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Is this the Beginning of a New Cold War?

A ChinaFile Conversation

On December 1, the same day U.S. and Chinese officials reached a tentative trade agreement, Canadian authorities arrested the Chief Financial Officer of the Chinese telecommunications giant Huawei, Meng Wanzhou. Meng faces extradition to the United States for allegedly helping the company skirt U.S. sanctions on Iran.

While the timing of the arrest may have been coincidental, Beijing sees it as further evidence that the United States seeks to frustrate China’s technological progress and, by extension, its economic development. Where previous administrations predicated their policy towards Beijing on the assumption that growing economic interdependence would stabilize ties between the two countries, the Trump administration argues that Washington was mistaken to encourage that dynamic. “Contrary to our hopes,” the administration’s national security strategy contends, “China expanded its power at the expense of the sovereignty of others.”

Beyond complicating trade negotiations between the United States and China, Meng’s arrest has renewed concerns that the two countries are embarking on a new Cold War, based on economic preeminence and technological innovation but also extending into the military and ideological domains. What are the similarities and differences between U.S.-China competition and U.S.-Soviet competition? Over what exactly are the two countries competing? And what would it mean for the United States or China to “win” today’s Cold War, assuming that one is indeed occurring? —Ali Wyne

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It has become increasingly common for observers of world affairs to contend that the United States and China have either entered into or are poised to embark on a new Cold War, adducing trade frictions as the latest evidence that the two countries have intrinsically incompatible approaches to domestic governance and conceptions of world order. While the contours of a long-term contest between Washington and Beijing are undoubtedly forming, especially in the economic realm, the analogy is problematic.

The United States seriously weighed the possibility of a nuclear exchange with the Soviet Union in which hundreds of millions might have perished. The core of U.S.-China competition, however, centers on the structure of the world economy and the mastery of frontier technologies. The Trump administration regards “Made in China 2025” as a challenge to U.S. national security; China regards that blueprint as the basis for its transition out of low-end manufacturing.

The Soviet Union had pretensions to a universal ideology and fomented revolution across the world. China, too, believes in its own exceptionalism, and is “exporting” some elements of the surveillance apparatus that it is developing to cement the Communist Party’s grip on power—telecommunications company ZTE, for example, is helping Venezuela develop a system to monitor its citizens—but it has yet to manifest a missionary zeal.

The Soviet Union was firmly opposed to and largely excluded from the U.S.-led order. China, however, has been one of the principal beneficiaries of that system, and has thus far contested it selectively, not frontally.

The United States and the Soviet Union each presided over blocs of ideologically aligned satellites. Today, however, few countries are inclined to “choose” the United States or China, even those that are nervous about the latter’s ambitions in the Asia-Pacific region; instead, as Japan and India demonstrate, many are strengthening their diplomatic and military ties with Washington while boosting their trade and investment ties with Beijing. It is unlikely that they would participate in an effort to contain China.

Finally, Washington and Moscow had little in the way of economic or cultural exchanges. Two-way trade between the United States and China, by contrast, totaled U.S.$635 billion last year and is on track to reach U.S.$650 billion this year. The two countries are also bound together by a dense network of global supply chains. In the 2017-2018 academic year, moreover, there were over 363,000 Chinese students enrolled at U.S. colleges and universities, accounting for roughly a third of all international students studying in the United States.

The purpose of noting the Cold War analogy’s limits is not to diminish the scope of the China challenge, but to suggest that the United States will need to manage it differently than it did the Soviet threat. Washington may have to reconcile the inevitability of intensifying competition with the imperative of sustained cooperation, without knowing what long-term equilibrium it seeks to achieve with Beijing—a long-term undertaking that could test its psychological resilience and strategic dexterity in equal measure.

The United States and China have more in common than both sides realize and are willing to admit.

Perfectly fitting the script of a Hollywood movie, the United States and the former Soviet Union were stark opposites. America is the beacon of democracy, while the Soviet Union was a brutal autocratic regime. America has free markets, while the Soviet Union was communist. The Soviet Union unambiguously fit the profile of a villain—an “evil regime,” as President Ronald Reagan called it—while America would and did ultimately save the day.

By contrast, the United States and post-1978 China are not clear-cut opposites. Most people think that America represents democracy while China undermines the appeal of democracy by proving that autocracies are better at achieving economic growth. But was it really autocracy that helped China prosper? If so, then why didn’t China prosper under Mao, who was more autocratic than any other leader after him, including Xi?

In fact, it wasn’t autocracy that made China great again. True, Deng Xiaoping spurned Western-style democracy, but through behind-the-scenes bureaucratic reforms, he quietly injected “democratic characteristics” of accountability, competition, and limits on power into an autocracy. China’s success proves that even autocracies require democratic characteristics to rule effectively and prosper. By insisting on a false binary—that countries are either democracies or autocracies, with no middle ground—American observers have misread the political foundation of China’s rise, and so have hawkish elites in Beijing.

Economically as well, America and China overlap. Although the government in China exercises far more control over the economy than in America, China has evolved a long way from Soviet-style central planning. The private sector accounts for 60 percent of GDP, 70 percent of technological innovation, and 80 percent of jobs. Far from insular, it is the world’s largest trading nation. Also, like America’s capitalist economy, China’s feeds on mass production and consumption. Alibaba’s Singles Day is a supersized version of America’s Black Friday. And, the two economies are highly interdependent; they cannot do without each other.

One final irony is that America and China face a common enemy: climate change. The devastating effects of climate change and global warming will not discriminate between Americans and Chinese. Nobody will win if the world’s two greatest nations spend their energy fighting a “Cold War,” while ignoring a catastrophe burning at their front doors.

The debate about whether or not the United States and China are headed into a new “Cold War” continues to rage. As other scholars have observed, the U.S.-China relationship differs from the U.S.-USSR relationship in significant ways that render the Cold War analogy less analytically useful. The deep integration between not just the American and Chinese economies but also the economies of China and U.S. allies is perhaps the most frequently cited example, but there are others. China is now enmeshed in international institutions in a way the USSR was not at the dawn of the Cold War. Of course, this cuts both ways, giving it a stake in the global order as well as greater incentives to reshape that order in ways that align with Beijing’s interests. The regional environment the United States faces in the Indo-Pacific is also different from the Cold War European theater. The United States and China are not going to be able to draw an Iron Curtain around their spheres of influence, dividing allies and partners between them. Instead, Asian allies and partners are likely to continue the calibrated hedging they are currently employing, balancing the need to maintain ties to both Washington and Beijing.

While there are key differences between today’s environment and the Cold War, what does appear fairly certain is that the U.S.-China relationship is headed toward a prolonged period of friction and competition. For the United States and China to manage this competition without allowing it to spiral into conflict—a goal that should be shared by both nations—asking over what exactly the two countries are competing and what it would mean for the United States or China to “win” becomes incredibly important. To my mind, these questions haven’t been adequately debated. The Trump administration’s National Security Strategy suggests differing views on the nature of U.S.-China competition. It suggests a geopolitical competition over the balance of power in Asia, and the need to “prevent unfavorable shifts in the Indo-Pacific,” but it also suggests an ideological competition “between free and repressive visions of world order.”

Competition—of any sort—is merely a means to an end. Lack of conceptual clarity about the purpose, the nature, and the bounds of this competition could undermine U.S. strategy. Not every Chinese action will merit a competitive response. For example, the United States may not relish China’s growing engagement of Latin America, but this does not mean it has a vested interest in each and every action China takes. Similarly, while the United States has rightful concerns about China’s access to sensitive technologies, it’s simply not practical to entirely disentangle our economies. To avoid the risk of a boundless competition that forces the United States to chase every Chinese move, U.S. policymakers will need a clearer vision of the endgame. How does the United States view its role and interests in the Indo-Pacific in the 21st century? And where must it compete to achieve those ends?

Despite the current swirl of breathless pronouncements, there is not and will not be a “new Cold War” with China. There are several reasons why:

  1. The basis of the Cold War with the Soviets, as spelled out trenchantly by George Kennan, was their rejection of the “possibility of a permanent happy coexistence of the Socialist and capitalist worlds, but rather a cautious, persistent pressure toward the disruption and, weakening of all rival influence and rival power.” Regardless of how frustrating Chinese transgressions on trade, mercantilism, human rights abuses, and South China Sea island-building may be, it is unlikely that the U.S. will convince the rest of the world—or even part of it—that China wants to destroy the capitalist world and disrupt all rival influence. China’s ambitions may expand with its interests in the future, but at present they remain limited.
  2. The nature of the competition with China is mainly economic, although there are certainly elements of military and political tension, stemming from the mismatch of systems and lingering mutual suspicions. Unlike during the Cold War with the Soviet Union, however, the Chinese economy is strong and resilient, and the Chinese have demonstrated ideological flexibility in pursuing needed reforms. The Soviet system’s resistance to reform hastened its demise from within, as Kennan predicted, but the seeds of decay, although present in China, will not find as fertile ground in China’s adaptable, hyper-competitive economic milieu. We cannot expect an imminent, or even eventual, collapse.
  3. Most importantly, China is not interested in having a Cold War, nor is it willing to sacrifice its national development goals. It will not go out of its way to challenge U.S. influence and power, which will remain paramount for the foreseeable future provided we maintain our network of steadfast alliances and don’t squander our soft-power capital. China realizes that the U.S. and its partners will continue to drive the global agenda, will remain major economic engines, and will continue to work to maintain global stability. It may want changes to the system, it may want more say, but it does not want to dominate or run the system. And it does not want to take on the United States. At least not yet.

But what the United States does will be more important to the trajectory of the competition than what China does. Again, we turn to Kennan, writing in 1947:

It is rather a question of the degree to which the United States can create among the peoples of the world generally the impression of a country which knows what it wants, which is coping successfully with the problem of its internal life and with the responsibilities of a World Power, and which has a spiritual vitality capable of holding its own among the major ideological currents of the time. . . [The American people’s] entire security as a nation [is] dependent on their pulling themselves together and accepting the responsibilities of moral and political leadership that history plainly intended them to bear.”

When the question arises of whether a new Cold War is emerging between China and the United States, most observers respond with a resounding “no.” Granted, the world today seems to have very little in common with the ideological and strategic divisions of the Cold War, when the U.S.- and Soviet-led blocs avoided engagement with each other. Today, U.S. allies in Asia and Europe often count China as their most important trading partner. Importantly, the U.S. and China have not relied on foreign military interventions or proxy wars to vie for influence against each other. They are intimately connected economically and politically through trade and investment, and joint participation in about 80 international institutions.

However, there are some notable similarities. First, China threatens the security of key U.S. allies in Asia, which may bring the two countries into a war. However, the threat is less than during the Cold War because, unlike the Soviet Union in Europe, China has no plans to occupy these countries. Taiwan is an exception without a parallel in the European context.

Second, while not a battle between communism and capitalism, there is an ideological component to the competition—autocracy vs. democracy. China may not be trying deliberately to challenge the United States ideologically, but its practices and policies have made the world safer for autocrats: it provides economic assistance with no demands on good governance, protects rogue regimes from punishment in international institutions, and teaches other countries best practices for internal repression. Also, the United States under the Trump administration has begun to emphasize the ideological division between the two countries.

But in the end, the Cold War analogy isn’t really apt. The nature of the competition between China and the U.S. differs from that which existed between the Soviet Union and the U.S. It is primarily economic and political at this stage, with the military element becoming more pronounced, and an ideological element in the background. The U.S. has advantages in the military sphere, China in the economic sphere. At this early stage, the stakes are lower than those that existed during the Cold War. China may be trying to revise the international system, but Beijing is not a revolutionary power seeking to make wholesale changes to the international order.

In short, the contours of the competitive relationship are different from those that existed during the Cold War. This is important to understand, not for the sake of reassuring Beijing, but to avoid relying on strategies that worked against the Soviet Union that are unlikely to work against Beijing. For example, the U.S. won’t convince China to engage in a costly arms race—and even if it could, China’s economy could handle the expense in a way that Moscow could not. Every rising power pursues a unique power accumulation strategy, and with that comes a new type of competition with each potential power transition dynamic. We are only in the early stages of seeing what that dynamic will be for the U.S.-China competition.

As relations between Beijing and Washington cool, it is natural to look to history for examples of previous great power competitions. Yet while history is a necessary tool of foreign policy analysis, observers should be wary of historical analogies that for various reasons don’t apply—especially (as Joseph Nye warned) when they convey a “whiff of inevitability.”

As a historical analogy for today’s emerging competition between China and the United States, the Cold War does not seem promising. Dynamics between China and the United States are not an existential competition of one system against another (NATO vs. Warsaw Pact), but rather a competition among great powers within the same, globalized system. Neither side seeks to destroy the other’s political system (though some in the U.S. may disagree), nuclear weapons and military competition are not at the fore of the relationship, China has no allies to speak of, and U.S. allies seek a positive and constructive relationship with Beijing (despite their misgivings). Indeed, the U.S.$635 billion traded between China and the United States in 2017 reflects how different today’s dynamic is from the Cold War.

So what exactly are China and the United States competing over, and what would it mean to win (or lose) that competition? U.S.-China competition is over two interrelated concepts: power and order. Washington and Beijing are both competing to effectively utilize all elements of national power to influence other nations and assert their national interests. That’s fairly direct and easy to understand, and power competition is playing out both in traditional arenas like trade and military investment, as well as in new frontiers like space and in emerging technologies such as AI.

The U.S. seeks to use its power to preserve its own influence and access in Asia while sustaining a liberal international order based on laws, norms, and institutions that have been developed by the international community for decades. China, for its part, seeks to establish itself as the dominant power in Asia and to circumscribe the regional role of the United States in the region. Beijing also seeks to rewrite some aspects of the established international order—or at least carve out exemptions for itself—in ways it believes to be more conducive to its interests.

Victory, therefore, will lie in either side’s ability to grow its power in Asia relative to the other, and to sufficiently assert its vision for the international order.

Competition will play out in traditional areas of dispute, such as Taiwan, on the Korean peninsula, and in the East and South China Seas. But it will also play out in the international fora that will determine critical laws, norms, and standards in areas as diverse as the freedom of the high seas, technological standards and protocols, and the enforcement of norms about national sovereignty, human rights, and the peaceful resolution of disputes. Though some may seem esoteric or otherwise insignificant, they—not Berlin or the Fulda Gap—will be the locus of geopolitical competition in the 21st century.

The Cold War is the wrong historical analogy to use in explaining U.S.-China dynamics. This is not meant to deny or minimize competition in U.S.-China relations. Rather, the Cold War framework obscures more than it clarifies about bilateral dynamics and, thus, diminishes the complexity of the challenge for U.S. policymakers.

First and foremost, the Cold War was defined by a series of characteristics that either do not exist in the U.S.-China context or manifest in ways that differ from U.S.-Soviet interactions, including the primacy of nuclear weapons, minimal economic links, a global battle for influence through proxy states, and a deep ideological divide defined by differing visions of global order.

For the United States and China, few of these conditions obtain. Nuclear weapons are far in the background; the two economies are deeply interdependent; the primary venue for competition is East Asia; both the United States and China, so far, are trying to prevent countries from choosing between them; and while ideological differences have surfaced in recent years, they do not yet constitute dueling visions of global order.

Second, U.S.-China competition now and going forward will look very different than during the Cold War. Indeed, it may be far harder for the United States. It will be broader and will require a more sophisticated response from the U.S. government, the private sector, and civil society. U.S.-China competition already covers at least four dimensions: security, economics, technology, and, increasingly, ideology. Americans may be forced to make costly choices between their economic and security interests.

The economic relationship offers one such example of the challenge. The world benefits enormously from China’s growth; China drives global market dynamics ranging from commodities to financial markets. Yet, Xi Jinping’s penchant for state-directed development and anti-competitive practices at home and abroad tilts the global playing field in China’s direction, disadvantaging economies all over the world. How to persuade and coerce China to alter its policy direction without tanking its economy is a hard policy challenge. In terms of ideology, the question remains whether Xi will actively promote “the China choice” as an alternative to Western forms of political and economic governance, thereby undermining democracies and market economies in vulnerable regions. Or is Xi trying to legitimize China’s choices? In its effort to do the latter it may actually achieve the former, triggering a more intense ideological divide.

A final point is that U.S.-China competition will be far more nuanced. The challenges from China will not lend themselves to the clarity of the Cold War. The geostrategic reality is that no country wants to choose between the United States and China and, at least in Asia, none want China to dominate the region. The competition needs to be thought of in terms of shades of gray and probabilities of alignment with U.S. goals. Thus, U.S. policymakers need to fashion policies that effectively challenge China’s policies but don’t recklessly confront China, in order to keep U.S. allies and partners aligned with U.S. strategies and policies.