China’s rise and the threat of a new cold war

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The phenomenal growth of Chinese military power is challenging the post-war hegemony in the Pacific, but it remains dependent on the US for its future economic stability, writes Adrian Budd

The Phase One Trade Deal signed by Donald Trump and Chinese Vice Premier Liu He in January marked a cease-fire in the twoyear tariff war between the US and China, the world’s major economic powers. The US reduced tariffs on certain Chinese exports while China agreed to increase imports from the US and improve protection of US intellectual property rights. Since then US-China relations have unravelled rapidly and are at their lowest ebb since the Tiananmen Square massacre in 1989.
Recent months have witnessed mutual recriminations over Hong Kong, Huawei and Covid-19. Both sides have expelled journalists and closed minor consulates (Houston and Chengdu). Each has imposed limited sanctions on the other and passed laws directed against the interests of its rival. The conventions of diplomatic language have given way to bellicosity. The deterioration has been so sharp that the West has even complained about the brutal abuse of the human rights of the Uighur Muslims in Xinjiang, on which it had been largely silent for two years. In recent weeks academics, journalists and foreign policy advisers from both sides have warned of the threat of war. These tit-for-tat actions were triggered by China’s imposition of Hong Kong’s national security law.
Conscious of the key role of students in previous protests, particularly in Tiananmen, and fearing a contagion effect, Beijing’s rulers aim to crush protest by linking it to “the offences of secession, subversion, organisation and perpetration of terrorist activities, and collusion with a foreign country”. Within a few days Trump signed the Hong Kong Autonomy Act and an executive order ending Hong Kong’s preferential status as a trading city. Senior Chinese political and business leaders now face sanctions and banks could have part of their dollar assets frozen. China responded in kind almost immediately. US actions may be partly explained by Trump’s narcissistic personality.
His reelection bid has been blown off course by his calamitous mishandling of the Covid-19 pandemic. And, if the hawkish John Bolton, Trump’s ex-National Security Advisor, is to be believed Trump has failed in his attempt to enlist Xi Jinping’s support for his re-election campaign. But while Trump may believe, like Louis XIV, that “l’etat, c’est moi” (“I myself am the nation”), for the wider US ruling class “l’etat, c’est nous” (“We are the state”). The immediate causes of the new hard line are rooted in longer term structural features of global capitalism. The US remains the world’s most powerful country, but its strategists are acutely aware that its relative power has been declining slowly for half a century.
Today, its chief rival is China, but the US is also conscious that its leadership of the West is no longer straightforward. From January to July, Britain’s Tory government faced intense US pressure to fully exclude Huawei from Britain’s new 5G network. Other US allies, including Japan and Australia, had already conceded and Canada has charged Huawei executive Meng Wanzhou (daughter of the company’s founder) with breaking anti-Iran sanctions and fraud. Washington claims that Huawei technology threatens Western security and that the firm is closely linked to the Chinese state. But the US is more broadly worried about China’s rapid technological development and the potential of its Made in China 2025 project.
This vast $300 billion industrial plan covers many high-tech sectors and is designed to close the technology gap with the West and reduce dependence on foreign technology. It also poses a long-term threat to US military leadership. On 20 July the Hong Kong newspaper the South China Morning Post asked “are ChinaUS relations drifting closer towards war?”. The threat of war was a constant theme of the paper throughout July. Neither side is mobilising for war, but there is deep anxiety that miscalculation or a knee-jerk reaction to an accident could propel the two into a limited conflict which would, via existing military agreements and guarantees, embroil all of Asia.
Recent US attempts to mobilise its allies behind US leadership against China should be seen against this background. Vice-president Mike Pence has used key speeches in October 2108 and October 2019 to paint a picture of China as increasingly “aggressive and destabilising”. At a virtual summit hosted by the Danish government in June this year Secretary of State Mike Pompeo said that China is “flagrantly attacking European sovereignty by buying up ports and critical infrastructure, Piraeus to Valencia”. He warned Europe that Chinese state-owned enterprise investments “should be viewed with suspicion. Europe faces a China challenge, just as the United States does”.
There is a whiff of the Cold War about US actions. One initiative, reminiscent of antiSoviet groupings, is the Inter-Parliamentary Alliance on China that was launched in June to “assist legislators to construct appropriate and coordinated responses” to China’s rise. Comprising over one hundred western parliamentarians, it is drawn mainly from the right and includes ex-fascists and neofascists. Twenty of its thirty UK members are Tories, while Labour’s four members are from the Blairite and anti-Corbyn right of the party. Its two US leaders, Senators Marco Rubio and Robert Menendez, are wellknown China hawks. US hawks are particularly exercised by developments in the South China Sea, which has emerged as the key site of military rivalry.
On 12 July a US State Department press statement ratcheted up the stand-off by claiming that the majority of China’s claims in the South China Sea are illegal. The New York Times concluded that the consequence will be, “more American military operations to push back Chinese maritime activity and sanctions on Chinese companies”. The risk of miscalculation and conflict will multiply as the US Seventh Fleet intensifies its activity in the region, where it routinely engages in freedom of navigation operations to demonstrate its naval power to both China and its own allies.
Far from being directed at Trump’s reelection, US actions in recent months are consistent with Trump’s National Security Strategy of December 2017. This states that competition and rivalry demand that the US, “rethink the policies of the past two decades — policies based on the assumption that engagement with rivals and their inclusion in international institutions and global commerce would turn them into benign actors and trustworthy partners. For the most part, this premise turned out to be false.”
China is the unnamed rival here. This echoes the thinking of another ex-Cold Warrior, Henry Kissinger. In 2012 he made the surprising claim that conflict between the US and China “is a choice, not a necessity”, but two years ago wrote that “from a historical point of view, China and the US are almost destined for conflicts.” Mirroring Kissinger, Yuan Peng, president of the governmentlinked China Institute of Contemporary International Relations think-tank believes that China should prepare for armed confrontation with the US.
Sections of the US strategic establishment frown upon Trump’s style and methods. Yet it is likely that his National Security Strategy has fatally undermined the long-standing belief that China could be brought into the US-lead world order on US terms. When China joined the World Trade Organisation in 2001, for instance, US strategists sensed a great opportunity. They believed that the greater exposure of China to external pressures would produce economic and political benefits for the West. Economically, it would provide a low-cost production base for Western firms and increase exports to China’s 1.4 billion people. It would also expose Chinese agriculture to more efficient Western producers which, some believed, might fundamentally weaken Chinese agriculture and provoke unrest. This, in turn, would be reinforced by the creation of a new middle class that might ultimately challenge Communist Party rule.
Instead, the Communist leadership has carefully managed the opening to the world economy since 1978, largely on its own terms. It has demonstrated that while facing the same sorts of class contradictions as Western variants authoritarian state capitalism could out-perform neo-liberalism. Transforming up to half-a-billion peasants into industrial workers, initially oriented on export markets, enabled China to make a gigantic leap from an economic also-ran to the second largest economy in the world. This entailed a second transformation as China became the major rival of the US in a global system of inter-imperialist rivalry.
Initially, Chinese leaders followed the advice of Deng Xiaoping, the architect of opening at the end of the twentieth century, to keep a low profile and not antagonise rivals and neighbours. But as China’s economic power has grown and its interests have extended globally it has, like earlier capitalist powers, become increasingly assertive. For two decades or more China’s foreign policy in the Asian region was based on cultivating a “good neighbour” image. This meant accommodation to regional alliances like the Association of South-East Asian Nations (ASEAN), despite its anti-Communist Cold War origins, and a willingness to expose its economy to investment and imports from its neighbours. But, by 2010, while not disavowing good neighbourliness, foreign minister Yang Jiechi was telling his ASEAN counterparts that “China is a big country and other countries are small countries and that is just a fact.”
Since then China has grown more powerful still and is now engaged in fierce regional rivalries, notably in the East and South China Seas. In the latter, where all the littoral states have competing territorial claims, there are regular armed clashes with China’s rapidly modernising and expanding navy. Chinese armed forces now pose a significant challenge to the US and its allies in Asia and, potentially, further afield. The US military response has been gathering pace. In 2010 President Obama and his Secretary of State Hillary Clinton announced a US pivot to Asia to contain the challenge of China. As the Financial Times argued at the time, you did not need to be a paranoid conspiracy theorist to say that US was trying to band-wagon the rest of Asia against China.
In subsequent years the US navy engaged in hundreds of joint exercises with regional allies in the seas around China. It has also strengthened its relations with India, longtime champion of non-alignment and cautious about US global power. Trump, Pence and Pompeo are intensifying US military activity around China. This is likely to continue whoever wins the November presidential election. The US military regularly simulates large-scale US-China conflicts, and according to former US military planner David Ochmanek a decade ago these simulations often ended in stalemate. Today, and in future-oriented simulations, they produce “clear-cut victories for China.”
We should, however, be careful not to over-state China’s power. In mid-July China announced sanctions against US arms manufacturer Lockheed Martin over its arms sales to Taiwan. But, as the South China Morning Post put it, Beijing “has far fewer choices to inflict pain on American businesses than Washington does against Chinese firms”. Even during the recent tensions, therefore, Xi Jinping wrote to multinational business executives promising to continue liberalising reforms and a further opening of China’s domestic market. China remains vulnerable to US pressure and its leaders understand that the support of US business leaders is vital if it is to remain a key base for global production. When sanctions against Huawei started, the firm increased its purchases of US chips by $18bn in one year.
This indicated that ready-made alternative suppliers could not be conjured up overnight, and also that US firms were happy to use loopholes in the sanctions regulations to supply China. But there is a longer-term danger to China in high tech. Taiwanese semiconductor companies are relocating production away from China, while Japan is offering huge support for its firms to do likewise. Although in its infancy, this so-called decoupling of the global economy poses a long-term threat to China in particular and underlines the degree to which it remains vulnerable to Western pressures. China’s relative weakness is also shown by Beijing’s worries that the US could limit its use of the dollar, the world’s major trading currency. China holds $1 trillion of US treasuries, a form of debt, and some commentators suggest that this could be used as leverage over the US.
This understates China’s dependence — should China dump US debt it would harm the US economy but deal a far more severe blow to China. And, unlike the US, China does not have long-established alliances with the world’s rich countries who could be expected to support the US, even if under duress. Indeed, in recent months China bought more US debt even as voices in Washington suggested that the US should disown some of its debts to China as compensation for its mishandling of the coronavirus crisis. China and the US are equally locked into a system of rivalry, but they are not equals. Xi Jinping’s much-discussed Belt and Road Initiative (BRI) underlines the problem China still faces as it tries to extend its power internationally.
The BRI aims to tie dozens of states economically to China, provide an infrastructure for its global exports, and provide an outlet for surplus capital unable to find profitable investment opportunities in China. The infrastructure is also potentially important militarily. Despite the fanfare surrounding a project that might eventually swallow up over $1 trillion, it has recently been criticised for charging above-market interests rates on loans and placing weaker recipients in debt bondage to China. Meanwhile, faced with China’s success in winning major infrastructure contracts globally, the US government has responded with increased support for overseas infrastructure projects via its International Development Finance Corporation.
It offers low interest rate loans of up to $1 billion and works with similar bodies in Japan and Australia. It is likely that the two projects will provide new sources of conflict in the future. Although less dominant than in the past the US remains the world’s major imperial power. It retains a wide range of power resources, including the reserve status of the dollar, the scale of its economy, its technological leadership, military might and system of alliances. China is also an imperial power and in a number of areas, chiefly economic, is well on the way to becoming a super-power. But its capacity to inflict damage on rivals, or to get its way in disputes, remains far inferior to that of the US. Socialists should expose and oppose US imperialism, but in doing so should not argue that a weaker imperialism provides a progressive alternative.
The logic of interimperialist rivalry that both China and the West are trapped in produces a permanent tendency towards conflict. The tendency may not result in actual military conflict for it to be labelled barbarism. Anti-imperialists are opposed to war and to the permanent preparation for war that necessarily accompany it. In a world of racism, economic inequality, hunger and all the other pathologies of capitalism, to side with either Beijing or Washington is a mistake. When the world is crying out for cooperation to produce a Covid-19 vaccine the success of one power over another should not be part of our calculations.