The Slow US-China Collision

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By NOURIEL ROUBINI*

The two countries remain on a collision course and a dangerous deepening of the ongoing “geopolitical depression” is almost inevitable.

I recently attended the China Development Forum (FDC) in Beijing, an annual gathering of foreign business leaders, academics, former legislators and senior Chinese officials. This year's conference was the first to be held in person since 2019 and offered Western observers the opportunity to meet China's new senior leadership, including new Premier Li Qiang.

The event also offered Li Qiang his first opportunity to engage with foreign representatives since taking office. While much has been said about Chinese President Xi Jinping appointing close supporters to crucial posts within the Communist Party of China and the government, our discussions with Li Qiang and other high-ranking Chinese officials offered a more nuanced view of his policies and style. of leadership.

Before becoming prime minister in March, Li Qiang served as the CCP's secretary in Shanghai. As an economic reformer and proponent of private entrepreneurship, he played a crucial role in convincing Tesla to build a megafactory in the city. During the COVID-19 pandemic, he enforced Xi Jinping's strict zero-COVID policy and oversaw a two-month lockdown of Shanghai.

Fortunately for Li Qiang, he was rewarded for his loyalty and not scapegoated for the policy's failure. His close relationship with Xi Jinping also allowed him to convince the Chinese president to roll back zero-COVID restrictions overnight, as that policy proved to be unsustainable. During our meeting, Li Qiang reiterated China's commitment to "reform and opening up," a message that other Chinese leaders also conveyed.

Li Qiang's remarkable wit was in stark contrast to the more reserved demeanor of former Prime Minister Li Keqiang, whom we met in previous years when he was Prime Minister. During our meeting, he made Apple CEO Tim Cook laugh out loud by attributing his lighthearted humor to the viral video of Cook being applauded by the crowd during his visit to an Apple store in Beijing.

He even joked about a video of US lawmakers quizzing TikTok CEO Shou Zi Chew that also went viral that week. Unlike Cook, he noted, the beleaguered TikTok boss wasn't smiling during his congressional hearing. Li Qiang's joke included an implicit warning that while American companies are still welcome in China, the Chinese government can play hardball if its companies and interests are treated harshly in the United States.

Li Qiang's thinly veiled threat captures the current Chinese attitude toward the US. Although top economic policymakers in China often talk about opening up, China's policies still prioritize security and control over reform. Qin Gang, China's new foreign minister, took a tough stance during his speech at the FDC. Dealing an implicit jab at the US, Qin Gang warned Western participants that while China intends to maintain an open global trading regime, the country would respond with force to any attempt to drag it into a new cold war.

In a recent speech, US Treasury Secretary Janet Yellen sought to alleviate the concerns from China that the US is trying to “contain” its rise by also tearing the two economies apart. Recent American actions limiting trade with China, she clarified, were based on national security concerns - not an effort to impede the country's economic growth.

But preserving the relationship with China will be difficult for the United States as it plans to introduce far-reaching restrictions on Chinese investment in the US and US investment in China. So far, Chinese officials have not been receptive to efforts by Janet Yellen and Secretary of State Antony Blinken to establish a dialogue on how to maximize cooperation, minimize areas of confrontation and manage the growing strategic competition and rivalry between the two powers.

European Commission President Ursula von der Leyen recently delivered a similarly pragmatic speech in which she argued that Europe should "focus on risk reduction rather than separating" from China, but also emphasized the many ways in which Chinese policies represent a threat to Europe and the West. Her speech was not well received in Beijing and she was effectively snubbed when she visited China with French President Emmanuel Macron in April. The more accommodating Emmanuel Macron, however, received a red carpet welcome.

China is currently trying to create a barrier between the European Union and the US. Given that companies headquartered in the European Union have significant interests in China, many European CEOs attended the Forum (FDC), in contrast to the limited presence of American business leaders. And Emmanuel Macron's controversial comments during his visit in April, particularly his declaration that Europe must not become a "vassal" of the US, suggested that the effort may have paid off. But a subsequent G7 communiqué reaffirmed the West's position on Taiwan and condemned China's aggressive policies towards the island, and China's tacit support for Russia's brutal invasion of Ukraine is likely to prevent Europe from succumbing to a charm offensive.

The run-up to the US presidential election, coupled with China's suspicion that the US is trying to curb its economic growth, will impede efforts to build confidence and ease tensions between the two countries. With Democrats and Republicans competing to be seen as tough on China, the Sino-US cold war is likely to intensify, raising the risk of an eventual hot war over Taiwan.

Despite US officials' efforts to set up barriers to strategic competition with China and Chinese officials' insistence that they have no interest in economic decoupling, the prospects for cooperation look increasingly remote. Fragmentation and decoupling are becoming the new normal, the two countries remain on a collision course, and a dangerous deepening of the ongoing “geopolitical depression” is all but inevitable.

* Nouriel Roubini is professor of economics at the Stern School of Business at New York University. Author, among other books, of MegaThreats: ten dangerous trends that imperil our future (Little, Brown and Company).

Translation: Eleutério FS Prado.

Originally published on the portal Project syndicate.


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