Sino-American relations and changes in the US presidency

A brief trip through time: From George W. Bush to Donald Trump

If we look back a couple of decades we can witness the instability that has characterized the relations between these two economic powers. While George W. Bush and Barack Obama decided to lead Sino-American relations under a generally optimistic approach, perceiving China as a economic and regulatory challenge and reaching significant levels of cooperation in commercial, financial and security terms – especially in the fight against terrorism –, the arrival to power of Donald Trump changed the course of events, deteriorating these relations to the point of causing which some political observers call a “New Cold War”.

Under Barack Obama, the East Asian region was presented as an opportunity that would benefit both countries in economic and commercial terms, and that is why he decided to “pivot” much of his foreign policy towards this region. The largest pillar of this initiative is the so-called Trans-Pacific Partnership Agreement (TPP in English). A treaty signed in February 2016 by 12 countries representing around 40% of the world economy. However, the strategy carried out by the Democratic president's Administration was sometimes categorized as controversial, even accusing it of being "the president's biggest foreign policy mistake". Resulting in a worsening of existing tensions in the Asia-Pacific region and leaving emerging crises in the Middle East and Europe unaddressed – the latter in relation to the growing migration crisis.

To learn more: The pivot to Asia was Obama's biggest mistake

However, if Sino-American relations were not at their best under the presidency of Barack Obama, with the arrival of President Trump to power the strategy in the region changed drastically. China began to be seen as an existential threat to the United States, as reflected in the 2017 National Security Strategy, and progressively pivoted toward a more aggressive policy. Furthermore, during the first 100 days of his mandate, The United States was withdrawn from the Trans-Pacific Partnership under the political pretext of carrying out bilateral relations that were more beneficial for the country.

Next, in early January 2018, the Trump government approved a series of tariffs on solar panels and residential washing machines mostly imported by the Asian giant. Tariffs that would amount to around 30% and 20%, respectively, and that would decrease progressively over the years. 

View: Trump imposes 30% tariff on imported solar panels

Likewise, Mike Pence – vice president of the Republican Administration – publicly accused China of using “political, economic and military tools, as well as propaganda, to expand its influence.” Generating a series of events that progressively escalated Sino-American tensions, acting as precedents for the commercial and technological war that subsequently broke out with Beijing. A war characterized by the increase in taxes on products imported from China and the implementation of a series of restrictions on the Chinese 5G network company Huawei. 

Although these restrictions were publicly justified by the Trump Administration under the pretext of human rights violations and exploitation of Uyghur labor in the Chinese province of Xinjiang, the President of the United States revealed at the same time another possible cause. of the measures given: the rivalry between both superpowers for supremacy in the scientific and technological fields. And if that were not enough, by May 2020, due to the global outbreak of Covid-19, relations between both countries were on the brink of collapse. Each side gathering allies and trying to blame the other for the origin and management of the disease. Not to mention the implementation of the so-called Hong Kong National Security Law approved last June by the Chinese Communist Party. A law that has been seriously contested by the Trump government, imposing in response restrictions on visa management and limits on the export of defense technologies.

A Bill and a new president of the United States

Following the line of action of the Trump Administration, it is possible to find some similarity with the realist school of thought in international relations. This school of thought explains international relations in terms of power (what is known in English as power politics). And, today, you could say that both countries are seen as rivals in terms of security and geostrategy. Giving rise to a game theory phenomenon known as Zero-sum game of security competition, where one's loss is the other's gain. 

However, the next big unknown that many are wondering is about the position of the new Administration led by Joe Biden regarding China and its foreign policy objectives.

Previously, before delving deeper into Joe Biden's presidency, it is important to highlight the bill signed last Friday, December 15, by the Trump Administration requiring those companies listed on U.S. stock exchanges to declare that they are not owned or controlled by any foreign government and allow the Public Company Accounting Oversight Board (PCAOB) – the non-profit entity in charge of overseeing audits of all US firms seeking to raise capital in the country's public markets – review your financial audits. It is the call Holding Foreign Companies Act. A project that, although applicable to any foreign company, the promoters of the initiative have recognized that its main objective is to target China. Going so far as to prohibit investment in those firms that do not comply with the regulatory and internal transparency requirements stipulated in the Holding Foreign Companies Act. 

At first glance, it seems difficult to predict the impact and possible long-term consequences of this law on diplomatic relations and political ties between China and the United States. However, this project has been hailed not only by the Republican Party, but has also received the full support of the Senate when it was approved unanimously last May. Giving rise to a precedent that could escalate existing tensions between two world economic powers and lead to a separation of international financial law in both countries. And not only in the financial sphere, but it could also affect other sectors of international law such as that in charge of regulating our relationship with the environment and climate change, among others. Thus increasing the differences between these two great powers whose relationship has been in special decline during the last four years.

According to Hua Chunying – Spokesperson for the Ministry of Foreign Affairs of China – the new legislation will harm global investor confidence in the American Capital Market and ultimately affect the interests of the United States. What's more, in an attempt to preempt the new legislation, certain Chinese companies such as Alibaba, NetEase and Yum China have sought secondary listings in Hong Kong as a hedge against a possible ban on trading their shares in the United States.  

For more information:  Trump signs bill that could remove Chinese companies from US stock indexes

El Holding Foreign Companies Act, although supported by many, has also been criticized by others, such as China. In fact, a legal retaliation by the Asian giant could undermine an already weakened field and cause a division, polarizing new norms and reducing the possibility of cooperation by both countries to practically zero. The reality is that New technological advances and the appearance of the first cyber attacks have created a new dimension of risk for the field of international finance, forcing it to adapt to new scenarios.. For example, in February 2016, a cyber attack took place that completely changed the way the world of finance works: the attack on SWIFT, the main international information network of the global financial system, in an attempt to steal nearly 1 trillion dollars from the Central Bank of Bangladesh. Not being the first nor the last to have a place until today. 

It is under this context that the new bill could have unfavorable long-term implications for the international community. Well, a decrease in Sino-American cooperation in financial terms would also affect cooperation in other areas, such as the fight against climate change. A very present fight with global consequences. Returning to the great unknown mentioned above, last Wednesday, January 20, Joe Biden assumed the presidency of the United States and many wonder how the change of government will affect Sino-American relations and the East Asian region. Well, although it is still early to define the strategy to be followed by the Democratic Administration, it is true that it intends to follow a less aggressive approach with respect to China than that of its predecessor. Although, as he indicated in his electoral campaign, the current president plans reduce carbon emissions, especially those from the maritime and aviation sectors, as well as ensure that China – currently the largest carbon emitter in the world – also reduces its ecological footprint.

The truth is that there are various points of view on the approach to follow to remedy the damage inflicted on Sino-American relations and thus minimize possible consequences that may affect the international community. In fact, in an article published by The Economist, the so-called “China strategy that America needs”. In it, an analogy is made to the US – Soviet Union rivalry present during the Cold War and the current US – China rivalry. The first based on ideological differences and nuclear weapons and the second, mainly characterized by the struggle in the fields of quantum computing, information technology and artificial intelligence (AI). Furthermore, while the Cold War – or first Cold War, as certain authors would insist – completely separated two worlds seen from opposite ideological perspectives, today both actors interact with each other and are in a certain way interconnected. Given these differences, the political approach taken with the Soviet Union should not serve as a reference to address the conflict with China, but rather a new strategy is necessary.

In the same way that the strategy carried out by Trump during his mandate can be discussed and even described as unfavorable for the United States in the long term. The main idea is that the sanctions imposed by the US and its allies on the Chinese company Huawei could act as accelerators in the process of technological independence, speeding up the creation by the Asian giant of its own chip industry on a global scale. Therefore, a possible solution would be to establish greater cooperation between the US and the European Union systematized in the form of a treaty or through the creation of an institution similar to the World Health Organization (WHO). This alliance would be mutually beneficial and would help solve global problems, such as climate change, the migration crisis, cyberterrorism or health, among many others. Furthermore, by increasing the levels of cooperation and exchange of information, the balance of power on which the international community is governed would be modified and a more lasting and predictable period of stability would be produced. 

For more information:  The China strategy America needs

As Bertrand Russell – British philosopher, mathematician and writer, winner of the Nobel Prize in Literature in 1950, said, “The only thing that will redeem humanity is cooperation.”

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