April 19, 2021 | Understanding US-China Relations: Focus On Fixed Constraints
It's easy to get caught up in short-term volatility, but to understand US-China relations its important to focus on their hard constraints
Last week US climate czar John Kerry met with his Chinese counterpart Xie Zhenhua in Shanghai. This meeting was more amicable than last month's high-level talks in Alaska. However, it’s unclear whether progress in forging a commitment to fight climate change will alter the current trajectory of US-China relations.
Although the Biden administration has kept many of the hawkish Trump-era policies in place, relations between the world’s two largest economies seem to have escaped the low point of last year’s rapidly escalating security spiral. Although relations are not deteriorating as rapidly, it’s unrealistic to believe we’ve found a stable equilibrium — things will likely continue to get worse in the long run.
The United States and China are both grappling with hard constraints that will likely fuel turbulence indefinitely. The United States and the Biden administration are largely constrained by strategic factors and entrenched interests such as the US military-industrial complex. The United States’ strategic imperatives vis-a-vis China center around maintaining the US’ dominant position in the Indo-pacific while protecting its top sources of global supremacy: 1) military, 2) global financial system, 3) semiconductors.
China’s constraints are largely internal, but they happen to be the driving factors behind its external behavior as well. China’s largest constraint is the Chinese Communist Party’s non-stop effort to shore up its domestic legitimacy. Before 2015 or so, Chinese leaders nested their legitimacy within rapid economic growth in a period where annual GDP growth topped 10% in many years.
As China’s economy reaches higher stages of development, GDP growth will naturally decline to something in the 3-6% range. This means Xi Jinping and the CCP will need to find new ways of consolidating authority. Nearly ten years into Xi Jinping’s reign, it’s clear the communist party’s substitute for rapid economic growth is a large-scale tightening of state control over China’s economy and society.
Beyond China’s increased authoritarianism is a dependence on selling the dream of China’s “great rejuvenation.” More recently, one of the strongest sources of legitimacy for the CCP has been the United States’ domestic failings. The US’ abysmal pandemic response coupled with widespread social unrest during the Trump years has all but confirmed Chinese leaders’ suspicions that the United States is in the midst of a structural decline.
The prevailing narrative within China is that a rising China threatens the United States. An increasingly aggressive US foreign policy results from the US’s unwillingness to recognize China as a global peer. China’s ruling party is capturing this narrative to full effect by arguing that only Xi Jinping and the CCP can bring China back to its historical and rightful position as the dominant superpower in Asia.
Though the Biden administration has succeeded in extricating the United States from the Trump adminsitration’s confrontational and reckless approach to China, there’s still no way to mitigate or meaningly soften the underlying constraints. In the meantime, the best we can hope for is a kind of stalemate through the rest of 2021 as the world emerges from the vaccine phase of the global pandemic.
US-China Relations
US-China relations: a good-versus-evil world view does no one any good
It is still true, even in this speed-freak era of AI and machine-learning, that international diplomacy needs governments to station quality representatives in foreign capitals, and for international organisations to listen and learn, soak up the ineffable atmosphere, and interact with real people, especially those with “issues”, and report back home.
China-US game shifts into long stalemate
China and the US issued a joint statement on climate change on Sunday following US Special Presidential Envoy for Climate John Kerry's visit to Shanghai and meeting with his Chinese counterpart Xie Zhenhua.
This signals some relaxation of the tensions between China and the US. It is also encouraging and represents that the China-US competition has become a protracted war. The two countries need a long time to deal with mutual competition and cooperation.
U.S.-China Joint Statement Addressing the Climate Crisis
U.S. Special Presidential Envoy for Climate John Kerry and China Special Envoy for Climate Change Xie Zhenhua met in Shanghai on April 15 and 16, 2021, to discuss aspects of the climate crisis. At the conclusion of the discussion, the two Special Envoys released the following joint statement.
China Digital Yuan
China's digital currency (II): Q&As
The following are several articles that cover some hot-button questions about the digital RMB.
Key takeaways:
Digital currency will take up the market share of private payment services, such as Alipay or WeChat Pay, but both will likely coexist.
Digital currency poses risks to traditional business models for banks but opens up new opportunities.
Digital currency is anonymous for daily use, but still traceable, especially for large transactions.
Experts believe the digital RMB can boost the yuan’s internationalization.
China’s Digital Yuan Poses No Threat to the Dollar’s Dominance
Excitable commentators who say China’s digital yuan is a threat to the dollar should take the word of Chinese central bank deputy governor Li Bo, who said on Sunday that the country’s digital yuan isn’t an effort to displace the greenback.
The yuan’s digitization is fascinating in terms of its political implications and regarding the new economic levers it might give the government domestically. But it offers relatively little as a tool to boost the yuan’s limp international presence, let alone as a weapon to challenge the dollar’s supremacy.
US-China Tech
California lawsuit against Chinese tech giant raises a thorny question: Can the plaintiffs remain anonymous?
A group of anonymous Californian plaintiffs suing the owner of a Chinese mobile app over alleged censorship and surveillance are clashing with defense lawyers about whether they need to identify themselves to the defense team.
Users of the WeChat app filed a lawsuit against Chinese tech giant Tencent in state court in January, alleging that the company’s practices violate their free-speech and privacy rights.
US-China Cross-border
Citigroup to ramp up Chinese investment banking plan - source
Citigroup (C.N) plans to expand its investment banking business in China and will soon apply to set up local underwriting, sales and trading and futures trading businesses by the end of June, a person with direct knowledge of the matter told Reuters.
Foreign Buying of Chinese Government Bonds Stalls
A huge run-up in foreign holdings of Chinese government bonds has stalled, with international investors hitting pause on their purchases as China’s interest-rate advantage over the U.S. has shrunk.
International ownership of Chinese government debt declined slightly in March to the equivalent of $313 billion, according to the China Central Depository & Clearing Co. Holdings fell about 1% to 2.04 trillion yuan, from 2.06 trillion yuan a month earlier.
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