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Negative political and economic dimensions emerging between USA and China

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The Chinese President's recent state visit to Russia and his discussions with Russian President Putin have only underlined Beijing's emergence as a great power whose influence now stretches far beyond Asia. Analyst Stephen Collinson has observed that the entire visit appears to have been not only "refracted through a prism of both nations' mutual antagonism toward the United States" but also that "Washington, watching carefully from the sidelines, poured scorn on the idea of China as a peacemaker in Ukraine".

However it is clear that the United States appears to be now facing a serious foreign policy challenge in a paradigm where strategic analysts think that there are efforts to dismantle the existing world order through the reshaping of the international system. Anticipating negative elements for the United States in the emerging choreography, White House, according to Collinson, mounted a public relations counter-offensive during the Xi-Putin summit. It reinforced its multi-billion-dollar support for Zelensky's government by announcing the earlier-than-expected deployment and dispatch of US missile systems and modern tanks.

John Kirby, the US National Security Council's coordinator for strategic communications, has laid out the strategic stakes in an interview with CNN's Christiane Amanpour more succinctly. He has observed that "this is a marriage of convenience, not of affection, not of love … where they intersect is pushing back against the United States and our influence around the world."

Former US ambassador to Beijing Gary Locke has observed - "China is trying to present itself as a kind of a new force, standing up against the Western order". China feels that they should have a say in the socalled bylaws of this club. They also take exception to the dominance of the United States and the European countries in most of the world affairs.

It would be worthwhile to remember that the idea of a Russia-China strategic alliance has preoccupied US policymakers for a long time. The Nixon administration's opening to Beijing in the 1970s was premised partly on their effort aimed at dividing the People's Republic of China and the Soviet Union, though territorial and historic antagonism between the communist giants already existed before the US initiative. After the Cold War, Russia, however, was seen as far less of a threat to the US until Putin's hard turn against Washington over the last two decades.

In this context, during the current time it would also be pertinent to recall the view expressed by late George Kennan, a US Cold War policy expert who had noted that NATO expansion into former Warsaw pact states in Eastern Europe could push Russia into Beijing's arms.

Despite all the controversial assumptions, Chinese Foreign Ministry spokesperson Wang Wenbin has stated that China would "continue to play a constructive role in promoting a political settlement of the Ukrainian issue" that calls "for a ceasefire and togetherness". The US has, however, reacted to the plan with scepticism, warning the proposals would allow Moscow to solidify its territorial gains in the country. Nevertheless, Ukrainian President Volodymyr Zelenskyy has pointed out that he remains open to China's proposals but any deal would depend on the full withdrawal of Russian forces from occupied Ukrainian territory.

In the meantime, according to AFP, US Secretary of State Blinken while responding to a question in a Senate Committee as to whether China has provided "lethal aid" to Russia has indicated that "we have not seen them cross that line".

Nevertheless, the emerging confusion about China, Russia and Ukraine has started having negative effects on US firms and American business institutions.

Analyst Jonathan Josephs has pointed out that the President of the American Chamber of Commerce in China is very worried as tensions continue to grow between the world's two biggest economies, this rivalry is "making business very challenging". It has also been indicated that the governments of the USA as well as China are clearly disagreeing on what seems like an ever-increasing number of issues- ranging from Ukraine, to coronavirus, and Taiwan, to Tiktok, and semiconductors.

Consequently, the latest AmCham China annual survey carried out among its more than 900 members suggests that for the first time "a majority, 55 per cent, no longer regard China as a top-three investment priority -- a place where they should spend money to grow their business". Josephs has also observed that "the number (of people) who see the uncertainty of bilateral relations as their leading challenge in China has risen 10 per cent in the last year to 66 per cent. At the same time, the number of people who think China has become less welcoming to foreign companies has grown to 49 per cent". This appears to be a contentious assumption.

It needs to be understood that trade has been at the heart of the bilateral relationship between the US and China. AmCham China members include some of the US's most successful companies such as Nike, Intel, Pfizer and Coca-Cola. Coca-Cola was the first US consumer business to sell its products in communist China after then President Deng Xiaoping opened the country up to foreign companies in December 1978. Coca-Cola has been a pioneer for US companies in China ever since their first shipment of soft drink left Hong Kong for the mainland in January 1979.

In addition AmCham China authorities have observed that the US "companies are just tired after three years of Covid, travel becoming more difficult, rising labour costs, executives not willing to take up assignments in China, political pressure, and China becoming a less predictable place in which to do business". Nevertheless, one should note that despite all those difficulties, numbers show that bilateral trade between the two countries crossed US Dollar 690.6 billion last year. This also reflects how much the global economic paradigm is influenced by the economic dimensions of these two countries.

This aspect has been particularly highlighted by Prof Eswar Prasad of global trade policy at Cornell University, and former Head of the International Monetary Fund's China Division. He has also observed that "the reality is that China does need a lot of products, especially technology products from the US, and the US does have a lot of companies that run their supply chains through China. This is important for the global economy because it's not just supply chains that these two countries are critical about. The tenor for global trade is set by the relationship between these two countries." In this context, one needs to remember that the World Trade Organisation (WTO) is supposed to keep that tone within the correct tenor of agreement by upholding global trade rules.

This scenario has, however, not been followed according to the desired prescription. In December, the US Administration vehemently rejected two decisions that had gone in favour of China about the tariffs that were imposed by then US President Donald Trump within the matrix of trade war. The US, while rejecting the WTO decisions, indicated that the tariffs had been imposed over issues of national security that the WTO had no right to rule on.

 It would be worthwhile here to refer at this juncture to an observation made in this connection by the Peterson Institute for International Economics who have pointed out that "overall, 66.4 per cent of US imports from China and 58.3 per cent of Chinese imports from the US remain subject to tariffs, with little sign that either side will reduce them". In this regard Professor Prasad has warned, "the US approach towards China in global trade could lead to a deterioration of the rules-based global trading system."

Strategic analysts have also observed that the downturn in the US-China relationship could also lead to a growing number of US companies planning to move their supply chains outside of China. The media in this regard has already pointed out that Apple, which became one of the world's most profitable companies by making huge numbers of iPhones in China, is now increasingly beginning to consider manufacturing them more in other countries, including India.

Dan Wang, who is the Shanghai-based chief Economist at Hang Seng Bank China, has observed that even if Western firms move supply chains away from China, they will still be dependent upon it. Those other countries will still rely on China for components, especially in industries such as green energy, medical technology and electronics. Ms Wang has added that "Beijing still wants US companies to invest in China, and that attitude I do not believe will change anytime soon."  AmCham China officials have also indicated that the giant Chinese consumer market has its own dimension and that is why, some US firms like McDonald's, Starbucks and Ralph Lauren will remain with their own major Chinese expansion plans in the pipeline.

However, this evolving scenario is also being impacted by national security concerns between the two nations, centred on technology. A growing number of measures have been adopted by the Biden administration to try to stop China accessing US technology- including semiconductor manufacturing. This has not gone very well with Beijing which considers such moves as creating challenges for that country's development. China is unhappy that Chinese telecom giant Huawei has been restricted in many countries because of US pressure, with Germany the latest to consider taking action. Meanwhile, social media firm Tiktok has also been threatened with a complete ban in the US, whilst also facing restrictions in the UK.

Nonetheless, we must not forget that rising hostilities can only create uncertainty- the last thing that an already fragile world economy needs.

Muhammad Zamir, a former Ambassador, is an analyst specialised in foreign affairs, right to information and good governance.

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