London is the alma mater of the diplomatic use of false slogans and fake news, but in recent years, the U.S. State Department has perfected euphemism as a key diplomatic tool. If the White House issues statements about planning “low intensity” conflicts, that means most likely war will break out somewhere, and if phrases about “peacekeeping” creep into White House discourse, that means yet another state will soon be subjected to “humanitarian bombing.” The same is true of the realities of the U.S.-China trade war.
The trade imbalance, theft of intellectual property, exchange rate and level of import tariffs are part of the same cover-up as the pool of anti-Russian sanctions imposed under the pretext of the Skripal incident. In reality, the U.S. is carrying out a full-fledged confrontational campaign against China, which, as in the case of Moscow, is supposed to shove Beijing into an economic downturn, provoke protests and undermine China’s innovative leadership plans at the introductory stage of a technological revolution.
In addition, Washington’s agenda includes informational and psychological aggression. You see, the White House understands that the well-to-do segment of Chinese society has been actively Americanized over recent decades and has become used to taking cues from how people live in the West. Hence, a Westernized China puts the interests of the Washington establishment above those of its own “regime.”
Meanwhile, under the banner of protecting intellectual property and national security, America, for the second year in a row, is trying to isolate China from technology and markets, and an official document serves as proof of it. The Communist Party of China’s state program that goes by the name “Made in China 2025,” adopted in 2015, represents a plan to transform the country into a manufacturing power that generates its own technology.
The pressure on an array of brands and technology sectors that began with Donald Trump’s election coincides completely with the fields and trends listed in the document. If, in 2015, the key objective of the program was to “strengthen Chinese manufacturers’ ability to develop microchips, artificial intelligence systems, and 5G networks,” in 2016, the blows began to fall upon precisely these sectors.
Generally speaking, Washington’s approach can be described as follows: In the first phase, the U.S. puts pressure on China’s exports using tariffs, changes in standards for imports to the West and other steps. In parallel, the U.S. develops a program for the return (not the launch) of new innovative industries in Southeast Asia (with the goal of accumulating modern technologies within the borders of American satellites and within America itself), creates a monopoly only in the U.S. on the production of future breakthrough goods and blocks activity of the most technologically advanced companies from Beijing.
Then, in the current phase of the conflict, Washington plans to instigate currency wars, as well as games around the devaluation of the dollar and blocking the weakening of the yuan, the discrediting of China on the world stage and pressure on allies to prevent Chinese goods from entering Western markets. All of this together is bound to slow China’s rate of growth, after which it will be possible to organize the classical process of a “color” revolution. And it is precisely because of the prospect of such a scenario in China that protests are being tested for the third time now by way of Hong Kong.
At first glance, the attempt at an “Umbrella Revolution” in October 2014, the millions-strong (according to the opposition) demonstrations by the residents of the autonomous region of China in June 2019, and the growth of protests in August might be regarded as local acts. But in reality, they are a trial run of the classic “color” scenario, intended for the time when the Chinese economy can be toppled and the protest movement itself moved closer to Beijing.
Despite the habit of believing that the standard method of Anglo-Saxon coups doesn’t work in China, one reaches such conclusions only when no one makes any serious attempt. The steady growth of the Chinese economy, and the symbiosis with the U.S. and the EU simply have not provided any grounds for a targeted destabilization of the “regime.”
Its niche as the global center of production, the growing rates of economic development and population growth have, for years, been the basis of stability in China, and no one, as is the case with Russia, blocked China’s exports (after all, the given export stream was the stream of Western corporations), no one imposed sanctions (since, in this case, the restrictions would also affect companies from abroad), no one undermined the “regime” and no one provoked large-scale protests, thereby creating the present aura of stability for the system.
And meanwhile, during the period of friendship with the West, private Chinese firms, family contracts and small enterprises began to generate more than two-thirds of the gross domestic product — on the order of 90% of China’s exports. Therefore, when a growth strategy based on the research of foreign prototypes, the purchase of imported innovations (finished processors, chips, and so on), and the assembly and sale of goods to the rest of the world began to come under pressure beginning in 2016 — while Xi Jinping’s plans to replace the strategy with the development of China’s own technologies didn’t succeed — it became a big problem for Beijing. The United States’ calculation led to plans for using this dependence against China.
Washington has repeatedly stated that from a military point of view, China will become untouchable by 2030; until then, it’s protected by Moscow’s strategic umbrella and military capabilities. From an economic point of view, China is vulnerable right now, and therefore if its exports can be reduced, a blockade implemented, its pace of development slowed and the debts of its banking sector made to collapse, it will be possible to incite protest by hundreds of millions of people in traditional occupations.
According to China’s National Bureau of Statistics, the private sector is the largest employer in the country (employing 36% of the population), and it brings in more than 80% of the profit to the economy. Using simple math, it turns out that 36% of China’s 1.4 billion citizens equals half a billion disgruntled citizens, and Washington, judging by its maneuvers in Hong Kong, is placing its bet squarely on them.
Moreover, the policy of transforming 300 million of China’s citizens into a “middle-income society” might have a boomerang effect, or, more precisely, cause them to disregard the country’s traditional culture and values. The Chinese counterpart to Russia’s liberal sector is already becoming the main source of social tension.
This is especially the case since Westernized citizens have begun to disparage the Communist Party and the rest of the “peasant world” as a relic of the past. The extremely uneven income distribution between these groups doesn’t improve the situation either, and that’s why it’s not surprising that Washington is, ideologically, coordinating the current demonstrations by residents of Hong Kong with the very same imperative.
This largely explains why, no sooner than the elite changed in the U.S., it “turned out” that the decades-long undervaluation of the yuan, from which manufacturing from abroad located in China previously also benefited, violated the norms of free trade. And the fact that American goods in China are expensive, while Chinese goods in the U.S. are the opposite, is a complete and total injustice. And this despite the fact that it is precisely due to such a scheme that Western corporations’ products, manufactured in China, have conquered world markets for years.
Previously, while supranational banking circles had power in the White House, they were only worried about corporate profit, so they turned a blind eye to the fact that China was actively filling its export lines with goods of its own production. Yet, when industry-oriented elites came to govern in Washington, the country was “sincerely” outraged by the injustice, and Beijing became the main target of World Trade Organization complaints.
Now, Washington is putting pressure on all the underlying pillars of the classic Chinese model, speaking out against the fact that Chinese authorities are subsidizing state corporations (although the U.S. itself has been subsidizing Boeing for decades) and the leaking and transfer of the intellectual property of third countries to Beijing (though previously China directly linked the opening of new manufacturing facilities to the partial transfer of technologies). Washington is also exerting pressure on the export of innovative products to China and blocking Chinese investment in the high-tech industries of the European Union.
Furthermore, the White House is using the fact that Chinese firms have incurred huge debts to expand their presence in foreign markets, and if this pressure exacerbates their losses, it will be possible to add this cohort to the half a billion people thrown out of the classic export model.
Currently, China is managing to adapt to the pressure. At the end of 2018, trade with the United States amounted to about a third of China’s foreign trade turnover, which in absolute terms is $600 billion. Thus, although the country’s total foreign trade exceeds $2 trillion, isolation caused by the U.S. won’t be limited to the American market alone.
It’s important to understand that China’s prosperity in the last 30 years has been based on its tight integration with the world economy, and that means if the country is displaced from the world economy, it will have an increasingly destructive effect with each passing year. What’s more, Washington’s moves have coincided with Beijing’s colossal expenditures on the One Belt, One Road project.
In particular, the trade war has already led to a crisis in housing construction, which previously was one of the engines of economic growth. Apartments are no longer selling, developers can’t repay loans, and the empty newly-constructed buildings have easily turned from being an investment into being a millstone around the neck of corporations. All in all, by June 2019, China recorded its slowest economic growth in 27 years.
According to the United States’ own estimates, the growth rate of Chinese GDP in the face of current pressure will potentially decrease by 1.7% each year, which means (within the framework of Washington’s plans) that by the time new technologies are introduced in a few years, China will lose the ability to become a center of innovation. Consequently, there can be no discussion of restoring previous growth rates. In view of this, the U.S. considers it feasible to destabilize China from the inside, and Hong Kong is already checking out how destabilization would work on itself.
As with Moscow, Washington intends to act against the “regime,” especially because in this way, Chinese welfare and Xi will truly be semi-dependent on the markets of Europe and the U.S. In the worst-case scenario, if China manages to withstand the pressure from Washington, the White House will get a weakened Beijing, and even if the Communist Party crushes the internal crisis by force, the U.S. will have a chance to diminish China’s prestige. The U.S. will continue the strategy of isolation, but under a new pretext in which the West can’t help but revise its relations with a country that has repeated the events that took place in Tiananmen Square.
China began to consider this problem back in August 2008 after the conflict in South Ossetia initiated by Washington during the Beijing Olympics. Even then, the first public remarks by members of the Communist Party that the Chinese economy should not be semi-dependent on Western markets appeared.
Yet Beijing got the real cold shoulder after the events of 2011-2012, the attempts at a “Bolotnaya” revolution in Russia and the events of the Arab Spring.* It was then that China started speaking about the risks to stability inside China due to dependence on the West. That’s why, by 2013, the Communist Party had announced the creation of a global idea of integration with the hope of finding support for protection from future U.S. pressure.
In other words, China prepared in advance for the current confrontation, but it didn’t expect such a rapid and far-reaching deterioration in bilateral relations. That’s largely why, after 2018, a strategic alliance with Moscow became the only way out.
On the whole, the situation that has developed in the world was predetermined. China created its own economic and political model, a cross between socialism and the Singaporean-South Korean version of capitalism. Russia, contrary to all forecasts, has returned to the arena of the great powers.
The only difference is that for many years, Moscow developed in the face of massive pressure, whereas China built its model in a crystal ball. Even the global financial crisis of 2007-2008 was a Western crisis that visited the East, and the current conflict with the U.S. will be China’s first and real test of its fortitude and sovereignty.
If China endures this crisis, we will see a full-fledged multipolar world. If it does not, we will watch the collapse of China, a change of leadership and an internal political struggle. In the first instance, Moscow will become one of the poles in a stable world order. In the second instance, like many times before, we will be left to deal one-on-one with the West.
*Editor’s note: The “Bolotnaya revolution” refers to action in 2011 during which thousands took to Russia’s streets to demonstrate in favor of free elections.