The economic Cold War between the United States and China, unleashed by former President Donald Trump, is not over. Expectations in corporate America and the Chinese government that Joseph Biden’s victory in the 2020 presidential election would restore normal ties between the two countries have remained unfulfilled to date.
However, despite retaliatory tariffs imposed on each other’s exports, trade between the US and China has increased over the years and China’s trade surplus vis-à-vis the United States has increased.
The US-China political clashes over China’s treatment of the Uyghur people in Xinjiang, the destruction of democracy in Hong Kong, the flexing of naval muscles by the PRC Navy in the South China Sea and East China Zee, Chinese strongman Xi Jinping’s threats to annex Taiwan by military force and a range of other Chinese allegations have certainly soured relations between the United States and China.
President Biden, who mocked the various steps of Trump’s foreign policy, has largely continued his predecessor’s China policy and has often sounded tougher on China. When asked if he would defend Taiwan if China attacked it, he promptly said it was a US commitment. None of his predecessors said so openly and clearly. It is another matter that White House officials were quick to declare that US policy towards Taiwan has not changed.
When a seasoned politician with decades of experience on the Senate Foreign Relations Committee makes a statement in his capacity as the country’s president, it’s no slouch. Such a comment actually reinforced US traditional Taiwanese policy – “strategic ambiguity”.
However, President Biden knows very well that there can be no past Cold War-like relations with China. Unlike US-USSR relations, the US-China economic interdependence is too deep and intense to allow the two countries to pursue traditional Cold War strategies.
It is precisely for this reason that Washington and Beijing have begun to express their mutual efforts to resolve economic disagreements and restore trade ties. In fact, it was the Trump administration, which signed a Phase 1 trade deal with China in January 2020, years after the reciprocal tariff war. While China pledged to buy $200 billion worth of US goods, the US spoke out to lower the high tariffs on imported Chinese goods.
Despite acute disagreements over political and security issues with China, the Biden administration also recently took a step, culminating in a recent virtual meeting between US Trade Representative Katherine Tai and Chinese Vice Premier Lin He. China, as usual, demanded the removal of the tariffs imposed by the Trump administration and the US asked China to abide by the trade commitments it made in the Phase 1 agreement.
These are relatively low-level interactions that wouldn’t have mattered much without the reported upcoming virtual summit between Joe Biden and Chinese President Xi Jinping. While global headlines today point to a new Sino-American Cold War, Washington and Beijing have embarked on a peaceful process to resolve their trade and economic disagreements.
What could be the impact of such developments on India and on India’s evolving ties to the United States? First of all, it is important to realize that despite the Chinese aggression along the Line of Actual Control (LAC) since mid-2020 and the strong Indian responses to Chinese moves, including a ban on more than 200 Chinese apps, trade between India and China in movement is on a positive course.
It is a clear signal that both the United States and India have refrained from ending economic ties with China, despite very serious clashes in other sectors of the relationship. It also indicates the desirability of taking advantage of the opportunities offered by China, while avoiding Chinese hegemony which would not be in the interest of any country.
The recent Chinese setbacks, allegations and aggressions have been met with international opposition. That India, Japan, Australia and the US have formed a Quad Forum, that India, Japan and Australia have agreed to establish alternative supply lines for uninterrupted trade in the Indo-Pacific, that Australia, the UK and the US will use the AUKUS- triangle of strategic partnerships, that tiny Taiwan has decided to push back any Chinese invasion, that the European Union has told Taiwan that “it is not alone”, that NATO has been able to shift focus on China from Russia, that ASEAN and the EU developed their own strategies on the Indo-Pacific, as opposed to China’s unwillingness to accept the Indo-Pacific construction, are but a few indications that China will not be allowed to march unimpeded towards the establishment of a Chinese-centric order in the region.
Significantly, China’s internal developments in recent times also point to the beginning of the end of the Chinese economic miracle, the false discourse of “China’s peaceful rise” and China’s attempts to rewrite the rules of international relations. China’s international image has been badly damaged by the secrecy surrounding the Wuhan virus, the human rights violations in Xinjiang and the political and civil rights violations in Hong Kong.
China today is home to a large number of ghost towns, the real estate collapse is illustrated by Evergande and other major real estate companies defaulting on loan repayments, the economic debt resulting from a large number of state-owned enterprises similarly defaulting continues, large multinational companies are closing stores and moving their production facilities to Vietnam and India and other countries or going back to Japan, South Korea, the US and other destinations. Interestingly, more than 600,000 Chinese citizens have applied for asylum abroad to escape the overcentralization of policies and lack of freedom.
China is currently facing huge internal challenges and the CCP led by Xi Jinping is trying to further strengthen party control over people’s social and economic lives. While seeking to reduce foreign cultural influences, it is also seeking to change its economic model by adopting a “dual circular” economy, i.e. a consumer-driven model of previous export-oriented economic models.
India can expect fierce competition between the US and China in the coming years that would facilitate a multipolar Indo-Pacific order. As China’s heated economy cools, India has every potential to attract and use foreign investment to achieve its ‘aatmanirbhar’ goal.
The real challenge for India will be the Chinese government’s foreign misfortune to stir up nationalism at home and hide its domestic failures. The current policy of modernizing defense and strengthening the strategic partnership between India and the US, bilateral and multilateral, should therefore be the goal.
The writer is professor, Jawaharlal Nehru University. The views expressed in this article are those of the author and do not represent the views of this publication.
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