond anything any of us had imagined. We do not know where decoupling will take us, but there is no doubt it is here.