Chat with us, powered by LiveChat

US-China Clash: Have We Entered Dangerous New Territory?

Dollar Rally
Print Friendly, PDF & Email

EDITOR NOTE: Here’s where we are with China: we engaged in a trade war, found some potential resolution last December, got mired in the COVID-19 pandemic, and now an escalation of a Cold War encompassing geopolitics, economics, technology, and espionage. Secretary of State, Mike Pompeo, believes the US can “influence” China toward “change.” Really? It appears as if the administration is a bit frightened. If it is, there’s every reason to be, as China works to overtake the US as the world’s most powerful nation.

We’ve never been here before.

The escalating confrontation between the United States and China is so perilous because the world’s two largest economies – and the two defining countries of their times – are navigating uncharted terrain.

Secretary of State Mike Pompeo’s landmark speech at the Nixon library on Thursday marked the most robust call-to-action yet against the Chinese Communist Party. It came amid tit-for-tat consular shutdowns in Houston and Chengdu, and the Friday arrest by the FBI of an alleged Chinese military operative in San Francisco.

It’s tempting to brand this a hotter phase of a new Cold War, as this column did just last week. However, that language understates the historic novelty of what’s unfolding and its epochal enormity.

It’s a unique moment because the United States since its rise to global power has never confronted such a potent peer competitor across so many realms: political, economic, technological, military and even societal.

 It’s new as well because no country in modern history has risen as quickly as China, from 2% of global GDP in 1980 to some 20% of global GDP in 2019. That leaves Beijing for the first time confronting global challenges without the learning curve of a more gradual evolution.

It is also new because the U.S. and China, after four decades of wishful collaboration, are now locked in a contest that could define our times. It isn’t a struggle, as the hyperbole would have it, over “world domination,” which no country has ever achieved. But it could have significant impact on “world determination,” influencing whether democracy or autocracy, whether market capitalism or state capitalism, are the flavors of the future.

It is a unique period as well in that this unfolding contest coincides with the Fourth Industrial Revolution and an era of unprecedented technological change driven by big data, artificial intelligence, quantum computing, bioengineering and so much more.

The fact that all this coincides with the worst pandemic in a century deepens and accelerates the drama, with China both as the plague’s source and potentially biggest benefactor as the first major economy to escape its claws.

For some context to understand the dangers of our times, think of what’s coming as an updated version of the period between World War II’s end in 1945 and the Cuban Missile Crisis in 1962.

It took the United States and the Soviet Union that fraught period and a near-nuclear war over Cuba before the defining relationship of that era settled into the patterns of nuclear agreements, superpower summits and mutual recognition of red lines that prevented catastrophic war.

Today’s Berlin, the deciding point in this new contest, could well be some combination of Taiwan and the South China Sea.  Where the United States sees a sovereign democracy in Taiwan and the South China Sea as international waters, China sees territory and waters that are ultimately its property.

That Secretary Pompeo chose the Nixon Library for his historic speech was deft staging. Pompeo noted that next year would mark the 50th anniversary of Henry Kissinger’s secret mission to China, which began Beijing’s opening to the United States and the Western world.

“Taking the long view,” wrote Nixon in Foreign Affairs in 1967, “We simply cannot afford to leave China forever outside the family of nations, there to nurture its fantasies, cherish its hates and threaten its neighbors. There is no place on this small planet for a billion of its potentially most able people to live in angry isolation.”

Pompeo focused on this line from the article, linking Nixon’s aims to President Trump’s follow-up.  “The world cannot be safe until China changes,” wrote Nixon. “Thus, our aim, to the extent that we can influence events, should be to induce change.”

Said Pompeo, “The kind of engagement we have been pursuing has not brought the kind of change inside of China that President Nixon had hoped to induce.”

He added later, “We, the freedom-loving nations of the world, must induce China to change in more creative and assertive ways, because Beijing’s actions threaten our people and our prosperity.”

Pompeo’s remarks were the last of a quartet of speeches by National Security Advisor Robert O’Brien on ideology, FBI Director Chris Wray on espionage, and Attorney General William Barr on economics. They are intended to be read as a package.

It’s perhaps understandable that the U.S., in these early days, still lacks a comprehensive strategy for our times that has been coordinated with allies. Yet former National Security Advisor Stephen Hadley gives the Trump administration credit for sharpening the country’s focus on our new era of major power competition with its National Security Strategy of December 2017.

Hadley sees as a significant next step toward a U.S. strategy this week’s little-noticed introduction of comprehensive legislation by the chairman of the Senate Foreign Relations Committee, Jim Risch, and other Republican lawmakers. Weighing in at 160 pages, its aim is no less than “to advance a policy for managed strategic competition with the People’s Republic of China.”

No doubt there is a domestic political element in such a significant electoral year. Expect President Trump and his top officials to remind critics that President Reagan was vilified as he stepped up his campaign against the Soviet Union as “the evil empire.” Yet history now vindicates him. Trump will embrace that Reagan legacy and argue his electoral opponent, Vice President Joe Biden, is too weak to take on China.

Even if Trump loses in November, the architects of this more assertive approach to China hope that they have put in place a policy approach that will endure.

Hadley argues that any effective approach to countering China would have to include domestic investments in technology and infrastructure, the healing of political divisions, rallying friends and allies while refurbishing the US global brand, and engaging with China on issues neither country can address alone.  

“Any U.S. administration is going to need a sustained strategy for dealing with China to set up a set of norms and rules of the road without dividing the world and plunging us into a war nobody wants,” says Hadley. “It will be the work of years before we get this right.”

Originally posted on CNBC

Bank Failure Scenario Kit - sm2



  • This field is for validation purposes and should be left unchanged.

All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

Precious Metals and Currency Data Powered by nFusion Solutions