By Nouriel Roubini
It also may try to internationalize the role of Alipay and WeChat Pay, sophisticated digital payments platforms that have already replaced most cash transactions within China.
In all of these dimensions, recent developments suggest a broader shift in the Sino-American relationship toward de-globalization, economic and financial fragmentation, and balkanization of supply chains.
The 2017 White House National Security Strategy and the 2018 U.S. National Defense Strategy regard China as a “strategic competitor” that must be contained. Security tensions between the two are brewing all over Asia, from Hong Kong and Taiwan to the East and South China Seas.
The US fears that Chinese President Xi Jinping, having abandoned his predecessor Deng Xiaoping’s advice to “hide your strength and bide your time,” has embarked on a strategy of aggressive expansionism. China, meanwhile, fears that the U.S. is trying to contain its rise and deny its legitimate security concerns in Asia.
It remains to be seen how the rivalry will evolve. Unfettered strategic competition would almost certainly lead eventually from an escalating cold war to a hot war, with disastrous implications for the world.
What is clear is the hollowness of the old Western consensus, according to which admitting China into the World Trade Organization and accommodating its rise would compel it to become a more open society with a freer and fairer economy.
But under Xi, China has created an Orwellian surveillance state and doubled down on a form of state capitalism that is inconsistent with the principles of free and fair trade. And it is now using its growing wealth to flex its military muscles and exercise influence across Asia and around the world.
The question, then, is whether there are sensible alternatives to an escalating cold war.
Some Western commentators, such as former Australian Prime Minister Kevin Rudd, advocate a “managed strategic competition.” Others speak of a Sino-American relationship built around “co-opetition.” Likewise, CNN’s F areed Zakaria recommends that the U.S. pursue both engagement and deterrence vis-à-vis China.
These are all variants of the same idea: the Sino-American relationship should involve cooperation in some areas — especially where global public goods such as the climate and international trade and finance are involved — while accepting that there will be constructive competition in others.
The problem, of course, is President Donald Trump, who does not seem to understand that “managed strategic competition” with China requires good-faith engagement and cooperation with other countries. To succeed, the U.S. needs to work closely with its allies and partners to bring its open-society, open-economy model into the 21st century.
The West may not like China’s authoritarian state capitalism, but it must get its own house in order. Western countries need to enact economic reforms to reduce inequality and prevent damaging financial crises, as well as political reforms to contain the populist backlash against globalization, while still upholding the rule of law.
Unfortunately, the current U.S. administration lacks any such strategic vision.
The protectionist, unilateralist, illiberal Trump apparently prefers to antagonize U.S. friends and allies, leaving the West divided and ill-equipped to defend and reform the liberal world order that it created.
The Chinese probably prefer that Trump be re-elected in 2020. He may be a nuisance in the short run, but, given enough time in office, he will destroy the strategic alliances that form the foundation of American soft and hard power.
Like a real-life “Manchurian Candidate,” Trump will “Make China Great Again.”