The US – China Cold War

In May 2020, the White House published a report, United States Strategic Approach to the People’s Republic of China, detailing a whole-of-government strategy with respect to the People’s Republic of China (PRC). This 16 page report outlines when and how China doesn’t play by the rules, and what the United States is doing to counter those challenges. In this week’s blog post, I will talk about the main topics covered in this report, and the US – China events that have transpired since May 2020.

The report talks about 3 major challenges that PRC poses to the US national interest: Economic Challenges, Challenges to American Values, and  Security Challenges. For the scope of this blog post, I will only discuss the economic challenges discussed in the report.

Economic Challenges 
The article states that Beijing’s poor record of following through on economic reform commitments and its extensive use of state-driven protectionist policies and practices harm United States companies and workers, distort global markets, violate international norms, and pollute the environment. Beijing’s economic policies have led to massive industrial overcapacity that distorts global prices and allows China to expand global market share at the expense of competitors operating without the unfair advantages that Beijing provides to its firms.

The United States Trade Representative (USTR) found that the PRC:
(1) requires or pressures United States companies to transfer their technology to Chinese entities;
(2) places substantial restrictions on United States companies’ ability to license their technology on market terms;
(3) directs and unfairly facilitates acquisition of United States companies and assets by domestic firms to obtain cutting edge technologies;
(4) conducts and supports unauthorized cyber intrusions into United States companies’ networks to access sensitive information and trade secrets.

The report points out the list of Beijing’s commitments to cease its predatory economic practices is, in fact, littered with broken and empty promises. In 2015, Beijing promised that it would stop government directed cyber-enabled theft of trade secrets for commercial gain, reiterating that same promise in 2017 and 2018. Later in 2018, the United States and a dozen other countries attributed global computer intrusion campaigns, targeting intellectual property and confidential business information, to operators affiliated with the PRC’s Ministry of State Security – a contravention of Beijing’s 2015 commitment.

According to US administration, Beijing acknowledges that China is now a “mature economy,” yet the PRC continues to argue in its dealings with international bodies, including the WTO, that it is still a “developing country.” The US administration claims that China self-designates as a developing country to justify policies and practices that systematically distort multiple sectors globally, harming the United States and other countries. The report also discusses how Beijing uses a combination of threat and inducement to pressure governments, elites, corporations, think tanks, and others – often in an opaque manner – to toe the Chinese Communist Party (CCP) line and censor free expression. Beijing has restricted trade and tourism with Australia, Canada, South Korea, Japan, Norway, the Philippines, and others, and has detained Canadian citizens, in an effort to interfere in these countries’ internal political and judicial processes.

Lastly, the report states that Beijing seeks global recognition for its environmental efforts and claims to promote “green development.” China, however, has been the world’s largest greenhouse gas emitter by a wide margin for more than a decade. Beijing has put forward vague and unenforceable emissions reduction commitments that allow China’s emissions to keep growing until “around 2030.” Chinese firms also export polluting coal-fired power plants to developing countries by the hundreds. The PRC is also the world’s largest source of marine plastic pollution, discharging over 3.5 million metric tons into the ocean each year. The PRC ranks first in the world for illegal, unreported, and unregulated fishing in coastal nations’ waters around the world, threatening local economies and harming the marine environment. Chinese leaders’ unwillingness to rein in these globally harmful practices does not match their rhetorical promises of environmental stewardship.

The report outlines that United State’s goal is to protect its vital national interests, as articulated in the four pillars of the 2017 National Security Strategy of the United States of America (NSS). The United States aims to: (1) protect the American people, homeland, and way of life; (2) promote American prosperity; (3) preserve peace through strength; and (4) advance American influence. The report then goes into detail on the measures taken by the United States in its dealings with China.

The report said, “the United States has significant interests in the future of Hong Kong. Approximately 85,000 United States citizens and more than 1,300 United States businesses reside in Hong Kong. The President, the Vice President, and the Secretary of State have repeatedly called on Beijing to honor the 1984 Sino-British Joint Declaration and preserve Hong Kong’s high degree of autonomy, rule of law, and democratic freedoms, which enable Hong Kong to remain a successful hub of international business and finance.” Interestingly, Mike Pompeo, the US Secretary of State, announced a week after this report was published that Hong Kong had lost its autonomy. On June 30, China passed a wide-ranging new security law for Hong Kong which makes it easier to punish protesters and reduces the city’s autonomy. I suspect that China’s decision was in response to this scathing letter from the United States.

Furthermore, US President Trump’s ban on TikTok and WeChat shouldn’t come of as a surprise given the fact that the report said, “To ensure protection of our information worldwide, including sensitive military and intelligence data, the United States is actively engaging with our allies and partners, including in multilateral fora, to promote a set of common standards for secure, resilient, and trusted communications platforms that underpin the global information economy. To compel Beijing to adhere to norms of responsible state behavior, the United States is working with allies and like-minded partners to attribute and otherwise deter malicious cyber activities.

The White House report also claims that, internationally, the CCP promotes General Secretary Xi’s vision for global governance under the banner of “building a community of common destiny for mankind.” Beijing’s efforts to compel ideological conformity at home, however, present an unsettling picture of what a CCP-led “community” looks like in practice:
(1) an anti-corruption campaign that has purged political opposition;
(2) unjust prosecutions of bloggers, activists, and lawyers;
(3) algorithmically determined arrests of ethnic and religious minorities;
(4) stringent controls over and censorship of information, media, universities, businesses, and non-governmental organizations;
(5) surveillance and social credit scoring of citizens, corporations, and organizations;
(6) and arbitrary detention, torture, and abuse of people perceived to be dissidents. In a stark example of domestic conformity, local officials publicized a book burning event at a community library to demonstrate their ideological alignment to “Xi Jinping Thought.”

After reading this report, it is evident that there is tension building between the United States and China. There appears to be a power struggle between an emerging super power and an existing super power. I believe that US will put additional restrictions on China, and China will impose restrictions on US goods accordingly. I suspect that de-globalization may be inevitable. The US – China cold war has begun.

american and chinese flags and usa dollars
Photo by Karolina Grabowska on

Hope you learned a little and found this blog post helpful. We talked about the White House Report from May 2020, and the rising tension between the United States and China. As always, you can sign up for our free mailing list here.  You can sign up for our paid subscription services here. Like us on our Facebook page here. Thank you!

Superior North LLC’s content is for educational purposes only. The calculators, videos, recommendations, and general investment ideas are not to be actioned with real money. Vyom Joshi is not a professional money manager or a financial advisor. Contact a professional and certified financial advisor before making any financial decisions. Please review the Disclaimer and Terms and Conditions.

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