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Adil Kaukenov: COVID-19 pandemic as a trigger for the US-China confrontation

The Center for Army, Conversion and Disarmament Studies presents an article by Adil Kaukenov, director of the China Center in Almaty, on the causes and consequences of the US-China confrontation, the possibility of imposing UN sanctions on China, and the strengths and weaknesses of opponents.

During the global pandemic COVID-19, the US-China controversy was marked by a series of scandals, loud statements and moved to the level of sanctions, which raises serious questions about the further development of world political and economic processes.

However, COVID-19 only became a catalyst for a significant acceleration of this confrontation, while the deterioration of relations began long before the coronavirus epidemic, it is worth mentioning the scandal with the flagships of Chinese innovative technologies Huawei and ZTE, spy scandals, trade war and others.

The American view

A country that is categorically dissatisfied with the status quo is Washington, which is extremely concerned about the growth of the Chinese economy, which is rapidly "on the heels" of American economic power. Moreover, Chinese companies have begun to compete with American ones in the field of high technology, in particular, Huawei and Apple are particularly competitive in developing the technology of the future 5G and "smart technology" to manage the infrastructure of entire cities. It should be noted that almost all sectors of the Chinese economy are rapidly catching up with American industry: cell phones, home appliances, even the Chinese car industry has reached the limit to start competing in developing countries, so soon the struggle will begin in the most profitable area: countries of the "golden billion".

The main reason for the American side's concern is that this growth and competition is taking place in a direction uncontrolled for Washington. For example, Japan's growth and the active expansion of Japanese companies have also raised concerns in American circles, and Japan has been weakened by Washington's political influence in Tokyo.

It should be noted that the Japanese experience in many respects correlates with the Chinese. By 1968, Japan had become the world's second largest economy, as China is now, and one of the problematic issues was the hard peg of the yen to the dollar at 360 USD / JPY, as well as the current yuan-dollar peg.

In the 70s, under strong US pressure, Tokyo was forced to revalue the yen, which later provoked a real chain reaction that led Japan to the so-called "lost decade" (失 わ れ た 10 年) of the 90s, during which many Japanese economic giants have left world markets, losing out to Korean and Chinese companies. And Japan itself has even lost its ambition for global economic superiority.

The issue of the revaluation of the yuan against the dollar has been key in the US-China controversy since the early XNUMXs. Although the cost of Chinese labor has long since lost its cheapness, the higher purchasing power of the yuan allows Chinese technology giants to attract highly skilled labor, enabling them to create world-class products as well as the prospect of seizing the initiative to develop innovative technologies.

This is what gives Donald Trump a reason to talk about a "bad deal", the meaning of which is that the United States, by providing its market and innovation, strengthens a geopolitical competitor who offers its own order, other values ​​and is not ready to follow White House instructions. It should be noted that this thesis is shared not only by Republicans but also by Democrats, who also point to differences in values, including the vision of democracy, human rights and international relations. Therefore, today in the United States there is a stable consensus between the two ruling parties that relations with China should be radically revised in order to prevent the development of a geopolitical competitor.

Chinese look

At first, the Chinese leadership was satisfied with the dynamics of economic relations, so in politics, Beijing avoided harsh rhetoric and involvement in any conflicts with the United States and its allies. During the first stage of the trade and economic war, one of the main messages in the Chinese establishment to the American counterpart was the desire to settle all issues with financial compensation. That is, the problem in China was seen in the economic plane, that China significantly outperforms the trade balance of bilateral trade, respectively, this amount can simply be offset by Chinese purchases of American goods.

During the COVID-19 pandemic, it became clear that the economic issue was a geopolitical consequence, so no trade deal or financial compensation removed the main contradiction: as economic power grew, China could overtake the United States on World Olympus. This issue cannot be resolved by any "agreements" and although Beijing would very much like to maintain the status quo, it is clear that this will not work. Therefore, the rhetoric of the Chinese leadership addressed to the United States and personally to Donald Trump has become much harsher, and around the world. Of course, there is hope in Beijing that if, after the US presidential election, Republican Trump is replaced by Democrat Biden, as a result, Washington's level of toughness will drop significantly, due to personal factors. Therefore, Beijing does not stop sending peace messages to the American elite. For example, Chinese Foreign Minister Wang Yi said at a press conference in May this year: "In China and the United States, there are different social systems that were the choice of the two peoples and deserve respect. Although China and the United States differ in many ways, this does not mean that there is no room for cooperation. "

However, the fact that the White House under any president will see China as a dangerous rival, the growth of which must be stopped at any cost, is obvious to most of the Chinese elite. Therefore, Beijing's tactical task is to calm the panic and gain precious time to reduce the distance.

Sanction blindfold

Washington's problem with trying to stop Chinese growth is the high interdependence of US-Chinese economies. Many American experts openly say that it is much more difficult to deal with China, even than with the Soviet Union. Since the USSR was isolated from the outside world, accordingly, all actions and sanctions against Moscow did not affect the United States and its allies.

The Chinese economy is deeply integrated into Western technological processes. Even in education, Chinese students are the largest group of international students in all American universities, giving more profit to the entire US higher education system. Cutting off Chinese students will immediately have a negative impact on the profits of American universities, which are, among other things, the leading centers of American science. On the other hand, by teaching Chinese students, American universities themselves create a huge number of competitors to American companies in all areas of activity.

Such a dilemma is present in almost everything, so the flywheel of sanctions against China is very difficult for American politicians to develop. However, this does not mean that there will be no sanctions, moreover, they have already begun. And according to a long-established mechanism, starting with individual political figures, key companies, and in the future - stronger in all areas. Here, it is important for Washington to follow a gradual course of action so that American companies have time to adjust to politics.

The first blow is already being inflicted on the Chinese flagship Huawei, which has been cut off from access to American patented technologies. The fact that Huawei is actively using American chips and software is quite a blow. Huawei has its own developments, but they are "raw" and can provide only the middle segment of technology, and for advanced expensive products are not yet powerful enough.

Therefore, the main task of the White House is to isolate China from advanced technologies, thus not letting it into the "top league", leaving it in the position of a "global factory" that serves the interests of Western transnational corporations. But the difficulty is to keep room for further use of Chinese resources and the market, as well as to prevent the radicalization of Beijing in its confrontation with the United States.

Celestial reaction

For the most part, China is only reacting to American attacks, which is a vulnerable position, as the defense takes a lot of strength, and most importantly - it is unclear where the next blow will be, which will be struck by the enemy. On the other hand, it is not possible to impose one's own order, due to the fact that the United States has great political and economic opportunities. In addition, Washington has a wealth of experience in confrontation, sanctions and political pressure. While China, since the beginning of the "Openness Reforms" in 1978, has followed the tactics of neutrality and non-interference on most issues that did not concern it personally.

But the strong point of Beijing there is a dependence of entire sectors of the United States, and even individual states on cooperation with China. For example, the sales of cars of the American concern "Buick" (Buick) in China significantly exceed sales in the US market. Moreover, the Chinese market has become the main one for this company. Famous iPhones and other Apple products are assembled at factories located in China. Moreover, to transfer such production from China to neighboring countries is extremely expensive, and in some places simply impossible. Unlike, for example, the production of clothing, the creation of high-tech products requires a large number of engineers, electricity, advanced logistics and much more that has developed in China for decades. It is almost impossible to build all this infrastructure at once, for example in Cambodia or Central Asia.

The richest state in the United States is California (whose GDP would be 5th in the world if this state were an independent country), where such world points as Silicon Valley and Hollywood are located, strongly connected with Chinese production. From San Francisco alone to the pandemic, 26 flights flew daily to a variety of cities in China.

Another important factor China has a permanent membership in the UN Security Council with the right of veto, which excludes the imposition of UN sanctions on it. The status of a nuclear state guarantees China military security.

However, the problem remains a small number of reliable allies of China. There are many who sympathize with and expect financial infusions from him, but Chinese phobia is also growing. Therefore, against the rather monolithic bloc of Western countries, China remains, in fact, one on one. Of course, the power of the Chinese economy makes it possible to restrain aggressive steps against it by many countries.

Thus, on May 19, 2020, the Government of China imposed anti-dumping and anti-subsidy duties on barley imports from Australia in the amount of 80,5% for a period of 5 years. With Australia being China's largest supplier of barley (about half of the country's total exports), raising Chinese tariffs will be a severe blow to Australian farmers.

Although the formal reason for the imposition of tariffs was the dumping of Australian companies, the more real reason is the response to the call of the Prime Minister of Australia Scott Morrison to conduct an international investigation into China over the COVID-19 outbreak. Beijing reacted painfully, saying it was a "blow to the back" of a business partner, as China is the main customer for many Australian companies.

Australia has officially stated that it will not take action in response to Chinese tariffs on barley. Most likely, Canberra fears that in the event of a trade war, Beijing will simply block the entire Chinese market for Australian producers, and there will be no one to replace this market. Which will be extremely painful for all sectors of the Australian economy.

Against the background of the need for strong and self-sufficient allies, China's rhetoric toward Russia has improved dramatically. For example, on May 24, Foreign Minister Wang Yi spoke in a very positive light about relations with Russia: "Against the background of unsubstantiated attacks and slander, China and Russia rightly support each other, rallied in an inviolable fortress in the face of the 'political virus', and demonstrated a high level of strategic cooperation…"

"China and Russia stand side by side, peace and stability on the planet will be fully guaranteed, and international justice will be securely protected."

Here we can observe a situation similar to the one that occurred in Russia after the imposition of sanctions, then the rhetoric about China also improved in the Russian media, and a "Turn to the East" was announced at the highest level. However, for complex reasons, the declared reversal to the East did not work. Moreover, during the "trade war" between the United States and China, in the summer of 2019, at the St. Petersburg International Economic Forum, Russian President Vladimir Putin gave a very specific answer about the Kremlin's position in this conflict: "You know, the Chinese have a saying: when tigers fight in a valley, a smart monkey sits and watches how it ends."

It should be noted that this saying, although attributed to the Chinese, but in the original sounds a little different: "Sitting on a mountain to watch the clash of tigers." But most interestingly, Chinese leaders, especially Mao Zedong, used the phrase to criticize their opponents. For example, in 1939, Mao accused the leading powers of indulging Japan's aggression against China and "watching the tigers fight from the mountain." In 1940, Mao, in his article "Actual Problems of Tactics in the Anti-Japanese United Front," criticized Washington for its policy of "sitting on a mountain and watching the battle of the tigers." In 1945, Mao accused Chiang Kai-shek of passively waging war against Japan, saying that the entire burden of the war with the invaders fell on the Communists, and "the Kuomintang, sitting on a mountain, watching the battle of the tigers."

Thus, for China, Russia's role is growing sharply, but it is highly doubtful that the Kremlin will provide anything more than moral support. Perhaps, on the contrary, Moscow will try to relieve itself of the burden of confrontation with Washington by "watching the clash from the mountain." However, historically, Beijing has not been very good at applying this policy.

Court cases

For the world community, one of the most important issues discussed in the confrontation between the United States and China during the pandemic is Donald Trump's statement about recovering from China the emergence of COVID-19 by zeroing or deducting from the US debt to China.

It was within this idea that lawsuits were filed in Missouri and Mississippi against China, which were supported by individual congressmen. These lawsuits are particularly beneficial to President Trump and the Republican Party, as China's accusations of spreading the epidemic to the United States can shift the fire of criticism to an external enemy. The Democratic Party is more inclined to blame Donald Trump himself, who until the last moment denied the possibility of an epidemic in the United States and the need for quarantine measures.

The Chinese side has repeatedly called the accusations of the White House "absurd, meaningless", appealing to the fact that information about COVID-19 and the fight against it, was initiated by China in December 2019. It was Chinese Foreign Minister Wang Yi who called Washington's lawsuits against Beijing "devoid of legal basis and trampling on international law."

It should be noted that the United States has a "Sovereign Immunity Act" (FSIA), according to which foreign states are protected from prosecution. However, there were exceptions, including lawsuits against Saudi Arabia, through the enactment of the Justice Against Sponsors of Terrorism Act (JASTA), which allows U.S. citizens to sue that country for damages from terrorism if they were related to Saudi Arabia.

Adoption of a similar law on COVID-19 is theoretically possible, but will open a real "Pandora's Box" with unpredictable consequences, negative for the whole world. And most importantly, the attempt to compensate for the losses from the pandemic in the United States, at the expense of China's foreign debt, threatens severe consequences for the world economy. With this development, the dollar may lose its role as the world currency, which it is de facto today. Because, a real crisis of confidence in financial relations will begin. And the entire international lending system will be called into question, as it turns out that the debt can be canceled if the party deems it possible to unilaterally release itself from it.

China, of course, will never agree to such reparations, as having paid one, will have to face pressure from others who want to replenish their budgets at someone else's expense. Moreover, the CCP's weakness will be poorly perceived within the country, as the situation will be reminiscent of the Opium Wars and other pages in China's history when it suffered from the actions of European empires.

Takim chiom,

  • The COVID-19 pandemic coincided with the US election campaign, complicating the international situation by threatening a new split in the West's international relations against China and its allies.
  • This situation is a matter of concern in many regions, as it may confront geopolitical choices, which will undoubtedly entail economic and political risks.
  • In this construction, the position of Moscow remains uncertain, which will most likely play its own game, hoping to receive dividends by diverting "fire" on China.
  • UN sanctions against China are impossible due to its "veto power", but the US sanctions flywheel is beginning to spin and will gain momentum. Even with the defeat of Donald Trump in the election, this situation is unlikely to change and will worsen. However, under the leadership of the Democratic Party in the White House, the rhetoric will be somewhat less intense.
  • Lawsuits against China in the current situation are not very promising and are rather propagandistic and irritating, to create a bargaining chip.
  • The stronger the pressure on China, the tougher and more uncompromising position Beijing will take, imposing its own sanctions and closing markets from hostile countries.
  • The ideal scenario for Washington is to stop China's growth, leaving it with the role of a "global assembly shop." China's goal is not to isolate itself, to catch up with the United States politically and economically, becoming one of the world's centers of power.
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