Index > Briefing
Tuesday, August 17, 2021
The Rugged Evolution of the U.S.-China Relations

As the global situation now sees drastic changes, what happens in Afghanistan has become the latest focus in international geopolitics and it will continuously impact the world. This, however, does not change the basic pattern of U.S.-China relations, the most critical bilateral relationship that affects the long-term world situation. The reasons why such a relationship has reached its present state are very complex as there are several key stages to this evolution. ANBOUND’s founder Chan Kung has recently put forward his personal views and made some basic judgments on the future possibilities of U.S.-China relations:

First of all, U.S.-China relations are in the current state because of the trade negotiations between the two countries. When the Trump administration radically reversed the United States’ stance toward China, American society began to reconsider its relationship with Beijing.

Another critical stage in the relations is the Hong Kong issue, which has a significant impact on both the upper class and the lower class in the United States. This demonstrates a stepwise evolutionary process in U.S.-China ties, which does not occur overnight, and such circumstances pose fresh opportunities for Taiwan and Singapore to rise.

Second, U.S.-China relations will not change with the arrival of a new U.S. President, and we can foresee this situation will continue on the same path for a long time, as Chan Kung has spoken about it even during the Trump era.

Note that Trump is still an intrusion into American politics and society, and "Trumpism" without Trump symbolizes conservative beliefs and stances that are the fundamental value promoted by the Republican Party. Such Trumpism will exist in the United States for a longer time.

Third, the United States will not decouple from China immediately and comprehensively in the economy, as this will bring huge losses. The United States has realized this, and Europe also understands this. However, economic issues can affect politics, but they cannot determine politics, especially when viewed in the historical period. The overall relationship between China and the Western world is currently in an unfavorable situation. When talking about ideological issues, we must realize that political reality is not the same as the verbal statements of politicians. In international relations, whoever emphasizes that they will not change their positions is likely to become the party that really wants to decouple.

Will China's economy and politics completely decouple from the world? Although China denies this in its official policy, it is theoretically possible. However, even if the conditions are met, this process will take some time. The world economy must have a transitional period. This will only happen after India and ASEAN countries like Vietnam can replace China's industrial supply to the world and maintain the balance of the supply chain, and this may take about 10 years. Unless major events continue to interfere with this process (i.e. the Taiwan Strait issues, India-China relations, and the violent conflicts on the Diaoyu Islands between China and Japan), this will be the expected trend.

Fourth, China is actually in the process of gradual decoupling, and this is manifested domestically with dual-circulation. If political interferences can be avoided, the time for maintaining the dual-circulation will be longer; yet if such interferences are amplified, the decoupling process will be shortened, and the dual-circulation will become single circulation. If China adopts the strategy of "separation of politics and economy" during this transitional period, under the circumstance that politics does not interfere with the economy, it will be beneficial to the Chinese business community where China can still maintain external economic cooperation for a certain time. However, if the reverse happens, then external benefits are likely to end sooner.

Fifth, the rise of nationalism in China is within the control of the core circle of Chinese policymakers. Any country would be influenced by nationalist sentiments, yet nationalism should be in a balanced state. In China today, nationalism is not in a balanced state. This "imbalance" may be related to the policy level's desire to advance some of China's goals too quickly. ANBOUND has stated previously that China’s major problems are related to the country attempting to advance its policies and measures too hastily, and as a result, there is such an imbalance state.

Sixth, finance and capital are very passive in the process of China's decoupling from the world, thus the focus has to be on the Chinese market, which is determined by the nature of the service industry. In other words, the idea of using foreign capital to develop the Chinese market and using China’s prosperity as a bargaining chip to exchange for capital will no longer be practical, as this model is already outdated

Seventh, the changes facing the corporate world are enormous. Unlike during the era of globalization, the age of free market is over now, and what is needed in the future is the project market. While entrepreneurs still aim to make money, there is very little room for them to do so according to their will. What enterprises can do is to follow the development of the policy, then they might be able to achieve their aims in the market for projects based on policy goals.

Eighth, it is unlikely for Chinese entrepreneurs to leave China and seek greener pastures; at least this is not quite possible for most well-known entrepreneurs, hence their future development will still be in China. The level of judgment of Chinese entrepreneurs is insufficient for them to develop smoothly in the global market. In the past, some senior private entrepreneurs once advised Chinese entrepreneurs not to engage in politics while making money. Such a view is proven to be wrong, and in the current era, Chinese entrepreneurs will have to pay attention to politics, as economic development now follows the progress of politics.

Ninth, there will be a huge impact of restrictions on technology. At present, most parts of China’s science and technology are still imported and digested by foreign capital, but this possibility will become increasingly smaller in the future. This is because first of all, Russia, which has had long-term cooperation with China, no longer has advanced technologies to introduce. Secondly, Western countries, which are the source of technology, have closed their doors to Chinese talents. As Chinese technology digests and integrates within itself and through an emphasis on innovation strategies, there will be some progress in the future, but in the incremental part of technology, the space for progress has been greatly narrowed for geopolitical reasons.

Tenth, on the space for cooperation between Europe and China, it should be remembered that Europe has a bottom line in its cooperation with China, and this bottom line is that it can make money from China. If not, then Europe will follow in the footsteps of the United States. In fact, the root causes of the disruptions in the United States and Europe’s relations with China are the same.

How likely will the separation of economy and politics be implemented in China? From an objective point of view, the possibility is relatively small for now. However, if China can be consistent from top to bottom, there should be spaces in the market for capitalists which will allow both China and capitalists to profit.

While China's reforms in education, property, economics and other areas including the new normal in the economy, structural reforms in strengthening the supply-side, and pushing for economic transformation and industrial upgrade are important, they are sometimes done too quickly, which has resulted in several issues. ANBOUND’s founder Chan Kung has long noted that these problems in China are related to measures taken at excessively high speed. It is crucial to understand this, as it is fundamental to the country's macroeconomic policy and strategic policy regulation.

Final analysis conclusion:

U.S.-China relations are developing along a new historical trajectory, which will bring about a new development environment and risks to China. If China strives to maintain the policy framework and governance principles of "separation of politics and economy" while the situation changes, this will help China to gain more space and longer time under the overall unfavorable international situation.

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