China and the US: A Battle for Economic Dominance

There is so much disorder, disarray, and confusion afoot that it is hard to determine where exactly coming fault lines will settle into tectonic plates that shape the future. One thing that seems now to be almost certain is the rhetorical split of China against the United States split.

Both countries are interdependent and their futures are impossibly intertwined, yet they are disengaging. On the surface, the U.S. is mistrustful of Chinese intentions. Its support for Russia and willingness to defy American will points to a newly assertive country who through Belt and Road, other soft money, influence, and a search for prestige seems squarely aimed at displacing the U.S. as the sole superpower on this planet.

We must not forget that, previously, China was the center of technology, art, and manufacturing, with goods that were the envy of the world. The nation rebuffed advances by the U.K. and others to trade with it because it had everything it needed already, with the best silks and porcelain to boot. This resulted in the disgrace that was the Opium Wars. France, the UK, and other Western powers forced China into humiliating concessions and the acceptance of large-scale drug imports from the British, in the form of the corroding and terrible substance called opium.

Disentanglement

With that experience in its rear view mirror, one could excuse some lingering mistrust of the West. A relationship with a newly powerful and independent China need not be a quite so scarred by the past. However, it does seem like unfriendliness is one element of the Sino-US relationship now. In turn, we’re seeing a disentanglement, disengagement, or confrontation between the nation and Western countries like the U.S., depending on who you listen to.

A complex scenario is unfolding, wherein the economies of ¨the West¨ and China are completely mutually interdependent. If world-makers are really serious about disengagement, selectively or completely, it would be like disassembling a pasta and putting each ingredient back into the box whole.

Westerners have simply lost a lot of the skills, jobs, tools, and processes needed to be completely independent. A selective independence where the U.S. would be able to make all of its military kit itself would be near-impossible, as well. From magnets to circuits, pharmaceuticals, and integration, all roads lead to China. Key steps, key materials, key competences, and true scale in many areas are only available whole or in part in that nation. The United States can not possibly hope for strategic autonomy and mastery of the battlefield in a world where its technology is playing catch-up with or dependent on China.

Chinese Unforced Errors

Investments in domestic manufacturing and chip production may help a good deal, but they replicate more expensive solutions done more successfully elsewhere. Flag-waving ceremonies will do much to advance the local jobs and manufacturing chorus, but will not move the needle, overall.

But, what would? What can the U.S. do? Hope that China understands a mutually-assured economic destruction and drops its designs on Taiwan forever? A hope that China can be stopped from gaining on the U.S. technologically? China’s “One China” policy seems set in stone. And, in all areas, the country is gaining on the U.S.

However, there is a central weakness in China. Ant Financial could have become the default online bank for the world, but its initial public offering was cancelled. Venture capital activity, unicorns, and leading tech companies in China were all set to eclipse counterparts in the U.S, but a crackdown on startups and investments have greatly reduced the nation’s dominance. Via TikTok, PUBG, and a herd of unicorns, Chinese firms could have dominated technology but this was thwarted by a goal of the national government.

Xi Jinping found it more important that the business environment of the country was obedient than prosperous. Therefore, his crackdown has potentially been one of the most expensive mistakes in history. China has always seen as being efficient and goal-oriented, but it is a disco ball masquerading as a solid sphere. Infighting by clans, corruption, and a need for one faction to dominate the other will always be guaranteed to interfere with whatever national objective is at stake. It is clear that China is willing to make the most expensive mistake in history just to make a point and this is the key to their undoing.

Clash of Clans

With this in mind, will the U.S. have the access, fortitude, and guts to interfere with China’s various clans of military officers and officials? Is it willing to let one clan dominate over the other in order to assure a new leadership that is more friendly to it?

China chafes at imagined U.S. interference, not out of paranoia but because domestic influence is the end-all-be-all of power in the country. Any slight imbalance could lead to one faction dominating the other. With losses now more often punctuated by bullets or long jail sentences and success leading to billion-dollar families, the gloves are off.

I do not believe that the U.S. could defeat China economically. I believe that it will be under threat, selectively military. I think that China’s more flexible foreign policy will also let the company gain in the uncontested world of non-aligned countries.

As we have seen recently, even long-time U.S. allies, which have received billions from the US, such as India and South Africa, are now supporting Russia. Fickle and unethical governments can reverse long relationships at will. At the same time, fractious, chaotic U.S. politics makes it hard to have any faith in the longevity and consistency of any one U.S. foreign policy item or promise. Just ask the Kurds what being a decades-long staunch supporter of the U.S. means.

I can see only two ways for an assured U.S. dominance in world affairs. One path would be for the country to get deeply involved in Chinese factions vying for control of the country. This will be nearly impossible given how tightly controlled China is. The U.S. may not even have any meaningful sources on the ground. A few years ago at least 18 U.S. spies were killed. The other more convenient and likely solution would be a far-reaching technological renaissance. We will delve deeper into that in the next article in this series.