Some Implications of the Sino-American Split

Some Implications of the Sino-American Split
A chat with the Peer Global Fundraisers Group

Ambassador Chas W. Freeman, Jr. (USFS, Ret.)
Visiting Scholar, Watson Institute for International and Public Affairs, Brown University
By Video from Washington, DC, 5 August 2022

There’s a good deal going on between China and the United States now, but I want to discuss three subjects with you today before we get into current events:

First, how does China threaten America or America, China?

Second, how is US-China competition affecting the two societies?

Third, how is the Sino-American split reshaping global geopolitics and the world of the future?

I will conclude with a few thoughts about what current trends may mean for American universities, which have had and continue to play a central role in U.S. relations with China.

Chinese who had studied here in the decades before the Cold War severance of ties in the 1950s were key to the revival of the Sino-American relationship in the 1980s.  The two countries are now once again in the midst of a nasty divorce.  Sustaining ties with Chinese alumni is, I understand, part of your job descriptions.  So, you will be key to ensuring that we retain sufficient ties with China to again find a basis for cooperation that serves our bilateral and global interests.

How China and the U.S. Threaten Each Other

The Sino-American relationship is proof positive that, if you disregard a country’s interests or treat it like an enemy, you can and will make it one.

For most of human history, China was the wealthiest and most powerful society on the planet.  Over the past four decades, it has sought to restore itself to this status without challenging the United States, which has enjoyed a century of global primacy.  In this endeavor, China has developed a uniquely competitive form of entrepreneurial capitalism, a convincing deterrent capacity against foreign attack, an unmeddlesome approach to working with foreign countries regardless of their ideologies, social systems, and other idiosyncrasies, and identification with the post-World War II world order defined by the United Nations Charter and international law.

But Beijing has failed to persuade Americans that this progress constitutes an unalarming, “peaceful rise.”  To many in the United States, China’s return to wealth and power is a rebuke to America’s values, imperils continued U.S. economic and military primacy, offsets and thereby erodes U.S. global and regional political authority, and offers an unwelcome retort to post-Cold War U.S. unilateralism.  This makes it look like a threat.

Rightly or wrongly (and most economists argue, wrongly), Americans attribute U.S. industrial decline and the consequent loss of well-paying factory jobs to the rise of China, which now produces about one-third of global manufactures.  China’s technological advances alarm our military-industrial complex even as weapons manufacturers profit by portraying China as an ever more formidable enemy.  Our national security bureaucracy is indignant about Chinese companies’ pilfering of U.S. corporate intellectual property.  The Pentagon sees Beijing’s apparent ability to defeat U.S. intervention if fighting resumes in the suspended cross-Strait Chinese civil war as an intolerable challenge to U.S. military supremacy in the Indo-Pacific region.  American politicians interpret Chinese indifference to the politics and ethical standards of third country trade and investment partners as support for authoritarianism and opposition to democracy.  China’s refusal to side with the United States against Russian aggression in Ukraine has capped its reputation for recalcitrance (even as India’s and other countries’ similar stances go unremarked).

Meanwhile, as China sees it, the United States continues to champion and offer military protection to the losing side in the Chinese civil war, to side against China in its territorial disputes with all its neighbors, and to dedicate nearly two-thirds of its navy, two-thirds of its marines, half of its air force, and ten percent of its army to war with China.  Washington has declared China to be America’s most important global adversary, sought to retard the advance of Chinese technology and bar it from foreign markets, banned investment by Chinese companies, and denounced China’s system of government and its domestic policies.

China has responded to American hostility by building defenses to hold U.S. forces at bay, grabbing whatever existing foreign technological knowhow it can, betting its future on indigenous innovation, reducing its reliance on imports of U.S. goods and services, and restricting diplomatic cooperation with the United States.  So far, China has not responded to U.S. military deployments along its coasts and borders with analogous deployments of its own to the Western Hemisphere.  But the logic of the escalating Sino-American confrontation suggests that sooner or later it will do so.

For seven decades, the core passion of Chinese nationalism has been the Taiwan issue – the question of what relationship Taiwan should have with the rest of China.  Skillful U.S. diplomacy in the 1970s deprived Beijing of reasons to see this question as urgent or resolvable only through the use of force.  But the diplomatic framework that did this has been salami-sliced out of existence and replaced with military confrontation in the name of deterrence.  Both sides are now actively preparing for war.  China’s heavying up of its ICBM force is a pointed reminder that any fight over Taiwan could go nuclear.

The problem is not, as many in Washington seem to imagine, a dearth of military-to-military communication.  It is a confluence of the ill-considered evolution of American policies and intensified Chinese nationalism.  This has made conflict between the two countries’ armed forces an ever more realistic possibility.

Recent American policy statements acknowledge the risk of war with China but ignore and refuse to address Beijing’s objections to the U.S. policies that it views as a casus belli.  Instead, the Biden administration emphasizes the need for so-called “guard rails” to prevent confrontation from turning violent.  No one seems to know what “guard rails” are or what they would look like.  Their apparent purpose is to replace the previously successful diplomatic framework for managing the Taiwan issue with some other way to ensure that China does not respond forcefully to U.S. statements and actions it considers provocative.  Apparently, this would involve the imposition of a set of rules to limit Chinese freedom of maneuver without constraining U.S. unilateralism.

This is either a one-sided American foreign policy fantasy or evasive diplo-drivel intended to outflank the need for strategic realism and the negotiation of a modus vivendi.  The same sort of suspension of give-and-take in the face of Russian objections to NATO enlargement catalyzed the current war in Ukraine.  There are many lessons to be drawn from the outbreak of that war.  But perhaps the most important is that ignoring the strongly expressed core interests of other nuclear-armed great powers can lead to a conflagration.

American politicians have little to no understanding of how China is governed, but they now clearly presume that peaceful coexistence with Beijing will be impossible without regime change.  Accordingly, Washington is escalating its trade and technology war with China, supporting Chinese dissidents and separatists, and standing ever more firmly with Taipei against Beijing in the unfinished Chinese civil war.  The U.S. armed forces are increasingly “in China’s face” militarily, mounting two-to-three aggressive air and naval patrols of China’s borders every day.  For its part, while continuing to urge cooperation with America, Beijing is now actively seeking to reduce or eliminate dependence on goods and services from the United States, arming itself against the U.S., and becoming more and more strident in its condemnations of American racism, social disorder, global ideological pretensions, and foreign policy unilateralism.

In the absence of mutually respectful dialogue between China and the United States about reasons to cooperate and ways to manage our disagreements, bilateral antipathy between the two is widening.  Neither side sees the other as worth listening to, though each is eager to lecture the other.  This is not diplomacy, but political posturing aimed at appeasing domestic critics on both sides.  Beijing and Washington are barely on speaking terms.

It has never been more important that Americans and Chinese understand each other as we are, not as we imagine each other or pretend ourselves to be.  But, at the moment, we are becoming less knowledgeable, more suspicious, and fearful of each other.

Bilateral Competition and its Effects on the Two Societies

If mishandled, the Taiwan issue can and will produce another trans-Pacific war, this one with a country able to strike the American homeland with nuclear weapons.  We now seem to be inching toward such a war.  But the Taiwan issue aside, the competition between China and the United States is not so much military as it is about which society can best meet the aspirations of its people for prosperity, domestic tranquility, justice, and personal advance while inspiring other countries with its example.

The Sino-American faceoff is not an ideological beauty contest.  It will be decided by relative performance.  Both sides are betting on technological progress to expand or sustain their relative wealth and power.

Innovation flourishes in an intellectual and entrepreneurial ecology that incentivizes adventurous exploration and development of novel ways of meeting the demand for more effective products and services.  It requires persistent investment in education and research and a socioeconomic culture that facilitates the commercialization of inventions.  Scientific and technological achievement is a cumulative process that is invigorated and accelerated by openness to transnational cooperation and exchanges of ideas.  It is hamstrung, not secured, by restrictions on transnational communication and collaboration.

The United States for long epitomized the characteristics and mores of such an ecology.  Sadly, in many respects, it no longer does.  Washington has been talking a lot about investing in education, research, and the technologies of the future to get our groove back.  But while we mouth off, Beijing has acted.  Complacency, indolence, and lofty talk are no match for ambition, diligence, and the focused pursuit of excellence.  The United States has the capacity to outcompete China if it puts its money where its mouth is.  It can’t seem to do so.  Nineteen of the world’s twenty fastest growing semiconductor companies are now in mainland China.   None are in the United States.

Even at nominal exchange rates (which understate the purchasing power of its currency by about fifty percent), China now outspends the United States on R&D, with a significantly higher percentage going to basic scientific research rather than marketing-related product improvement.  It is home to one-third of the world’s manufacturing.  Chinese universities already graduate at least four times as many students as we do in science, technology, engineering, and math (STEM) and the gap is widening.

China is on track to educate twice as many PhDs in STEM by 2025.  In that year, it will have more workers in STEM fields than the thirty-eight member countries of the OECD combined.  Many will be world class.  Some will be returnees driven from positions in the United States by racial prejudice and xenophobic bureaucratic restrictions on their freedom to pursue their research interests.  Their departure will undermine the excellence of U.S. universities and laboratories as well as reduce the number of U.S. high tech startups but will result in plenty in China.

The natural enemies of innovation are not just politically motivated bureaucratic restrictions, but protectionism, monopoly, and its close cousin, oligopoly (all of which now dominate the American economy).  An inventive spirit, when armed with education, presented with opportunities for research, funded, and allowed to set its own horizons, can prosper in both the government and private sectors.  Einstein was not driven by the profit motive.  Nor was the invention of the internet.  The missile and jet plane debuted in Nazi Germany.  The first man in earth orbit was Soviet.  Many examples from history refute the complacent American presupposition that only private companies in liberal democracies with free speech on political matters can be inventive.  China is doing nothing startling in once again proving this assumption wrong.

Americans now seem increasingly disinterested in discovering and adopting foreign best practices or in keeping our country open to foreigners and their ideas.  This is both a break with attitudes and policies that made America great and a recipe for future stagnation.  For its part, China remains committed to “reform and opening” in areas relevant to science, technology, engineering, and mathematics.  But, in the short run, the draconian lockdown policies that were so successful in enabling it to avoid mass casualties in the first two years of the pandemic are now both increasingly ineffective and cutting China off from intercourse with the outside world.  Such intercourse is essential both to do business and to sustain continued economic and technological advance.

Most Americans shrug off the deterioration in Sino-American relations.  Some applaud it.  But American and other foreign businesses currently operating in China do not.  They have been so profitable that their reinvestment of their retained earnings in China’s economy is now its single greatest source of foreign direct investment.  And China continues to pay U.S. companies almost $47 billion annually to license their intellectual property.

The escalating antagonism between China and the United States is clearly taking its toll on both societies.  Chinese no longer see the United States as worthy of emulation.  Presumed national security threats from China and other rising and resurgent powers are taken to justify the curtailment of American civil liberties.  Like China, the United States is becoming more xenophobic, doctrinaire, and intolerant of dissent.  In both countries, those who speak well of the other or argue for better relations can expect to be smeared by political correctness vigilantes.  Even those most committed to engagement no longer dare advocate it.  They either walk away or just do what’s in their interest without talking about it.

The Geopolitical Fallout of the Sino-American Split

Sino-American animosity is catalyzing rapid decay not just in bilateral relations but in the global economic, technological, and politico-legal orders.  The United States and China were the two greatest beneficiaries of globalization and economic interdependence.  They have turned against both and are now striving for decoupling.

The war in Ukraine has severed Russian ties to Europe, leaving Moscow with no alternative to partnership with China and India and the pursuit of an Asian rather than European identity.  This has accelerated the emergence of a global economy divided between a U.S. dominated sphere and the rest of the world, in which China, India, Iran, Russia, and other nations resistant to U.S. policing compete for markets.

You can pretty much map the non-US sphere by identifying the countries that have not banned the Chinese telecommunications giant, Huawei.  They account for two-thirds of global GDP and include the world’s fastest growing economies.  U.S. export controls and their extraterritorial application are helping to bring into being distinct technological ecospheres.  After a long period of convergence in international industrial and other standards, they are diverging.  The world to come will be one of regional technological incompatibilities and independently managed, firewalled internet systems.

For countries outside the Western orbit, the Sino-American split is a bonanza.  As each side competes for their favor and allegiance, they are free to choose to align with neither while accepting whatever they can reap from each.  The fact that China’s development experience is more recent than the United States makes its model seem more relevant to some.  But China’s real advantage is that its rapidly expanding economy enables it to offer generous support for economic development while the increasingly insolvent American government no longer does.

Washington has also deprived itself of international influence by repudiating trade agreements like TPP and declining to join post-Bretton Woods institutions like the Asian Infrastructure Investment Bank.  When the U.S. is absent, China is inevitably drawn into leadership positions.  Asian economies are rapidly becoming part of a Chinese sphere of economic influence from which the United States is absenting itself.

Meanwhile, Washington’s takedown of dispute resolution mechanisms in organizations like the WTO has left differences over trade practices to be resolved by trade wars and other forms of confrontation.  The U.S. refusal to ratify other international treaties like the UN Convention on the Law of the Sea or the International Criminal Court has much the same effect, leaving the U.S. to resort to unilateral coercive measures rather than multilateral institutions and processes to resolve differences with China and other countries.  The result has been to erode the international legal regimes that earlier generations of Americans tried so hard to have replace the notion that “might makes right.”

The U.S. turn to unilateralism now also threatens the dollar’s status as the universal currency for trade settlement.  The escalating U.S. reliance on the imposition of unilateral sanctions that have no standing in international law is now generating a backlash.  Bilateral and plurilateral currency swap arrangements for trade settlement that avoid the dollar are proliferating.  The BRICS countries are actively working on creating a transnational currency in which to settle trade without reference to the dollar and inviting other nations to join them.

Current trends foreshadow a future in which the dollar coexists with competing currencies and methods of clearing international transactions that bypass New York.  In such a regime, the dollar would be significantly devalued and the “exorbitant privilege” to which America has long been accustomed would disappear.  Rather than allowing a sudden shock to occur, it would be far better to engineer a transition to a new, post-post Bretton Woods arrangement.  But the fact that the United States and China are currently not on speaking terms makes management of an orderly transition impracticable.

Meanwhile, political gridlock in the United States has frustrated almost all efforts to fund the reindustrialization of the American economy and the restoration of its human and physical infrastructure, even at the modest levels persistent U.S. budget deficits permit.  Congress had no qualms about allocating an additional $80 billion in defense spending – $45 billion more than the president had requested – to counter China.   But it has struggled to authorize $52 billion to recreate an American semiconductor industry.  By comparison, China has committed at least $150 billion and south Korea $265 billion to semiconductors.  In effect, the Washington establishment, finding it hard to get its act together to compete with Beijing in any domain other than the military, has chosen to define the contest with China in almost purely military terms and to act accordingly.

China’s rise is inevitable reshuffling the global status quo.  The so-called G-7 want to hang onto their “quo” despite their lapse in “status.”  But it is natural that China, already the largest economy in the world if measures other than nominal exchange rates are used, should play an ever-larger role in global governance, and be asked to contribute more to it.  And, given Beijing’s investments in education and research and China’s historical role as a technological innovator, it is clearly destined to play a leading role in this domain as well.  Greater global prominence for China inevitably means diminished prominence for the United States, EU, and Japan, just as the rise of the global South implies a lessened role in world affairs for the G-7.

The post-World War II period is clearly behind us.  In the wake of Russia’s assault on Ukraine, Germany is rearming.  So is Japan.  Turkey has come unmoored from NATO.  Britain is also adrift.  The EU appears for the first time to be making a serious effort to develop defense capabilities that both supplement NATO and are separable from it.

China’s refusal to align itself against Russia has fed European views of China as an amoral global competitor that must be dealt with at arm’s length.  But Europeans will not commit to join the United States in war with China if the Taiwan issue ignites such a war.  Russia is quite enough for them.  They can’t afford a military role in the Indo-Pacific even if their alienation from China is such that in any Sino-American war, they would support the United States with measures short of war.  India might do the same.  Australia and Japan can be expected to support the U.S. military even if they don’t themselves engage.

China would be without allies, though it might have some support from Russia.  Other countries concerned about how a strengthened China might throw its weight around in future would, as the Chinese phrase has it, 坐山观虎斗 – sit on the mountainside and watch the tigers fight.  North Korea might see an opportunity to do something while China and the United States were distracted.

Meanwhile, China’s political image and influence are worsening rather than improving.  In the West, this is in part due to Beijing’s equivocal position on Russia’s invasion of Ukraine.  But globally it is also the result of tone-deaf interactions with foreigners by Chinese representatives more concerned to curry favor back home than to persuade the people they are addressing to want to do things China’s way.

China is trying to impose its domestic controls on discourse about its policies and practices abroad in places far from its borders.  It should surprise no one that this evokes a hostile response.  China will not allow foreign nations to impose their moral or legal standards on people in China.  The universal rule for dealing with other cultures is 入乡随俗, “go along to get along.” Anything more assertive comes across as arrogant and is counterproductive.  Beijing’s insistence that foreigners defer to Chinese culture’s emphasis on “face [面子]” by censoring critical views of its policies and practices generates a particularly strong backlash in cultures that place a high value on open debate between contending ideas.

Even in societies that are not committed to a dialectic of open argumentation, China can come across as both hypersensitive and highhanded.  The United States and its closest partners need to be more respectful of Chinese interests and values.  But to improve its political influence abroad, China must learn to be more respectful of the interests and values of non-Chinese, not just disdainfully tolerant of their eccentricities.  Both China and the United States would clearly benefit from a return to seeing interactions with foreign societies as opportunities to learn about possibly better ways of doing things, rather than as occasions on which to score political points back home.

The Consequences for American Universities

What does all this mean for the American universities for which you raise funds?  Here are three obvious implications:

  • The flood of tuition-paying Chinese students that has helped subsidize American higher education is almost certainly coming to an end. University budgets will take a hit.
  • Travel to China has been almost impossible during the pandemic. Worsening bilateral relations promise to ensure that it remains much more difficult than it once was.
  • Chinese typically form strong bonds with classmates, professors, and the schools they attend, but continued donations to their American alma maters now face obvious headwinds. The creation of institutions in China (including Hong Kong) like the American University Alumni Association (AUA) centers in Thailand might be one way to keep up connections until relations improve.  AUA provides an apolitical, non-threatening umbrella association for the alumni of American universities, sustains their connections to classmates and alma maters, and enlists them to help local students considering study in the United States.

Some last thoughts, not on fundraising.

  • China’s insistence on adherence to the Party line is a menace to the free discussion of controversial topics, which is essential to the functioning of both universities and democracies. Chinese students need to be as free to speak their minds at our universities as others are.
  • Sinophobia has driven the post-9/11 U.S. national security state into hypervigilance. Gumshoes and martinets who combine paranoid imaginations with limited understanding of science and technology now claim a right to monitor U.S. labs and classrooms.  They cannot be allowed to intimidate researchers and teachers to the detriment of both universities and national competitiveness.
  • As China continues to grow as an innovator, U.S. universities will find they need to track its progress, understand its scientific basis, and replicate its achievements. We are heading into a period in which Americans will have as much or more to learn from China as Chinese have had to learn from us.

Lastly, the apparent closing of the American mind amidst an increasingly corrupt information environment that is rife with conspiracy theories and tendentious misinformation is a much larger threat to our competitiveness than China.  Both “liberals” and “conservatives” have become unprecedentedly insistent on political correctness.  Neither tolerates dissent.  Both thereby jeopardize the purposes for which universities exist.

Our universities became the best in the world by being open to foreigners and their ideas.  They are now international, not just American institutions, and they have influential constituencies in other countries, including China.  That’s where you international development officers come in.  Sustaining relationships with well-disposed Chinese graduates is essential to preserving the global relevance and prestige of our universities as well as to a future U.S. rapprochement with China.  Doing so is also very much in the self-interest of the institutions you serve.