The Economist - USA (2021-07-17)

The Economist July 17th 2021 BriefingAmerica’sChinapolicy 19

global  economy.  America  cannot  try  to
contain  it  as  it  did  the  Soviet  Union;  in­
stead  Mr  Biden  wants  to  counter  China’s
influence by increasing America’s own. 
The  emerging  strategy,  while  still  pro­
tean, sounds of a kind with Mr Doshi’s pre­
scription  for  “blunting  and  building”.  The
building  comes  first.  Mr  Biden’s  aides  in­
variably  start  any  discussion  of  China
strategy with the need to restore American
greatness after decades of decline. “Rarely
has  a  great  power  like  the  United  States
gone on such a detour,” says the senior offi­
cial.  “It’s  tragic.”  America  must  recover
from  all  that,  and  invest  in  itself,  Mr  Bi­
den’s aides say, so that it can deal with Chi­
na from a position of strength.
Hence the United States Innovation and
Competition Act, which passed the Senate
in early June packed with spending intend­
ed to improve America’s competitiveness.
It  would  authorise  $52bn  to  boost  semi­
conductor research and manufacturing in
Americaand $29bn for a new applied­sci­
ences fund that would support projects in
advanced materials, robotics, artificial in­
telligence  and  other  technologies.  It  also
contains  extra  money  for  going  to  the
Moon (see International section). 
Spending does not have to be aimed so
precisely to be part of the policy. Mr Biden’s
$1.9trn pandemic recovery package, which
passed  in  March;  his  multi­trillion  dollar
proposals for “hard” and “soft” infrastruc­
ture; his provisos on buying American: all
can  be  read  as  part  of  a  rebuilding  policy
aimed at China while also looking to fulfil
lavish campaign promises.
But ambitious as they look in Washing­
ton,  these  numbers  cannot  compare  with
Chinese  spending  on  infrastructure  and
industrial  policy.  And  they  are  shrinking.
The  core  infrastructure  plan  has  been
whittled  down  to  $600bn  in  negotiations
with Republicans whose distaste for hand­
ing victories to Mr Biden exceeds their ani­
mosity  to  China  (though  Democrats  want
to  add  back  $3.5trn  in  another  package—
see  United  States  section).  Republicans
such  as  Ted  Cruz,  Marco  Rubio  and  Josh
Hawley,  all  self­professed  China  hawks,
are unlikely to abandon their party’s oppo­
sition to Mr Biden’s domestic agenda when
they have their eyes on his job. 
Even  if  America  were  united  in  its  ef­
forts,  though,  building  back  at  a  rate  that
would  seriously  diminish  China’s  current
prospects is not possible. Barring a serious
setback, China’s economy will become the
world’s  largest  within  its  10­15  year  “win­
dow of opportunity”. The country’s gigan­
tic  market  will  exert,  as  Communist  Party
lingo  puts  it,  a  “powerful  gravitational
field” far beyond its borders. It will be able
to  spend  even  more  on  its  armed  forces.
The country’s investments in research and
development  will  make  its  technological
prowess increasingly formidable. 

Thatiswhyanantagonisticpolicyre­

quireswhatMrDoshicalls“asymmetric

blunting”: waysofundermining China’s

attemptstorebuildtheworldorderthatdo

notcosttoomuch.Militarily,thatmeans

adoptinganapproachof“deterrencebyde­

nial”inareasjustbeyondinternationally

recognised Chinesewaters, investing in

state­of­the­art weapons to stop China

seizingcontrolofwatersorislands(like

Taiwan)towhichitconsidersitselfenti­

tled. Economic blunting tactics include

enforcingexportcontrolssothatAmerican

companiesdonotfuelChina’srapiddevel­

opment of critical technologies—a tool

that the Trump administration used to

crippleHuaweiandtoimpedeChina’sbig­

gestchipmaker,SemiconductorManufac­

turingInternationalCorporation.Political

bluntingincludescounteringChina’sin­

fluence intheUnitedNationsandother

multilateralinstitutions.

Sharpenup

Becausesuchstrategiesrequirepartners,

theircultivationisa coretenetofMrBi­

den’sstrategy.Hehasbeencourtingother

governments andsorting out old griev­

ances.Hehasagreeda suspensionoftariffs

ina 17­year­olddisputewiththeeuover

subsidiestoAirbus,anaerospacecompa­

ny.Hehasalsowaivedsanctionsonthe

company buildingtheRussian­led Nord

Stream2 pipelineasa favourtoGermany,

whichwillbetherecipientofmostofits

gas.Insodoinghesignalledthathisad­

ministrationviewspotentialco­operation

withalliesonChinaasmore important

thanconfrontingRussia.InMarchAmeri­

caagreedanewdealonfundingforthe

mainAmericanmilitarybaseinSeoul.

Thiscultivationhasbornesomefruit.

InMarchBritain,Canadaandtheeujoined

withAmerica inimposing sanctions on

Chinese officials and entities over Xin­

jiang—the first time any other govern­

mentshaddoneso.InMaySouthKorean

President MoonJae­in,onavisitto the

WhiteHouse,agreedtoa mentionofpre­

servingthestatusofTaiwaninthesubse­

quentjointstatement.InJunetheg7and,a

coupleofdayslater,anatosummitboth

produced statements recognising the

threatposedbyChina.

Serious blunting, though, requires

more than co­ordinatedstatements and

(largelysymbolic)sanctions.Herethereis

lesstoreport.BuildBackBetterWorld,or

b3w, a responsetoChina’sBeltandRoad

Initiativeannouncedattheg7summit,has

nonewinstitutionalframeworkorfund­

ing.MrBidenhasworkedwiththeg7and

theQuad,a militarygroupingwithAustra­

lia,JapanandIndia,tocounterChina’sco­

ercive,strings­attachedvaccinediploma­

cy.Butthecommitmentsofvaccinedoses

aretinycomparedwiththeneed.Hehas

not as yetput serious resources to his

broader vision of providing middle­in­

comecountrieswithalternativestotaking

moneyandbusinessfromChina.Congress

wouldnotlethim.

WhereAmericadoesnotlead,itsallies

seemunlikelytogooftheirownaccord.In

MaytheEuropeanParliamentresponded

to China’sbullying overtheeu’s earlier

Xinjiangsanctionsbyfreezingratification

ofaninvestmenttreaty.Butmanygovern­

mentsstillwantsuchdealsandare not

lookingfortrouble.OnJuly1stRishiSunak,

Britain’schancellor,calledfora“mature

and balanced relationship” with China,

eyeingtheCity’spotentialtosellfinancial

services into the world’s second­largest

nationalmarket.OnJuly7thBorisJohn­

son,theprimeminister,saidhedidnot

wanttoscareawayinvestmentbecauseof

an“anti­Chinaspirit”.

EmmanuelMacron,theFrenchpresi­

dent,andArmin Laschet,whomaysuc­

ceedAngelaMerkelasGermanchancellor,

haveshowna lackofenthusiasmforcon­

frontingChina.Smallercountriesfeelsim­

ilarly.Notcoincidentally,thenumber of

countrieswithwhichChinasharesmore

tradethanAmericaisfargreaterthanthe

otherwayround(seechart).

There are also American voices op­

posedtoa tougherline.Businessesandfi­

nancialinstitutionsarelobbyinghardto

maintainaccesstotheChinamarketand

fortheeasingofexportcontrols.OnJuly

7thmorethan 40 progressivegroupswrote

toMrBidenurginghimtodropAmerica’s

“antagonisticposture”towardsChinaand

toco­operateonclimatechange.Suchcalls

are musicto Mr Xi’sears. As MrDoshi

writes, Chinese officials routinely treat

America’swishforprogressonmajorchal­

lenges—suchasclimateornuclearnon­

proliferation—asopportunitiesforlever­

age.China’sdeterminationtolinkissues

Americawouldliketokeepseparatemakes

America’sinterestincordoningoffareas

forco­operationsomewhatmoot.Theyare

notdecisionsit canmakeonitsown.

Theclimatelookslikelytofallvictimto

thisantagonism.Bothcountrieswilllower

Who you gonna call?

Countries which share greater trade* with:

% of global total

Source:IMFDirection

ofTradeStatistics

*Gross merchandise trade,

exports plus imports

100

75

50

25

0

2000 05 10 15 20

China

United States