By Yilun Zhang
U.S.-China Trade Talks End With No Deal in Sight
Alexandra Stevenson
The New York Times, July 31
“American and Chinese negotiators finished talks on Wednesday with little progress toward ending a trade war that has shaken the world’s economic confidence and rattled markets.”
Huawei Says Its First-Half Revenue Jumped 23.2% Despite Political Headwinds
Saheli Roy Choudhury
CNBC, July 30
“China’s Huawei reported a 23.2% year-over-year increase in revenue for the first six months of 2019 despite facing political headwinds. The company said its total revenue came in at 401.3 billion yuan ($58.26 billion) and its net profit margin for the period was 8.7%. Huawei’s carrier business, which sells core networking equipment, reported 146.5 billion yuan in sales revenue. The tech giant also said it shipped 118 million smartphone units for the period, resulting in a 24% jump compared to the year-ago period. To date, the company says it has secured 50 commercial 5G contracts with leading global telecommunication carriers.”
Trump Presses World Trade Organization on China
Ana Swanson
The New York Times, July 26
“The Trump administration on Friday escalated pressure on the World Trade Organization, giving the international group a 90-day ultimatum to alter a provision that the United States argues has long allowed China to game the global trading rules.”
Alibaba Welcomes U.S. Small Businesses to Sell Globally on Its Platform
Melissa Fares
Reuters, July 23
“Chinese e-commerce giant Alibaba Group Holdings Ltd will allow small U.S. businesses to sell on Alibaba.com, as it seeks to tap into the business-to-business e-commerce market and fend off rivals like Amazon.com Inc.”
Chinese Money in the U.S. Dries Up as Trade War Drags On
Alan Rappeport
The New York Times, July 21
“Growing distrust between the United States and China has slowed the once steady flow of Chinese cash into America, with Chinese investment plummeting by nearly 90 percent since President Trump took office.”
US-China Trade Deal ‘Not a 10-minute process’: Wilbur Ross
Julia Limitone
FOX Business, July 17
“Commerce Secretary Wilbur Ross said on Wednesday that U.S.-China trade talks are ‘not a 10-minute process.’ ‘This is a long, involved process,’ Ross told FOX Business’ Maria Bartiromo during an exclusive interview. ‘The fundamental process now though, is will they go back to the point where we were before they changed their mind and backtracked on some of the understandings that had been reached.’ Ross said some of the ‘big-ticket items’ in the talks will include structural reforms, theft of intellectual property, the unlevel playing field in procurement, and subsidies. He also believes another ‘real’ key to negotiations is enforcement. ‘In some ways [there’s an] even bigger issue,’ he said, ‘and that is what is the U.S. enforcement capability in the event that they violate the agreement.’”
U.S. Needs New Bases in Asia to Counter China Threat, Esper Says
Glen Carey and Anthony Capaccio
Bloomberg, July 16
“Mark Esper, President Donald Trump’s nominee for defense secretary, said the U.S. needs more bases ‘throughout the Indo-Pacific region’ to counter China’s ‘significant technological advancements.’”
As Duterte Courts China, U.S. Says Don’t Forget Your Old Friend
Jason Gutierrez
The New York Times, July 16
“The Philippines stressed Tuesday that the country was not drifting into the military orbit of China, despite President Rodrigo Duterte’s perceived warming ties with Beijing and fresh concerns about Beijing’s aggressiveness in the South China Sea.”
Manufacturers Move Supply Chains Out of China
Austen Hufford and Bob Tita
The Wall Street Journal, July 14
“U.S. manufacturers are shifting production to countries outside of China as trade tensions between the world’s two biggest economies stretch into a second year. The moves by U.S. companies add up to a reordering of global manufacturing supply chains as they prepare for an extended period of uneven trade relations.”
China to Sanction U.S. Companies for Arms Sales to Taiwan
Philip Wen
The Wall Street Journal, July 12
“China will sanction U.S. firms that participate in arms sales to Taiwan, after Washington approved sales of $2.2 billion in tanks, missiles and related military hardware, Beijing said. It coincided with Taiwan President Tsai Ing-wen’s arrival in the U.S. on Thursday, as part of a visit to four Caribbean allies, a trip that has also prompted anger from Beijing. China’s Foreign Ministry on Tuesday urged the U.S. to immediately withdraw the sale and said it had lodged ‘stern representations.’”
Trump Team Fears New Face on China Trade Team Signals Tougher Stance
Robert Costa and David J. Lynch
The Washington Post, July 10
“The Trump administration is increasingly concerned about the prospects for a trade deal with China, amid an unexpected reshuffling of the Chinese negotiating team and a lack of progress on core issues since the Group of 20 summit in Japan, according to U.S. officials and senior Republicans briefed on the discussions.”
Possibility and Consequences of China’s Trade and Technology Decoupling with the U.S.
Hu Ran
Institute of International and Strategic Studies, July 22
“(Original Text in Chinese) It is almost impossible that a complete technology decoupling between the U.S. and China will happen due to global value chains. The moving away of factories from China does not change the GVC as well. However, the risks of disengagement are growing after the Trump administration denied visas to Chinese students, suspended certain research projects with Chinese scientists and enhanced scrutiny of hi-tech exports to China. The US government is able to tighten its control over intellectual property rights, logistics and the financial system on a global scale via administrative and legal means – that would restrict China’s technology development in the short term.”
“It is suggested that China drop its nationalistic approach of focusing on ‘national industry’ and ‘indigenous innovation’ to manage the risk of a trade and technology decoupling with the United States, and build up a global, but not Chinese, value chain. The rhetoric of competing against the US for global technology supremacy is against China’s policy goals, hence should be avoided. China should guide its businesses to obey rules and regulations in cross-border deals as a way to avoid giving excuses (to others) and to mitigate risks, while engaging in dialogues over cyberspace security and technology competition … to boost trust and to reduce suspicion with the U.S. The ultimate goal of China is to overcome the middle income trap, to enrich the Chinese people, not to compete against the US.”
How to Confront an Advancing Threat from China
Nikki Haley
Foreign Affairs, July 18
“Getting Tough on Trade Is Just the First Step.”
China and the World: Inside the Dynamics of a Changing Relationship
Johnathan Woetzel, Jeongmin Seong, Nick Leung, Joe Ngai, James Manyika, Anu Madgavkar, Susan Lund, and Andrey Mironenko
McKinsey Global Institute, July 15
“China has made progress in integrating with the world economy, achieving true global scale as a trading nation, but not in other areas such as finance. Now the relationship between China and the rest of the world is changing. A great deal of value could be at stake depending on whether there is more or less engagement. Businesses will need to adjust their approach to navigate the uncertainties ahead.”
“However, not all dimensions of China’s scale have translated into global integration. A huge majority of Chinese firms’ revenue still comes from the home economy. Operational and regulatory complexities in China’s financial markets remain a barrier to international players. Cross-border data flows tend to be limited despite the massive amount of data China’s digital ecosystem generates. The relationship between China and the world now is changing. The new Mckinsey Global Institute China-World Exposure Index shows that the world’s exposure to China has increased, while China’s exposure to the world has fallen in relative terms.”
The Right Way to Deal With Huawei
Adam Segal
Foreign Affairs, July 11
“The United States Needs to Compete With Chinese Firms, Not Just Ban Them.”
Why the United States Doesn’t Need to return to a Gentler China Policy
John Pomfret
The Washington Post, July 9
“Near the end of the Vietnam War, American historian Barbara Tuchman came up with a theory on how the United States got into the ill-starred conflict: It was, she said, because of a failure to cultivate Chinese leader Mao Zedong in the 1940s.”
Kennedy Conversation with Eric Hyer on U.S./China Relations
Event hosted by BYU | David M. Kennedy Center For International Studies, July 25
Dialogues on American Foreign Policy and World Affairs: A Conversation with U.S. Sen. Sheldon Whitehouse
Event hosted by Hudson Institute, July 24, 2019
The Role of Technology in the US-China Trade War
Event hosted by Brookings, July 18, 2019
Network Futures: 5G, SDN, and the Internet
Event hosted by CSIS, July 10, 2019
Building Bridges? Development and Infrastructure in U.S.-China Relations
Event hosted by CSIS, August 8, 2019
Countering Emerging Economic Threats
Event hosted by Hudson Institute, August 1, 2019
By Yilun Zhang
ICAS posted the Open Letter titled ‘China is Not an Enemy’ on its previous bulletin, which originally appeared in the Washington Post. Since the publishing of the open letter, the debate over U.S. policy towards China was reignited within the U.S. foreign policy community. The Washington Post open letter received criticism from members of this community, prompting additional open letters from various other sources. Among the responses that argued against the original open letter, the major debate focused on whether it is China or the Chinese Communist Party (CCP) that is the real threat to the United States, and whether the United States should pursue a more confrontation-based approach and decouple with Communist China as a means to deal with the CCP threat. Here I form four questions to discuss these issues and provide my comments on the matter.
– What threat does China pose to the United States?
China’s historical and cultural experience shapes its so-called China Dream, which is a similar Chinese version of the concept of American exceptionalism. China sees itself now as in the process of the rejuvenation of its past economic and cultural glory, which had spread its influence across the East Asian region. Such a self-identification in strategic planning threatens the United States which seeks to sustain, or even strengthen, its preeminent status in the Indo-Pacific region. The United States also views itself as an exceptional country that rallies countries around the world to its system of values and standards. When two exceptional characters meet, they are likely to disagree and clash over conflicting interests and beliefs.
Furthermore, China is among the few countries on earth that has an independent and self-sufficient military system, the only other two being Russia and the United States. These three countries have a well-developed systematic military industry that can produce armaments and equipment for all types of conflict from localized warfare to nuclear warfare. It is reasonable, from a military perspective, that the United States views both China and Russia as strategic competitors. Through military cooperation and arms sales, the United States is able to increase mutual trust and interoperability with its allies and partners. Due to China and Russia’s independent military structure, however, the United States is more uncertain of their intentions, causing a feeling of insecurity, which can descend into a ‘security dilemma’. This insecurity has been amplified by the rapid growth of China on both the economic and military fronts through its “Reform and Opening up” – further making the U.S. more inclined to confront rather than to cooperate with China.
– Why can’t the U.S. separate the CCP from China when shifting to a more confrontation-based China policy?
The first answer is obvious, it is simply not feasible. Targeting the CCP through confrontational foreign policy is the same as confronting China as a whole. Articles in response to the Washington Post open letter often refer to U.S. Vice President Mike Pence’s speech that separated the CCP from China when thinking about U.S.-China relations. However, after ruling China for seventy years, the CCP has been integrated into China’s political and societal system. Furthermore, the CCP has inherited many historical Chinese views and values and has incorporated these beliefs into China’s military strategy.
In regard to the existential threat America feels that China poses, it has nothing to do with Communist ideology or its alleged “authoritarian” regime. Even at the height of the Cold War, the Soviet Union’s communist ideology per se was not a matter of immediate concern. Only when it served as and became a tool for Soviet expansionism and subversion of foreign societies was it seen as a grave security threat. By contrast, post-reform Communist China has shown neither the interest nor the will to export its political model – let alone subvert foreign nations. Further, from a geo-political perspective, its vision of expansion of influence was clearly and carefully defined in its Science of Military Strategy in 2013, well before the Trump Administration took office. This document defined China’s vision for expanding both its political and military influence to secure its path for development as well as maintain internal stability. Such ideas of extending influence into the broader Asian region while maintaining its size-current, existing land territory can be seen at every stage in Chinese history since unification under the Qin Dynasty. Long after the Sui Dynasty, China has always sought to expand its political and military influence over this broad regional theater, while at the same time maintaining its self-claimed land territory within a defined area. From that historical perspective, the current CCP regime is merely another vehicle to carry out a 5,000-year-old Chinese national defense strategy. Therefore, with this in mind, the CCP should be thought of as “China” when talking about the threat posed by China to the U.S.
Moreover, from a practical perspective, targeting the CCP instead of targeting China will not make the United States’ job any easier. To the contrary, the U.S.’ geopolitical management of Asia will grow more difficult as it seeks to proceed with its Indo-Pacific strategy. Due to the CCP’s firm grip over the People’s Liberation Army, targeting CCP will likely provoke tensions with the PLA in the Asia-Pacific region, putting U.S. allies in danger if the PLA seeks to counter U.S. policy by flashing its military strength at U.S. allies in the region, such as holding military exercises in the Taiwan Strait or provoking Japan over the disputed Diaoyu/Senkaku Islands. Up to this point, China’s military strategy has focused on the geostrategic environment rather than global competition. Marking the CCP as an “enemy” not only fails to address the strategic challenge posed by China to the United States but will also intensify the geopolitical situation in the Indo-Pacific region.
North Korea is another reason why the United States should not attempt to separate the CCP from China. Up to this point, China and North Korea have been linked by historical, ideological and political ties. China therefore has the ability to exploit these close ties to influence North Korean actions when the latter misbehaves. However, getting rid of the CCP could cut one of the most valuable channels to communicate with North Korea. Getting rid of the CCP is also likely to trigger increased insecurity in North Korea and further destabilize the region.
– What is the U.S. plan for post-CCP China and the world system?
This is also my question to those advocating for the U.S. to pivot its China policy to ousting the CCP. Given that regime change advocates are calling for a revision of U.S. strategy towards China, it is necessary to ask what plans and strategies exist for both the short and long term to ensure a transition that would not destabilize the region for years to come. The removal of the CCP would be one of the most difficult undertakings for the United States in its history. The biggest challenge for the U.S. plan would be determining how to deal with a post-CCP China if the removal of CCP was a success. Since 9/11, there has been no solid evidence that the United States has enough resources to help a country peacefully recover and move towards a democratic transition after the removal of an alleged authoritarian/totalitarian regime. In all cases, these countries fell into bloody civil clashes over various interests. With a 1.4 billion population like China’s, what would be the U.S. plan to prevent this vast population from falling into the same trajectory and potentially drag the surrounding region and U.S. allies into armed conflict?
From the U.S.’ perspective, the CCP may represent a troubling set of governance challenges, especially given its communist ideology. However, the CCP also insists firmly on promoting China’s stability both in its defense white paper and in its national strategy. Although many of the CCP’s approaches towards achieving these goals is viewed as largely unacceptable from the U.S. perspective, China’s stability is one of the fundamental reasons why the U.S. and its partners in the Indo-Pacific have reaped enormous economic benefits since China’s opening up to the world. The future of this mutual prosperity is threatened should China become unstable.
– What is the benefit of “fruitless engagement policy” vis-à-vis decoupling?
Indeed, many of America’s past engagement policies have been ineffective when dealing with a China that sought to further expand its influence through leveraging its rapid economic and military growth since the “Reform and Opening Up”. However, continuing this engagement policy that many in America believe has failed would still benefit the United States and the international world order.
There will always be voices advocating for decoupling because the two countries are interdependent with each other. For instance, U.S. dissatisfaction over China’s trade practices is largely due to the deep interdependence between the U.S. and China, which allows China’s participation to impact the U.S. economy in many ways. In such a situation, it would be easy to talk about decoupling, but not as easy to actually implement and achieve it. The Trump administration has endangered the U.S. agricultural industry in the short term and potentially in the long run by beginning this process. Yet, in the end, the administration ultimately decided to resume negotiations with China in Shanghai. Such a decision to continue negotiations may not lead to a completely satisfactory trade agreement but it is a better alternative than potentially permanently hampering the U.S. agricultural and other industrial sectors.
Maintaining a policy of engagement deepens the connection between China and the United States, not only through interdependency, but also leads to a more stable balance of power. The United States has the ability to leverage its military capabilities with its allies in the region as well as keep diplomatic pressure on issues that the United States is deeply concerned about, such as on human rights matters. However, due to a lack of cultural or historical connections with North Korea, the United States has been largely unable to deter its continued nuclear development. Should the U.S. continue decoupling with China, that leverage will be lost, and North Korea could further pursue its destabilizing activities without any external constraints from China.
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The existence of a debate over the U.S. approach towards China is a positive sign that the bilateral relationship will begin to improve again. And indeed, while most policymakers tend to be pragmatic and realistic about potential outcomes when engaging with China, American beliefs and values provide an overarching framework to do so more effectively. However, this emphasis on American values and ideals must also be structured on a realistic basis. Overemphasizing American values without properly addressing the feasibility question is counterproductive to U.S. policy on China.
Yilun Zhang is a research assistant at ICAS. He obtained his M.A. in International Relations with a concentration in International Political Economy from Johns Hopkins University SAIS.
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