President Biden has thrown down the gauntlet:
Note that just 3% of total views liked this post. In a full employment economy, consumers might not see the downside of cheaper Chinese cars. How will the Chinese respond? Treasury Secretary Janet Yellen has said that she hopes that Beijing won’t overreact. Or will Xi Jinping simply wait for a changing of the guard?
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A Strong China, or a Weak China?
US elections are still a full baseball season away, but the China Hawks League has taken over Washington. No Substitute for Victory, the recent article in Foreign Affairs by Matt Pottinger and Mike Gallagher, is the Republican administration-in-waiting version of Competition Without Catastrophe, written in 2019 by Kurt Campbell and Jake Sullivan. Beyond trade, the emerging bipartisan consensus is a barely concealed call for regime change in China—a foreign policy that has failed spectacularly for the US in Vietnam, Iran, Libya, Russia, and Iraq. What are the implications for global investors of the heightened geopolitical rivalry between China and the United States?
What makes the situation even more dangerous, and certainly a cause for alarm in Beijing, is that there is not much light between the two sides on China, and no real debate. The underlying assumption, championed by analysts such as Elbridge Colby, is that China is a strong, menacing power that must be subdued and managed. Its growing military strength and undiplomatic diplomacy signal aggressiveness and the inevitability of conflict. We’re told that China will take over Taiwan in 2027, and so we must act quickly and decisively to weaken China before that can happen. We need to rearm and replace what we have given to Ukraine and Israel, and pivot quickly to counteract the real threat from China. Or so the argument goes.
I have no way of knowing if and when China will cross a red line and ignite a hot war in Asia. However, I am concerned that by overestimating China’s strengths, and ignoring the country’s weaknesses, we will overplay our hand and perversely help to bring about the very outcome we fear most.
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