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Rising “great-power” competition continues to shape US-China relations

Thomas Mucha
Thomas Mucha
Geopolitical Strategist
Boston

In light of some notable events over the past several weeks — China’s domestic regulatory actions, the Biden administration’s recent six-month milestone, and the US foreign policy debacle in Afghanistan — I thought now would be an opportune time to provide my latest take on the state of US-China relations.

Putting regulation in context

As many of my colleagues have observed, the recent regulatory moves by Beijing are mainly China-focused and not driven by global geopolitics or US policy shifts. That being said, there are some key takeaways here from my broader geopolitical perspective. For example, I think policymakers in both China and the US have begun to view their domestic policy decisions through the lens of the rising “great-power” competition between the two nations.

As a result, domestic and foreign policies are becoming more entwined as the US and China line up for a long-term geopolitical rivalry that will likely involve multiple levels of government, greater government control or oversight of strategically important sectors/industries, and (in the parlance of policymakers) “a whole of society approach.” We should expect a more activist and coordinated regulatory environment in Washington as “managed competition” with China becomes further institutionalized and increasingly bipartisan.

Against this geopolitical backdrop, I believe US-China relations are likely to remain on a downward path for the duration of the Biden administration and perhaps beyond.

Taking stock and looking forward

How did the US-China relationship reach such a nadir? The COVID-19 pandemic has magnified and accelerated the structural challenges facing the two countries, while domestic politics in both the US and China have pushed bilateral relations to their lowest point in decades.

Moreover, the Biden administration’s foreign policy approach to US-China relations is markedly different from that of his predecessor from 2017 through 2020. President Biden’s version of “managed competition” with Beijing is not just a replay of the Trump administration’s tough stance on China. It’s more strategic, it’s more bipartisan, it’s more coordinated across government agencies, and (critically) it includes more US allies and international institutions, with a greater emphasis on human rights and democratic values.

In my judgment, the latter two aspects in particular are likely to ensure ongoing geopolitical frictions between China and the US (and with some of our allies, for that matter). The issue of climate change may also continue to stress US-China relations over the long run, potentially creating new geopolitical pressure points in some existing global “hot spots.” In terms of US domestic politics and policy, I expect US discussions around China to be fluid and very noisy as we near the 2022 midterm elections and the next presidential cycle.

But regardless of the noise, the general direction seems clear to me: I see US-China policy largely following the “great-power” competition narrative described above.

But there are hopeful signs

On a more positive note, I also see some signs that professionalism and even a measure of predictability are slowly making their way back into the US-China dynamic, including a resumption of more regular diplomatic and informal interactions that could help put relations on a more stable footing.

The immediate signpost to watch will be whether Biden and Chinese President Xi huddle on the sidelines of October’s G20 meeting in Rome, as I suspect they will. That summit-level event should give us a somewhat better sense of the range of possible (albeit limited) cooperation between the US and China going forward. As of this writing, I think climate change — specifically, the potential for joint efforts to reduce global carbon emissions — is one area that may offer some opportunity for US-China policy accord.

A word about the Afghanistan crisis

Regarding Afghanistan, my usual “breaking news” advice holds: Don’t jump to any sweeping conclusions amid a dramatic and historic, but still-unfolding, development like this. Conditions in Kabul are evolving rapidly and will continue to do so in the period ahead. So we’re only at the beginning of trying to assess the longer-term implications for the US and the rest of the world.

However, I will say this: The Afghanistan situation is clearly a negative for the US geopolitically and for the Biden administration’s desire to lead global alliances, especially its goal of forming a “coalition of democracies” to push back on authoritarianism in China, Russia, and elsewhere. And it’s a potential win for China in the “great-power” struggle that defines US-China relations.

My biggest takeaway: The “Thucydides Trap”

Recent events have strengthened my conviction that the historical pattern of the “Thucydides Trap” — where existing powers take more punitive actions against rising powers, further straining the relationship and raising the risk of conflict — is the “new normal” and the proper framework for understanding the current (and future) state of the US-China dynamic. And national security considerations now underlie the broader policy landscape in a way they haven’t for years.

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For professional, institutional and accredited investors only. The views expressed are those of the author and are subject to change. Other teams may hold different views and make different investment decisions. While any third-party data used is considered reliable, its accuracy is not guaranteed. Forward-looking statements should not be considered as guarantees or predictions of future events. The value of your investment may become worth more or less than at the time of original investment. Past results are not a reliable indicator of future results. Commentary provided should not be viewed as a current or past recommendation and is not intended to constitute investment advice or an offer to buy or sell securities. Wellington assumes no duty to update any information in this material in the event that such information changes.
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