The US is heading for defeat in the rivalry with China

No smooth measures will save America from losing its global leadership
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print 2 7 2021

The US expert community is feverishly looking for recipes to solve the problem of containing China. An interesting opinion on this issue was expressed in the American magazine National Review in an article entitled "The U.S. Must Prepare for Great-Power Competition Once Again". The publication sharply criticises the course on globalisation that has been followed by the US presidential administrations for the past 30 years, both from the Democratic and Republican parties.

The result of this globalist policy is described somewhat in an ironic tone: "Our globalists did achieve one clear state-building success: They facilitated a 900 percent GDP growth of the People’s Republic of China in just 30 years."

National Review magazine recognises the high complexity of the task of containing China. In all previous wars, the opponents of the US had a GDP of no more than 40% of the American one. Now the situation is completely different. Let's take a look at the statistics. In terms of nominal GDP for 2020, the US ranks first in the world ($20.897 trillion) and China is second ($15.222 trillion). However, in terms of GDP calculated by purchasing power parity, China is already in first place in the world ($27.805 trillion) and the US is in second ($20.29 trillion).

National Review puts forward the thesis that "unless and until the United States and its democratic allies make a firm decision to decouple our critical supply chains from China, we will continue to track for defeat, for one cannot both bleed technology and proprietary technical information to one’s adversary state and at the same time expect to win." Therefore, it is necessary to firmly disconnect from China: to tear off the critical supply chains of the US and its allies from China.

The recipe for containing China for the US, according to National Review, is to stop China's access to the American "research and development base, education system and industry". It is necessary to return key industries and strategic supply chains to the territory of America. In addition, the US should share information only with its allies and partners, especially in the field of technology, but not with opponents and enemies.

Thus, the National Review magazine identified "the need for a hard separation from China" as "the greatest strategic task facing the United States and its allies." At the same time, it is noted that "the transfer of supply chains will be expensive and will meet strong resistance, not least from American and European companies that have made deep investments in them." It is also concluded that without separation from China, there is no way to victory for the US and for the West as a whole "in this new round of great power rivalry."

Well, let's try to assess the chances of success of this recipe for containing China. Let's start with the US allies: let's take the European Union and the EU's economic locomotive - Germany. Let's look at the data from Eurostat for 2019.

The European Union exported more than half of all cars, auto parts and accessories to China. The Chinese market for the German BMW company was the largest sales market in a row during 2012-2019. In 2019, 28.6% of new cars of this manufacturer were sold in China. In the same year, the share of new car sales in China for the German Volkswagen group was 39% of its global sales.

Are the US’ allies, in particular Germany, ready to make such economic sacrifices? Something, of course, has already happened. At the plenary session of the European Parliament in Brussels on May 20, 2021, a resolution was adopted on freezing the Comprehensive Investment Agreement with China, which would provide EU countries with expanded access to the Chinese market. From the point of view of the separation strategy with China, this is the right step. The US can be satisfied.

Interestingly, the negotiations between China and the European Union on a Comprehensive Investment Agreement lasted seven years. It should also be understood that at present there is no market for European companies comparable to the Chinese one in terms of purchasing power.

Is America also reducing its trade with China? Let's look at the statistics of the Main Customs Administration of the People's Republic of China. Despite the contradictions and the pandemic, the trade turnover between the US and China for the period January-May 2021 increased by 52.3% compared to the same period last year and amounted to $279.64 billion.

In January-May 2021, exports from China to the US increased by 49.8% compared to the same period of time in 2020 and amounted to $206.05 billion. Exports from the US to China during this period increased by 59.8% compared to the same period of time in 2020 and reached $73.59 billion.

It should be noted that in 2020, the trade turnover between China and the US increased by 8.3% year-on-year, to $586.72 billion. Chinese exports to the US amounted to $451.81 billion and increased by 7.9%. And US exports to China increased by 9.8%, to $134.91 billion. China's trade surplus with the US in 2020 amounted to $316.9 billion, an increase of 7.1% year-on-year compared to 2019.

An interesting picture is emerging. The European Union is freezing the signing of a Comprehensive Investment Agreement with China, making it difficult for its investments and exports to China. And the US is increasing the volume of trade turnover with China for the first five months of 2021 by 52.3% compared to the same period in 2020.

The US’ allies and partners will also analyse data on exports to and imports from China from Washington. The EU countries may consider the option with the so-called hard separation from China as just a trick aimed at replacing the share of EU exports to China with exports from the US. This is the first point.

The second point is that the volume of trade turnover between the US and China in 2021 is growing at an unprecedented pace, while the countries have serious disagreements.

It should be noted that the trade turnover between Russia and China in 2020 decreased by 2.9% and amounted to $107.76 billion. At the same time, the countries do not impose economic sanctions against each other and vote the same on most issues in the UN Security Council.

Thus, the facts so far suggest that the scenario of a hard separation with China is practically not feasible, if not utopian. Most likely, part of the EU's exports to China will simply replace exports from the US. Washington, as always, will improve its economic situation at the expense of its allies and partners.

It can also be predicted that in the medium term, China has a real chance to become the number one economy in the world in terms of nominal GDP. And if we take into account the rapid build-up of Beijing's military power and, in particular, its strategic nuclear forces, then it will have something to protect its economic interests and global networks of its sea and land supplies.

It can be stated that no smooth measures will save America from losing global leadership, since time is running out for China. And the presence of the US potential for drastic steps in terms of a hard demarcation with China raises great doubts.

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