Business World

Cold War II?

- By Edilberto C. de Jesus EDILBERTO C. DE JESUS is a Senior Research Fellow at the Ateneo School of Government.

NO ONE disputes the reality of the strategic competitio­n that has blossomed between China and the United States. But experts disagree on whether this contest will rise to the global reach and the comprehens­ive scope of the Cold War, when the US and the Soviet Union led opposing economic and political systems defended by their respective, globe-girdling security alliances. China is a regional Asian power with hardly any treaty allies. It is also the biggest beneficiar­y of the internatio­nal, rules-based liberal order and the global market that has promoted its phenomenal economic growth.

With a swarm of Chinese naval vessels in the West Philippine Sea, the issue is of more than academic interest for the Philippine­s. Academic historian Niall Ferguson was among the earliest to announce around 2018 that Cold War II had already commenced. This was a striking conclusion from the co-author (with Moritz Schularik) of a 2007 article that had coined the term “Chimerica” to describe the mutually beneficial relationsh­ip between China and the United States. By pegging its currency to the US dollar and investing the massive profits generated in the global market in US securities, China was able to keep the value of the renminbi low and its products competitiv­e. American business benefited from lower interest rates and consumers from lower prices for goods.* Chimerica suggested an enduring, warm, and cozy relationsh­ip unlikely to chill into a Cold War.

But the authors’ pun on chimera, the mythical monster with the head of a lion, the body of a goat and the tail of a serpent, already anticipate­d the authors’ conclusion two years later — Chimerica was an unsustaina­ble illusion destined to end.** The USChina

symbiosis was damaging to their trading competitor­s. More critically, it exposed the partners to risks that both would rather avoid. China has accumulate­d in its war chest about $4 trillion in reserves. While the amount makes US policy makers uneasy, it is also worrisome for the Chinese to have so much of its resources vulnerable to US actions.

It seems reasonable to accept Ferguson’s dating of Cold War II, when he reports both Washington, DC and Beijing officials telling him that they are already engaged in such a conflict. Biden’s Interim National Security Strategic Guidance, issued in March, has settled the issue. The document identified the comprehens­ive range of issues — diplomatic, military, economic, technology, informatio­n — over which the

US resolved to compete. More significan­tly, it framed the competitio­n in ideologica­l terms, in the context of a “historic and fundamenta­l debate about the future direction of our world.” As in Cold War I, the choice on “the best way forward,” was between autocracy or democracy.***

Xi Jinping had grasped the ideologica­l foundation of the clash with the United States much earlier than Biden. Sinologist­s have gathered from Xi’s communicat­ions to the party faithful since his ascent to power in 2012-13 on the continued relevance and correctnes­s of the Marxist Leninist view of history and the inevitable decline of Capitalism and the eventual triumph of Socialism it foretold. American mismanagem­ent of the coronaviru­s pandemic and the turbulent transition into the Biden presidency have further reinforced this narrative.

At Davos in late January, Xi Jinping was content to lobby European officials and businessme­n to resist the American move to “decouple” Chimerica. While promoting business with China, he warned foreigners to respect the red lines protecting Chinese core interests in Tibet, Xinjiang, Hong Kong, and Taiwan.

In March in Anchorage, Alaska, at the first top-level meeting between officials of the Biden Administra­tion and the People’s Republic of China, Yang Jiechi, Director of the Central Commission for Foreign Affairs and Foreign Secretary Wang Yi faced off with National Security Adviser Jake Sullivan and Secretary of State Antony Blinken. As the testy opening statements revealed, the participan­ts had their gloves off. For Asian observers, the session recalled the Cold War I confrontat­ions between the Soviet Union and the United States. ****

The reset in US-PRC relations both sides might have thought possible would not come through a roll-back of Trump’s anti-China policies. Apart from Biden’s own democracy advocacy, the Democrats could not show themselves less ready than the Republican­s to stand up to China. Nor would the People’s Republic of China (PRC), convinced that it was riding the tide of history, retreat from the sharp power/wolf warrior diplomacy it had been pursuing.

Beyond the atmospheri­cs in Alaska, the PRC aimed to strengthen its “countermea­sures and deterrent capabiliti­es.” The PRC sought to establish its position as the dominant center of production of high-tech communicat­ions and artificial intelligen­ce products, for the world. To enforce this policy, the PRC also had to reduce its dependence for strategic materials on ideologica­lly unreliable trade partners, like Australia, the source of 60% of its iron ore. Hence, its move to Gambia in Africa for access to the world’s largest untapped iron ore reserves and to the Middle East to protect access to oil from Saudi Arabia and Iran, while also expanding its diplomatic footprint.

Cold War II will make it more difficult for countries to improvise on opportunis­tic or temporizin­g, transactio­nal diplomacy that seeks free-riding advantages. This approach will not come without costs. Countries will need to be much more deliberate in crafting a foreign policy strategy that identifies and protects their permanent national interests. Nor can leaders postpone coming to grips with foreign policy challenges that are, admittedly, of a long-term nature, as appears to be the inclinatio­n of the Duterte administra­tion.

Matt Pottinger, former White House national security adviser, described the competitio­n with China as a marathon. But to qualify for the long-distance event, runners must qualify by keeping competitiv­e in the 400-meter sprints. Or lose the marathon by default.


* https://www.jfki.fu-berlin. de/faculty/economics/persons/ schularick/chimerica.pdf 1apr21

** ris/Publicatio­n%20Files/10037_0fdf7d5e-ce9e-45d8-942984f804­7db65b.pdf


**** articles/matt-pottinger-on-chinaand-u-s-business-1161722486­3

 ??  ??

Newspapers in English

Newspapers from Philippines