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US cannot force decoupling into technology politics: Chinese scholar

Ningbo Zhoushan port. Photo: VCG

Editor’s Note:

The Biden administration is accelerating its decoupling with China despite the fact that the move goes against market principles and will cost the United States itself. Can the United States meet this goal? Can economies such as India and Southeast Asia replace the Chinese market? Global Times (GT) reporter Wang Wenwen is a professor at the Chinese University of Hong Kong Shenzhen and director of the Qianhai Institute for International Studies. I spoke with Mr. Zheng Yongnian (Zheng) about these issues.

GT: You said in previous interviews that the United States and China will never be completely separated. He has two reasons. First, as long as the United States is still capitalist and goes where capital always creates money, the United States will never shut itself down. Second, as long as China is open, there is no reason for China to be closed. Can a politically polarized US maintain rationality in its basic policies?

Zheng: To realistically assess the United States, we need to look at it from multiple perspectives. Viewing the United States as a monolith can be misleading.

Like many other nations, the United States is a nation of vested interests and diverse interests. The United States is really the United States of Different Interests. Those who want decoupling from China are some in the US government and those who support the Cold War and anti-communism.

Wall Street’s attitude toward China is different from that of the military-industrial complex. The federal government’s attitude differs from that of state governments. The attitudes of eastern and western nations differ from each other, and the attitudes of agricultural and industrial nations differ from each other. The United States has forces that want to decouple with China, and there are forces that want to couple with China.

China’s role in the global economic system and supply chains is irreplaceable. China, the world’s second largest economy, is not an isolated country. Both Mr. Trump and Mr. Biden recognize that Sino-U.S. relations are not as straightforward as those between the U.S. and the Soviet Union during the Cold War.

Even those who advocate decoupling from China worry that if the United States decouples from China, they will be deprived of information on China’s development. Earlier this month, the U.S. Department of Commerce’s Bureau of Industry and Security eased restrictions barring the export of some encryption technology to his Huawei.

China is currently under the influence of the US technology blockade policy. China is developing so fast that the United States is putting up roadblocks to block its development. But that doesn’t mean China can’t succeed.

China has no intention of harming the United States or the West. We export low-cost, high-quality products made in China to the world. Labor and land are cheap in China. It has taken a toll in its environment. China does not export democracy like the United States. Nor will it export communism like the USSR. China exports goods necessary for people’s lives.

China has a middle class population of 400 million and the population is still growing. Due to the nature of the capital, there is no incentive to leave China. Why has China acquired the world’s supply chain in just a few decades? Foreign capital entry and Chinese market dominance are key factors, but most important is China’s political and social stability. . China is one, if not the only, of the few economies that have simultaneously achieved sustainable economic development and social stability. As long as China keeps opening up, more foreign capital will come in.

Zheng Yongnian Photo: Courtesy of Zheng

Zheng Yongnian Photo: Courtesy of Zheng

GT: The facts show that decoupling China and the US will cost the US a lot. However, the United States continues to make extreme efforts toward decoupling in some areas. Recently, the United States has started promoting chip decoupling. Will the US continue this “partial decoupling” in key areas, or will it stubbornly choose to gradually achieve full “decoupling” with China?

Zheng: Some Americans want to achieve complete decoupling because they want to turn Sino-US relations into Cold War-era US-Soviet relations. This is a dynamic process, as the United States does not decide whether China and the United States can separate.

For example, the U.S. has eased restrictions on Huawei, fearing Huawei will follow a completely independent path. The same thing is happening in other areas of China. If China develops in any field, such as nuclear weapons or aerospace, other countries will join in, but if it does not develop, it will be suppressed forever. It all depends on China’s innovation capabilities and progress.

This involves the power of capital as well as political resistance. Take chips as an example. Without political manipulation, it is balanced and in line with market demand and supply. Without a Chinese chip market, the United States and its partners Japan, South Korea and even the island of Taiwan would suffer. The situation may even be reversed once China develops to some extent. The logic of technology is different from the logic of politics. We are now only talking about the logic of politics, but we cannot ignore the logic of technology.

GT: Many experts believe that the US Chip 4 Alliance will disrupt global industrial and supply chains at the expense of US allies’ interests. What do you think about the future of the Washington-promoted chip alliance?

Zheng: There are many alliances that Washington promotes, such as the Chip 4 Alliance and the so-called alliance of democracies. The United States is eager to form alliances in all areas. The West does it all the time. Alliances should be in the public interest. Large countries have to provide public goods, small countries have to pay a “protection fee”.

Sustaining the alliance depends on whether the United States is still capable enough to serve the public good. Why did the US withdraw from so many alliances during the Trump administration? Trump really felt that the US could not protect its allies unless they paid to protect them. However, there is a condition for the amulet, that is, there is an enemy. If there are no enemies, these allies do not want to pay protection fees. The United States sees China as an imaginary enemy. However, China poses no direct threat to these countries or their economies, nor does it intend to provide protection fees over time.

GT: In an effort to stifle China, the US-led Western powers are restructuring their supply chains, declining China’s position in the global supply chain system, and making India and Southeast Asia new supply chain centers. Do you think India and Southeast Asia have the potential to replace the Chinese market?

Zheng: Supply chains are the product of a combination of many factors, including land, labor costs, education, and infrastructure. take India. Demographic bonus is fine, but infrastructure construction is very slow in India because the land is privately owned. Also, the state’s mobilization capacity is not as efficient as China’s, and its education is also a problem. Although China’s land and labor costs are rising, it still retains its educational advantage, and industrial chains are forming, making it difficult to move out. Most importantly, the Chinese market is profitable. All these factors combine to make it difficult to find alternative markets to China.

It should be noted that China also needs to have a sense of crisis. With markets like Vietnam, Indonesia and Malaysia booming, China must step up its competitiveness and not take it for granted. Competitiveness can only be maintained through human effort. Therefore, we must continue to reform and open up.

GT: What are your thoughts on the recent debates by some German politicians? In the long term, in what direction will economic and trade relations between Europe and China develop?

Zheng: What Western politicians say is for votes and approval ratings, and what they say and what they do are different. After the conflict between Russia and Ukraine, Europe imposes sanctions on Russia on the one hand and buys Russian energy on the other. Ask German entrepreneurs what they think of China and their answer will be very different from that of politicians. German entrepreneurs won’t seek secession from China unless Germany returns to an East German planned economy.

From a risk diversification perspective, it is understandable that some multinationals are reducing their dependence on China. China is no different. This corporate-level adjustment should not be interpreted with too much nationalist sentiment.

As a matter of fact, there is no geopolitical rivalry between China and Europe. Economic and trade relations between Europe and China are still very optimistic. I do not deny that Europeans have idealism, but idealism that is achievable is the true ideal, and what is not achievable is only utopia. Look how many German cars China consumes per year.