The 2020s will be a crucial decade for China, and even its leaders know the good times may not last

Chinese leader Xi Jinping delivering a speech in Tiananmen Square.
Chinese leader Xi Jinping.

  • The 2020s will be a crucial decade for China as it readjusts to being richer, older, and more resource-deprived.
  • China’s own policymakers have expressed concerns for the future, seeming to realize that the good times may not roll on forever.
  • See more stories on Insider’s business page.

For the past four decades, a narrative has taken hold among policymakers and the general public alike suggesting that China’s rise will continue indefinitely, even when mathematics and demographics suggest otherwise.

Between the 1980s and the turn of the millennium, this notion was fueled by China’s astonishing double-digit growth. In more recent years, although expectations of growth have been tempered, hopes for and fears that China is on the rise both politically and militarily have given the impression that Beijing’s progress is unstoppable.

In a recent Foreign Affairs article, Ryan Hass, a senior fellow at the Brookings Institution, even had to remind readers that “China is not ten feet tall,” and that “the United States remains the stronger power in the US-Chinese relationship.”

The first months of 2021, too, brought a flood of excited headlines marveling at China’s exceptionally fast recovery from the pandemic, and predicting more Chinese economic success to come.

There is no doubt that China has had economic successes, not just in the COVID-19 period, but also over the past two decades and more.

The country’s reinvention of itself as a major innovator in technology; its development of a foreign direct investment strategy through the Belt and Road Initiative; and its experimentation with ideas like digital currency in its domestic market have created a unique ecology for economic development.

China Marks 100th Anniversary Of The Communist Party
Chinese President Xi Jinping speaks during the celebration for the 100th anniversary of the founding of the Chinese Communist Party at Tiananmen Square, July 1, 2021.

But China’s growth is not going to be a linear story of infinite extension. The 2020s will be a crucial decade for the nation as it readjusts to being a richer – but not, per capita, rich – older and more resource-deprived country.

Even China’s own policymakers have expressed concerns for the near future, both explicitly and by implication. The Chinese Communist party, or CCP, seems to realize that the good times may not roll on forever.

From 2030 onward, the country will begin to feel the effects of the One-Child Policy imposed by the CCP in the late 1970s. Though that restriction officially ended in 2015, giving way to a two-child policy and, very recently, a three-child policy meant to increase birth rates, China’s population is likely to shrink by 48% by the end of this century, from 1.4 billion in 2017 to 732 million in 2100, according to a projection published in The Lancet.

That drop-off, combined with low education levels in China’s vast countryside – only 30% of China’s workforce has finished secondary education – may mean that China will lack the human capital to escape the “middle income trap” and sustain its current growth going forward.

Meanwhile, severe droughts in northern China have caused significant drinking water shortages and fears of food insecurity, even as new, major cities are being built there.

There is little likelihood that China’s economy will collapse, as some of its more apocalyptic detractors suggest, or perhaps hope. However, observers should be skeptical of the idea that China will continue along its current trajectory indefinitely.

The 5-year plan

A Chinese soldier in front of a statue of Deng Xiaoping at an exhibition in Hong Kong, August 21, 2014.

Although the Chinese Communist Party’s messaging these days presents China as a “confident nation,” its newly endorsed Five-Year Plan details many areas of concern – food insecurity, increased defense spending, sustainable development and the significant debts incurred by local governments.

In doing so, it reveals a caution underlying the exuberant rhetoric. And the plan’s significance goes beyond its policy prescriptions. It also reveals a wider ideological shift in which China’s Marxist-Leninist political framework has become ever more explicit.

Of course, China has been a communist country since 1949, when Mao Zedong capped off the decades-long Communist Revolution by founding the People’s Republic of China. But from 1978 on, China entered an era of reform, spearheaded by Deng Xiaoping, during which it implemented economic reforms to achieve “socialism with Chinese characteristics.”

Along the way, the new leadership downplayed the importance of the state’s ideological foundations in favor of a loosely defined pragmatism. Deng spoke of “crossing the river by touching the stones” to describe the kind of experimentation that marked the reintroduction of market mechanisms to the country’s economy.

In contrast, in recent years, the Marxist-Leninist strand in Chinese political thinking, never absent, has become much more noticeable, with the Marxist element underpinning many of the state’s economic assumptions and the Leninist element guiding its approach to political control.

The framework that current Chinese leader Xi Jinping and other top leaders use to frame China’s dilemmas draws increasingly on classic Marxist terminology such as “struggle,” or douzheng in Chinese, and “contradiction,” or maodun; the former, when invoked, can relate either to China’s current global standoff with the United States or the party’s desire to purify itself domestically through anti-corruption reforms.

Last year, the Chinese state media outlet Xinhua even used the term “rectification” to describe intraparty reforms in certain cities, bringing to mind the first usage of the term, by Mao, amid his ruthless campaign to remodel the party in his own image in the 1940s.

chinese communist party centenary
A performance at the Bird’s Nest national stadium in Beijing on June 28, 2021, ahead of the July 1 celebration of the Founding of the Communist Party of China.

More explicitly, in an August article for the CCP’s political theory journal Qiushi, Xi took pains to point out that the “foundation of China’s political economy can only be a Marxist political economy, and not be based on other economic theories.”

His goal was to reject the idea that “capitalism,” a term that the CCP firmly associates with a Western system they perceive to have failed, has any connection with the economy of today’s China, even though the accumulation of capital is central to its strategy.

Xi also commonly refers to key societal “contradictions,” a part of Marxist theory drawn originally from the German philosopher Hegel, that was also greatly beloved by Mao. “Contradictions” refer to crucial differences between the needs and wants of unequal social classes, which can be either “antagonistic” and resolved through “struggle,” or “non-antagonistic” and resolved through debate.

For Xi, one of the major “contradictions” today is how growth can be both sustainable and green, since up to now, economic progress has concentrated purely on GDP without much assessment of the quality of life associated with that growth.

This is a challenge China shares with the rest of the world, to be sure – but few ruling parties other than the CCP define sustainable, green growth in such explicitly dialectical terms, to use another bit of Marxist terminology.

Leninism is namechecked with less frequency than Marxism, but it is visible throughout the political style of today’s leadership. The philosophy depends on top-down political control and the ruthless exercise of state power to achieve wider social goals. The civil society and social media networks that emerged during the early 2000s have since been heavily repressed, a tactic that Lenin would have easily recognized.

These are not abstruse observations. They relate to the way the CCP will implement its Five-Year Plan in reality and explain many decisions taken in the past decade as China’s politics has become more top-down and heavily controlled.

In addressing the many issues listed in the plan – from reforming the financial sector to implementing green growth – the CCP will rely on the exercise of party-state power.

Hopes from the 1990s that China will liberalize its markets – or indeed its politics – must give way to acceptance that a “socialist market economy” is a real model in both theory and practice. And in that system, when the liberal confronts the Leninist – that is, when there is a choice between greater economic freedom and greater political control – the CCP’s choice will almost always be for political control.

Ideology in practice

Beijing military flypast communist party centenary
Planes flying over Tiananmen Square for the 100th anniversary of the Communist Party of China, on July 1, 2021.

How successful has China’s approach been so far – and how will this reaffirmed Marxist-Leninist devotion affect its trajectory going forward?

The country has made a remarkable recovery from the COVID-19 pandemic, with an 18.3% growth rate in the first quarter of 2021. Consumer behavior is steadily returning to normal in many areas, including in the entertainment, hospitality and domestic travel industries.

Nonetheless, CCP leadership is concerned about the pressure from outside forces, notably the United States, that mean China no good.

In response, they have placed a “dual circulation” strategy at the heart of the Five-Year Plan, which aims to reduce reliance on overseas supply chains in favor of domestic production and to stimulate domestic consumption while remaining a significant exporter to the world.

The contradictions in the strategy, which demands a large export surplus and increased domestic consumption, have not been resolved. China’s workers still have relatively little to spend compared to their counterparts in other emerging economies, so if the state hopes to boost domestic consumption, it will at some point have to make the hard decision to give them more cash.

But then there will necessarily be a period when China exports less, until production levels can meet the rising demand at home. Doing so isn’t impossible to pull off, but it will mean making some difficult economic and political choices that, in a democratic society, would at least be debated. In China, they will likely be imposed without a proper discussion of how this particular contradiction can be resolved.

Meanwhile, the complexities of China’s global initiatives will also come to the fore in the 2020s. The Belt and Road Initiative, or BRI, the state’s foreign direct investment strategy adopted in 2013, has been a mixed bag of positive and negative outcomes. Its infrastructure projects in Sub-Saharan Africa provided badly needed capital, even as lending to countries like Pakistan has enabled the building of coal-fired power stations that will exacerbate climate change.

The strategy behind the campaign also fosters a reliance on Chinese contractors and manufacturers, which has led many in the West to characterize the BRI as a form of Chinese imperialism. But the real problem with the initiative is that the money is too frequently funneled into financially high-risk investments, such as the project to build a high-speed rail line in Laos.

china belt and road
The China-Kazakhstan logistics terminal was built in 2014 to boost the construction of the Belt and Road Initiative.

So instead, in the 2020s, the BRI is being reoriented to focus on technology and health, bringing together the areas where China has – or expects to have – advantages over its competitors.

This shift has involved the mass rollout of Chinese COVID-19 vaccines in countries like the United Arab Emirates and Malaysia, as well as the provision of cheap 4G and 5G networks. The latter is heavily subsidized, requiring customers to weigh their desire for efficient broadband against fears that installing Chinese equipment may create pathways for the CCP to conduct industrial espionage.

The pivot toward technology has also involved attempts to set international norms in the tech and cyber areas, a mission that it can be expected to double down on in the 2020s.

The West, once more, sees dangers in this approach – but their political priorities are often less of a concern for Global South economies that need support to recover from the coronavirus pandemic right now, and not in a decade’s time.

Furthermore, China’s approach to technology development, which combines the capabilities of the civil and military to innovate for both markets, is likely to find a massive, untapped market in the 2020s among emerging economies that want cheap technology suited for middle-class lifestyles and products that can serve for either defense or internal repression.

But in the tech arena, too, the CCP is balancing its desire for growth with its desire for social control. One recent focus of attention has been the increasing prominence of China’s antitrust regulators, notably the Anti-Monopoly Enforcement Agency. Its powers have been updated and made more prominent in 2021, and its most high-profile victim has been Jack Ma, founder of the Chinese e-commerce giant Alibaba, which was recently hit with a $2.8 billion antitrust fine by state regulators who want to see the behemoth split up into smaller, competing entities.

At first, the regulators’ strategy brings to mind former US President Theodore Roosevelt’s campaigns to break up powerful monopolies in the early 1900s, including, most prominently, US Steel. But in the Chinese case, even if giant tech majors like Alibaba, Huawei, Didi Chuxing, Meituan and Tencent are broken up into seven or eight competing companies, the one-party state will remain in control, with party members at the helm of each new entity.

The breakups would provide greater competition and – crucially – more, not less, leverage for the CCP in the domestic market. The liberal notion that competition creates the market is close to the opposite of the Chinese strategy, in which government is the deciding factor. And so far, in China, this alternate approach seems to be working.

There is also a performative motive behind this antitrust campaign, in addition to the economic one. For the past decade, the only Chinese figures with genuine global reach, glamour and credibility have been the tech innovators and marketers, in particular Alibaba’s Jack Ma and Pony Ma, the founder of Tencent, the technology conglomerate behind the messaging app WeChat.

With the recent public pressure on Alibaba and Tencent, the CCP has made clear that no individual Chinese person should be seen to be bigger than the party – with one exception: Xi Jinping. If the concentration on party over market forces creates economic distortions, too bad.

Hong Kong is another area being subjected to the new Chinese model. The city’s liberal economy and civil liberties once made it especially attractive to foreign investors, and analysts once believed this economic value would protect the city from the repression found in mainland China.

But, in the wake of a national security law implemented in July 2020, Hong Kong’s legal and financial systems are likely to work more closely with those of southern China in the coming decade.

Shenzhen, a major Chinese city just across Hong Kong’s border, is now home to one of the liveliest tech ecologies in China. The value of Hong Kong, meanwhile, has become less about its role as a global financial center and more as an entry point for venture capitalists looking to cash in on the mainland’s burgeoning tech sector.

China will try to redefine “one country, two systems” – the policy that previously allowed Hong Kong a degree of democracy and openness – as “one country, two economies,” while using economic revival in Shenzhen and elsewhere in the southeast as proof that its implementation of a “socialist market economy” has been successful.

Struggle in the new decade

China Marks 100th Anniversary Of The Communist Party
Members of the Chinese military orchestra march on Tiananmen Square for the centenary of the Chinese Communist Party, July 1, 2021.

To be sure, there are several known unknowns standing in China’s way in the decade ahead. The first and most unpredictable problem is one the country shares with the rest of the world.

Last year’s hopes that the COVID-19 pandemic would be swiftly defeated with lockdowns and quickly developed vaccines were clearly over-optimistic. Given its low case numbers and economic recovery, China’s domestic situation is better than that of many other countries, at least for now, but it still faces systemic problems that muddy the picture.

Recently, China’s top disease control official, Gao Fu, suggested that Chinese vaccines may be much less effective than the ones developed by Pfizer-BioNTech and Moderna in the West, and that anyway, it will take well into 2022 to vaccinate the whole population.

China more recently announced that it hopes to vaccinate 40% of its population by the end of June, but nevertheless plans to keep border restrictions in place for at least another year, according to The Wall Street Journal.

And China has a problem that no other sizeable economy does. Pandemic performance in the US, Brazil, India and across the European Union has been very poor at times – but the extent of this underperformance has always been relatively clear. The governments of these countries collect and publish sufficient information to make known the reality on the ground, and to allow governments and experts to assess what needs to be done in order to return to something like normal.

Outside observers and investors will find it difficult to make such an assessment about China. The anecdotal impressions have been impressive – there is no doubt that China has done a good job in repressing the pandemic – but precise infection figures are hard to obtain, as is peer-reviewed information about the efficiency of the Chinese-developed vaccines.

This makes calculations about how fast China will recover in the medium term challenging and unreliable. China has never been a liberal society, but before the pandemic, its economy was well-connected to the outside world, with millions of visitors coming in and out for business and tourism. It’s hard to imagine a version of this cosmopolitanism returning until 2023 at the earliest.

Biden and Xi Jinping
Then-Vice President Joe Biden with Chinese President Xi Jinping at a meeting in California.

Chinese antagonism – another good Marxist term – toward the US is driven in large part by a crucial similarity between the two countries: They are the only ones that tell apocalyptic stories about themselves and each other, often claiming that only one of their systems can endure in the longer term.

But the 2020s are likely to be more prosaic for China: Its economy will likely grow and may even become the world’s largest by GDP, but growth alone will not address the challenges it faces in areas as different as the environmental crisis to the undereducation of rural workers.

More lurid scenarios, much debated in policy circles, are possible as this decade unfolds – ranging from a climate catastrophe that would make life in newly-built cities all the more difficult to the outbreak of war with the US over Taiwan.

In either of these cases, it is likely that China’s prospects would darken quickly – and given its ties to economies across the developing world, it would take the world’s stability and security with it as it fell. The fall of China in the 2020s would be a lot more problematic than its rise in the 2010s.

But since its founding a century ago, the CCP has proven itself a remarkably flexible institution, changing from a command economy into a capitalist behemoth – despite its ideological aversion to capitalism – and drawing on advice from figures as far apart as Lee Kuan Yew,* Milton Friedman and Henry Paulson. Its incarnation in the 2020s may yet surprise us too.

*Editor’s note: The original version of this article incorrectly spelled Lee Kuan Yew’s name as Lee Kwan Yew. WPR regrets the error.

Rana Mitter is a professor of the history and politics of modern China at the University of Oxford. He is the author of several books, including most recently “China’s Good War: How World War II Is Shaping a New Nationalism,” published in 2020.

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China’s ‘wolf warrior diplomacy’ has come to Wall Street

Xi jinping at CCP 100th anniversary
Chinese President and Chairman of the Communist Party Xi Jinping appears on a large screen as performers dance during a mass gala marking the 100th anniversary of the Communist Party on June 28, 2021 at the Olympic Bird’s Nest stadium in Beijing, China.

  • China’s assertive, nationalistic behavior – known as “wolf warrior diplomacy” – has come to the financial markets.
  • This week Beijing punished a Chinese tech company that listed on the New York Stock exchange, and announced rules to govern all Chinese companies listed abroad.
  • Consider this part of the Chinese Communist Party tightening its grip on power at home, and closing its doors power from abroad.
  • This is an opinion column. The thoughts expressed are those of the author.
  • See more stories on Insider’s business page.

It was only a matter of time before Beijing’s heightened nationalism came to Wall Street.

This week, Chinese authorities punished Didi, a ride sharing company, for its June 30 public debut on the New York Stock Exchange. Shortly after the Didi crackdown, Beijing announced new measures that could restrict Chinese companies going public abroad.

What all this is telling us is that Beijing is no longer going to tolerate its tech stars making foreigners rich on foreign exchanges. And it is further evidence that China is closing its society and economy to the West.

Bring it all back home

In order to more freely list on foreign stock exchanges, Chinese companies create something called a “variable interest entity.” In such an arrangement, a Chinese company creates another company in a tax haven like the Cayman Islands where foreigners can invest. The Chinese company then signs an agreement that gives control and profits to the Cayman entity, from which money is distributed to shareholders and the company back in China. For years, Beijing generally looked the other way when it came to VIEs.

Now, according to Bloomberg, Beijing’s new regulations are designed to limit the ability of Chinese companies to set up these entities. The proposed rules would govern what data can and can’t be shared abroad, target “illegal securities activities,” and set up extra-national laws Chinese companies would have to follow regardless of where they are listed.

Didi shares are down around 20% since it’s IPO, in part because Beijing announced these measures, and in part because it has become a target for authorities at home. On July 2, the Cyberspace Administration of China announced it was investigating Didi. Two days later China’s app stores were ordered to stop allowing users to download Didi. The CAC claims that Didi was illegally collecting user data.

And perhaps that’s true. But it’s also likely that this is a signal that “wolf warrior” aggression – a kind of Chinese diplomacy named after a hyper-nationalistic film- has come to financial markets. Two other Chinese tech companies listed in the US – Kanzhun and Full Truck Alliance – also had their downloads halted by Chinese regulators. The almost 250 Chinese companies worth $2 trillion in market cap listed on major US exchanges should all be watching their backs.

China is closing

There are two main reasons for this seemingly sudden crackdown – one is China’s increasing antagonism with the West, and the other is the Chinese Communist Party’s own desire for power and self-preservation. Together they amount to the reality that China is once again closing its doors to the world, reversing the opening that began in the 1970s.

As part of a larger crackdown on civil society, the Chinese Communist Party has been tightening its control over any sources of power that might challenge it at home. That includes tech billionaires like Alibaba founder Jack Ma, who has recently been publicly brought to heel by Beijing. And it includes tech companies, like Tencent and Pinduoduo, another e-commerce giant.

Targeting tech companies that list abroad also puts pressure on Chinese companies to consider an IPO to list in Shanghai or Hong Kong instead. It is no secret that China’s encroachment into Hong Kong prompted an exodus of financial firms from the city. Making it the new landing place for Chinese tech companies to go public could help it maintain its status as a global financial center.

It is also no secret that the US and China are at risk of what some call “decoupling”– essentially breaking ties and creating a world with separate US or China-centric technologies and financial centers. In some ways, because the two powers have become so antagonistic, this is already happening. Domestically, Beijing has been investing in technological advancements with the hopes making the country a techno-superpower by 2025. Now it’s calling its companies home.

What’s doubly important is that none of the above is primarily about making China rich. It’s all about hoarding power for the CCP. Under President Xi Jiinping that has become Beijing’s motivation above all else, and we should all expect it to act accordingly – even when it means hurting its own domestic companies.

A chilling effect

Last year Congress passed the Holding Foreign Companies Accountable Act, which requires foreign companies listed on US stock exchanges to be audited by the Public Company Accounting Oversight Board’s. If they refuse for three years in a row they can be delisted. Last month, the Senate passed a law that would shorten the time frame to two years in a row.

The problem with this is that so far, Chinese regulators will have absolutely none of it.

This is a stare down. If Chinese companies listed here in the US do not comply they will be delisted. If they do comply Beijing could come down hard on these companies at home. In the meantime recriminations are flying. GOP Sen. Marco Rubio of Florida called the Didi IPO “reckless and irresponsible” weeks before Beijing clamped down on the company, arguing that Didi is a black box.

Rubio and Democratic Sen. Senator Bob Casey of Pennsylvania introduced a bill in May that would prohibit companies from going public on US exchanges if they do not comply with US regulators and submit to an audit from the Public Company Accounting Oversight Board.

All of this pressure from Beijing and Washington will, without a doubt, have a chilling effect on Chinese companies listing here in the United States. So yes, this is another form of decoupling – and it’s coming from both sides of the Pacific.

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Xi Jinping said other countries will ‘crack their heads and spill blood’ if they come after China, a stark warning to mark 100 years of the Communist Party

Xi Jinping speaks at a microphone with the Communist Party of China logo in front of him.
Xi Jinping at a ceremony marking the centenary of the CPC in Beijing on July 1, 2021.

  • The Communist Party of China marked 100 years in since its foundation on Thursday.
  • President Xi Jinping used the event to warn other countries against trying to influence China.
  • He said they would “get their heads bashed” if they tried.
  • See more stories on Insider’s business page.

China’s president used his party’s 100 year anniversary to warn other countries against trying to influence China.

Xi Jinping said that they would “crack their heads and spill blood” if they tried.

He was speaking in Beijing on Thursday at an event marking the centenary of the Communist Party of China, founded in 1921.

The party has ruled continuously for the past 72 years, after triumphing in a long civil war in 1949.

Xi said: “The Chinese people will never allow foreign forces to bully, oppress or enslave us. Whoever nurses delusions of doing that will crack their heads and spill blood on a Great Wall of steel built from the flesh and blood of 1.4 billion Chinese.”

Xi said that China would not allow “sanctimonious preaching” from other nations.

Relationships between the US and China have been deteriorating, and other countries have increasingly condemned China for its human rights record, including its placing of millions of Uighur Muslim people in camps.

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Greta Thunberg calls out Chinese state-run media for ‘fat-shaming’ her in a scathing article that questioned her veganism

Greta Thunberg
Swedish founder of the “School Strike for Climate” movement Greta Thunberg speaks on the sidelines of talks between representatives of the movement and German Chancellor in Berlin on August 20, 2020.

  • An article in the China Daily accused Greta Thunberg of lying about being a vegetarian.
  • The China Daily is a newspaper owned by the propaganda department of China’s ruling Communist Party.
  • She responded on Twitter by calling being a “fat-shamed” a “pretty weird experience.”
  • See more stories on Insider’s business page.

Greta Thunberg has called out Chinese state media for “fat-shaming” her in a scathing article that questioned her vegetarianism, the Independent reported.

The article published last week by the China Daily, a newspaper owned by the propaganda department of the ruling Chinese Communist Party, implied that the 18-year-old climate activist was lying about her meat-free diet.

“Although she claims to be vegetarian, judging from the results of her growth, her carbon emissions are actually not low,” wrote the China Daily journalist Tang Ge.

Thunberg, who is a vegan, responded to the article on Twitter on Friday. She described how being “fat-shamed” by a wing of the Chinese government was a “pretty weird” experience.

Read more: China’s box-office dominance was accelerated by the pandemic and it has big implications for Hollywood’s future

“Being fat-shamed by Chinese state-owned media is a pretty weird experience even by my standards,” Thunberg wrote. “But it’s definitely going on my resume.”

The climate activist has been heavily critiqued by the China Daily since posting a tweet on May 7 calling on China to do more to help address the climate crisis, Vice News reported.

She was previously attacked in China for supporting the poster boy of Hong Kong pro-democracy protest movement, Joshua Wong, Vice said.

Read the original article on Business Insider

When it comes to China, the US need to figure out which fights are principled, and which fights are petty

Biden and Xi Jinping
Then Vice President Biden met with Chinese President Xi Jinping at a California meeting aimed at strengthening Chinese investment in the state. China has now the lead in 5G infrastructure, but experts say don’t count Silicon Valley out yet.

  • John Kerry was in China this week discussing climate change and some people are upset about it.
  • They think cooperation on that issue could stop the US from being aggressive with Beijing about a host of other issues.
  • They’re delusional.
  • This is an opinion column. The thoughts expressed are those of the author.
  • See more stories on Insider’s business page.

President Joe Biden’s special envoy on climate, John Kerry, went to Shanghai this week to discuss how best the two largest economies in the world can address the threat of climate change. Despite the meeting being pretty standard stuff, it still has some US-China watchers completely losing their minds.

This freak out crew would prefer to have cordial relations between the two countries end tomorrow and instead have the US put maximum pressure on the Chinese Communist Party. They would prefer a world completely split in two, divided by a “digital iron curtain” with the US and fellow democracies on one side, and China, Russia, and their allies on the other. Economic ties would be cut, the flow of people would slow to a trickle, and the prospect of war would heighten across the world.

To them, Kerry and his message of cooperation on climate change could derail that future. That’s a false choice, but despite it’s absurdity the idea has become pervasive. Over at the Brookings Institution they decided that Kerry could go rogue, becoming a one-man wrecking ball for the entire government’s more muscular China policy. This is ridiculous on its face. Ultimately it is President Biden who will decide the direction of our China policy – and, as one former Obama administration Asia hand told me dismissing this theory, “John Kerry is no panda hugger.”

This is a delicate moment. The boundaries of the US-China relationship are being redrawn. We are watching trust rapidly dissipate between world powers in real time, and we shouldn’t waste what little trust we have now on empty antagonism. There will likely come a time when we wish we had that trust back.

A bomb and the time bomb

In the 1950s and 1960s the end of human civilization was staring its destruction in the face in the form of the nuclear bomb. The bomb was getting bigger and deadlier; spreading to more countries; and had already laid waste to cities and contaminated populations.

And so in 1963 during some of the most frigid times of the Cold War between the United States and USSR, the key nuclear powers of the time (which also included the United Kingdom), signed the Limited Testing Ban Treaty. The treaty regulated how and where countries could test their bombs, and it set up an emergency line of communication between powers to avert disaster – “the hotline.”

This all amounted to one critical thread of cooperation between the US and USSR during an otherwise entirely uncooperative period. The Cold War went on, but the prospect of nuclear winter shrank.

Today the threat facing human civilization is climate change, and the two countries that most need to work together to solve it – the US and China – are on the verge of another conflict that will force the planet to choose sides. In both countries there are people who are calling for a cessation of cooperative interactions. To them, every cooperative meeting is a Trojan Horse, during which one side will magically convince the other to forget every other issue pulling them apart.

But what we learned from the Cold War is that the US and an adversarial superpower are perfectly capable of sustaining fierce competition, while also cooperating enough to keep the world from destroying itself. When it comes to the US and China today, not only are we not in as dark a place as we were with the USSR in 1963, but we also have far more economic and business ties to break before we get there.

Until we’re serious about breaking those ties entirely (we’re not yet), we shouldn’t act like we are. That’s called posturing, and the United States ought to be above that.

That doesn’t mean we aren’t aggressive regarding issues that concern us – like Xinjiang, Hong Kong, North Korea, and Taiwan. It does not mean we aren’t aggressive when China bullies our allies, like Australia, or engages in cyber hacking. It does not shrink our commitment to democracy. But it does mean finding ways to cooperate where we can and keeping lines of communication open.

I mean my God, even in 1963 they had the hotline.


Here’s how I know we’re not serious about cutting commercial and social ties with China just yet. Right now the Senate Foreign Relations Committee is working on a sweeping bipartisan bill to address China’s rising power. In it there’s hundreds of million of dollars for defense and programs to country China’s telecommunications rise. But for companies that want to move their operations and supply lines out of China there’s just $15 million. The US government loses $15 million in the couch cushions. That is not serious money.

But what people who do business in China will tell you is that getting public data, or having the mobility and access to interview customers to do business there, is getting harder. On March 19, Anne Stevenson-Yang, founder of China-focused investment firm J Capital Research Ltd testified before the US-China Economic and Security Review Commission on Capitol Hill.

She told attendees that more and more of China is state run – that it’s not opening it’s economy anymore, that it’s closing it. Public economic data that used to be easy to get started evaporating back in 2015, shortly after Chinese President Xi Jinping took power. This back pedaling does not just make Chinese society more brittle, she argued, but it also creates incentives in the Chinese economy that put investors and multinational corporations at risk. The solution, in some of those instances, is more cooperation – not less.

“The practical remedy for faked data, for example, on a corporate, industrial, and macroeconomic level, is to grant American researchers unfettered access to conduct surveys, interview individuals, and review financial records of all sorts in a legal proceeding, including tax records, audit papers, invoices, and communications,” she said. “A key impediment to such data collection is China’s law forbidding independent surveys. Survey teams need to be able to access respondents within a framework of privacy law but not one of data supervision.”

Achieving that requires cooperation, but that doesn’t mean Stevenson-Yang isn’t realistic about where it is not possible. For example, she recommends treating Huawei, ZTE, and other Chinese network gear as spyware and supports technology export restrictions.

If China closes and gradually makes itself a terrible place to do business, that is on China. It is on the US government to ensure that our multinational corporations are ethical, transparent, and consider our domestic interests at the center of their business. In the meantime the most productive thing to do is engage with China to protect investors and US businesses as best we can.

Besides, this is America and we do capitalism. If you want to do business in China and don’t mind the uncertainty of having your product randomly barred from military complexes and personnel; or you want to deal with your company being harassed and boycotted for not endorsing cotton from Xinjiang or whatever, knock yourself out.

Separating the principled from the petty

In this fragile moment, there is a danger of confusing the principled with the petty. When that happens, any slight can lead to a stand off.

There are petty new features of this more antagonistic relationship we all just have to get used to rolling off our backs. For example, China forced the world to get used to its hyper-aggressive “Wolf Warrior” diplomacy, and now it has to get used to a US strategy that it dislikes – US led multilateralism. To China, when we rally our allies to make joint statements about things like human rights abuses in Xinjiang, that’s bullying.

Too bad. When the US is run correctly, that’s how we do things. Beijing will have to get over it.

This is to make space for the issues that Beijing and Washington cannot get over, most of which was discussed between President Biden and Japanese Prime Minister Yoshihide Suga on Friday. Suga will be the first foreign leader to visit the White House since Biden took office. It is a sign of the gravity of the matters they have to discuss – like North Korea, Taiwan and a maintaining “free and open Indo-Pacific.”

Perhaps it’s a coincidence that Kerry’s and Suga’s meetings fall at the same time, perhaps it’s not. Both are meant to address exigent situations that demand cooperation at highest levels of government and both must be had. Until the day comes when we are serious about ending the US-China relationship – and that day very well may come – we should continue to seek cooperation where it benefits the people and institutions of the United States of America. Anything else is an exercise in fantasy, or worse – just posturing.

Read the original article on Business Insider