China and America set on a collision course

Xi and Trump share a desire to make their respective empires great again and seem willing to pursue such a goal to the detriment of the other. As Washington accuses China of manipulating its currency and Beijing threatens to dump a trillion dollars' worth of U.S. Treasury bonds, a military incident could well be the natural outcome of a looming trade war.

1. China is aware it is a vulnerable giant not that far from the inflection point. At a domestic level, perhaps the country even exaggerates the threats that could bring it down. Its highest leaders came to this conclusion in good time. In 2007, it was Prime Minister Wen Jiabao who was tasked with pointing out the national economy’s four pathologies – “instability, disequilibrium, a lack of coordination, unsustainability” – as well as with suggesting remedies; “Boost domestic consumption, push forward reform and opening-up, remove institutional obstacles, encourage intellectual and technological innovation and make more efforts to conserve energy and reduce emissions.” In 2015, his successor, current Prime Minister Li Keqiang insisted that, “China’s economic growth model remains inefficient; our capacity for innovation is insufficient, overcapacity is a pronounced problem and the foundation of agriculture is weak.” And Xi Jinping, the “Great Helmsman” now in command, established that “The tasks our Party faces in reform, development, and stability are more onerous than ever – and the conflicts, dangers, and challenges are more numerous than ever.”

A quick overview confirms such alarmism. The ‘red dynasty’ is legitimised by economic success, but the first stage of China’s formidable ascent is now overheated. The problem is not lower GDP growth, which is in any case stable at about the established figure of + 6.5%, but rather the model that has sustained it so far and hence the grandiose state investments made to support manufacturing and infrastructure projects. Untenable levels that feed a perverse cycle; in order to fuel growth, overall debt, now two and a half times the country’s GDP, is inflated. China continues to insist on having an obsolete energy model; still top heavy as far as the use of coal is concerned, to the detriment of the environment and people’s health, while Chinese companies are launched around the world to search for resources and markets. This results in China’s geo-economic and geopolitical overexposure. Thus Beijing offers itself up to the sharp countermeasures of competitors and opponents and the protectionist drift tends to become global. This results in a crisis experienced by trust in markets, emphasised by the deformities in the Chinese financial system and confirmed by a significant flight of capital, so much so that in recent years Chinese investments abroad are greater that foreign investments in China.

Above all, the excessive power of opaque state companies, in which politics and economics merge, still endures under the sign of systemic corruption. Social inequality remains acute with one third of national wealth in the hands of 1% of the population. The geopolitical partition between depressed north-western provinces and sparkling south-eastern metropolises (suffocated by smog) and linked by sea to world markets, still remains. As far as welfare is concerned, it is a mere shadow. Population tends to diminish but gets older. In 2040, the ratio between workers and pensioners – currently an enviable 5 to 1 – will collapse and settle at 1.6 to 1. Internal geopolitical fault lines (Xinjiang, Tibet, Hong Kong) are not secure, while the rebel province of Taiwan, titillated by American and Japanese sirens, may be tempted to declare de facto independence as a point of law. All in all, the economic model, which has so far ensured the regime’s survival, might tomorrow decree its death.

Simultaneously, and in spite of everything, China’s importance is formidable and continues to expand. What it needs, however, is not quantity but quality. The pathologies that afflict it could be more easily dealt with by a state of a similar size, but equipped with a political regime less dependent on economic performance. For the People’s Republic of China it is crucial that institutions be adapted to society’s development. It is only as the expression of widespread feelings that these institutions will become more self-confident and thus more open and transparent, consequently reassuring the world regards to Beijing’s intentions, currently as unfathomable as the regime that creates them.

One must, however, exclude the idea of importing a western kind of democracy, now experiencing a profound crisis precisely in the countries that have made it a symbol of their identity and at times even a universal brand name to be exported. China will never become a yellow America. An empire dating back thousands of years cannot copy models used by others; nor can it, however, indefinitely endure a regime that is in power only because it is in power.

This China has an identity problem. It is no longer what it originally was, imbued with Confucianism and founded on a civilisation considered absolute – “everything under the sky” (tianxia). For centuries proudly self-sufficient, then invaded at the time of the Opium Wars (1839-42 and 1856-60) by “foreign devils who came from the ocean”, thus oppressed and suffering during the “century of humiliation” before the Maoist redemption (1949), this new China is a faceless colossus. Nor is it any longer containable within its atavistic geopolitical area – circumscribed by deserts, steppes and mountains to the north and the west, jungles to the south and fish to the east – were it not for the intensity and spreading of trade routes.

The overwhelming modernisation begun in the late 1970s subverted Chinese customs and certainties without producing alternative paradigms. Never in human history have so many people become so wealthy so quickly. However, the enrichissez-vous proposed by Deng and his imitators, destroying social and family ties, does not provide that additional soul every empire needs. Singapore’s (Chinese) authoritative father, Lee Kuan Yew, was a good prophet when telling German Chancellor Helmut Schmidt that, “When the people’s social and economic rights are satisfied it will be time for political and civil rights.”

2. Under Xi Jinping, China discarded the low-profile strategy pursued during the decades of its post-Maoist turbulent ascent, to assume a markedly nationalistic posture. This was perhaps an unavoidable choice. At a certain level, economic power becomes geopolitical extroversion. When the rite of passage is abrupt, the risk is an excess of emphasis. Seen from the exterior and measured on previous modest rhetoric, Chinese nationalism can seem arrogant, provoking reactions from neighbours and rivals. This was what Deng Xiaoping proposed to avoid during the Eighties, promoting the slogan, “hide your strength, bide your time, be good at maintaining a low profile and never claim leadership.”

With this, modern China’s founder did not at all mean renouncing power. The meaning of that attitude – the last version of which was drafted by Hu Jintao, Xi’s cautious predecessor, using the words “peaceful growth” – was illustrated by Zhao Ziyang, the reformist leader removed from office in June 1989 for having attempted to oppose the Tiananmen Square Massacre. “Deng Xiaoping’s political objective was to make the country wealthy and equip it with a strong army. In order to achieve this he considered indispensable economic development that would produce the wealth needed to undertake the expensive modernisation of the military apparatus. This would have made us a global power. That is what Deng aspired to; he wanted China to be a great power.”

In his own way Xi is coming to conclusions arising from Deng’s teachings. China is rich enough to be able to create a modern and flexible army, ready to protect and expand Chinese power, directly commanded by the “nucleus” and therefore removed from the wishes of the military and their core rivalry. Reform of the armed forces begun in 2015, is aimed at adapting military power to economic capability as demanded by the holistic equation of power. In other words, economic growth is at risk without a robust military instrument.

The militarist turn stimulated nationalist rhetoric. A low geopolitical profile and a high level of rearmament are incompatible. Consequently, the nationalism shown after decades of soft propaganda concerning rather remissive ideas intensified alarm in the outside world. Chinese perception of the fear of others in turn excited the domestic front, inflating their pride which degenerated into arrogance. Once unleashed, the nationalist beast sparked reactions hard to keep under control. A slow and constant raising of the stakes, the rational calculations of which are easily overpowered by irrational impulses; the “facade” is more important than the doubles match.

3. Among the gladiators who fought in arenas in ancient Rome, the retiarius held a unique position. At a first glance one could mistake him for a fisherman. In fact he fought with a net to ensnare his heavily armed opponent and then attack him with a trident or a dagger. According to Sinophobes, increasingly numerous and aggressive since China divested its low profile, the OBOR project (One Belt One Road) launched by Xi Jinping in 2013 is nothing but an updated version of retiarius-like strategies. The extensive network of Eurasian land and maritime routes – extending to Africa, to Latin America and potentially the rest of the world – that the Chinese president has presented as the brand name for his foreign policy – is supposedly a clever mask for Beijing’s neo-imperialistic geopolitics. This is a wide-ranging interpretation, encouraged by the ambiguity of Chinese rhetoric and the vagueness of this project, very recently renamed BRI (Belt and Road Initiative), involving over forty countries while dozens more are supposedly on the waiting list. Everyone has been summoned to Beijing in May, when Xi Jinping will celebrate a grand propitiatory ritual for this shared feat.

In a long-term perspective this strategy expresses a yearning for a Chinese-styled globalisation, destined to succeed the American one. All this without being put to the test in a direct military conflict, for which the People’s Republic is not equipped and betting instead on an economic-trade projection accompanied by the required propaganda needed to support the China brand, thereby enlarging and stablishing its sphere of influence.

In a geostrategic key, the BRI is Beijing’s countermove to the “rebalancing towards Asia” launched by Obama. This was an attempt to create an anti-Chinese containment belt based on the United States, extending from India to Japan and Australia, including Vietnam, South Korea, the Philippines as well as other “friends and allies”. This formation should press on China to the south and the east, but leaves enormous openings to the north and the west, from Russia to post-Soviet satrapies in Central Asia, all the way to the European market. It is along these land lines that massive Chinese infrastructural investments are concentrated, in more or less committed partnerships with the countries crossed by the retiarius strategy. For those not wishing to understand, General Qiao Liang has explained that the BRI is “a protection strategy against America’s move towards the east.” It is no surprise that such organisation includes a security aspect. The construction in Djibouti of the first Chinese military base abroad is destined to become a model and not only because Beijing needs to deploy its troops to protect Chinese workers building infrastructures in Eurasia and across the ocean.

The BRI also has domestic objectives. It is needed to develop and stabilise the Xinjiang tormented by Uighur terrorism as well as other backward provinces – including the north-eastern coast – the junctions for old and new land routes crossing central and southern Asia. It therefore contributes to healing internal economic and geopolitical rifts and acts as a release valve for industrial over-production, channelled towards grandiose trans-continental infrastructure projects such as railways, motorways, ports and other logistic structures. Like other “emerging” countries, China in fact puts the conquest of foreign markets before the reorganisation of its own, so as to sweeten the difficult transition from growth arising from investments to growth based on domestic consumption.

But the penetration of both nearby and distant foreign economic areas with medium and long-term investments, thought to be in the order of a trillion dollars by 2020, is aimed primarily at supporting the rise of the People’s Republic in the global hierarchy of power. Some Chinese ideologues have created the idea of “double circulation” between China and developed countries as well as between China and developing countries. In the coming global circuit, loyal to its name, the Middle Kingdom “has gradually become the glue that holds together the global economy.”

In order to understand the range of the BRI within this vision, one must broaden the analysis to include the new financial institutions in which China plays a central role. The Asian Investment Infrastructure Bank (AIIB), launched by Beijing with 56 other countries, without the United States but with its main European allies, supports the BRI. It also indicates impatience with American unwillingness to concede to China the importance it claims in financial institutions dominated by the West, starting with the International Monetary Fund and the World Bank. China remains, however, the third largest backer of the AIIB’s main competitor, the American-made Asian Development Bank (AIB). Beijing is playing at every table.

4. China and the United States are set on a collision course. With a paradoxical inversion of the classical roles, Xi Jinping presents himself to the world as the herald of globalisation and the standard bearer of a green economy. To do this he has even used the stage in Davos, the sancta sanctorum of capitalist elites. Donald Trump has appointed himself as the champion of protectionism. Since neither of them are philosophers or moralists, they both consider their respective strategies in line with national interests. China needs world markets, starting with the American one. Furthermore, the mandarins in power are aware that a collapse in exports could mean the end for them. The United States, and not only the new administration, accuses the Chinese of cheating at the trade table, putting at risk the superpower’s wellbeing, cohesion and security. And they are moving towards a strategy aimed at choking China, following Obama’s pale containment.

Trump’s offensive has a rhetorical element, also expressed in the direct language used for the benefit of his constituents. The Chinese know this technique. Was it not Mao himself who joked with Kissinger about the “cannons firing blanks” that he now and again enjoyed using to mobilise his people and frighten his enemies? But the days of anti-Soviet alignment between Washington and Beijing are long gone. At the time the leaders of these two countries understood one another (almost) instantly because they had the same plans as these were coherent with their respective geopolitics. Over time such strategies parted ways. There is no great effort made to understand what others are thinking, or it is done attributing to the interlocutor one’s own logic. Cultural codes, stereotypes and prejudices disturb communications between Chinese and American leaders. When Obama discussed matters with Hu or with Xi, there was no dialogue, just two parallel monologues. Imagine the empathy that will inspire Trump and Xi. Not understanding one another is always serious, but it becomes dangerous in crisis times, because the Chinese-American counter-position is not mere propaganda, it arises from a conflict of interests that will be hard to resolve.

Optimists promise that the economies and finances of the two countries are so interlinked that one can exclude military or trade wars. There are echoes of Norman Angell’s unfortunate ideas concerning the futility of military conflicts between interdependent economies, which preceded by a few years the start of the Great War. Following such a script, Chinese neo-nationalism will bow to the imperative of access to the American market and awareness of America’s military superiority. Trump’s protectionism, the geo-economic expression of American nationalism, will want to restrict itself to avoid Chinese retaliation against American goods produced there, as well not running the risk of having someone, in desperation, in Beijing, pressing the red button of guaranteed mutual destruction, converting over a trillion U.S. Treasury bonds into euros.

More realistic assessments lead one to consider that a great Chinese-American compromise is anything but a given. It would, however, be preceded by a long period of turbulence, during which an improbable slide towards resorting to weapons cannot be excluded.

The timeframes of these two nationalisms are different. Chinese revival is a multi-decade long feat. A long wide-ranging curve, to be travelled avoiding direct conflict with its rival – but not eventual limited local wars, useful for testing its very gentrified military personnel and measure the warmongering spirit of a society dominated by wealthy and very spoilt only children, miniature “emperors”. The new American administration has the urgency of all democracies; there are less than two years to go to the mid-term elections on which Trump’s future will depend.

In the “deep state” of the United States, especially in its strategic workshops, there is the image of a Red China that is a mortal enemy, seen as far more powerful than it really is, so much so that planning for war has become compulsory. It is an analytical reject typical of the military-industrial complex that has already been experienced vis a vis the USSR. The geopolitical revolution outlined by Trump, mentioning harsh (not only) anti-Chinese tariff barriers and threatening to reconsider everything, starting with the taboo of a Single China, is the result of this atmosphere. This is all based on the certainty that China depends on the American market more than the United States depends on importing Chinese capital. These are perceived as Trojan horses aimed at breaking open American technological coffers to raid them, undermining national security. Even worse, the militarisation of the seas around China and the expansion of Beijing’s naval and port projects at a global level, starting with the new silk roads, threaten American control over maritime routes, the fulcrum and symbol of the U.S. empire. Various American analysts and decision-makers have accused the Chinese of imitating Mahan. None, however, have made the effort to consider that for a Chinese strategist, the South China Sea is as important to its empire as the Caribbean is for the American one. Or that it may seem odd to the Chinese that the United States should proclaim to be the defender of freedom to sail in waters almost entirely delimited by the often overlapping exclusive economic areas of the contending countries. All this while also appealing to the United Nations Convention on the Law of the Seas which Congress refuses to ratify.

What alarms Washington even more than the Middle Kingdom’s pensive posture in the contested waters of East Asia, is China’s inability to bring to its senses the regime in P’yŏngyang, which in a few years’ time might be able to hit metropolises on America’s Pacific coast with its nuclear missiles. Trump himself seems persuaded – mistakenly – that Xi is holding hands with Kim Jong-un so that he will blackmail the United States.

The great compromise would imply an effort in sobriety in both Beijing and Washington. There is no need for particular strategic acuity to grasp the improbability of Chinese aspirations. It would be sufficient to observe the formidable diaspora. How can a nation that does not integrate with the world aspire to integrate it? Nor does it seem astute that the Americans should spark a preventive offensive – an inverted Pearl Harbor in the form of tariff barriers – against their Chinese opponent, elevated to the status of an existential threat. Recent history teaches that the United States loses or draws the wars it fights; it wins the ones it does not fight.

Xi and Trump share a desire to make their respective empires great again. Two Number Ones are too many. Anyone wishing to challenge this rule may discover that in the end it is more probable that there would be none. In the “deep state” of the United States, especially in its strategic workshops, there is the image of a Red China that is a mortal enemy, seen as far more powerful than it really is, so much so that planning for war has become compulsory.