US, China spit fire, blow kisses in attempt to outsmart each other

Even as the COVID-19 pandemic holds the world to ransom, on the sidelines the United States and China continue to joust – in a relationship that seems mutually contradictory yet beneficial with no way of knowing whether the two are friends or enemies. Even the mandarins in Beijing or Washington probably can’t exactly say where they stand vis-a-vis each other.

In the latest spat, US President Donald Trump has blamed China for the COVID-19 pandemic with his administration accusing a Wuhan lab of leaking a strain of the coronavirus that in the last five months has turned the world upside down and inside out. At the same time, reports say that it is the US which has co-funded research in the very same lab that includes testing a strain of the virus that can infect humans.

Yet, Trump according to a report in Politico.com has praised Chinese President Xi Jinping not less than 15 times since the COVID-19 outbreak. This begs the question: Are they friendly enemies? Or inimical friends?

Since the advent of the Internet era over three decades ago, the Americans and the Chinese have reached a level of economic interdependence that is usually seen only between countries that share a deep friendship. Simultaneously, the political one-upmanship between the two, for example in the South China sea, has spiked to levels that is only possible between deep-set rivals.

Or, should the relationship be seen as one in which rivalry and cooperation exist together, even if they are conflicting attitudes? Some analysts even describe the relationship between the two as the start of Cold War 2.0 with characteristics that are different from the one between the US and Soviet Union that dominated the world for 45 years. But what is almost certain (no one can be caught wagering 100 percent certainty in geo-politics) is that the US and China will not go to war with each other.

In 2001, when the US and China decided to establish normal trading relations they did away with the earlier policy that necessitated yearly renewal of economic ties between the two. With information technology via the Internet emerging as a game-changer, the easing of trade ties opened the floodgates of the manufacture of US goods in China – egged on by cheap labour and concomitantly higher profits.

Trump would have the world believe that the US has since received a raw deal in trade with China. But that may not be entirely true. It is a mixed bag. A Brookings Institution paper points out how US exports to China supports around 1.8 million US jobs in services, agriculture and capital goods. But, the flip side is that (alleged) intellectual property theft and Chinese unfair trade practices threaten high wage jobs and high value-added manufacturing jobs in the US.

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Trump, in his unpredictable style, did challenge Beijing’s dominance in mutual trade by levying tariffs on Chinese goods imported into the US. China retaliated likewise against US goods it imports. But, after the initial noise and chest-thumping, both countries have quietly worked backstage to reduce tariffs mutually and bring back an element of normalcy in their trade relationship.

In the aftermath of the 2008 US market crash, Chinese purchase of American treasury bonds worth an estimated $500 billion helped the US administration bail out companies in deep trouble. It is widely acknowledged that China holds more than a quarter of all US treasury securities and its foreign exchange reserve is in the range of $2 trillion. Yet, lest anyone reasons that Beijing is doing a favour to Washington by holding US treasury bonds, think again. China opts for US papers as it considers them the most reliable and secure in the long-term. And, it works for both countries in a nice cosy arrangement.

Despite this, the US political leadership is reluctant to acknowledge the country’s dependence on China and barbs are thrown frequently at Beijing which naturally retaliates.

The tussle for global political supremacy between the eagle and the dragon is for real, though. The South China Sea is a hotbed of tension over claims of sovereignty and the ownership of scores of islands. Japan, the Philippines, Vietnam and other countries in the region have been engaged in an ugly spat with China even occasionally leading to minor skirmishes. The US opposes Chinese claims, supports the other countries and has conducted a series of naval manoeuvres to assert its dominance in the region.

At heart is the estimated 11 billion barrels of oil, untapped, under the sea and close to 200 trillion cubic feet of natural gas besides being a key maritime highway – all of which makes the rivalry not just mere posturing but for real and valuable stakes.

If the South China sea is a point of potential conflict, the Korean peninsula is a region where the US needs Chinese cooperation in its denuclearisation talks with North Korea. The reclusive Pyongyang regime is politically, geographically and in every other way dependant on China for survival and will not act against Beijing’s wishes. If the Trump administration fancies any chance of success in talks with the North Korean dictator Kim Jong-un it will not be possible without Beijing’s prod.

For the US, the situation is stark. By all accounts, it has lost its pre-eminent position globally after the 2008 market crash and since then has had to share the top position with China, however reluctantly. While this is undoubtedly a cause for Washington’s irritation with Beijing, the ground reality forces it to remain pragmatic.

Take China’s Belt and Road Initiative (BRI), which has seen Beijing emerge as a new imperious contending power that is taking on the US with global investments running into more than a trillion dollars. The BRI, as a concept, is perceived as a counter to the US’s stranglehold over the Pacific Rim region for the last seven decades.

For a politically and economically ascendant China, the US dominance in its neighbourhood in the Pacific is an existential irritant and one way to challenge Washington is to move into areas that the US dominated for decades, in Africa and Asia.

The US is no pushover either. And, China will not back down. Sooner or later, something will have to give. Will the rest of the world pay a price for this curious tussle? As an old African saying goes, “when two elephants fight, it is the grass underneath that suffers”