For all its protestations, the US is set on decoupling from China – an act that will cause global economic harm
- Faced with US tariffs, investment curbs and export bans, China has simply opened its economy wider, working to protect itself and the stability of global supply chains
- But if the US continues down this path, it will be a supreme act of self-harm and a global disaster
I remember watching a short video about two men balanced at opposite ends of a see-saw that was somehow on the high seas. As one man with a sword moved towards the other to kill him, the see-saw tilted, throwing both men off balance – and into the sea. It was deadly foolish. Washington’s actions to effectively decouple economically from China fall into the same category.
Meanwhile, China has stepped up efforts to develop critical technologies and is working to fully integrate its domestic market to capitalise on its huge potential.
Clearly, neither “superpower rivalry” nor “geopolitical contest” is an accurate description of the US-China conflict. China has not been the aggressive party – it has neither the ability nor the strategic intention. Beijing is far from enthusiastic about decoupling. Its countermeasures are defensive, taken only to safeguard what it sees as its legitimate right to develop.
Indeed, Washington’s actions have posed a stark challenge to China, and caused harm. Tariffs have slashed China’s share of US imports to less than 18 per cent in 2021, down from 21 per cent in 2018. After the US crackdown on Huawei Technologies, the once-successful company has struggled: its revenue grew just 0.9 per cent last year while profits plummeted by nearly 69 per cent.
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Decoupling means dismantling supply chains forged over many years to divert the flow of goods, capital and people, presumably to where the US desires them to be. It will be a costly and time-consuming process.
This decoupling will not improve efficiency. Rather, it is a geopolitical tool to cut China’s links from the rest of the world and to maintain US hegemony.
Decoupling from China is akin to sabotaging the world’s economic growth engine. China is a major trading partner for some 140 countries and the largest investor in many nations in the Global South. Over the past decade, it has contributed to around 30 per cent of global economic growth.
The IMF expects China to continue to account for a third of global growth this year. Asian countries in particular will benefit from China’s economic expansion. A percentage point increase in China’s gross domestic product is estimated to boost the output in the rest of Asia by 0.3 percentage points.
Like the man with the sword who ended up killing himself and his opponent, Washington should beware of taking the rest of the world down with it in its race to the bottom.
Zhou Xiaoming is a senior fellow at the Centre for China and Globalisation in Beijing and a former deputy representative of China’s Permanent Mission to the United Nations Office in Geneva