William S. Fang A COUNTRY’S conduct in foreign policy is an extension of its domestic politics. This applies to China-U.S. relations today, with a domestically stable China relative to an unstable America. China can deal with the U.S. on an even keel. The U.S. will be prone to make hostile moves out of domestic political desperation. We can expect the U.S. to engage in dirty tactics that were typical during the Cold War, even if it cannot officially launch one today. Stability vs instability For the first 30 years since the founding of the People’s Republic of China (1949 - 1978), the U.S. was a stable superpower, while China was struggling to rebuild. The next 30 years (1979 - 2008) started with their establishment of formal diplomatic relations. The U.S. was still as stable as the Rock of Gibraltar. China experimented with its reform and opening-up initiatives. It had its ups and downs. But gradually, its developmental success brought increasing socio-political stability. The year 2008 marked a watershed. By then, China had secured essential livelihood for its people after three decades of rapid growth, developed an effective system approach to public administration, and established a broad and competitive industrial base. It demonstrated impressive crisis management during the Wenchuan Earthquake. In the Beijing Olympics later that year, the world caught a glimpse of a revitalizing civilization. That same year, the American self-professed “perfect” socio-economic system showed significant cracks. Barely one month after the Beijing Olympics, the U.S. financial markets collapsed. The monetary regime imploded and sank the world into a financial tsunami. The subsequent massive creation of money to prop up the system has continued to this day. The instability resulting from this artificial economic sustenance has become structural. Phantom of an enemy The year 2020 will go down in history as a major turning point. Firstly, China has emerged as a solidly stable and integrally strong nation, whereas the U.S. has exposed its entrenched social and political divisions, administrative incompetence, and embedded financial fragility. The COVID pandemic has led to massive additional borrowings and a financial market bubble swamped by speculative liquidity. The national debt has jumped from US$20 trillion four years ago to over US$27.4 trillion today, and is rising. Secondly, the world has become polycentric, with nations becoming less dependent on alignment. China is very adept at working within the world dynamics. The U.S. is ill-adept at it. Under the new polycentric power configuration, the use of force and coercion has limited effectiveness. Alliances do not work. Nations are entering into ad hoc circles for functional purposes, not blocs with exclusive loyalty. U.S. hegemonic behavior is generally reviled and resented. Increasingly, it is losing its grip on global affairs. In shock, the U.S. looks for enemies as the excuse for its failure, and as leverage to re-establish hegemonic leadership. China fits the figment of their imagination. China today is reminiscent of the rising U.S. nation in the early 20th century. In area after area, it is matching the world’s leading edge, and surpassing it in some. Psychologically for the Americans, China is like a phantom enemy that follows them everywhere like a shadow. A world without China? It is extremely difficult for the Americans to accept that China’s rise is real. Their elites uniformly talk about China as “the threat.” Their fear is that, with China’s rise in the world, the U.S. can no longer (a) dictate the rules, and (b) hold itself “exceptional” and therefore above such rules. ln their fantasy, they envisage a world from which China will be ostracized. They are advocating a new world order in which the U.S. and its allies would be disengaged from China. However, they are unlikely to succeed – whether by military, economic, financial or diplomatic means – because China is too strong and offers real synergies with everyone in the world. Today, China has the world’s largest real economic markets, and full industrial supply chains. Its economy contrasts sharply with America’s predominantly virtual economy. The U.S. has hollowed out its industrial base, and constructed an economy registering monetary turnovers instead of real value-added; even its consumption sector is significantly financed by debt. Cold War is ugly It will be difficult for the U.S. to start a global Cold War against China. Nations worldwide derive real benefits when they engage with China. The U.S. cannot offer comparable substitutions. The U.S. will avoid a hot war directly, but will ignite fires around China’s borders, and draw it indirectly into military conflicts with American-supplied proxy enemies. China has to be prepared. Some of the U.S. dirty tricks have already taken place, such as holding Huawei founder’s daughter Meng Wanzhou hostage. Even as the new Biden administration will appear to engage more with China and the world, Uncle Sam will unfurl new lethal warcrafts to try to derail the progress of its appointed “enemies.” (The author is a retired international investment banker and certified public accountant. He graduated from Harvard University with a bachelor’s degree in international relations and Columbia Business School with an MBA in finance.) | 