Is China waging economic war on America?

James Pierson
James Pierson

Senior Researcher, Tactics Institute For Security & Counter Terrorism

In 2018, in an interview with Australian television channel ABC, Steve Bannon, Donald Trump’s former chief strategist, was asked about the ongoing trade war between the United States and China. He interrupted the interviewer to say:

This is not a trade war…we’re in an economic war with China, ok? Not a trade war. China’s been in an economic war with the West and they’re not authoritarian, they’re a totalitarian, mercantilist system. They always talk about this international, rules-based order. The Chinese don’t play by any rules. They don’t have any internal rules, it’s a completely totalitarian regime… What Donald Trump has said, he’s the first President – because the elites in our country, just like the elites in Australia, said: “The rise of China is inexorable; it’s the second law of thermodynamics”. Do you know what Trump said? I don’t think so.

It’s a stark and apocalyptic vision. With Trump out of office, and a Biden Administration in the White House – and Bannon, of course, is ideologically at odds with the new administration – one might be forgiven for assuming such an outlook is out of fashion. But while the trade war has cooled, relations between the United States and China remain frosty. And many see economic war as an apt description of China’s approach to the West.

The story of China’s conflict with the West, however one defines it, starts with intellectual property theft. This is the longest running dispute between the US and its allies, and China.  China has been associated with technological theft since at least the 1970s, and in the days of DVDs, it was often accused of being the source of bootleg copies. But as the digital world bloomed, and the world became more sophisticated, so too did China’s efforts. And the scale is extraordinary. According to Keith B Alexander, former director of the US National Security Agency, Chinese theft of intellectual property from other countries represents the greatest transfer of wealth in history. An idea of the figures which alarmed him so much: in 2017, the United States government estimated Chinese theft of American intellectual property costs as between $225bn and $600bn annually. One in five corporations on CNBC’s Global CFO Council – representing some of the largest corporations in the world, collectively managing almost $5trillion in market value – claim China has stolen their intellectual property. And it’s not just theft for economic reasons, important though those are. China steals military tech, too. Indeed, so serious an issue is this, that in 2020, the Director of the FBI, Christopher Wray, labelled China’s theft of tech the biggest law enforcement threat to the US.

But there’s another major issue which troubles Western onlookers about China’s economic ambitions, and that’s been labelled a new colonialism. To be clear, China’s occupied no territory, unlike the colonial powers of old. They haven’t acted with the brutality of, say, King Leopold’s Belgium, whose rule over the Congo is shocking to recall. On the surface there’s no comparison between the deals China has struck to purchase resources, and build infrastructure, with African, Asian, and Latin American countries, and the old colonial regimes which used to reign over them. But look closer, and disturbing parallels become apparent.

For example, in many of the countries China engages with they have quickly come to dominate the local economy; many have become heavily indebted to China; China quickly develops influence over the local, political and international outlook of these nations; while Chinese expats start to form enclaves and live separately from the local populace. China is seeking two things primarily: to purchase raw materials for its economy and win contracts for infrastructure projects. And in many of these endeavours, they’ve upset regional relationships.

One such example is the Gerd Dam which Chinese companies have constructed for Ethiopia. While a source of national pride, it’s of great concern to neighbouring Egypt and Sudan. Some have gone as far as suggesting tensions over the Nile could lead to war. But Egypt has itself benefitted from China’s largesse. The government of Abdel Fattah al-Sisi has, since 2015, embarked on an ambitious plan – some would say foolhardy – to build an entirely new capital 35 kilometres from Cairo. The Egyptian government intends the New Administrative Capital – its official name is still to be unveiled – to be the centre of all governance and commerce, and thus wants all foreign embassies to relocate there, as well as all government ministries. The city is being built by the Chinese State Construction Engineering Corporation who won a contract worth $45 billion.

While there’s undoubtedly economic interests behind China’s decisions to build such projects – the construction contracts are lucrative after all – many suspect a geopolitical motive, too. Namely, to win them over to China’s sphere of influence. Indeed, some argue China offers such assistance without the strings attached which the West insists upon – whether that be efforts at good governance or concerns about human rights – precisely because they don’t mind if the nation concerned, through financial mismanagement, becomes indebted. Because if they do, they become even more reliant.

Of course, the elephant in the room which hasn’t been addressed is Taiwan. Many worry this is where any economic war with the West might turn into a military conflict. But this might not be the case. Because there are two areas where China and the West vulnerable. The first, in which China has the advantage, are rare earth elements. These are of immense importance to the world economy and vital in the manufacture of everyday electronics, such as smartphones. They’re also key to modern weapon systems, such as missiles. Currently, China produces approximately 85% of the world’s rare earth elements, and so if they ever turned off the tap, this would devastate the global economy. But China is reliant on the US for semiconductors. China purchases 60% of the world’s supply of silicon chips, and 90% of that is either sourced from abroad or manufactured domestically by foreign companies, such as Intel. Once again, should the supply ever be threatened, this would cripple the Chinese economy. To be clear, neither side is likely to do this unless in the heat of hostilities, but it’s easy to imagine a localised conflict over Taiwan leading to one side taking a rash decision with calamitous consequences.

Of course, all this talk of economic war with China can be seen as hypocrisy. The West hardly has a record to be proud of in the third world. Similarly, Western intelligence agencies aren’t above spying on China, and Western companies likely steal intellectual property and technology, albeit not to the same degree. A good argument could be made that while the West is right to be concerned and to take measures to defend itself, all China is guilty of is striving to develop, and carve out a niche for itself. Regardless of which position one takes, China is likely here to stay. While that doesn’t mean Western nations and companies should let their guard down, talk such as Bannon’s of economic war is unlikely to harness mutual understanding or reduce tensions.

 

 

 

 

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