This threatening U.S agenda, which is completely against the interests of the people of Europe, China and the U.S., is unfortunately and persistently being advanced by the U.S. administration. But significant opposition to this dangerous cold war approach is also growing across the world, including in Europe.

The opposing interest of the U.S. proponents of the new Cold War and interests of the people of Europe is particularly clear. This new cold war against China was started by former U.S. President Donald Trump. The explicit goal of the U.S. is to block China’s economic development, something that the current U.S. Secretary of State Anthony Blinken continues to describe as the “biggest geopolitical test” facing the U.S. in the 21st century.

U.S. President Joe Biden’s approach to attacking China differs from Trump in that the new U.S. administration is attempting to build a wider international front of U.S. allies to engage in a cold war with China. Europe is seen as a key area for this.

However, this approach runs into the obstacle of public opinion in Europe. In January 2021, polling conducted by the European Council of Foreign Relations (ECFR) found that a majority of Europeans believe that China will be “more powerful than the U.S. within a decade” and would want their country “to stay neutral in a conflict” between the two superpowers.

As Mark Leonard, an ECFR director recently said, “The European public thinks there is a new cold war but they don’t want to have anything to do with it.”

“Our polling reveals that a ‘cold war’ framing risks alienating European voters,” he explained.

Despite this European opposition, at the most recent summits of both the G7 and NATO in June 2021, Biden’s focus was to attempt to recruit new European allies to support the cold war. Under U.S. pressure, the NATO Summit’s communiqué went as far as identifying China’s rise as a “systemic challenge” and “a security threat to the Western military alliance”. From the polls, this is quite clearly contrary to the majority of public opinion in Europe.

It is clearly absurd to suggest that China poses any threat to NATO countries. In fact, the exact opposite is the case. Both Europe and the U.S. are thousands of kilometres from China, and China has no military forces even remotely close to Europe or the U.S.

But the U.S. militarization of the Pacific region has been a growing trend over the past decade. The U.S. currently has 400 military bases surrounding China and the U.S. military budget request for 2022 proposes to spend hundreds of billions of dollars on upgrading the U.S. military’s capabilities with the explicit, if unrealistic, aim of overpowering China.

Regrettably, Britain, France and Germany have all sent warships to the South China Sea this year in politically provocative, if militarily insignificant, gestures of support for this U.S.-led military build-up in the Pacific. China has not sent warships to roam the coasts of the U.S. or Europe.

A further escalation of the new Cold War against China took place in September, with the announcement that Britain, Australia and the U.S. have formed an alliance known as AUKUS. This will see Britain and the U.S. furnishing Australia with the technology to deploy nuclear-powered submarines.

The reality is that any European country that decides to follow the U.S.’ cold war approach against China will suffer economic damage and loss of jobs, trade, investment and access to key advanced technologies.

China is already a major trading partner of most European countries, and the trend toward further economic cooperation is growing. Therefore, the U.S.’ attempts to disrupt the economic cooperation between China and European countries, including Washington’s efforts to prevent the signing of the EU-China Comprehensive Agreement on Investment, are completely against the interests of the people of Europe.

Instead of accepting this U.S. cold war agenda, Europe should cooperate with China and the rest of the world to tackle the real threats and problems facing humanity. Pursuing a new cold war against China is both a distraction and a serious obstacle to the genuine global cooperation urgently needed to end the pandemic, boost economic recovery and stop climate change.

Fiona Edwards is a member of the Organizing Committee of the No Cold War campaign.

Join No Cold War’s next online event Europe Against the Cold War – China is Not Our Enemy!

SATURDAY 23 OCTOBER 2021

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If anyone thought that talking of a ‘new cold war’ with China was overstating the case, the recently announced AUKUS military pact must make them think again. Surely timed to deflect notions of US weakness after its defeat in Afghanistan, this major new multifaceted defence agreement between the US, UK and Australia sees the latter firmly jump into the US camp and the former strengthen and renew its Pivot to Asia through unashamedly militaristic means. The UK is coat-tailing the US as usual, hoping to garner some jobs in nuclear reactor production, and trying yet another gambit to boost the ‘global Britain’ profile.

Just six months on from the publication of the government’s big overhaul of foreign and defence policy – the Integrated Review which included a 40% increase in the nuclear arsenal – this is the UK’s second significant provocation towards China, following on from the UK aircraft carrier’s tour to the South China Sea. Australia has the most to lose from this agreement – China is its biggest trading partner and up to recently Australia has avoided getting too sucked into US strategies against China. Earlier attempts during Bush’s presidency to build a ‘Quad’ against China with Australia, Japan and India, foundered when Kevin Rudd withdrew Australian support, but now Australia is back in the fold.

Billed by the signatories as ‘a landmark defence and security partnership’, it’s partly being sold as a values-driven agreement to support a peaceful rules-based international order (US/UK rhetoric for some time now even when the US was unilaterally withdrawing from fundamental pillars of said order); and its key military focus centres on ‘the development of joint capabilities and technology sharing’, deeper integration of security and defence-related science, technology, industrial bases and supply chains.

What this actually means is that the US and UK are going to collaborate with Australia to help provide them with nuclear-powered submarines. Bizarrely the joint governments’ statement suggests that this will ‘promote stability in the Indo-Pacific’; it looks more likely to massively ramp up tension in the region at a time when cooperation with China – in the run up to COP26 to deal with the climate emergency – should be top of the agenda. Not surprisingly, the Chinese authorities haven’t responded well. It’s also dealt a blow to Britain’s relations with France which already had a contract with Australia to provide them with 12 diesel/electric-powered subs to replace their ageing fleet. That contract has now been ripped up but in spite of comments about delays in production and escalating costs, this is not a military-industrial decision, it is a strategic one, fully entering the US orbit – and being granted access to rare nuclear reactor technology.

Nuclear – whether military or civilian – is always controversial and symbolic, and here it means Australian admission to the top level club; only six countries, all nuclear weapon states, have nuclear-powered subs. It is also an indication by the US of the priority it gives to this growing – fortunately still cold – conflict, and its determination to get Australia onside and keep it there. T he nuclear component of the subs lies in the fact they are powered by onboard nuclear reactors. They won’t have nuclear weapons – and the Australian PM Scott Morrison has been quick to insist that Australia will not be pursuing either nuclear weapons or civil nuclear capacity.

Beyond the strategic nightmare created by AUKUS there is much that is not yet clear. Will the Australians build the subs or buy them in? How will the highly enriched uranium necessary to fuel the reactors be provided? There is no doubt that the provision of reactors and the technology they require is the most significant factor here.

Reactor technology is highly prized and top secret, as the uranium used for the reactors is enriched to 95% – weapons grade. The US and UK cooperate on this under the terms of the Mutual Defence Agreement, the world’s most extensive nuclear sharing agreement which first came into force in 1958. Renewed by parliament every decade, the last time in 2014 allowed for greater cooperation on reactor technology. If the Australians were going to build the reactors themselves they would need US technology and expertise and a nuclear-sharing agreement with the US of their own. So the simplest solution would be to buy them in; Boris Johnson’s comments so far about jobs suggest he will try and get reactor orders for the Rolls-Royce factory in Derby. Maybe he will also try for the decommissioning contracts for the spent fuel that eventually needs disposing of. Presumably it will add to the nightmare build up of radioactive waste at the dangerously unsafe Sellafield complex in Cumbria. Highly enriched uranium is stored there but no safe long-term storage facility has yet been found.

Boris Johnson said in Parliament today that the AUKUS agreement did not contravene the Nuclear Non-Proliferation Treaty – that this is for nuclear power not nuclear weapons so the restrictions do not apply. But the fact is we are talking about providing weapons grade enriched uranium to a non-nuclear weapons state to power military submarines undertaking provocative action in a very fraught area of the world.

The NPT does not stop the exchange of civil nuclear technology but it stipulates it must be ‘for peaceful purposes’. Sending war-fighting subs to potential conflict in the Indo-Pacific region is hardly that. This is yet another breach of international law by our government, hard on the heels of the nuclear arsenal increase. It’s time to stand up and oppose the government’s reckless and illegal foreign policy.

This article was first published here

It is vital that the Western left grasps the enormous stakes involved in ensuring the total defeat of US’s new cold war and discards any temptation to take a neutral position on this massive life-and-death issue.

US imperialism is desperate to contain the rise of China, retard the country’s economic development and maintain the US’s domination of world affairs.

The Covid-19 pandemic is greatly accelerating the relative economic decline of the US vis-a-vis China, and attacks on China are accelerating in step.

Should the US succeed in its cold war, the policies of an unconstrained US imperialism on pandemics, climate change, poverty, racism and war threaten to dominate the globe.

Central to the US’s cold-war effort is to attempt to paint China as the enemy on all these major questions for humanity.

The opposite is the case and to suggest that the US and China represent twin evils and adopt the slogan “neither Washington nor Beijing” is not only factually untrue, but provides support for Washington’s cold war.

The US lies being told about China are on the scale of Iraq’s WMD or the Gulf of Tonkin incident.

It is crucial to look at the reality of the contrasting approaches of US and China on the major issues facing humanity.

The US’s catastrophic response to the pandemic

As the global pandemic continues to rage, it is vital to recognise that it is the US policy on coronavirus that is the greatest threat to human life, not China.

Donald Trump has allowed Covid-19 to rip through society because of the US ruling class’s insistence that profits must be protected at the expense of human lives. The results of this policy have been nothing short of catastrophic.

At the time of writing, over 194,000 people have been killed in the US.

In China there have been fewer than 5,000 deaths. Driven by the goal of saving lives, China has adopted extremely effective public-health measures including strict quarantines, social distancing, an efficient test-and-trace system, temperature checking, masks and the use of adequate personal protective equipment.

China has effectively defeated the virus.

Taking into account population size, the coronavirus pandemic has been around 183 times more deadly in the US than in China. The Chinese authorities put public health first. The US prioritised profits.

The US leads the world towards climate catastrophe

As the global temperature rise edges towards the critical point of 1.5°C, it’s clear that the US approach to climate change is leading humanity towards catastrophe.

Trump has spent the past four years blocking progress internationally on climate change starting by withdrawing the US from the UN Paris Climate Change Agreement — the only country in the world to do so.

The US has now become the world’s number-one producer and exporter of oil and gas.

Yet the US ruling class is determined to obscure this reality by blaming China for climate change in an attempt to disorientate the environmental movement in the West.

Historically, the US is responsible for 25 per cent of all production-based carbon emissions ever released.

This is almost twice as much as China’s cumulative emissions which stand at 12.7 per cent.

The US currently emits twice as much carbon per person (16.5 tonnes) than China (seven tonnes).

China has dedicated massive state resources to building up green industries, driven by a commitment to sustainable development and building an “ecological civilisation.”

As the International Renewable Energy Agency points out, China is the world’s largest producer, exporter and installer of solar panels, wind turbines, batteries and electric vehicles.

China’s huge state investments are making renewable energy an affordable alternative to fossil fuels globally.

US hypocrisy on human rights

The claims of the US government, echoed by the mainstream Western media, that the US is the “land of the free” and an international beacon of human rights, while China is the land of human rights abuses are both hypocritical and completely absurd.

This is while unarmed black people are gunned down daily by cops and Black Lives Matter protesters are brutalised by various militarised state forces in the US.

CBS reported last week that US cops have killed 288 people since George Floyd was murdered three months ago, and once again black and other people of colour are disproportionately victims.

The US-led “war on terror” over the past 20 years has led to brutal invasions, occupations and bombings of Iraq, Afghanistan, Libya and Syria which have killed and displaced millions of people in the Middle East. China has done none of these.

Meanwhile at home the decades-long “war on drugs,” in reality a thinly veiled war on African-Americans, has made the US the home of the world’s largest prison population in the world, with over 2.3 million people incarcerated in 2020.

African-Americans are imprisoned at more than five times the rate of whites.

In per capita terms the US imprisons five times as many people as China does. In 2018 the US imprisoned 655 people per 100,000, whilst China imprisoned 118 people per 100,000.

Despite its own verifiable and widely understood violations of human rights, the US is leading an international campaign against China on this issue.

At its centre are fabrications over China’s treatment of Uighur Muslims. Trump’s administration claims that “millions” of Uighur Muslims are been detained in “concentration camps,” with absolutely no evidence, and even that there is “genocide.”

The facts are that the Uighur population in Xinjiang has more than doubled in the past 40 years from 5.5 million to over 11 million and there are 24,000 mosques in the province.

Any serious discussion about human rights in China should proceed from the following facts: in 1949 life expectancy in China was 36 years following a century of imperialist domination.

Today its 76 years. Over the past 40 years China has lifted over 860 million people out of poverty.

While the rise of Western imperialist countries such as the US and Britain took place as a result of colonialism, slavery, racism and imperialism, China’s rise has been achieved peacefully and without dominating other countries.

But China’s peaceful rise is being met with US aggression. The US currently has over 800 foreign military bases, 400 of which are encircling China.

China has only one foreign military base, in Djibouti. The US is increasing its military budget to $740 billion in 2021.

In 2019, the US spent more money on the military than the next nine biggest spenders combined.

US warships are roaming China’s coastline. Britain intends to send its aircraft carrier to the region.

China is offering the world a different model of international relations, based on respecting other countries’ right to determine their own affairs and “win-win” co-operation — with the offer of mutually beneficial trade and investment.

The foreign policy doctrine of China, to build multilateral co-operation towards a “shared future for humankind” contrasts very sharply with Donald Trump’s “America First” doctrine that all humanity must be subordinated to the interests of the US ruling class.

The left in the US and the rest of the West must reject the US government’s claim that our enemy is China and instead understand that the enemy is at home.

The No Cold War campaign is organising an online International Peace Forum on September 26 to discuss how to oppose the US-led new cold war. For details and to register go to nocoldwar.org.

This article was originally published by the Morning Star

British China expert Jude Woodward, who sadly passed away recently, had given us the essential The US versus China, Asia’s new cold war? Moreover she left us two documents, which will give us an insight into the true nature of the US-China contradiction in 2020, during and after the COVID-19 crisis as well: the Introduction to the Dutch language edition of her book, published in Belgium (EPO, 2018), and The US offensive against China, her speech at the launch in Brussels, January 2019.

The great contradiction in COVID-19 times

The hawks in the US leadership continue their offensive against China, even now that their own population is suffering terribly from the corona crisis. From the beginning onwards COVID-19 was seen by American ideologues as a golden opportunity for conducting an international smear campaign against China, sowing discord in the country itself, and perhaps even overthrowing Xi Jinping. They haven’t given up their wild hopes yet. And what is worse: this is a bipartisan project in the political culture of the US. In spite of all provocations and attacks, the Chinese leaders try to maintain a constructive and respectful dialogue between the two countries. At the same time, of course, Beijing has to defend China’s core interests. The offensive continues on a great many fronts. American politicians, some at the very highest level, are taking steps and passing laws that menace China’s territorial integrity: especially regarding the Chinese regions Hong Kong, Taiwan, Xinjiang and the islands in the South China Sea. U.S. troops have been taken away from other hotbeds the U.S. created in the past and concentrated in the Pacific. To all that has been added the COVID-19 campaign.

According to official reporting

In prestigious publications and on social media we read that ‘China and the US are rivals’, that ‘China as an emerging power has renounced the modest role advised by Deng Xiaoping and is becoming increasingly aggressive’. China is said to ‘expand its power, by any means, permitted and not permitted, in order to take over world domination from the US or the West’. An eminent American professor describes China’s approach in response to COVID-19 in the following hateful terms: ‘It is as if at every stage the unfolding of the crisis has pulled back another curtain, revealing yet more ugly facets of the regime’s character and highlighting the diverse dangers that it can pose to others.’

A view actually dominating the world press is that Trump is ‘an unreliable, narcissistic leader who attacks China for short-term considerations’ (safe-guarding his re-election, disguising his own failure, etc.) and a serial offender of his own allies. Everything will get better when that man is replaced, and the US, preferably together with an EU ‘with which it shares the same values’, will ‘take on Chinese authoritarianism’ united and effectively.

In 2019 this was foreseen by Jude Woodward who observed: ‘the decisive shift in the international situation to one of confrontation and conflict between the two largest economies and most powerful countries in the world was, according to the Western media, exclusively a response to aggressive foreign policy actions and economic, trade and other culpabilities of the People’s Republic of China. From 2010 onwards this view has been virtually unchallenged in the mainstream media, academic journals and publications in the West’. We must admit: it has been going on until today.

According to Jude Woodward

Challenging the aggressive anti-Chinese and anti-socialist analysis is a continuing task for progressive and peace-loving people. Jude Woodward’s The US versus China, Asia’s new cold war? remains an essential tool for this. Thomas Blommaert, director of the Belgian publishing company EPO where Woodward’s book was translated, understood the necessity of reacting against the fatality of ‘the Thucydides Trap’ or the ‘inevitability of war with China’ which he termed Hollywood scenarios that started to be told in Brussels, capital of the EU, as well. ‘Those who follow the issues of the day, hear and see a lot, but miss the broad framework and often formulate the wrong questions. The danger of being brainwashed is great. Fortunately, there are people who leave Hollywood scenarios for what they are, learn lessons from history, start with facts, sketch context and then produce well-thought-out and hugely readable books about it. Jude Woodward was one such person. We will continue to promote her book. Whoever follows the news knows: it is more topical than ever’.

Reception then and now

Sadly, Woodward passed away on April 26 this year. However, we have two recent documents written by her, which can help us understand the true nature of the great contradiction between the US and China that the world will be dealing with for a long time to come. The English original of the Introduction (until now exclusive) to the Dutch language edition of her book, published in Belgium (EPO, 2018), and US offensive against China, her speech at the book launch in Brussels European Institute for Asian Studies EIAS, January 2019. At the time the book launch elicited a lot of coverage on radio, TV and in the press of Belgium and the Netherlands. Journalists and politicians appeared to be unpleasantly surprised by Trump’s aggressive antics and some were willing to learn about an alternative analysis. This however, was before the escalations regarding Hong Kong, Huawei, Xinjiang, Covid-19. It seems the tide is turning in Europe as well with the EU declaring China ‘a systemic rival’ and EU countries ‘looking to diversify their supply chains, limit foreign subsidies, or review how they regulate sensitive Chinese inward investments’. Stories of ‘Chinese authoritarianism’ and ‘inevitable conflicts’ are gaining traction.

Dangerous hostility

That is why reading Woodward remains so important. She explains where polarization in the US-China relationship comes from, why the US will be stepping up political confrontation in the fields of economy, technology, the military, with propaganda, slander and accusations against China and attempts to isolate the country. Woodward tries to predict how this new Cold War will differ from the previous one, but also what past tactics the US will try again. She assures her audience that powerful individuals and institutions want to curb China’s growth and development and ‘bring it back to a level where China is no longer a challenge for the US’, and warns, ’this hostility is very dangerous to the world. It will not disappear’. Jude Woodward’s 2018-2019 analysis certainly retains its validity. Keith Bennett, China Specialist and Deputy Chairman of the 48 Group Club: ‘There’s so much that is valuable in these documents. Much of them reads as even more relevant, timely and urgent than when Jude wrote them. Her speech notes for her visit to Belgium show the serious, meticulous and painstaking way in which she prepared for it.’

Two world views

According to Jude Woodward, the US (and some of its European allies) essentially has a worldview diametrically opposed to China’s. The US and the West (throughout contemporary history) seek conflict and dominance. China, on the other hand, wants to strive for a common future for humanity and to seek points of cooperation between actors, who can and may differ regarding their social systems.

Why trust this and invite us to take the words of the Chinese leaders seriously? Because, according to Jude Woodward, a convinced socialist, ‘Xi’s thinking about the world rests not on the unscientific, neo-classical mumbo-jumbo of Trump, Cohn and Bannon, but on the understandings of Smith and Marx about the development of production and society… Xi’s key concept for international relations is that of “a common future for humanity”, which is in turn based on the economic foundation of unequivocal support for globalisation. For example Xi, notes: “economic globalisation is a result of growing social productivity, and a natural outcome of scientific and technological progress”. In other words, collectively, socially organised production means that overall output is much greater than the sum of each person’s individual efforts.’

The desire of human beings to go forward and improve their lives if they can see a way to do so

At the end of her Brussels speech, Woodward seems somewhat pessimistic and her concern will undoubtedly be recognisable in these times of COVID-19 and what lies ahead of us. Many will tend to say with her, ‘we can’t look into a crystal ball and see how all this pans out, whether for good or bad. But what is certain is that the confrontation the US has picked with China is not set to end soon and will determine much of the shape of the next decades.

However, she always sees the possibility of a positive alternative:

‘a new, more advanced multilateralism, backed and driven by a number of countries coming together around the common interests of humanity. China is fighting for the latter.’

And, both at the end of the ‘Introduction to the Dutch translation’ and of her book itself, Jude Woodward demonstrates rational thinking based on confidence: ‘China is winning the battle of ideas with Trump; because this is scientific and true, whereas the dog-eat-dog world of Trump will just lead to conflict and economic destruction’… ‘In the end the sword cannot win against the desire of human beings to go forward and improve their lives if they can see a way to do so.’

Jude Woodward’s book The US versus China, Asia’s new cold war?  (MUP 2017) was translated under the title America tegen China. De nieuwe Koude Oorlog? (EPO 2018) and in French as USA-CHINE. Les dessous et les dangers du conflit (Investig ‘Action 2020). The publisher EPO gave permission to publish the ‘Introduction to the Dutch translation’, both in English and in Dutch.

The Invent the Future website has a recent video on its YouTube channel summarising Jude Woodward’s book. Carlos Martinez, the site administrator, tweeted: ‘At a time where the US is moving aggressively and dangerously towards a new cold war with China, this book could hardly be more relevant’.

1. Introduction to the Dutch edition of ‘The US vs China: Asia’s New Cold War?’

By Jude Woodward

This book was finished in the early months of Trump’s presidency. The general direction of Trump’s foreign policy was already clear, with a sharpening of conflict with China in particular from day one.[1] His campaign slogans were well known: ‘America First’ in order to ‘Make America Great Again’; and rhetoric against multilateral agreements and threats of protectionist trade measures had been etched into his election campaign.

In his inaugural speech Trump had formulated the US’s global role in terms starkly different from the traditional ‘one indispensable nation’ trope of post-1945 American exceptionalism.[2]

‘From this moment on, it’s going to be America First. Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families… We will seek friendship and goodwill with the nations of the world – but we do so with the understanding that it is the right of all nations to put their own interests first.’[3]

Trump also used Twitter to inveigh against all forms of multilateralism in international relations, attacking the UN, WTO and NATO, trade agreements like the TPP but also NAFTA, multilateral policies like the Paris Climate Accords, the Iran nuclear deal, and berated the intrinsic unfairness of the EU in preventing the US negotiating one-to-one deals with Germany and France.

If Trump truly meant all this, then he was calling time on the whole post-1945 US approach to its role in the world.

Whether or not Trump would follow through on this new US unilateralism took some time to clarify due to the chaos in the first year of his White House – but such statements immediately created an ideological vacuum in the rest of the West, which remains committed to the benefits of multilateral agreements, free trade and globalisation. But no Western leader was prepared to speak out directly against Trump.

Prior to Trump’s election the fact that China had the world’s most rapidly growing economy and had overtaken the US to become the world’s largest economy in purchasing power parity terms meant that it was already having an increasing global impact. China had long been influential among developing countries but, as discussed in this book, from the 2007 financial crisis onwards this influence began extending even to traditional US allies.  The most telling example was when, in 2015, Britain enraged Obama by rushing to join China’s Asia Infrastructure Investment Bank without even informing the White House in advance. After a little more hesitation Germany and Australia also signed up. Other initiatives – such as the Belt and Road, the Shanghai Cooperation Organisation, the regular meeting of the BRICS countries, the establishment of the 16-country bloc of Central and Eastern European countries in the ‘16+1’ meetings with China, and China’s improved relations with traditionally less supportive countries such as Singapore, the Philippines and South Korea underlined this.

From early 2017 China began to take this to another level, by directly entering into the battle of ideas with Trump and his supporters by putting forward an alternative vision of global politics. This kicked off with Xi Jinping’s speech at the 2017 Davos forum, where he put forward a coherent defence of globalisation, contra Trump but without mentioning him:

‘Countries have extensive converging interests and are mutually dependent. All countries enjoy the right to development. At the same time, they should view their own interests in a broader context and refrain from pursuing them at the expense of others.’ [4]

The Western media fell over itself to praise the speech. Nor was the meaning lost on Trump’s team. Steve Bannon, Trump’s chief strategist, urged that ‘…people [should]compare Xi’s speech at Davos and President Trump’s speech in his inaugural…. You’ll see two different world views.’[5]

They would indeed. But between these two world views, most of the US’s chief friends and allies preferred that put forward by Xi Jinping rather than Donald Trump. Martin Wolf, chief economics commentator of the Financial Times, put it succinctly: ‘Xi Jinping, president of China, made a speech last week on globalisation at the World Economic Forum that one would have expected to come from a US president. At his inauguration, Donald Trump made remarks on trade that one would never have expected to come from a US president. The contrast is astounding.’[6]

In May 2017 two senior Trump aides wrote a seminal piece for the Wall Street Journal that took the debate further. Jointly authored by National Security Adviser, H.R. McMaster, and director of the National Economic Council, Gary Cohn, it clearly had the approval of the Oval Office. Most fundamentally the article directly countered Xi Jinping, also without naming him:

‘…the world is not a “global community” but an arena where nations, nongovernmental actors and businesses engage and compete for advantage… Rather than deny this elemental nature of international affairs, we embrace it.’[7]

In Britain we are familiar with such formulations, rooted in right-wing neo-classical economics, because Margaret Thatcher in the 1980s became notorious for the similar statement that ‘there is no such thing as society’, only ‘individual men and women’. This ideology was used as the basis for cutting welfare programmes, ending public housing, restricting trade unions and so on.

In foreign policy, as McMaster and Cohn draw out, this philosophy means the pursuit of American interests irrespective of others. ‘America First’, they argue, signals the intention ‘to use the diplomatic, economic and military resources of the US to enhance American security, promote American prosperity, and extend American influence around the world’. 

This is different from the ideological underpinning of the US-led post-1945 international system, based on the argument that the US would use its weight, in line with the common interests of all as expressed through institutions like the UN, to mitigate political conflicts, and further to provide resources to even out dangerous economic hiccups through its contributions to the IMF. The averred aim was to create a harmonious global community, in which – it was claimed – the strong protected the weak thus avoiding the type of conflict and economic crisis of the World Wars and the Great Depression.

Of course the definition of ‘common interests’ substituted the interests of maintaining the position of the US and its allies, particularly in preventing any advance of communism or even genuine post-colonial independence, for the real common interests of all in peace and development, as this book discusses in relation to the US’s post-war record in Asia. But it was not an entirely empty ideology either. As Perry Anderson analysed, in the US-led world created in 1945, the US projected itself globally primarily ‘…as a guardian of the general interest of all capitals, sacrificing – where necessary, and for as long as needed – national gain for international advantage, in the confidence of ultimate pay-off’.[8]

For Trump, this was over: no longer affordable for a US in relative decline, if it ever had been.

But despite Trump’s statements and those of his key advisers, the liberal Western media, and probably most of their political masters, hung on to the hope that this was simply rhetoric to shore up his electoral base.

For six months it seemed this might be true; Sturm und Drang on Trump’s twitter-feed led to very little action. The abandoning of the Trans-Pacific Partnership was not definitive proof of a general course, as Clinton had promised she would too. Demands that South Korea and Japan should pick up more of the US’s military costs in East Asia were dismissed as mainly bluster and anyway negotiable. Similarly his challenges to NATO were unwelcome, but no one believed the US would actually pull out of its main military alliance.

But Trump was not just letting off hot air. He is not a joke, but the outspoken representative of a powerful revanchist strand of opinion in the US ruling elites that believes the US has long made too many concessions to its allies, taken on too great a share of global military expenditure, and at the same time been squeezed on trade not just by China, but close allies as well. This is Trump’s explanation for the German and Chinese trade surpluses with the US, and, to a lesser extent, those of Korea and Japan.

Trump has been open that he wants a large share of these surpluses transferred to the US, through a combination of means: imposing terms of trade and insisting upon exchange rates that preference the US over its competitors; demanding successful economies invest in the US or take up more US debt; and insisting that allies increase their contribution to the West’s military budget.

This is already being met with resistance from key targets China and Germany, which have offered strikingly few concessions to Trump. Therefore it is clear that Trump’s project requires greater leverage than the state of the US economy or its present alliances can necessarily deliver. This is the context for Trump’s remarkably consistent pursuit of an opening to Putin’s Russia, despite huge opposition from Pentagon and foreign policy elites, and from within his own White House. There has long been a serious current of opinion in the US and beyond, that argues that a US-Russia link up could be a reverse ‘Nixon goes to China’, with a US-Russia axis able to bring sufficient pressure to bear on China that it is forced to concede to US demands. But secondly, of course, such an alliance with Russia could encircle Germany, squeezing the EU from East and West; both Trump’s political agent, Steve Bannon and Putin have been actively aiding right wing and anti-EU political forces across the continent. This is why, Angela Merkel, by contrast with other Western leaders, was quick to realise that Trump and his advisors’ threats to Germany and the EU were not just rhetoric but constituted a dangerous, disintegrative force in Europe.

In mid-2017, with the new team in the White House finally more or less settled, residual hopes in the emergence of a tempered Trump were abruptly ended when he walked the US out of the hard-won Paris Climate Change Agreement. Amid global disapprobation of Trump’s wilful sabotage on such a vital issue, China again stepped into the vacuum. Xi Jinping used a major speech in October to stress that China would be ‘Taking a driving seat in international cooperation to respond to climate change’, and that it would be a ‘torch-bearer in the global endeavour for ecological civilisation’.[9] In the same speech he again drew a line against Trump’s approach, remarking that: ‘No country can alone address the many challenges facing mankind; no country can afford to retreat into self-isolation.’

The unilateral move of the US embassy in Israel to Jerusalem and abandoning the Iran nuclear deal reduced multilateral approaches to the region to tatters. Withdrawal from UNESCO and the UN Human Rights Council followed.

Finally in spring 2018, the threatened new US protectionism was launched with tariffs imposed on aluminium and steel not just from China, but also Canada, Mexico and the EU.

The growing ideological and political disorganisation in the West that flowed from these actions was reflected in the chaos at the June 2018 G7 summit in Canada; a meeting which happened to take place almost contemporaneously with the 2018 summit of the Shanghai Cooperation Organisation in Qingdao, China.[10] The smooth functioning and productive outcomes of the SCO meeting – the first to include India and Pakistan as full members meaning it represented a majority of the world’s population and countries responsible for a majority of annual GDP growth – was inevitably contrasted with the tensions and dysfunction at the G7.

The G7 meeting started in acrimony and ended in farce with Trump removing his signature from the proposed closing statement – meaning that the meeting dispersed without one for the first time since its inception – and trading insults with its host, Canadian Prime Minister Justin Trudeau, who he described as ‘very dishonest & weak’.

The ensuing media firestorm highlighted growing concerns for the future of the US-led Western world order, contrasting the G7 to the harmony at the SCO. So the Diplomat headlined its analysis ‘A West in crisis, and East rising?’; The Atlantic asked ‘Has the Western world started shunning America?’[11]

This crisis of relations in the West as a result of Trump’s policies has pushed not only Europe (with the exception possibly of the UK) and Canada in particular closer to China, but has also begun to shake up Sino-Japanese relations. Trump’s current and projected tariffs, on European steel, but particularly the prospect of duties on German and Japanese cars, makes China’s growing market potentially even more important in the long term for both these countries. German relations with China had been generally good and improving for some time, but from the G7 summit onward Abe in Japan also made a turn to improving relations with China. Proposed reciprocal visits between Abe and Xi Jinping in Autumn 2018 have trade at their centre.[12]

Of course, the key target of Trump’s tariff war is China itself, which has already been hit with 25% tariffs on $50bn of its exports to the US and faces the threat of tariffs on a further $200bn goods in September 2018, with Trump also saying that a further $267bn will follow. If implemented this would effectively mean China’s entire export trade to the US was subject to tariffs. Trump embarked on this tariff war with China despite very reasonable alternative proposals from the Chinese and urging from key members of his administration to accept a deal.

China’s negotiators offered the US a ‘win-win’ compromise, aiding the US economically while not damaging China. China proposed to reduce the trade deficit through increasing its own imports from the US in areas where there is rising demand in China, such as luxury foods – for example cherries, lobsters, beef. China also offered reduced tariffs on US cars. This deal would have aided the US’s farming and manufacturing sectors, presenting an attractive proposition from several perspectives.

Trump snubbed this proposal; demonstrating that ‘reducing the trade deficit’ is not the main goal of this tariff war with China; its real aims are to stifle its technological development, stall growth and therefore encourage political discontent and instability.

At the time of writing it is not clear what the final outcome of the trade dispute will be, but it is already clear who is winning the overall propaganda and ideological war, and that is China.

While the other Western leaders have been more or less silent, it has been left to China to assume the mantle of global ‘thought leadership’ that the US is abandoning, at each point advancing, in words and in deeds, an alternative vision of a ‘global community’ run on the basis of mutual benefit and ‘win-win’ diplomacy.

The reason that China is increasingly thrust into the ideological leadership of the response to Trump is not simply because the Western countries are too mired economically and strategically with the US to take on Trump, even though they know he represents a coherent, aggressive and ultimately deeply dangerous international force. But it is also because they do not have the philosophical and theoretical armoury to take on the neo-liberal, ‘winner takes all’ ideology that Trump and co avow.

This is the irony of why China is increasingly able to assume ‘thought leadership’, not just for the developing world, but even for the higher interests of the advanced West; because Xi’s thinking about the world rests not on the unscientific, neo-classical mumbo-jumbo of Trump, Cohn and Bannon, but on the understandings of Smith and Marx about the development of production and society.

Xi’s key concept for international relations is that of ‘a common future for humanity’, which is in turn based on the economic foundation of unequivocal support for globalisation. For example he notes: ‘economic globalisation is a result of growing social productivity, and a natural outcome of scientific and technological progress.’[13] He acknowledges there are problems with globalisation, from inequality to governance, but these are outweighed by the benefits, therefore, following an old Chinese proverb: ‘One should not stop eating for fear of choking’.[14]

This is a coherent view, and is drawn from the core ideas on economic development of Adam Smith, later developed by Marx. Smith’s ‘The Wealth of Nations’, the founding work of modern economics, opens with the statement that the greatest development in human productivity seems ‘to have been the effect of the division of labour’. The rest of the work is built on this understanding. Marx took over this concept, which he later reformulated as the increasing ‘socialisation of labour’ being the crucial contribution to raising human productivity and economic growth. Fully internationalised socialisation of labour – that is globalisation – is thus the greatest, most advanced scope that can be achieved by the socialisation of labour and the basis for the most productive development of human labour. In other words, Smith and Marx show that, rather than there is no such thing as society and that individualism of persons and countries is the only way forward, it is human beings as producers interacting in production that has been the basis for the entire advance in wealth and economic output in human history; upon which base is built culture, science and other advances. In other words collectively, socially organised production means that overall output is much greater than the sum of each person’s individual efforts.

Or as Xi put it: ‘one plus one can be greater than two.’[15] And that is why China is winning the battle of ideas with the Trump; because this is scientific and true, whereas the dog-eat-dog world of Trump will just lead to conflict and economic destruction.

2. The US offensive against China

By Jude Woodward

These are the notes for Jude Woodward’s speech at the launch of the Dutch edition of ‘The US vs China: Asia’s New Cold War?’ on 24 January 2019

My book was finished in mid-2017 – so I apologise for not dealing with the trade war and the escalation of confrontation with China by Trump this year. The developments of the last 18 months however have only reinforced the argument of the book. Indeed, a new polarisation has opened up in geopolitics between the US and China. This takes the form of a confrontation by the US on all fronts – economic, military, propaganda, vilification, accusation and isolation. It is aimed at holding back China’s growth and development to a level where it might be seen no longer to challenge the US. This confrontation is very dangerous for the whole world, and it is not going to go away.

Post-Nixon

Broadly speaking US policy towards China had been stable from the Nixon thaw in the 1970s. It may have had its ups and downs – particularly in the late 1980s – but on the whole a policy of engagement prevailed.

China reciprocated by in general supporting or acquiescing in US policy worldwide, including voting with it in the UN or at least abstaining. This got China into a mess with the left – e.g. over its supporting UNITA in Angola, or not breaking with Pinochet – but gained it a quiet life on the international front. Deng’s dictum, ‘hide strength, bide time’, meant simply China did not intend to intervene, even if it could, in international affairs and instead preferred to concentrate on economic development.

Both sides of this equation have changed, but not in the same way.

Pivot to Asia

A change of line by the US began under Obama, and particularly under Hillary Clinton when she was Secretary of State. There was a sharp hardening of rhetoric and diplomatic or even military intervention against China. This was unlike previous periods of tension in Sino-US relations in that it was accompanied by a formal, long-term shift in policy – the so-called ‘pivot to Asia’.

Military resources began to be shifted to the Pacific. The US gave the green light to substantial Japanese rearmament. And Japan’s series of increasingly nationalist governments stepped up their own rhetoric and diplomatic confrontation with China. The Trans-Pacific Partnership (TPP) was repositioned as a comprehensive trade deal explicitly aimed at excluding China. The US also began to intervene more aggressively in ASEAN to push for it to take an anti-China stance, and in the individual countries of the region.

It had most success with the Philippines, which took up the gauntlet and broke the consensus that had been brokered by ASEAN to defuse conflicts over the disputed islands in the South China Sea. In 2012 a provocation by the Philippines at the Scarborough Shoal (almost certainly encouraged by the US) led to a conflict with China, which intervened to protect its fishing boats in the area. This stand-off then became the justification for referring the whole issue to the international court under UNCLOS.

But with the US still mired in Iraq and Afghanistan; the challenges and opportunities of the ‘Arab spring’; the civil war in Ukraine, etc. Obama was never really able to fully follow through on the realignment of priorities that the ‘pivot’ envisaged.

Trump’s offensive

Trump made a stepped-up offensive versus China – on trade in particular – a key component of his election campaign. From his inauguration in 2017 he had made clear this was his intended course. However, he did not implement it at first and instead praised Xi Jinping and China, claiming they were friends. Trump had other issues on his agenda. This totally changed in the course of 2018 when Trump launched his promised offensive against China on multiple fronts.

National Defence Strategy – China not ‘terrorism’ now US primary concern

This began with a major reformulation of the priorities in US foreign policy set out in the new National Defence Strategy published in January. Titled ‘Sharpening the American military’s competitive edge’ it placed ‘strategic competition’ with key rivals, i.e. China, ahead of the previous priority to the so-called ‘war on terror’. ‘Inter-state strategic competition, not terrorism, is now the primary concern in U.S. national security’, it says. [16]

And in the document, this is clarified as follows. ‘The central challenge to US prosperity and security is the re-emergence of long-term, strategic competition by what the National Security Strategy classifies as revisionist powers. ‘Long-term strategic competitions with China and Russia are the principal priorities for the Department, and require both increased and sustained investment, because of the magnitude of the threats they pose to US security and prosperity today, and the potential for those threats to increase in the future.’

The National Defence Strategy concludes: the US military has to ‘build a more lethal force’, able to win a war with any enemy. It puts forward precise proposals based on simulations of how the US could win in an all-out war with China and/or Russia. In line with this, in the summer of 2018 Congress agreed to increase US defence spending to $718bn in the coming year, an increase of 13% in one year. This compares to China’s defence budget in 2017 of $228bn.[17]

Nuclear weapons and withdrawal from the INF

Part of this budget is allocated to updating and improving the US nuclear arsenal. In October 2018 Trump announced that he intended to withdraw from the 1987 Intermediate Range Nuclear Forces Treaty (INF). This proposal was widely seen as mainly targeted at China, to allow the US to develop new intermediate range missiles and permanently base these in Guam, Japan or even South Korea – although any such steps would create major political divisions in the region. This would strengthen the US’s military position to attack China and potentially force China into an economically damaging arms race. 

Militarisation of China’s seas

Alongside this, the US has been behaving more aggressively in the South China Sea and the Straits of Taiwan. Since late 2017 the frequency and size of flotillas of US warships that have sailed within 12 nautical miles of Chinese-claimed islands in the South China Sea has increased. They are now more frequent than under Obama. In mid-2018 France and the UK announced that they intended to join the US operations. Australia is already a participant.

The excuse for this militarisation of the South China Sea is defending ‘freedom of navigation’ – but this has never been threatened by China, which urgently needs free navigation through international waters to conduct its vast international trade. In July 2018 US warships sailed through the Straits of Taiwan, again on the claimed basis of defending free navigation. China has never objected to the passage of any commercial shipping through the Straits, but it does object to hostile navies sending warships so close to Chinese home shores. The only ‘freedom of navigation’ this defends is the right of the US to send its Navy right up to China’s coasts; a freedom that the US would hardly accept around its shores.

All these military steps are directed to two goals. Firstly, to change the military balance in the region to make it possible for the US to wage an offensive war against China, which US military planners believe under current conditions would be a very risky enterprise.  Secondly to force the Chinese to divert economic resources into a damaging arms race that would reduce its competitivity internationally, and with the US in particular. An arms race, it was hoped, would eventually create a domestic economic squeeze that would undermine support for the regime and even promote popular sentiment in favour of caving in to the US based on the illusion that the US would then ‘allow’ China to develop again.

China is showing no sign of falling into an ‘arms race’ trap though.

Trade wars

The US’s offensive against China in 2018 has been most concentrated on seeking to apply pressure on its trade. This has correctly commanded most international attention. This has involved Trump’s threatened escalating imposition of up to 25% tariffs on over $250bn worth of Chinese imports into the US.

It is not currently clear whether there will be some easing of this tariff war through ongoing talks. There is some chance as most commentators suggest that the US and world economy are entering a cyclical downturn. Volatility and falls on stock markets over December 2018 may well be signs of this. There may be an impact on Trump’s popularity. It is already trending down in the polls, as the current shutdown is unpopular. Also, a trade war with China has a boomerang impact on the US economy in pushing up prices and pushing down stocks and shares. The administration is clearly divided with Lighthizer taking a harder line and Mnuchin flagging up the likelihood of a deal.

China has not shown any signs of giving in – although it has offered reasonable concessions and compromises to reduce the trade deficit, to improve action on Intellectual Property Protection, to open up some greater opportunities for Western companies.

But if Trump judges that the problems created domestically begin to outweigh the value in putting pressure on China, then he will probably organise some face-saving retreat. The US economic offensive however does not just take the form of a tariff war.

ZTE, Huawei and attacks on Chinese companies

The imposition of the first tranche of tariffs in April was preceded by an unprecedented US attack on ZTE, one of the top Chinese telecoms companies. The company was found to have broken a previous agreement with the US on trade with Iran. It was a stupid step bound to provoke a response from the US, but the level of sanction that the US imposed in punishment – prohibiting ZTE from using US parts or technology for seven years – threatened to completely destroy the company.

After intense negotiations, China managed to get the sanction lifted in July. The confrontation had been an object lesson in how the US’s lead in major technologies gives it huge international leverage, even as its growth rates falter and it runs major trade deficits with key competitors.

More recently Huawei has been in the firing line. There was the arrest of Meng Wanzhou in Canada and that of an executive in Poland for alleged spying. A range of countries, ‘The Five Eyes’, an intelligence alliance comprising Australia, Canada, New Zealand, the United Kingdom and the United States was trying to ban Huawei’s 5G technology. Oxford University recently banned R&D projects with Huawei.

US vs China: a new Cold War?

Other aspects of this offensive are: accusations of spying and hacking; allegations about treatment of Muslims in Xinjiang; support to separatist politicians in Taiwan; attacks on Chinese investments in Africa and elsewhere as ‘debt diplomacy’. China is targeted for supporting the ‘wrong’ regimes (e.g. Venezuela). Recently Vice-President Pence even claimed: ‘China has initiated an unprecedented effort to influence American public opinion, the 2018 elections, and the environment leading into the 2020 presidential elections…’ The evidence for which was one advert opposing the trade tariffs in one magazine.

However, Trump, like Obama, faces obstacles in carrying through this 360-degree campaign against China. The US is far from out of the Middle East and Trump has stepped up US involvement in Yemen. The US is also extensively engaged in many unstable African states. Despite Trump’s own preference for a détente with Putin’s Russia, this has not been delivered against opposition within his administration and the Pentagon. Army chief-of-staffs warn that the US military remains over-extended globally and even the large budget hike cannot allow it to upscale sufficiently to believably challenge China and without full-blown retreats elsewhere.

But, even if obstacles remain to the launch of a full-blooded Cold War with China, there is now no equivocation that this is the intent of major sections of the current administration and is at the heart of Pentagon strategising. The recently retired Commander of US forces in Europe, Lt Gen Ben Hodges, told the Warsaw Security Forum in October 2018, that he thought ‘it is a very strong likelihood that we will be at war with China’ within 15 years.[18]

And while tactics may differ, it is clear that in general this is a bipartisan policy and return of a Democratic administration would not eliminate this geopolitical confrontation.

Who was to blame for this?

Such a decisive shift in the international situation to one of confrontation and conflict between the two largest economies and most powerful countries in the world poses the question as to what or who was to blame for this?

According to the Western media from 2010 onwards this was exclusively a response to aggressive foreign policy actions and economic, trade and other culpabilities of the People’s Republic of China. This view has been virtually unchallenged in the mainstream media, academic journals and publications in the West.

Study of China’s actions throughout this period does not bear this out.

Firstly, many of the accusations made against China have been made without evidence. They are mere assertions. For example, the claims against Huawei are made without any substantiating evidence. It is purely that Huawei ‘could’, not that it does. And everyone knows that US tech companies effectively have to keep a backdoor open to the US security services.

Secondly many Chinese actions that have been cast as ‘aggressive’ were almost always in response to the new confrontational stance adopted by the US. Let’s take the example of the South China Sea. The US points to China’s steps to build naval installations on a number of islets in the South China Sea as evidence of its new aggressive stance. For many years however, China had held off taking any new steps to establish its presence in the Sea, in order to preserve the ASEAN compromise framework, despite the fact that other claimants did not hold back. China’s physical presence on these islets in fact only began to develop after the US had challenged China’s claims in the Sea at the 2010 meeting of ASEAN and particularly after the stand-off at Scarborough Shoal and UNCLOS. By this point Vietnam for example already had installations on 21 disputed islets. Thus, when China built an airstrip on Fiery Cross Reef in 2015 it was used to justify US naval exercises in the area. But it was hardly mentioned that the province of Taiwan had long had an airstrip on Taiping Island, Malaysia on Swallow Reef, Vietnam on Spratly Island and the Philippines on Thitu Island. As China said: ‘We have simply repeated what everybody else was already doing.’[19]

And as regards trade, many of the accusations on trade or currency manipulation are either just false, or China made it clear it was prepared to take any reasonable action. For example, contracts that US companies willingly entered into for two decades and more, offering technology transfer for highly profitable deals in China, are post facto recast as having been unfairly forced upon hostage US companies. The claim that the burgeoning Chinese trade gap with the US is down to unfair Chinese trading practices or an undervalued RMB, ignores the declining competitivity of the US economy reflected in trade deficits not just with Chinese producers, but German, South Korean and Japanese producers as well. In reality China allowed the RMB to revalue by about 20% from 2007 onwards. It reduced tariffs on a range of Western imports, including soy and liquid natural gas. It stepped up action against intellectual property theft, both in the market and in industry. It bought up US debt.

Of course, China did and does refuse to meet many of the US’s demands. It will not entirely deregulate its financial system and banks, surrender state control over the national bank and the exchange rate of the RMB. China is not going to privatise the main state-owned companies, or end state-led investment into the economy, especially infrastructure and technology. It will not take any steps that would compromise its military security from attack.  

China has also rejected the US’s extensive conditions for lifting the tariffs, which included, inter alia: ‘China must lift all restrictions to US investment in China while agreeing not to object to any restrictions the US imposes on Chinese investment in the US; China must withdraw its appeal to the WTO on its status as a market economy and any other matter’ and ‘China must take no retaliatory action against new US tariffs or other restrictions on trade’. China also rejected that ‘compliance with the agreement should be monitored by the US, which might impose sanctions if it found China non-compliant’ and ‘to abjure its right to object to any such sanction imposed by the US’.

Martin Wolf – Financial Times chief economics commentator and no particular friend of China – said of all this: ‘…the idea that the US will be judge, jury and executioner, while China will be deprived of the rights to retaliate or seek recourse to the WTO is crazy. No great sovereign power could accept such a humiliation. For China, it would be a modern version of the “unequal treaties” of the 19th century.’

Thus, it is very hard to form any conclusion other than that the US has chosen to create a conflict with China; making impossible demands; provoking an arms race in the region; and picking fights that China did not want and had not initiated.

We then have to ask why?

Clearly the US feels threatened not by alleged aggression by China, but by the speed and scale of China’s catch-up with the West and with the US in particular. For the first time since it overtook Britain in the 1870s, an economy is emerging that – unless it can be halted – will imminently be larger than the US itself. The US views this possibility as an existential challenge to its hegemonic position in geopolitics irrespective of what China actually does.

Indeed, the speed of China’s development in GDP per capita terms has been astonishing. Following an initial take-off in the 1980s China’s GDP per head doubled in a single decade, whereas it took Britain six decades to achieve the same after the Industrial Revolution in the late eighteenth century and America five decades after the Civil War.[20]

China’s advance towards overtaking the US economy in absolute size and eventually in fundamental strength heralds the end of more than a century of American pre-eminence. This is not a small matter. No one living can remember a time when the US was not the largest economy. The last such transition in the modern world was when America itself overtook Britain in the 1870s.[21] Within 70 years the Pax Britannica – based on sterling and the gold standard – had yielded before US attempts to establish a Pax Americana and the dollar as the world currency. This transition also involved fending off other contenders, particularly Germany and in a different way Japan, and two bloody and costly world wars.

Given this history, contemplating such a shift leads to understandable anxieties about what the coming decades will bring. But it is clear that not only is China not seeking to replace the ‘Pax Americana’ with a ‘Pax Sinica’, but it couldn’t do so even if it wanted to.

Firstly, China strongly argues for a strengthened multilateralism, within which all nations are able to fully contribute and the ‘great powers’ seek beneficial compromises, not just in their own interests but in the interests of all. Xi Jinping, in particular, refers often to ‘the common future of humanity’ as the framework for how individual countries should think about their role in geopolitics. He argues that while all countries and nations are different, the decisive issue is that they all contribute in different ways to the richness of humanity as a whole and have to be facilitated to do so. This approach, and the steps that China promotes like the Belt and Road Initiative, and the Asian Infrastructure Investment Bank (AIIB), breaks from the underlying ideology of the ‘Pax Americana’, which was to put US and Western interests first, and instead proposes a real multilateralism that addresses the interests of all.

Secondly, the situation in the world is entirely different from 1945. In 1945 the size and scale of the US economy made it not just primus inter pares, but the absolutely dominant power in the newly emerged imperialist world of the post war era. 1945 saw the US the victor in a global struggle which had left its economy larger than the sum of all 29 countries of Western Europe as well as Japan, Canada, New Zealand and Australia put together; and only marginally smaller than all these and the USSR.[22] Its share of industrial production was even greater. This gave it an unprecedented advantage from which to embed its interests and leadership in the post-war political and economic settlement.

There is no possibility whatsoever of a similar Pax Sinica replacing this. China may be on the verge of overtaking the US economy in absolute size (if it hasn’t already), but it is not, in any scenario whatsoever, about to become bigger than the US and the next 28 largest countries in the world taken together. In other words, not only does China in no way aspire to create a Chinese dominated world order of the type imposed by the US in 1945, but it is in no position to achieve this even if some megalomaniac fantasy of this type was lurking unspoken – which it is not.

The inevitable end of the Pax Americana will either lead to conflict and chaos or to a new, more advanced multilateralism, backed and driven by a number of countries coming together around the common interests of humanity. China is fighting for the latter. We can’t look into a crystal ball and see how all this pans out, whether for good or bad. But what is certain is that the confrontation the US has picked with China is not set to end soon and will determine much of the shape of the next decades.

Dirk Nimmegeers translated Jude Woodward’s book into Dutch.

[1] See Chapter one

[2] See Chapter four

[3] Remarks Of President Donald J. Trump – as prepared for delivery, Inaugural Address, 20th January 2017, Washington, DC. Available at https://www.whitehouse.gov/briefings-statements/the-inaugural-address/ (Last accessed 8^th August 2018)

[4] President Xi’s speech to Davos in full, World Economic Forum, 17^th January 2017, https://www.weforum.org/agenda/2017/01/full-text-of-xi-jinping-keynote-at-the-world-economic-forum (last accessed 12th September 2018)

[5] Costa, R. ‘Bannon calls Trump’s speech “Jacksonian”’, 21^st January 2017, Washington Post, https://www.washingtonpost.com/local/2017/live-updates/politics/live-coverage-of-trumps-inauguration/bannon-calls-trumps-speech-jacksonian/ (last accessed 3^rd August 2018)

[6] Wolf, M. ‘Donald Trump and Xi Jinping’s battle over globalisation’, 24^th January 2017, Financial TImes

[7] McMaster, H. R. & Cohn, G. D. ‘ America First Doesn’t Mean America Alone ‘, 20^th May 2017, Wall Street Journal

[8] P. Anderson, ‘Imperium and consilium’, New Left Review, 83, Sept–Oct 2013, p. 43

[9] ‘CPC advocates joint building of a clean, beautiful world’, China Daily, 18^th October 2017, http://www.chinadaily.com.cn/china/19thcpcnationalcongress/2017-10/18/content_33404676.htm (last accessed 4^th September 2018)

[10] For Shanghai Cooperation Organisation see Chapter 15

[11] C. Putz, ‘‘A West in crisis, and East rising?’, the Diplomat, 12 June 2018; K. Calamur, ‘Has the Western world started shunning America?’, The Atlantic, 7^th June 2018

[12] Reuters, ‘Japan’s Abe tells paper that relations with China are back on ‘normal track’, CNBC, 1^st September 2018, https://www.cnbc.com/2018/09/02/japan-pm-abe-says-relations-with-china-back-on-normal-track-paper.html (last accessed 8^th September 2018)

[13]  Xi, J. (2017, 17 January). Shoulder the Responsibilities of Our Time and Promote Global Growth Together. In J. Xi, The Governance of China Vol.2 (pp. 519-532). Beijng: Foreign Languages Press.

[14] ibid.

[15] Xi, J. (2014, 23 March). Follow the Trend of the Times and Promote Global Peace and Development. In J. Xi, The Governance of China (Kindle Edition) (pp. Location 3972-4094). Beijing: Foreign Languages Press.

[16] Summary of the 2018 National Defence Strategy of the USA, ‘Sharpening the American military’s competitive edge’, January 2018.  https://dod.defense.gov/Portals/1/Documents/pubs/2018-National-Defense-Strategy-Summary.pdf

[17] Figures from Stockholm International Peace Research Institute, constant 2016 dollars. China’s defence spending has been rising by about 10% a year, meaning its likely spending in 2019, when the US will spend $718bn, will be around $275bn

[18] V. Gera, ‘Retired US General says war with China likely in 15 years’, Associated Press, 24 October 2018, https://www.apnews.com/fe7595bd59414c6fa27f8b497821f0a5

[19] T. Mitchell, T. and G. Dyer, G., ‘US military flight over South China Sea escalates tensions’, Financial Times, 21 May 2015.

[20] Maddison, ibid., Tables 1c and 2c. (Later, during the Second World War, 1939–45, US per capita GDP doubled in five years, but this was not sustained.).

[21] A. Maddison, A., The world economy: a millennial perspective, Volume 2: Historical statistics, OECD, Paris, 2006. Tables 1b and 2b.

[22] Maddison, World economy, Vol. 2. 1945 GDP (measured in 1990 Geary Khamis dollars): US GDP $1.65tr; total GDP of other countries mentioned (ex. USSR) $1.37tr; inc USSR $1.70tr.

Can China do much to fight back against the power wielded by the US in the world economy? At first sight, that looks unlikely. China is big, but world trade is conducted in dollars, and the US has economic, political and military influence across the globe. The usual result of a tally of US might is that its position as hegemon is unassailable. But that would overlook how measures of its strength depend upon the world staying in the form that US power has created since 1945. If it doesn’t, then these will not count for as much. As one might expect, China has been responding to US attacks, and the outcome is likely to foment a split in the world economy.

——-

Imagine you wanted to travel from one city to another, but the train company wouldn’t sell you a ticket. Neither would the bus company. Then you were not allowed to buy or hire a car. And anyone who sold you or lent you a bicycle would be fined, or would face imprisonment. With due allowance for analogy, that is similar to what has happened to Cuba, Venezuela, Iran, North Korea and anyone else that the US does not like.

Woe betide you if you are on the wrong side of the US. Then you will find it very difficult to ‘travel’ in the world economy, that is to have any trade or financial dealings. It is not only the sanctions the US imposes; these are also followed to varying degrees by its allies in Europe, Japan and elsewhere. Could the same thing happen to China? It already has, but so far only to a limited extent.

I begin by discussing important dimensions of US power in the world, with a focus on the economic, commercial and financial aspects. I will not deal with the mountains of US weaponry and its means of intimidation with worldwide military bases, although these are significant. The remainder of the article deals with how the rise of China is reshaping the world economy and acting as an alternative focal point to the US.[1] Many countries are paying attention to this, even if the ‘western’ powers do not like it.

Economy & trade in the US-China balance

In the past few years, the Trump-led US administration has stepped up anti-China moves. Even if Trump does not get re-elected in November, this direction of policy is not likely to be reversed by the Democrats. We have seen higher tariffs on China’s exports, attempts to block its companies from receiving any US-made (or designed) products, particularly in the technology sphere, as well as pressure on US allies to exclude Huawei and other important Chinese companies from their domestic markets on supposed ‘security’ grounds.[2]

China’s importance in the world economy means that these exclusion tactics cannot easily be extended. Although the US administration has trumpeted, so to speak, a new objective to cut China out of the supply chains that its big corporations have profitably been using for decades, even the ‘great again’ America must know that this would take many years to achieve.

The US is the world’s biggest economy. With a population of some 328 million people, its GDP in 2019 was $21,439 billion. China has a much bigger population of around 1.4 billion people, but a smaller GDP, estimated at $14,140 billion. China is nevertheless number two in the world, and would be a little bit closer to the US when Hong Kong’s $373bn is added to the mainland China number. Both countries have huge domestic markets of interest to foreign companies, and each has a relatively small volume of international trade when compared to GDP, giving their domestic economies some insulation from the vagaries of the world market. China and the US are the biggest two global exporters and importers of goods, but China is far ahead on exports and the US leads in imports.

A Bank of England report included an interesting chart of the international trade in goods, showing how China was bigger than the US in trade with Asia and South America, and the US was bigger than China with the rest of North America and with Europe. Unfortunately, Africa was left out of account in this chart, but China’s direct trade with Africa in 2019 was more than three times larger than that of the US.

China’s importance in international goods trade, 2018

The trade pattern shows there are already different relative strengths of the two countries in relation to the rest of the world. Geography goes some way to account for that difference, but one also has to take note of how US companies export from outside the US – including from China – and that many products from China will contain US components. China has a far smaller volume of foreign direct investment and ownership of foreign companies, so its role in world trade is overstated when compared to the US by this simple country-to-country trade picture.

FX power plays

US economic power in the world is shown most easily in the foreign exchange market. This comprises a multitude of transactions, usually across borders, for goods, services and flows of money to buy and sell equities, bonds, commodities, real estate and so forth. Most internationally traded commodities, like oil, copper, wheat and gold, are priced in terms of US dollars, as are many industrial goods like aircraft and chemicals, let alone weapons and illegal drugs. Many countries also have their own currencies directly tied or more loosely linked to the dollar, nearly all central banks hold reserves of US dollar-based securities, and all international companies have dollar bank accounts. As a result, the US dollar is involved in 88% of all exchanges between one currency and another on the international market.[3]

This gives the US government more power than you might think. If a person or a company receives money from selling, or pays money to buy something, then that money has to shift between the bank accounts of the buyer and the seller. When that money happens to be US dollars, the transaction has to go through the US banking system, perhaps indirectly, even if both the buyer and the seller are not located in the US. So, if the US government does not like you, your company, or your country, it can block your ability to use the US banking system.

That would exclude you from the usual channels of world trade and international business transactions. There may be other ways to avoid the dollar entirely and get a transaction done, but these will likely be more costly. And they will also run the risk of the US government using other means of intimidation – for example, when it levies a fine on any bank that processed a deal with you and threatens to stop that bank from operating in the US. This is one way in which the political objectives of the US administration are advanced by its economic power and influence, with no guns needing to be fired.

The centre of gravity

Not only is the US dollar by far the most widely used global currency, the US also has the biggest markets for financial securities, ie for bonds, equities, futures and options contracts.[4] US markets are the centre of gravity for world capitalism. Even though the bulk of transactions in such markets are done within the US itself, the linkages in the global system mean that they filter through quickly into other countries. That is why financial news reports focus most on policy decisions by the US central bank, the Federal Reserve, and the ups and downs of the US stock markets usually have knock on effects elsewhere.

The New York Stock Exchange is the biggest equity market by far, with a capitalisation of nearly $23,000bn at the end of 2019. Nasdaq, also in New York, was the second largest, at nearly $11,000bn capitalisation. Next in line was Japan’s Tokyo Stock Exchange, at a mere $5,700bn, with London at less than $5,000bn.

It is only when China’s three stock exchanges, in Hong Kong, Shanghai and Shenzhen, are taken together that they come anywhere near the US. At the end of 2019, their total market capitalisations amounted to around $10,500bn. However, the Chinese exchanges do have a slightly higher number of corporations listed, some 5,900 compared to a little over 5,300 in the two US markets.[5]

The reason for considering these things is that they are not narrowly financial. For example, a company’s market capitalisation – the total value of its shares – indicates the potential leverage the company has in the broader market. A higher capitalisation means that it can more easily borrow funds from banks, issue bonds itself to get funds, or use its own shares as a means of payment in its takeovers of other companies. Microsoft and Google stand out here, each having done more than 200 takeovers of actual or potential rivals, or of companies that will help them build up a monopolistic position in the market.

It is mostly US companies that figure at the top of the rankings for market capitalisation. In recent years, it has been the Big Tech corporations like Apple, Amazon and Microsoft, each having a number over $1,000bn. China’s Alibaba and Tencent are the only two non-US companies in this top rank, but with valuations of half that of the largest US corporations.

Financial markets magnify US economic power. Not only does the US stock market present its corporations with many billions of market value, that value is also denominated in US dollars, a currency readily acceptable in most of the world. In global terms, it is ‘real money’. Corporations wanting to takeover another will find it easier to do so with US dollars than euros, Japanese yen or sterling, let alone Australian dollars or Norwegian kroner. Apart from its size, liquidity and access to funds, that explains the attraction for companies of listing on the US equity market.

China and the US dollar

The US authorities run access to the dollar, especially the Treasury and the Federal Reserve central bank. So why is it that China, seen by the US as its most dangerous antagonist, has let its economy be dominated by dollars?

First, if China wanted to operate in the world economy, it had little choice 30-40 years ago but to accept the existing structure of world trade and finance. Asia’s economies in particular were, and still are, bound up with the US dollar, through close ties of their currencies and through flows of trade, investment and loans. China has also for a long time followed a policy of keeping its domestic currency relatively stable versus the dollar, even in the wake of the severe crisis that hit emerging markets in the late 1990s. This, along with capital controls, helped keep its economy growing steadily by curbing one source of potential instability.

Second, one method of limiting the impact of possible capital flight is to build up foreign exchange reserves. If foreign investors have assets in China, whether through direct investment in factories, in buying equities or debt securities, then little could be done about the domestic effect on market prices if they sold those assets. But this would not lead to a serious shortage of funds or a collapse of the currency if China’s central bank could sell dollars it already had to counter these flows.

This was an important rationale behind China boosting its official foreign exchange reserves from just $5bn in 1994 to a massive $3.84 trillion by 2014. Some reserves were shifted into state-sponsored purchases of foreign assets (often done using US dollars), some into covering the bad loans of domestic banks, some into offsetting downward pressure on the value of China’s currency in the FX market.

That has still left what may look like an extravagant volume of reserves, totalling $3.1 trillion by end-June 2020. However, such funds have been required on a ‘safety first’ policy.

Consider that China has received a large volume of foreign investment inflow. By the end of 2018, the cumulative amount was $2.8 trillion of direct investment in China, $0.7 trillion in equities and $0.4 trillion in China’s debt securities. Not all of this near-$4 trillion is at risk from capital flight – a chunk of it will also come from Hong Kong – but how much might be vulnerable is unknown. China also has foreign assets of its own that could be sold if necessary: $1.9 trillion in foreign direct investments, and roughly $0.5 trillion in foreign equity and debt securities. This reckoning puts in perspective what otherwise looks like absurdly big foreign exchange reserves.

If anyone thought that a country’s FX reserves had much to do with its international trade in goods and services, the previous figures should put paid to that. Or contrast what happens when you are not as much at the mercy of a potentially destabilising flow of funds. The US has foreign exchange reserves of just $129bn, less than 10% of China’s.

China’s dollar holdings at risk?

Close to half of China’s foreign exchange reserves is held in terms of US dollars,[6] from bank accounts to US Treasury bills and other interest-bearing securities, to gold.[7] The rest is held in other currency denominations, especially the euro. Not just the central bank, but Chinese state agencies, as well as non-state companies and investors, also hold US securities and dollar bank accounts, as well as having dollar liabilities. Could the US government seize China’s dollar assets, or limit China’s access to them?

If seizure of China’s assets looks implausible, consider what has happened to Venezuela’s gold reserves held in the Bank of England’s vaults, or to payments that have long been overdue to Iran! The US could, in principle, also say that the security certificates owned by China – often held in the big US-based custodian banks like Bank of New York Mellon, State Street, JPMorgan Chase, etc – are now invalid pieces of paper, or computer registered items, which belong to an enemy state and now will not be recognised. That would be an extreme measure, also undermining the US ability to attract further funds and investment, so it is unlikely. Such things are usually only done to ‘little’ countries to show them who is boss. But it remains a risk that China’s policy has to manage.

Over recent years, there has been lots of speculation that China could reduce its dollar risk by selling the Treasuries and other US securities that its government and companies own. This would be a foolish thing to do quickly on a large scale, since the prices of the securities could fall in response.[8] Much more importantly, it would also remove the easy access to US dollar funds that China has, and will continue to need, given the dollar-dominated global financial system. What China’s authorities have done instead is to cut back new dollar exposure and quietly offload dollars in the market.

A more comprehensive way of reducing the risk that China faces from US sanctions would be to build another economic, commercial and financial network. Over the past decade, that is exactly what China has been doing.

Your money is no good here

Almost all of the measures used to highlight US economic power depend upon a link to the dollar-based system, for example, the dollar’s domination of the global FX market, the huge capitalisation values of US corporations, and the scale and influence of US financial markets. But what if something shakes the foundations of this power and the global system begins to take on a different form?

Up to now, China’s rise has been evident in production and trade figures. By comparison, its development in the more financial sphere has been limited, but let’s take a look at some of these numbers and what they mean.

The US dollar rules the FX system, with 88% of the $6.6 trillion daily turnover involving the dollar on one side of the transaction. By comparison, even the euro is only at 32%, and China’s currency, the renminbi, is at just 4%.[9] Yet, 38% of the total volume of FX trading is between the dealing banks themselves, and 55% is between banks and other financial institutions, including 9% with hedge funds and other speculators. Only 7% of FX trading is with non-financial firms! What would happen if international financial dealing were less important, especially in US securities? This calls into question the solidity of the dollar’s pre-eminent position in FX markets and in the world at large.

A similar thing applies to the financial power of big US corporations. For example, with a market capitalisation of around $1.6 trillion each in mid-July, it would seem that Amazon, Apple and Microsoft can do pretty much what they like: buy up any budding rival company, run a predatory pricing policy or extend their monopolistic positions further in other ways. But just as a company’s share price can collapse when its prospects no longer look as rosy as before, so can its apparent financial power if it is not able to operate as it wants and finds its markets cut off.

So far these things have not affected the big US corporations very much, although they have faced more constraints than they would like in China’s domestic market. They have not been able to compete well with the domestic champions Alibaba (e-commerce, payments systems, finance), Baidu (a search engine) and Tencent (various operations, from video games to e-commerce, to finance). The boot has instead been on the other foot, as China’s big companies have been edged out of the US and face restrictions in the markets of US allies. Nevertheless, that could change if the US-dominated structure of world markets changes, a development that is well under way.

World in flux

China has prepared itself against US hostility for years. That didn’t take a lot of strategic insight, given the numerous reports to the US Congress complaining about the Chinese ‘threat’ – ie the threat to US hegemony in the world economy, not simply a military calculation. Three international projects have been key: the ‘One Belt One Road’ project launched in 2013, now called the ‘Belt and Road Initiative’ (BRI); the Asian Infrastructure Investment Bank (AIIB), launched by China in 2013-14, and the BRICS Development Bank, now called the New Development Bank (NDB), proposed in 2013-14 and starting up in 2015.

The NDB is headquartered in Shanghai, and initially had enthusiastic support from all its founding members, Brazil, Russia, India, China and South Africa (hence BRICS). They account for 20% of world GDP and 40% of the world’s population, and the NDB looked like it was going to become a big player in development finance. But little activity seems to have taken place in the last couple of years, although there have been important, separate bilateral deals between China and Russia and between China and Iran.[10]

At least partly, this has been due to renewed tensions between India and China, the latest being over their shared border in the north-west of India and India’s ban on the use of 59 Chinese phone apps, including TikTok. The election of Bolsonaro in Brazil, who has criticised China’s investments in the country, is another factor. More importantly, in recent years both India and Brazil have come more under the influence of the US and more anti-China in their policy stance. Bolsonaro has even tried to emulate Trump in this regard, as he has done in his disastrous handling of the coronavirus pandemic.

The Asian Infrastructure Investment Bank (AIIB) has had a more active time, and it now has more than 100 member countries. Not surprisingly, the US did not join, but several of its close allies did, including the UK and Australia. It is a moot point whether the latter were defying the US, or whether they saw joining as a means of keeping an eye on what China was up to – apart from also not wanting to be on the outside to tender for any new contracts. China accounts for nearly 30% of the AIIB’s capital of $100bn, and for 26% of the voting power. Since 2016, this bank has financed a number of power, energy and road projects in the Philippines, Bangladesh, Pakistan, India, Indonesia, Egypt, Turkey and elsewhere.

Belt and Road

The Belt and Road Initiative is a much more serious plan from China. It has involved more than 130 countries in its projects, and some 30 international organisations. The basic idea is to develop ports, shipping lanes, roads and other infrastructure, including high voltage electricity grids, in a vast enterprise spanning the next 30 years.

The plan’s scope can be seen in the following image, where its routes run all around Asia and Europe and extend into East Africa. It could be considered the beginning of a single market area, but it is nowhere near that yet. Although trade, investment and transit arrangements have been made with other countries along the routes, those countries may often have a cautious approach to dealing with China.

Where the Belts and Roads go

Source: Ewa Oziewicz and Joanna Bednarz, ‘Challenges and opportunities of the Maritime Silk Road initiative’, October 2019

Europe, in particular, is wary. Not only because the relevant powers are not used to a ‘developing country’ having so much leverage, but also because they have been within the US sphere of influence. Yet they are growing worried about that, given Trump’s unilateralist ‘America First’ approach that has also targeted their industries for extra import tariffs, and their fear of the role of US Big Tech corporations. While they have joined in some moves to curb Chinese companies, this has been only to a limited extent so far.

As the political leaders of the European Union, Germany and France will have to make up their minds which way to jump. Yet that process will take some time to play out. For the time being, they are working on trying to cohere the EU itself as the UK leaves, and they hope that the EU can play the role of being an independent actor in the world economy.

The UK, ex-EU and ex-much else, is far more tied to the US. It has legions of political figures and economic interests integrated with the Anglosphere global set up, from the UN Security Council, to military cooperation, to the ‘Five Eyes’ spy network, to the rules applied to finance and trade at the BIS, IMF and WTO, to deluded hopes for a special Brexity relationship with the US in the future. These things will weigh on British decision-making, and the resulting disarray in and confusion of an arrogant imperial power should be amusing to observe.

The Belt and Road project is very important for China, and opponents can easily cast it as simply a tool with which China secures safe routes for its exports and imports. It has also had negative media coverage because of signs of unequal deals, projects that have led to large indebtedness for the country concerned, or projects in which a commercial port is claimed to be a cover for a potential Chinese naval base (as in Sri Lanka), or potential Chinese takeover and ownership when the debt cannot be repaid or serviced.

Evidence I have seen points to a more positive assessment. At least some of the problems with projects have been due to local corruption as much as to any Chinese misdemeanour. It is also worth noting that China’s infrastructure development plans often include building schools and hospitals as well as improving energy supply. The BRI should act to integrate more isolated areas into the world economy, greatly speed up logistics, travel and transport, and help these regions grow. It is not in China’s long-term interests that cooperating regions and countries become mere servicing wastelands.

The Xinjian crossing

The BRI’s routes traverse areas in which US imperialism has long sought to gain influence, many of which were formerly inside the USSR – including Kazakhstan, Uzbekistan, Turkmenistan and Georgia – and also Iran and Russia itself. One area along the route that has been prominent in the news media recently is Xinjiang in north western China.

Xinjiang, or to give it the official title, the Xinjiang Uyghur Autonomous Region, is home to around 25 million people, of which 45% are of the Uyghur ethnic group, and many of these are Muslim. It is China’s largest natural gas producing region, and has been the locus for many attacks by Islamic separatists, especially since the 1990s. Plausible reports claim that this was a ‘blowback’ from previous Chinese arming and training of Islamic guerrillas to fight Russia in Afghanistan in the 1980s. China, along with Pakistan, Saudi Arabia and others, cooperated with the US CIA in this period, and trouble brewed for China in this region when the guerrillas came home.

The US, UK and other western powers have a long history of using Islamic militants to do their dirty work of political disruption and destabilisation, even though it often comes back to bite them. Just think of Osama Bin Laden and the support the US also gave his organisation to attack the Russians in Afghanistan. Or the British support for Islamic militants in Egypt against Nasser and in Libya against Gaddafi.[11] It is therefore no surprise that the US has been heavily involved in promoting Uyghur separatists, and that western news media have been full of stories about Chinese ‘concentration camps’ and brainwashing centres for Uyghurs.

BRI & the Xinjiang Region

Source: World Affairs blog, see footnote 12.

It would take too long and be too off topic to cover this in more detail, but my basic view is this. China has not been kind to separatist forces in Xinjiang and may well have clamped down on them harshly. It has also encouraged Han Chinese to move into Xinjiang. But there is no evidence of actual or cultural ‘genocide’ of Uyghurs and the region has even had some autonomy from strict regulations imposed elsewhere in the country, for example, on population and family policy. The western media view of all this is readily available; for an informed alternative view, I give some sources in a footnote.[12] Surely, anyone with any sense would see that there could not possibly be a ‘Save the Muslims’ motive behind the western propaganda about Xinjiang.

Hong Kong less important for China now

As the US anxiety and near-hysteria about China has grown, another opportunity has arisen for mischief – in Hong Kong, especially since early 2019. There have been widespread protests in this ‘special administrative region’ of China against the introduction of laws that would increase mainland China’s authority and potentially suppress dissent and opposition to government policy. Although led principally by students, the protests clearly had support from a large section of the population of Hong Kong.

Beijing was obviously none too pleased with this, and its paranoia alarm bells rang loudly when some demonstrators carried US flags and called for the US to impose sanctions on Hong Kong to force China to drop its proposals. (The US has now done it.) With the CIA-backed National Endowment for Democracy supporting the protests and with Joshua Wong, one of the leading students, cosying up to arch reactionary and regime-change interventionist, US Senator Marco Rubio, the stage was set for a Chinese clampdown.

China’s political system is authoritarian, but one should not fall for the hypocrisy of western powers lamenting the threat to a tradition of democracy in Hong Kong. Prior to UK talks with China in 1984 about the handover of Hong Kong in 1997, there was no sign of democracy, but instead an oligarchic Legislative Council, an advisory body to the British Governor. Full elections to this Council only began in 1995. So ‘democracy’ began to be introduced only just before Britain was going to lose its colony after 99 years.

What will be China’s policy towards Hong Kong now? To answer this question, it is worth noting the role it has played in relation to China.

When it was a British colony, Hong Kong specialised as an entrepot centre in Asia, with a large port operation and a big financial sector. As China grew as a global production base, particularly from the 1980s, Hong Kong also thrived as the ‘western’ gateway into China, with booming cross-border deals. In turn, China used Hong Kong to gain experience of international markets, from how best to run a port to how to manage banking and finance.

Hong Kong is now less important for China than it might seem. Its GDP is less than 3% of mainland China’s, and its 7.5 million people could be seen as barely a rounding error compared to China’s total. It is nevertheless politically inconceivable that China would allow Hong Kong to become fully ‘independent’ or to secede. In the event of continued protests about rule by mainland China, a much more likely policy would be to slowly run down the remaining economic reliance China has on Hong Kong. This is no doubt on the minds of some Hong Kong residents, not all of whom are anti-Beijing.

Hong Kong’s population has significantly higher living standards than the average in mainland China, and US dollar millionaires make up a surprising 7% of the population. Such factors will have influenced the protest movement in Hong Kong, and there have also been many signs of locals resenting mainlanders. Some of the latter have been attacked for supposedly being Beijing loyalists; others have faced opposition from locals who felt their presence was driving up prices and rents. I think that fear of an economic ‘levelling down’ is at least as significant a factor in the protests as any call for democratic rights.

Top 10 World Container Ports, Volume in millions of TEU *

Source: Worldshipping.org. Note *: The data represent total port throughput, including empty containers. A TEU is a ‘Twenty-foot Equivalent Unit’. The dimensions of one TEU are equal to a standard 20-foot shipping container.

One way of judging the ability of China to sideline Hong Kong, if it wants to, is by looking at its importance as a port. A list of the top world container ports – containers are critical in the trade of goods – has mainland China with six in the top 10. Hong Kong’s port is large, but is ranked number seven and is only roughly half the size of Shanghai’s at number one. Shenzhen, at number three and also bigger than Hong Kong, is only around 15 kilometres from Hong Kong (although a bit further to travel by sea!).

Out of control

Rivalries in the world economy can bring unexpected results, especially when a former underdog can now pro-actively resist. The world order is no longer entirely one where, as Bob Dylan put it, ‘You’re dancing with whom they tell you to, or you don’t dance at all’. How far China is able to build stable alliances for an economic area that limits US interference, and whether it too becomes oppressive, remain to be seen. But in the meantime it has offered many countries an alternative to the rich country model of development, one that has left poor countries poor.

Prospects for the Anglosphere powers are not good. Political idiocy born of generations of arrogance now adds to their difficulties in navigating a world that is changing increasingly outside their control. Examples of their recent responses to Chinese technology sum up their problem. China’s Huawei produces very good, and cheaper, 4G and 5G products, including infrastructure and smartphones, and ByteDance also has a popular media app, TikTok. Instead of saying, ‘we have something even better’, the US and others respond by claiming, with no evidence, that they pose a security risk and that Chinese products should be rejected.

By contrast, Germany, the most productivist of the European powers, has shown more enthusiasm for China-led developments than others. The Belt and Road Initiative already has an important outlet in Duisburg, the world’s largest inland port, where it is the first European stop for 80% of Chinese trains:

“Every week, around 30 Chinese trains arrive at a vast terminal in Duisburg’s inland port, their containers either stuffed with clothes, toys and hi-tech electronics from Chongqing, Wuhan or Yiwu, or carrying German cars, Scottish whisky, French wine and textiles from Milan heading the other way.”[13]

Duisberg’s main problem seems to be that ‘for every two full containers arriving in Europe from China, only one heads back the other way, and the port only earns a fifth of the fee from empty containers that have to be sent back to China’.

At the other end of the line, another German company, BMW, has praised China’s technical know how:

“The auto industry is undergoing a major transformation driven by technological development. In the midst of industrial upgrading and transformation, we need to keep an open mind and to collaborate with outstanding Chinese innovation powerhouses.”[14]

To say the least, these things suggest that China’s growing importance in the world economy will be difficult for the US to curb.

Tony Norfield, 14 July 2020

[1] Other articles on this blog have also analysed US-China relationships, including one from May 2011, looking at the growing strategic tensions, one in April 2019 on the economic and technology competition and another in September 2019 on the relative positions of the major powers. I cover the coronavirus pandemic here.

[2] The US makes much of the links, actual or alleged, between top Chinese companies and the Chinese Communist Party, the military, etc. For reasons that only an evil commie would speculate upon, it seems to forget that Amazon, Google and myriads of other US corporations, not just the arms producers, derive a lot of funding and regular contracts from the US government, the CIA and the Pentagon.

[3] See the article FX & Imperialism on this blog, 7 October 2019, for further details of the role of the US dollar compared to other currencies.

[4] Although London is the biggest market for dealing in foreign currency and for interest rate swaps.

[5] Both totals will include some companies listed on more than one exchange. Nearly 20% of companies on the two US exchanges are foreign companies; there is no comparable figure available for China, but it is likely very much lower.

[6] China does not usually disclose the currency composition of its FX reserves, but China’s SAFE has reported that the dollar component of reserves fell from 79% in 1995 to 58% in 2014. It will have fallen further since 2014, and is likely now a little under 50%. The absolute volume of dollars held will have risen up to 2014, given the big rise in total reserves, but will have likely fallen since.

[7] Over the past 10-15 years, China’s central bank has boosted its gold reserves from 600 tonnes to 1,917 tonnes. At $1,700 per troy ounce, this amounts to ‘only’ $106.5bn and a little over 3% of the reserves total at present.

[8] I say prices ‘could’ rather than ‘would’ fall because of the huge size of the US interest-bearing securities market, especially for shorter-term US Treasuries and agencies, which would limit the response to any selling by China.

[9] FX deals involve two currencies, so adding the shares of all currencies traded would give 200%, not 100%.

[10] Going against US sanctions, in July 2020, China and Iran have drafted a deal covering trade, investment and military cooperation. See New York Times, ‘Defying U.S., China and Iran Near Trade and Military Partnership’, 11 July 2020. This Iran-China cooperation has been going on for several years. Notably, most of the payments between China and Iran, if not all, exclude the US dollar.

[11] For the less well known British escapades in this respect, see the book by Mark Curtis, Secret Affairs: Britain’s Collusion with Radical Islam, 2010.

[12] See here, and for the more official Chinese responses, see here and here.

[13] The Guardian, Germany’s ‘China City’, 1 August 2018.

[14] Comment from Jochen Goller, president and CEO of BMW Group Region China, Asia Times, 6 July 2020.