Xiaogu Xu | July 12, 2019
Responding To: The Future of U.S.-China Relations: Friend or Foe?
More Bittersweet Days to Come
The People's Republic of China and the United States have had a profound relationship since they established their diplomatic relations in 1979. Yet the difference in ideology and interests has exacerbated the tensions from time to time. Given the risk of tit-for-tat competition, which can only result in a zero-sum dilemma between the two countries, both leaders should come up with effective and beneficial solutions to change the situation.
Retrospectively, the United States and China had a hard time establishing diplomatic ties. After the Communist Party took power in 1949, the United States recognized the Republic of China as the representative of the Chinese people. However, after the death of Mao Zedong in 1976 and the initiation of the Reform and Opening up policies of his successor Deng Xiaoping, the economic interests of not only the United States, but most western countries, over weighed the compliance to ostentatious superiority, which led to the Taiwan’s lost of support from many western countries. Only after that time, more and more countries recognized the Peoples Republic of China as the representatives of the Chinese people. This had not only provided significant opportunities to China, but also left the United States concerns that its traditional dominance in politics and economy could be challenged. With the opening of China’s economy, the trade between the United States and China grew from $33 billion in 1992 to $772 billion in 2017, which makes the United States China’s biggest export market and China the third biggest export market for the United States (after Canada and Mexico). One of the main political problems in U.S.-China relations is the huge trade deficit between those countries, which grew to $375 billion in 2017. This means that China exports $375 billion more to the United States in goods than it receives from the United States. Due to that deficit, the Trump administration decided to increase tariffs on Chinese goods, which led to the same reaction from China. China is accused of unfairly subsidizing domestic companies and encroaching on American intellectual property, so the Chinese companies are being pressed to leave the United States. Huawei, for example, will no longer learn of patches and intel from Google before they are announced on Android Open Source Project, which will have a huge impact on the efficiency of Huawei’s use of Android. Concurrently, the consequences of the trade war have come home to roost as well. There are concerns sparked out among American farmers for the export of their crops could go downhill tremendously during the trade war–before the trade war began China was buying $14 billion soybeans in United States every year.
The economic disagreement is not the only issue in U.S.-China relations. Wherever we look around the world the bilateral relationship is often followed by a dispute. The first example is North Korea where both parties support different parties. While China supports politically and economically the communist North Korea, the United States supports economically and by military the capitalist South Korea. Moreover, from Venezuela to Iran to the South China Sea, there are mostly different opinions on how foreign policy should be done.
The status quo discloses a reality which is not so optimistic. It’s obvious that the Chinese government as well as the U.S. government is not ready to compromise. Both countries see themselves as a major power with nuclear weapons on the world stage. And both countries are ready to go one step further in order to achieve their political goals. This is the real danger that can lead not only to a trade war but to an actual military confrontation, which adds another prickly layer to the dispute.
But if we look more closely at the trade dispute there is already one positive consequence. With the adoption of China’s foreign investment law amid the trade war disputes, abundant opportunities are provided for global investors including American ones. By the end of October 2018, almost 950,000 foreign-funded companies have registered in China and yielded over $2.1 trillion in investment. Financial services, information technology and motor vehicle manufacturing, which were restricted before the law, are now open to foreign capitals, hence a better business environment is expected. By opening up the economy for foreign investments as China shows, it means that it’s ready to listen to and talk with western countries.
Fundamentally, the future of the United States and China is shaped by both governments and their common interest. It is believed by analysts that the U.S.-China trade war can be solved and a consensus will be reached. As for other political issues, like the South China Sea or North Korea, they can exclusively and effectively be settled diplomatically. In terms of the trade war and the technology front, while the United States should abandon the fear that it would be “out-competed by any other country”, China is suggested to trade fairly and not to backtrack on settled trade deal. Despite current disagreements, the sanctions cannot possibly be a permanent feature of two countries’ trade landscape, for both sides have already suffered a lot these two years. And more importantly, sincere dialogues and genuine bilateral engagement, which are our silver lining, should be employed by both sides.
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