The strategic dance between China and the United States is afoot. It is sometimes a more graceful waltz, at other times a spicy swing. We bicker. We talk. We take a break. Repeat.
The Decoupling Development Dilemma
(Xinhua Photo, www.scmp.com)
As China attempts to tack in the face of strong domestic and international headwinds (Covid-19 shocks, blowback to aggressive foreign policy, and sharper American responses), the Chinese government could benefit from an appreciation of self-reflective irony. Recognizing strengths and weaknesses and listening to how others perceive what is said and done by them and in their name is as important a skill for the Chinese government as it should be for the American government.
The official freak out about other countries again requiring Covid testing and coordination of air passengers from China is a case in point. While China may have “re-opened” earlier this month, ordinary tourists are still prohibited from entering the country and all arrivals are required to be tested before boarding planes to China.
Vice Foreign Minister Xie Feng (www.fmprc.gov.cn)
Chinese Vice Foreign Minister Xie Feng (who may soon be appointed the next Chinese ambassador to the U.S., replacing a more hardline diplomat) said recently that “to win a competitive advantage, certain countries use the state apparatus … and violate the rules of the market and economic laws, waging tariff wars, trade wars, technology wars, chip wars and wars on rules in an attempt to suppress and deprive other countries’ rights to development, which is unjustified.” This sounds like something the U.S. Secretary of State might say as well.
The following characterization of Chinese society is a familiar refrain about America: “The digital finger-pointing [on China’s internet] reveals a country that is deeply polarized, with each side distrustful and skeptical of the other — and, to varying degrees, of the party and its proxies. In some cases, the party’s own supporters are indirectly questioning its decisions, complicating efforts by the party’s censors and propaganda outlets to push its messaging.”
TSMC Phoenix Factory (www.azcentral.com)
The 2022 CHIPS and Science Act is America’s new foray into a national industrial policy for the tech sector. The Act is designed to incentivize semiconductor and other manufacturers to re-invest in America. One of the first dramatic effects of the new policy was the announcement that Taiwan Semiconductor Manufacturing Company (TSMC) would triple its investment in America and build a second plant in Arizona. TSMC produces more than ninety percent of the world’s most advanced chips and is also diversifying in Japan and South Korea.
While China has complained that America is poaching TMSC from Taiwan (and by extension China), China’s own national industrial policies have long existed in the successive Five-Year Plans adopted since the founding of the People’s Republic of China as well as the Made in China 2025 Policy and the China 2035 Vision. China’s love-hate relationship with Tesla is but one example of the benefits and detriments that arise. China is also thinking of how to further support its chip industry.
Lego Groundbreaking Vietnam (AFP Photo - www.scmp.com)
China has been called the “world’s factory.” It will continue to be a significant player so long as people want all manner of stuff quickly and as inexpensively as possible; however, many companies are hedging their bets by shifting capacity abroad. Lego is building a new, carbon-neutral factory in Vietnam. Apple, through its contractors, and an increasing number of European companies are expanding and shifting operations to Vietnam and India. American and Asian companies are also expanding in Thailand, Malaysia, and Indonesia.
Though ordinary Chinese and Americans currently hold unfavorable views of the other, economic and strategic competition does not have to lead to bad outcomes.