US – China Conflict

Introduction:

America’s hostile attitude towards China is deep rooted in their political and social system. It is not
just trump administration’s policy. US-China once had a relationship based on cooperation, but that
relationship was based on two faulty assumptions by the US: China first, that China's economic rise
would never challenge America's economic ascendancy; and second, that as China modernized, it
would inevitably Westernize and in time become a Western democracy. In 2016, China not only
surpassed US in the economic front, but also their political system gained popularity & delivered
results. Consequently, US started eyeing China as a potential threat hence the trade war, now also
being called the new cold war, began.

1. Economic Conflict

The biggest competition between US and China is that of economics. US has been the market leader
for decades. They have used this to influence the global political economy and have gotten their way
in international affairs. However, China has dethroned US and is now the biggest market share
holder. China is now using their technological & production capabilities to rally countries behind
them by offering mega projects such as the BRI. These events are not acceptable to the manifest
destiny backed ideology of the US political and social system.

a. US losing markets to China

 How? Both are the global economic leaders. US is the status quo leader and China is
emerging leader.
 90s and until 2010 – US was the largest producer and exporter. But since 90s abnormal and
substantial rise of economic rise of China.
 Currently China is the worlds biggest producer and exporter. The world markets where US
was leader, china has replaced them.

How has it replaced?

1. Largest trade partner of TPP (trans pancific partnership) nations is no more USA, it is china
2. The largest trade partner of middle east is now China
3. The largest trade partner of African region is China
4. The largest trade partner of South American countries is China
5. Second largest in Europe is China; US is leading but soon China will replace US
6. US-China trade is heavily in favor of China – 4:1 – 4 export of China and one import
7. In 2017 – 532 billion dollars traded between the two – 116 billion dollars were China
imports, rest were exports. So heavily in the favor of China

Why has it lost market share?

1. China is the cheaper producer

2. Factors that contribute to production cost :
a. Purchase of raw material - no edge for either
b. Transportation - no edge for either
c. Cheap labor - cheaper in china by a lot)
d. Taxes ratio - much lower in China
e.

/le China does it in Yuan & dollar is high in price, so China has edge
f. Trading and production policy is market oriented – China produces according to the market
demand for e.g. quality of a Chinese product for Europe market would be far better than the
one being produced for middle east, and for middle east would be better than third world
countries

b. China has become the economic concentration of the world:

 Two decades ago, the biggest investment was in US – whether in BOT model, loan model, or
Foreign investment model
 Now, increasing shift in investment from investors to China
 This is because product cost is cheaper in china

c. China is becoming the leader of the free trade world

 Promotion of free trade on global level was done by US in the 90s
 Now US products are no more competitive on the rules of free and fair market as they are of
higher price
d. BRI – Belt and road initiative of China
 BRI is the largest infrastructural product of 21 st century
 1.3 trillion-dollar investment in Asia, Africa, and Europe
 US does not have the economic potential to balance/counter this project – Even though
Biden has announced that they want to upgrade their existing infrastructure, railroads etc
 120 countries
 China is winning over these countries from USA
 China is also using this influence to increase their role and influence in international political
economy
 Alternative trade route system – Shorter & Faster in form of bullet trains
 China is giving a parallel system as compared the sea route controlled by US

e. Global Monetary Politics

 Increasing role not acceptable to US
 What is role? Currency swap agreement ( CSA) to end the dollar hegemony
 Has done this agreement with 34 countries. Yuan vs the respective country
 Petro Yuan increasing effort – Trying to convince the world countries to announce their
energy trade in Yuan –
 Previously Petro dollar agreement made dollarization of international trade possible
 What will this do? In phase 1 - China would purchase hydrocarbons from these countries in
Yuan

f. US economic stability is in decline – China is on rise

 As mentioned above (all points)
 PPP (purchasing power parity) China has surpassed US
 The highest foreign reserves are in China – 3 trillion dollars plus
  Largest producer and exporter
 China is the largest loan provider – China has become the bank for US – US has taken big
loans

US – China Trade War

 When trump entered the oval office, he entered the largest trade war of the century
with China
 US-China are the biggest trade dealers of the world
 US-China are the biggest trade partners
 Trade war started between these two
 US initiated – China retaliated

Phase 1

 US imposed high tariffs on Chinese goods i.e., 50 billion dollars’ worth of goods were taxed
 Then additional 100 +
 Then additional 130 +
 Nearly 400 plus dollars’ worth of good were taxed
 US targeted electrical equipment for eg washing machines, solar panels, mobiles etc
 US targeted steel and aluminum
 Worst targeted was Huawei – World’s largest cellular company
 In return, china’s response was that they targeted 30 billion dollar worth of good with heavy
taxes
 Then 50
 Then 20
 So, in total around 100-billion-dollar worth of goods
 China targeted agricultural goods the most
 Especially those that were the stronghold of trump.
 China was the biggest importer of US agricultural goods.
 China targeted luxury goods i.e. Private jets, private helicopters, private ships
 They targeted apple goods

Why did US do this

 To reduce the trade deficit – 50% of trade deficit was only with China
 To revive the local industry; how? US products were unable to compete with the Chinese
products in the US market. Resultantly industrial decline took place
 Nationalist policies – America first, Americans first, American products first – Make America
Great again mantra
 China is involved in intellectual theft
Why did China do it

 In retaliation
 Free trade suits china more – in fact the defactive leader of the free trade word is china.
 They retaliated bc Chinese industries were targeted
 More than 200 billion dollars cut came in export of China to US

Implications on US

 Trade deficit of US got reduced by 200 billion dollars

 Revival of the local industry
 Huge set back to the agriculture sector
 China usurped their global space in trade world

Implication on China

 Exports declined - Huge setback to the foreign reserves – setback to the industries

Implications on global political economies

 Revival of protectionism in the world. US imposed tariffs on multiple countries and then
they retaliated
 More space for China in the political market – China’s trade relations improved with
Europe, brazil, Canada, TPP regions

China US both agreed to downsize the mounting trade war. Why? Because both had more
negative impacts than positive.

What did they agree on?

 Remove sanctions on each other’s cellular companies

 China to increase its imports by 200 Billion dollars in the coming 10 years
 In return, US would remove sanctions on Chinese products

Encirclement of China By US

1. Strategic partnership with the rival of China; India, Japan etc.

 India
a. Civil nuclear deal
b. Providing weapons to India
c. Transfer of military technologies

Why?

 China is a common enemy

 India is the regional economic competitor of China and unable to compete
  China’s increasing presence in the Persian gulf, east china sea, south china sea, bay of
Bengal, Arabian se is not acceptable to both India and china
 India has territorial conflict with china. It needs to strengthen its defence

2. Strong naval installation of US

 Naval bases like guaam, Okinawa, Diego Garcia
 The world’s largest aircraft carrier CattyHawk is in East China Sea
 US has a complete naval fleet at the state of Malaka – South China Sea
 5th Naval fleet is in Persian gulf
 Air bases across the region – Biggest in Aus, second in New zealand, third in japan, south
Korea main, middle east main 5. Trying to establish an air base in Ladakh
3. Military bases across Asia Pacific
4. Supporting rivals of China in the region – Economically as well as militarily
 US is supporting ASEAN countries, they have claim to the island of South China Sea based on
the international law of seas.
 Supporting japan in its claims of islands of east china sea on the basis of international law of
seas
5. Supporting Proxies
 ISIK – Islamic State of Iraq and khorassan – Supported by US
 ETIM – Ughir Islamic extremist iorganization founded in china
 ISIK & ETIM nexus
 ISI & ILU nexus
 These are proxy groups made by US to destabilize China
6. Deaminizing China
 Showing that China is aggressive and oppressive of its minorities i.e. Ughiyur
Muslims
 Unrest in Xianjuang, an autonomous state of China, has been highlighted by US
 Corona – Chinese virus
7. B3W initiative
8. The Quad ( Japan, US, IND, AUS) – Biggest threat to China in terms of economy, leaking of
intelligence information to the five eyes by the Japanese, and aiding of US encirclement by
these regional forces

China’s Response

 Territorial expansion – In the east and south china sea – Has declared all the islands in these
seas as their sovereign territories based on the nine dosh line.
 China does not recognize the international law of seas
 Any intervention is said to be retaliated
 They have also developed artificial islands – seven in south china sea – these have two main
purposes – one, to increase the maritime right of china. Two, military base and air bases
banana
 Strings of pearl policy – Under BRI china is investing in 26 sea ports across asia and African
regions. This investment is not only from trade perspective but it is also putting in military
installations. In places like myanmmar, srilanka, sudan, pakistan
  Military expansion - East and South China sea – China has militarized the whole of south
and east china sea – How?
a. Navy
b. First ever aircraft of china is floating across east china sea
c. South china sea is more militarized than east china sea
d. China has two aircraft carriers in the making: the biggest in the world
e. Air bases on series of Islands
f. China’s biggest strength is its submarines (torpedoes)
 Peaceful Co-existence with neighbors and world powers
a. Avoiding war with all of them
b. Use of soft power with these countries
c. Defuse the intensity of conflict through economic diplomacy i.e. BRI
d. Growing Chinese Soft power at the UN – China heads four of the UN’s 15 specialised
agencies
 China’s policies on proxy
a. China’s policy is of no more use of force in Afghanistan. Negotiate with Afghan Taliban
b. Socio-economic development of the region no matter which the region. Overcome
poverty to undermine the intensity of these terrorist organiations
c. Rats – regional anti terrorism squads - A branch of sco, which is most effective in central
asia against ILU. China is the biggest provider of rats
 China tackling dehumanization
a. In Xinjuang, it is avoiding use of force against protestors
b. Xinjuang main socio-econmic development ki policy
c. China intensified soft power projection by giving the highest medical aid to the world
after COVID
d. European countries like Italy and spain got medical aid by China the first time
e. South Asia ko bhi esp Pakistan
f. ASEAN countries
g.

Its no more trade war: It is a cold war ( if this question comes)

1. You will elaborate economic walay points. Under econ wala topic, bri and opposition by US is
the biggest point for cold war from that topic
2. Under the topic of trade war – intellectual theft by China is a point
3. Encirclement of China pura

Contemporary Developments

 Ever since Biden administration has taken over, the intensity of the conflict has reduced
 Endless Frontier Act – A bill to counter the fear that China is overtaking the US technology
 This act would give funding to new technologies, AI, robotics