CHINA-US RELATIONS were always going to be rocky in the run-up to November’s US presidential election. Then-candidate Donald Trump made hay out of China-bashing in the 2016 campaign. For President Trump, finding a way to replay the theme this year was a given.
The coronavirus pandemic has provided unanticipated means for that — and taken the bilateral relationship to rock bottom. The US president has been unsparing of China, with the US economy, on whose job-creating growth he was already hanging his re-election campaign, devasted by the measures to mitigate the infection.
Most Western allies of the United States have no taste for the Party claiming the superiority of Chinese system of governance for the country getting through the first wave of Covid-19 even while castigating the United States for its tardy response. They criticise Beijing for its initial mishandling of the outbreak in Wuhan and for being duplicitous with its data. Trump has given that narrative a more malevolent twist by suggesting that the pandemic was an attempt to destroy the US economy with the intent of undermining his re-election bid.
US Secretary of State Mike Pompeo, a relentless critic of the Party and the most public of the administration’s China-hawks by dint of his office, has held fast to his so far unsubstantiated assertion that there is ‘enormous evidence’ that the source of the outbreak was the Wuhan Institute of Virology, a Chinese Academy of Sciences lab in the city that researches dangerous pathogens. He has eased back from suggestions that Covid-19 was developed there as a bio-weapon, but still claims it escaped from the Institute one way or another.
The foreign ministry has challenged Pompeo to show his evidence and, of late, distanced itself from conspiracy theories advanced by its diplomats, notably that US participants in the World Military Games in Wuhan last year brought the infection with them. State media remain on the offensive, however, bluntly accusing Pompeo of lying and ‘spitting poison’.
Even US allies are privately sceptical of Pompeo’s claim, despite Trump pushing his intelligence services to find support for it that is more than speculative. The scientific evidence is that SARS-CoV-2 is not a synthetic virus but originated in bats from which it jumped to humans, probably via an as yet unknown intermediary species and likely at a wet market.
However, Beijing has resisted an independent international inquiry into the origin of the pandemic called for by Australia as current chair of the World Health Assembly, the governing body for the World Health Organization (WHO), and echoed by the EU. This reluctance sustains credence in the possibility of an accidental escape of the virus from the Insitute, even though that remains a conceivable, not likely theory.
True, there is a history of lax security in Chinese biological labs and the Politburo discussed earlier this week reform of China’s disease control system. However, that is more directed at lapses in the early response to the outbreak. The initial public suppression of information about its emergence may have followed the official playbook, but it is unclear from the outside when Party leadership first knew of its potential severity. Improved epidemic monitoring and early-warning capabilities, revamped public health emergency laws and enhanced responses to major epidemics will be introduced, according to state media. So too, this Bystander will hazard, new internal reporting guidelines for local officials that will tighten central control.
Separately, the WHO is again talking to China about sending in an academic team to look for the origin of the outbreak. However, a WHO team sanctified and sanitised by Beijing would have scant credibility in Washington. The Trump administration already believes the UN agency is in Beijing’s pocket and intends to cut off its US funding.
Public and political-class opinion in the United States has swung evermore behind Trump. Polling by the Pew Research Centre in March, as many US states initiated lockdowns, showed that US views of China had become increasingly negative. Roughly two-thirds of those polled said they hold an unfavourable view of China, the highest level since the survey started in 2005, and up nearly 20 percentage points since the start of the Trump administration. Republicans, and more fruitfully for a campaigning president, those who are Republican-leaning, were more negative than Democrats, but sentiment towards China is now negative within both parties.
There has also been a significant shift to seeing China’s power and influence as a major, not minor threat to the United States. The 62% of US adults polled who identify China as a major threat is 14 percentage points higher than in 2018.
Congress reflects this shift. It, too, has become more hawkishly anti-China, especially as Beijing has moved into the diplomatic space opened up by the Trump administration’s ‘America First’ withdrawal. At a time of deglobalisation in which the administration’s world view is of contesting national powers, China is magnified as a rising power in a zero-sum game.
Beijing is seen in Washington (and Brussels) as exploiting the pandemic to advance its global strategic rivalry with the United States. Its critics point to its international ‘health diplomacy’ in sending supplies and skills around the world to aid coronavirus-struck countries and to its putative reinvigoration of the Health Silk Road. They also accuse it of opportunistic expansion in the South China Sea and of taking a more belligerent posture towards Taiwan and Hong Kong.
These misgivings are expressing themselves within the US Congress not only as criticism for mishandling the outbreak but also as a greater willingness to legislate on human rights issues, such as the treatment of Uighurs and Christians within China. Trade policy and the pursuit of market access for US businesses pushed such matters to the back. However, while Beijing can take an international backlash against its handing of the coronavirus in its stride, it will not take kindly to being pressed on what for it are highly sensitive internal issues — just as it will get prickly over US attempts to bolster Taiwan by drawing it more into the WHO’s discussions of lessons to be leaned from those places that have handled the pandemic well.
An indication of how the political winds have shifted in the United States is that both Trump and his presumptive Democratic presidential rival, Joe Biden, are vying to outdo each other on being ‘tough on China’. One telling sign of this campaign dynamic is how Trump is seeking to undercut his challenger by changing his soubriquet from ‘Sleepy Joe’ to ‘Beijing Biden’.
Thus the administration’s fiery rhetoric is turning to threats of action. How many can be carried through without damaging the recovery of the US economy is a moot point. The truce in tensions that the signing of the Phase One trade deal in January marked is over. Moves by a couple of states to sue China are mere showboating, as is the historically tone-deaf suggestion that the US should pursue reparations from China for the economic damage caused by the epidemic.
White House threats to reimpose tariffs on Chinese exports are not. Trump has threatened to pull the plug on Phase One if China fails to meet the requirement to buy an additional $200 billion of US exports over two years compared with 2017’s level. ‘If they don’t buy, we’ll terminate the deal. Very simple’, Trump has said. Bluster, perhaps. Nonetheless, China is behind the pace and the agreement’s lead negotiators, Vice Premier Liu He and US Trade Representative Robert Lighthizer, brought forward to this week their scheduled biannual call to review progress on the deal. with US Treasury Secretary Steven Mnuchin joining the call.
China has a couple of years to comply. It might yet invoke the agreement’s force majeure provision but for now is expressing its best intentions to catch up with its obligations under the deal once the pandemic has passed. If the deal falters (and this November, not end-2022 is the political deadline), tariffs from both countries suspended by the agreement will snap back into place. That would do little good for either economy amid a global recession.
Trump’s re-election campaign would anyway be better served by his being able to revert to his original election stratagem — to boast to voters that his tariffs and threats of yet more had yielded results in the form of a trade deal (limited though it was in many aspects), and to have by polling day in November tangible jobs and business for farmers and manufacturers who would vote for him in the crucial swing states, as a result of large-scale Chinese purchases.
Less simple as a campaign message, but more significant in substance are the administration’s denial to China of access to US foundational and emerging technologies. Its domestic and international campaign against China’s two leading telecoms-equipment makers, Huawei Technologies and ZTE Corp., are the focus but not limit of its policy of broad-based containment of Beijing’s indigenous technology ambitions under Made in China 2025. There will be no let-up. Export controls on semiconductor sales to China have been tightened again in recent weeks. They are likely to tighten further, especially for any technology that might have dual military-civilian use.
Washington is concerned about China’s modernisation of its armed forces. Meanwhile, Chinese concerns have surfaced that jaw-jaw might turn into war-war long before the People’s Liberation Army is ready to fight a hot war with the currently superior US military.
US government pension funds are also likely to be prevented from investing in some Chinese companies, again particularly those held to have ties to the military. Ways are being looked for to put similar constraints on private US investment funds, which, perversely, are meant to be getting greater access to Chinese capital markets under the Phase One trade deal.
The cancellation of China’s holdings of US Treasury debt, which has been discussed, appears to be off the table for now. That is a slippery slope that Washington should be extremely wary of approaching. Not so, US infrastructure, a likely beneficiary of massive post-virus stimulus spending. That is expected to be off-limits to Chinese investors.
Further immigration restrictions are also likely, not just to keep a second wave of Covid-19 infections at bay but Chinese citizens well distanced from US intellectual property in companies, universities and research centres. New applications for permanent residence by non-citizens (‘green cards’) are already suspended. Short-term work visas will control who comes into the United States.
The post-virus stimulus may also be used to reduce US dependence on Chinese supply chains, particularly in the technology and healthcare sectors. Tax and other incentives for US companies to expand their domestic manufacturing operations are likely well before the elections. This will hasten the reconfiguration of supply chains that touch China that is already underway.
Made in America now or Made in China 2025 both speak to growing economic nationalism that can easily spill into political nationalism, which in turn can have accidental and unintended consequences. A clash of differing ideologies and contesting strategic ambitions could spark what some are starting to call ‘a new sort of Cold War’.
Oddly enough, if there is a safety valve, it is the personal relationship between Trump and President Xi Jinping, which seems able to bring both countries back from the brink of their worst intentions. It is a slender thread from which to hang relations between the world’s two largest economies.
The broader concern in the business community about the deterioration in relations between the two countries is that it puts both on a downward spiral of shrinking trade and investment flows. That would deepen the US and global recessions and hasten the decoupling of two economies that three decades of deglobalisation have tightly entwined.