Tag Archives: Cold War

China and the USA: a New Cold War?

In January 2020, China and the United States signed a trade agreement called Phase One. The agreement provides for an increase in Chinese purchases of American products and services over the next two years by approximately $ 200 billion, including USD 32 billion in agricultural products, USD 52.4 billion in the energy sector, and USD 78 billion in manufactured products. Since then, China has not changed its abusive trade practices and, until mid-March, President Trump has repeatedly praised Chinese President Xi Jinping for his leadership during China’s COVID-19 crisis. He even cited the professional work of the Chinese while expressing his immense respect and friendship with President Xi Jinping.

Although there was hope that the two countries were entering a new phase, the coronavirus crisis has resulted in an acute deterioration in their relations, the greatest in recent decades. The pandemic could have resulted in an opportunity to develop deeper cooperation, including joint actions to stem the epidemic, develop a vaccine or medicine, and reduce the impact of the global economic depression.

However, the two countries have started a rhetorical war over who is to blame for the pandemic. The Chinese government has been presenting the narrative that American soldiers took the virus to Wuhan during the World Military Games in October 2019. At the same time, President Trump has repeatedly claimed that the United States has evidence of COVID-19 being developed in a Chinese laboratory in the same city. To date, neither country has provided any evidence substantiating their narratives. Also, it is a consensus among the scientific community that the virus developed in nature.

In recent weeks, competition between the two countries has been going to the ideological arena. The Chinese government has been using its propaganda machine to presenting itself as a success in managing the pandemic and as a reliable and responsible world leader who is supplying the world with medical products in urgent need. The Chinese media has also denigrated the Western governance model, especially the American one, accentuating the end of Western supremacy in the last thirty years. See my video on this subject by clicking here. China has also developed a video ridiculing the American response to the pandemic (below). Other factors negatively influencing the relations between the two countries are tensions in the South China Sea, the issue of Taiwan and Hong Kong, and China’s commercial and technological practices.

The relations between the two countries are expected to worsen as the result of two problems: one structural and the other political. The structural problem stems from 40 years of neoliberal policies, which resulted in the American economy’s structural transformation. During that period, part of the American and the Western manufacturing sector was relocated to China. This resulted in two problems. On the one hand, there was the belief that the service sector would absorb the labor force turned unnecessary by the productive sector. This didn’t happen. Many workers went through a process of precarious work or “uberization.”

At the same time, China has been going through an intense economic and social transformation, which has resulted in the development of a more complex economy. Before China had a subordinate insertion in the productive global chains. By developing economic complexity, it started directly competing with American and European companies. The most significant example at the moment is Huawei and the 5G cellular network. Despite economic rhetoric saying that competition is always good, the United States has been trying to limit Chinese competition in complex sectors. An example is actions that restrict access to electronic components of American technology, such as the chips of Huawei cell phones.

The political problem is the result of these structural problems. During the first campaign, one of Trump’s main points was the promise to bring back the manufactures that had been relocated to China. However, the process of industrial localization follows economic and not political logic. And this process fell far short of expectations.

COVID-19 offers an opportunity to change the economic logic in the name of the security of production chains and strategic stocks in times of emergency. However, even if there is a transformation in global production chains, it is impossible to return to the economic structure of 40 years ago. To offset higher labor costs, job creation in a hypothetical manufacturing boom in the United States will be low due to the high technological level of production lines. Thus, the problem is not solved.

In this way, Trump’s attacks on China serve three purposes. First, to decrease support for populist democrats. Second, to divert people’s attention from the failure of the American government to combat the pandemic. Third, to have an external enemy as a political campaign element. Polls show that 31% of American voters regard China as an enemy, while 23% consider it as neither an enemy nor an ally. Democratic candidate Joe Biden accused Trump of being too condescending to China in a recent campaign commercial, promising to be tougher. Considering that China has been adopting increasingly assertive diplomacy, it is to be expected that Sino-American relations are far from calming down.