Towards a costless war against China?

FIRST we had these several days of US media frenzy during which Americans were warned that they were under attack by a Chinese balloon or perhaps several of them.

“Bowing down before a floating intruder mere hours after it entered American airspace, the entire US nation reportedly surrendered on Friday to the Chinese balloon spotted hovering over Montana,” read the cover story of The Onion, the satirical and fake newspaper, which quoted “President Joe Biden” telling the Chinese: “You can have all our states, and all our protectorates” and adding, “I have told our military to stand down and I’d advise all 350 million Americans to do so, as well.”

And on more serious, although no-less-disturbing note, the (real) newspapers reported last week that the White House, concerned about China’s military and economic ambitions (which seems to be Washington’s 24/7 preoccupation these days), and perhaps impacted by the voyage of the Chinese spy balloon across the US, is now weighing yet another effort to restrict Chinese access to advanced technologies that could be used in war.

Apparently the Biden administration has been preparing curbs on the investments that US firms can make in China, particularly in areas of advanced computing.

This move comes as Washington continues to set up economic barriers with China. It has already prohibited US companies from directly selling certain advanced technologies to China, and it has been monitoring the investments that Chinese companies make in the US for potential security risks.

At the same time, the Federal Bureau of Investigation (FBI) has been warning American companies that they may be targets of cyberattacks by the Chinese government and called on American business executives to cooperate with the agency in fighting this alleged threat.

According to news reports the White House decided on the move on investment restrictions in response to pressure from Capitol Hill, where Republicans and Democrats – who are divided on almost any and every policy matter, not to mention their differences over social cultural issues, like abortion – seem to be more united than ever on one issue: Standing up to those Chinese!

After news reports about the Chinese surveillance balloon surfaced about two weeks ago, the Republicans launched an attack against President Biden and the Defence Department for supposedly failing to protect national security. “SHOOT DOWN THE BALLOON”, tweeted former president Donald Trump.

But after shooting down the Chinese balloon, President Biden went on to lash out at China and its leader during his State of the Union address on Feb 7, declaring “Make no mistake: as we made clear last week, if China threatens our sovereignty, we will act to protect our country. And we did.”

And as he made those comments and bashed China, specifically naming Xi Jinping, slamming autocracies and arguing for the superiority of democracies, President Biden was applauded and cheered by both Democrats and Republicans. That underscored how opposition to China, which has been crystallising in Washington for several years, has now become a rallying and unifying point in US politics, and could be central to the coming 2024 presidential election.

Put another way, you cannot lose politically in the US these days by bashing China.

But then sometimes what sounds good in an address or in a policy paper is much more difficult to implement in the real world, like trying to apply investment restrictions on American companies investing in China.

Biden administration officials are saying that they plan to prohibit outright investments in sensitive areas, like quantum computing and certain artificial intelligence capabilities with military applications.

But they admit that it would be much more difficult to employ those restrictions in areas like biotechnology, medicine and infrastructure, steps that would be opposed by US companies who argue that doing so would harm American competitiveness. The policy would apply only to US firms, and not to foreign companies that would continue to operate in China, making money and benefitting from Chinese innovations. Not to mention the fact that China would continue to have access to other sources of funding even without American investments.

Yet notwithstanding all the talk about a new Cold War between the US and China and the calls heard in Washington about the need to decouple the two economies, the US Commerce Department has just announced that US-China trade levels hit a record last year, even amid the tariffs covering hundreds of billions of US dollars in Chinese goods and export controls imposed by Washington.

Hence US imports of goods from China totalled US$536.8 billion in 2022, a 6.3 per cent increase from 2021, and close to the record reached in 2018. At the same time, US exports to China grew 1.6 per cent last year.

Or to put it in comparative terms, China is the US’ third largest trading partner after Canada and Mexico, while the US is China’s third largest trading partner after the Asean economies and the European Union. Moreover, China remains a top supplier of products that are in demand in the US, like personal computers, cell phones and videogames.

Which raises the following question: How do you wage a hot or cold war against a country on whose economy your economy depends so much, and vice versa?

Bashing and punishing the Chinese might make Americans feel good and allow politicians to win brownie points with voters. In the same way, anti-Americanism provides a tool of political mobilisation for the Chinese leaders.

But American administration officials and Congressional lawmakers have yet to come up with a coherent strategy that would allow the US to maintain its legitimate national security concerns without harming core US economic interests.

Instead, they seem to be advancing neither a hot nor a cold war but one that, very much like decaffeinated coffee, is a practical substitute for real coffee, along the lines of a costless war with the Chinese. Whether that trick would work in the long run is another question.