USA vs China: trade war – the first stage in the battle of ideas

Confrontation between Washington and Beijing will deepen

It is wrong to explain the current aggravation of USA-Chinese relations only by an increase in the US trade deficit with China in 2017 (by 8% or 375.2 billion dollars against 347 billion dollars in 2016). Let's look at the general approach of the United States to relations with China, which is presented in D. Trump's annual address to the Congress and in the US National Security Strategy adopted in December 2017.

The current Strategy of 2017 is radically different from the previous National Security Strategy of 2015 approved by President Obama, which gave a high assessment to the “unprecedented cooperation” with China and designated it as a strategic partner. The new Strategy for the first time paid special attention not to military but to economic threats to US security. It notes the need to “reconsider the policies of the past two decades,” aimed to “gradually transform these countries into good partners through cooperation with opponents, their inclusion in international institutions and global trade.” At the same time, China's economic development is defined in the Strategy as one of the main threats to security, a kind of a challenge to the current “global order.” China, along with Russia, is called a “strategic competitor,” and the US must be prepared for a “long-term strategic rivalry” with it.

US analysts mark the previous administration made a strategic mistake in its relations with China. They expected that the development of a market economy in China would result in a change in the political system and weaken the position of the Chinese Communist Party (CPC) as the leading political force, turning China “into a liberal democratic nation.” Washington tried to create an alliance between the two countries, close in ideology, political, and economic ways. Dreams of a union of two economic giants, who will rule the world together, were formulated by American researchers in the project “Chimerica.” The latest US National Security Strategy shows that Washington's geopolitical structures collapsed, bumping into the mighty block of Chinese civilization.

Obviously, one of the reasons for a radical change in the US policy towards China was the XIX Congress of the CPC. It is no coincidence that the new US National Security Strategy was adopted in 2 months after the Congress and became a kind of response to the strengthening of the Chinese president’s positions. According to the Washington analysts, “China's move towards a liberal market economy” has slowed down after in late 2012 XI Jinping was elected as CPC General Secretary. In his speech at the Congress, XI Jinping called for increasing the role of the state sector in the economy, preservation and development of state enterprises, and also confirmed construction of “socialism with Chinese specificity.”

Washington considers as the main threat the rapid growth of China, which got closer to the United States in many areas of economic development (GDP, foreign trade balance, current account balance of payments, state budget, etc.). Washington establishment with its faith in the superiority of the American way of life can’t accept the fact that some countries are able to exceed the United States. But there are other circumstances that make Americans to perceive China as a real threat. China threatens not only to beat the US in economic development, but also to spread its highly effective development model around the world, which is based on a combination of private initiative in most industries and the dominance of state property in strategic sectors. It is an alternative to the American concept of a “neo-liberal market economy” and a template for many developing countries.

The Chinese “One Belt, One Road” project can only be compared with the US Marshall Plan. Secretary of State Rex Tillerson in his speech to the Atlantic Council on December 13, 2017, stated that Beijing was trying to “extend its own rules and regulations to the outside world” by implementing this project.

It is important that the effectiveness of the Chinese model is expressed not only in high rates and the quality of economic growth, but also in its social dimension. The Chinese government is consistently and methodically reducing poverty and increasing the “middle class” in the country. Over the past five years, the poor in China have decreased from 99 million to 30 million people (3.1% of the total population).

Speaking of the US, neo-liberal economic policy is increasingly prevents the country to implement the “American dream” of global prosperity. Social and property inequality is growing rapidly. In the late 70-ies of the last century the middle class was 61% of the total population, now it is 49%. The number of people living below the poverty line reached 40 million or 12.7% of the population.

In other words, there was a turning point in US policy in relations with China: Washington moved from “engaging in cooperation” to containment policy, and the upcoming trade war is only the first stage in the battle of ideas. We are likely to witness the second “cold war” between the USA and China. The prospects of US-Chinese relations are obvious. Americans are people of business, who methodically and steadily go to their purpose. In the near future, we should not wait for the development of US-Chinese economic relations. Confrontation between the United States and China will deepen, covering not only economic areas.

It is clear what Russia should do in this situation. The USA showed us a vector of development, comparing Russia with China in the Strategy of National Security as a military-political threat. Cooperation with China promises Russia broad opportunities. If we do not use them, we will lose the chance of a breakthrough in the future. Russia has to abandon the American neo-liberal model of economic development and adopt the Chinese economic experience.

China trade USA economics