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China shouldn’t “coerce or intimidate” the Philippines in the South China Sea, says US Ambassador
Tensions are rising between China and the Philippines over control of the South China Sea, which Beijing sees as its territory, and Manila as its exclusive economic zone. On GZERO World with Ian Bremmer, US Ambassador Nick Burns explained the US position that it is concerned about China’s aggression in the South China Sea, particularly at Second Thomas Shoal, a submerged reef where Manila deliberately beached a ship in 1999 and has used as a military outpost ever since.
“China should not seek to coerce or intimidate the government of the Philippines at Second Thomas Shoal,” Burns stresses, “The Philippines has an absolute right to resupply their forces.”
Burns emphasizes broad international support for the Philippines’ rights in the area, referencing the 1951 Mutual Defense Treaty between Washington and Manila. Tensions in the region have escalated sharply since Chinese and Philippine coast guard vessels collided in early March, injuring four Filipino crew members. Burns says China needs to act responsibly and commit to a peaceful resolution on the issue.Catch GZERO World with Ian Bremmer every week on US public television (check local listings) and online.
US aims to maintain military advantage over China by controlling tech
“In critical areas, essential for our national security, we're not going to permit trade,” Burns says, “There's a lot of complaints that I receive from my Chinese counterparts about our de-risking strategy, and I remind them you're doing the same thing.”
Prohibiting the sale of semiconductors isn’t about limiting China’s economy or tech industry, but about maintaining America’s advantage in the race for military development. Burns points to growing tensions in the Indo-Pacific, where the US is keenly interested in maintaining military superiority, and says that so far Washington’s action has been limited to a small yard. Limiting chip exports, he says, is the only way to prevent Chinese leadership from acquiring powerful technologies that could tip the balance of power.Catch GZERO World with Ian Bremmer every week on US public television (check local listings) and online.
Where the US & China agree - and where they don't
“This is largely a competitive relationship,” Burns tells Bremmer. It’ll likely be a systemic rivalry well into the 2030s between the two largest economies in the world and the two strongest militaries in the world, so what happens here is very consequential.”
Catch GZERO World with Ian Bremmer every week on US public television (check local listings) and online.
Ian Explains: Xi Jinping's nationalist agenda is rebuilding walls around China
On Ian Explains, Ian Bremmer breaks down how Xi Jinping is turning China inwards at a time when it can’t afford to close itself off. Since assuming the presidency in 2012, Xi has consolidated power within the Communist Party to become China’s most dominant ruler since Chairman Mao Zedong. Under Xi’s watch, China has rolled back democratic rights in Hong Kong, implemented crackdowns on the powerful tech, finance, and real estate sectors, restricted English in schools, and even expanded the definition of espionage so broadly that basic interactions with foreigners are viewed as suspect.
President Xi’s nationalist vision has become so dominant that it's written into the Constitution and official history of the People’s Republic. But will that vision make China hostile to the very ideas that fueled its economic transformation in the first place?
Watch the upcoming episode of GZERO World with Ian Bremmer on US public television (check local listings) and at gzeromedia.com/gzeroworld.
Biden holds a microchip to discuss the strategic importance of semiconductors.
US chokes off investment in Chinese tech sectors
In a move that deepens the breach between the world’s two largest economies, the Biden administration this week authorized the Treasury Department to prohibit US firms from investing in several cutting-edge technology industries in China.
The order aims to stop American capital from financing Chinese research into quantum computing and advanced semiconductors and places fresh restrictions on investment in Chinese AI or other semiconductor technology industries.
Amid a deepening rivalry with China to achieve mastery over these technologies, Washington has framed the latest measure as a way to protect US national security.
One big question is: Will US allies do the same thing? Powerful as the US is, a strategy to crimp Beijing’s technological progress doesn’t work half as well if China can look elsewhere for high
quality investment.
It looks like things are moving that way. UK Prime Minister Rishi Sunak said Thursday he was considering a similar move, and the EU has been mulling measures of this kind since at least April when European Commission President Ursula von der Leyen suggested measures to curb European private sector investment in “sensitive technologies” in China.
And recall that after the US banned its companies from exporting sensitive technology to the Chinese semiconductor industry last year, both Japan and the Netherlands — major suppliers to China — quickly followed suit.
Is “decoupling” of this kind a good idea? If the US and EU are worried about China making critical breakthroughs then it makes sense not to help China do that. On the other hand, critics say that cutting the industries off from each other makes it harder for each side to monitor the other’s progress and to collaborate on guardrails for potentially destructive new technologies.
Tell us what you think. Is “decoupling” smart or shortsighted?
An improvised gate blocks the way leading to a Cuban military base near Bejucal.
Chinese troops in ... Cuba?
What's China up to in Cuba these days? First, setting up an electronic spy base. Now, it's reportedly planning to build a military training facility on the island.
That's right — America's No. 1 geopolitical rival could potentially deploy its troops just 100 miles off the coast of Florida.
If you're the US, that's too close for comfort. More troubling geopolitically, China's plans in Cuba seem to be part of "Project 141," an ambitious strategy by the People's Liberation Army to vastly expand China's global military footprint that includes a base in Djibouti and naval outposts in Cambodia and the UAE.
But if you're China, flexing your military muscles in Cuba is an adequate response to the US Navy's presence in the disputed South China Sea or near Taiwan, which is also about 100 miles from mainland China. And the US can hardly complain about a Chinese military presence on its doorstep when it has more than 350,000 troops stationed within striking distance of Beijing.
Throwback: In 1962, the Soviets got caught red-handed deploying nuclear missiles in Cuba. Yet, more than six decades later, the Chinese don't seem to be trying too hard to conceal their activities on the island from US intelligence. However inaccurate, the Cold War narrative is becoming harder to dispute.China snoops on US from Cuba, US shares drone data with Taiwan
On Thursday, the WSJ reported that China and Cuba have cut a deal to establish an electronic spy base on the island, barely 90 miles from the US mainland, presumably in exchange for a hefty sum of yuan. This is a big deal because it would allow the Chinese to eavesdrop on military comms in the southeastern US and monitor ship traffic from America's doorstep.
Meanwhile, the US, Japan, and Taiwan have agreed to share real-time data from naval reconnaissance drones — crucial to anticipate and respond to a hypothetical Chinese attack on Taiwan. But what'll really trigger Beijing is direct military cooperation between Washington and Taipei.
While China snooping on the US from nearby Cuba — and not hiding it from US intelligence — is likely intended to give Uncle Sam a taste of its own medicine over the US military presence in the South China Sea and near Taiwan, granting Taipei access to intel that would give the self-ruled island a heads-up that China is on its way is probably meant to warn Xi Jinping: We might do a bit more than just help Taiwan defend itself.
We don’t think the US and China are in a Cold War, but they are certainly doing things with Cold War vibes to each other. And this icy bilateral temperature raises the stakes ahead of US Secretary of State Antony Blinken’s planned visit to Beijing sometime this month, a trip he had to delay over that spy balloon.Has China’s power peaked?
I had a fascinating debate on this question a few months ago with political scientist Michael Beckley, who wrote a thoughtful and compelling book arguing that China’s relative rise is over and, therefore, that the United States will remain the world’s sole superpower for the foreseeable future.
This isn’t a new claim. In fact, every few years going back decades we get a new big article or book saying China’s power is peaking and its decline (or even collapse) is imminent. So far, they’ve always been wrong. But could it be true this time?
Let’s break down the strongest arguments on both sides and decide (spoiler: I say “not so fast”).
Why China has peaked already
The exceptional rise of China over the past 40 years was just that – exceptional. It relied on a lucky combination of unique and irreplicable tailwinds that are rapidly turning into headwinds. By almost every metric, things have already stopped getting better and are starting to get worse for China.
China’s economic slowdown is structural. As China has grown wealthier, its labor force has become more expensive, diminishing the country’s attractiveness as the “factory of the world.” Official GDP growth had already dropped to 6% before 2019, despite government stimulus masking even weaker underlying growth, and three years of COVID-19 lockdowns only made it worse.
Not only has growth slowed every year for a decade, but most importantly, the quality of China’s growth has deteriorated. Infrastructure has been overbuilt to juice up growth, with dozens of “ghost cities” outfitted with new apartment buildings, roads, and bridges … and no people – the definition of growth without productivity. All this stimulus has been financed by an explosive debt bubble that Beijing has shown little willingness or ability to deflate.
Meanwhile, China’s closed political system and Xi’s statist economic preferences hinder technological innovation, the most reliable engine of long-term growth. While China’s research and development spending has increased massively, the Chinese Communist Party’s increasingly heavy-handed interventions in the tech sector are chilling entrepreneurship and technological experimentation. Many of China’s best and brightest have already left the mainland for more welcoming environments, taking their talent and capital with them. Add to that Western export controls on semiconductors and other dual-use advanced technologies, and China’s tech capabilities will face major binding constraints soon.
China faces the worst demographic trajectory of any country we’ve seen in peacetime. Its 1.4 billion population peaked last year and is now starting to shrink, owing to aging and plummeting birth rates. By 2035, China is estimated to lose roughly 70 million working-age adults and add 130 million seniors. Studies put its total population in 2100 anywhere between 700 million and 475 million (!), at which point one in three Chinese citizens will be over the age of 65. President Xi Jinping’s decisions to end China’s one- and then two-child policies have failed to reverse these trends, and in all likelihood, so will any new policies to boost birth rates short of liberalizing immigration (something Beijing is loath to do). The fact that the demographic implosion has hit China before it’s had a chance to grow wealthy makes its economic and political implications all the more dire.
China faces an increasingly hostile external environment. This is embodied by the United States’ explicit policy of containment of China’s tech sector as well as China’s growing strategic encirclement in its own backyard – where Japan and South Korea are increasing their defense spending, Taiwan grows more defiant by the day, and new anti-China alliances like the Quad and AUKUS are blooming like algae. Relations with India, meanwhile, have become more competitive on the back of military clashes on the shared border, causing Delhi to draw closer to Washington. Anti-China sentiment more broadly has increased as China’s global footprint has expanded, with more than 10 countries having suspended or canceled high-profile projects funded by the Belt and Road Initiative. Meanwhile, China’s closest allies are imploding, with Russia now a pariah in the West, Pakistan’s economy in tatters, and North Korea having gone fully rogue.
China is ruled by an error-prone and capricious dictator who’s unfettered in his ability to pursue his statist and nationalist policy agenda. Much like Russia under Vladimir Putin, the unprecedented consolidation of power under Xi means less transparency and debate, less feedback flowing to the top, more arbitrary decisions, and more policy volatility. Dramatic shifts like the haphazard exit from “zero COVID” are inevitable in an environment of poor information and blind loyalty, radically increasing the risk of miscalculation and accidents and further undermining China’s growth and stability.
Why China hasn’t peaked yet
It’s true that unprecedented headwinds make China’s continued growth more challenging. It’s therefore possible that China will never surpass the United States economically or become a global superpower. But the question is whether China’s power has already peaked, and that’s just not the case.
Yes, China’s economy is growing slower than it used to … but it is still growing faster than America’s. You’d expect growth to slow in any low-income country that has become middle-income in the span of a generation. Still, the IMF projects that China will continue to narrow the gap with the US in the coming decade – growing from 73% of US GDP today to roughly 87% by 2027 and achieving parity around 2030. Chinese labor costs remain dramatically lower than in advanced industrial economies, and China’s already deep integration into global value chains means any decoupling will be slow and incremental rather than sudden and absolute.
As for quality, China’s growth hasn’t been primarily stimulus-driven since shortly after the global financial crisis (except for the COVID reopening period). And while infrastructure spending used to be unproductive, eventually that led to fiscal reforms imposing stricter profitability conditions. Indebtedness is admittedly a huge issue that Beijing has delayed dealing with through the pandemic, but the government remains committed (at least in principle) to getting it under control.
Xi is ideologically committed to a statist economic agenda that will drag on Chinese growth, but he also understands that he shouldn’t kill the goose that lays the golden eggs (the private sector in general, the tech sector in particular). China continues to invest massive state resources in advanced technologies, and it has already achieved parity or surpassed the US in many fields (e.g., voice/facial recognition, smart infrastructure, telecommunications, and electric vehicles). If AI ends up becoming the new commanding height of the global economy (as I think it will), China’s data advantage and strong AI talent pipeline will make it competitive if not dominant.
Demographics are an undeniably real and massive challenge for China … but not a near-term one. And there are plenty of things Beijing can do to kick this can down the road. For example, China’s retirement age is low by international standards (60 for men, 50-55 for women) and hasn’t changed in decades despite big jumps in life expectancy. China can halve its demographic tax by 2035 by bringing 40 million more people into the workforce – a reform Xi flagged in his recent Party Congress report.
Moreover, China’s educational system has only recently seen dramatic increases in funding, with the associated improvements in labor force quality still to come (especially in rural areas). China can further boost productivity by increasing urbanization (now at 65%, compared to an average of 80% in developed countries) and, in particular, moving workers out of low-productivity agriculture (still 25% of the workforce, compared to 3% in most industrialized countries). All this room to grow its labor force participation and productivity gives China a minimum of 10-15 years of runway to address the more stubborn challenge posed by low birth rates.
China’s external environment has become hostile … but no one really wants a “cold war” with Beijing. While the US-China relationship is tilting more antagonistic, Biden (and Xi for that matter) wants to put a floor under it. His containment policy seems to be limited only to narrow sectors deemed critical to national security. And while most US allies want a stronger security relationship with Washington and they’ll abide by any potential US sanctions, none are prepared to decouple economically from China as they have from Russia. China continues to be by far the most important trade partner for nearly all the world’s developing countries – most of whom are sympathetic to Beijing’s prioritization of economic development over ideological alignment.
China has the largest diplomatic network in the world, and its global soft power projection is just getting started. Increased hostility toward Beijing among most wealthy countries doesn’t change the reality that for much of the world, there simply are no feasible economic alternatives at scale. Despite all the talk about decoupling, even the US remains happy to continue selling record levels of agricultural exports to China.
Xi isn’t Putin. His decision to shift away from his zero-COVID policy in response to public demonstrations was clunky and poorly executed, but it was a better choice than cracking down on demonstrators or doubling down on a failed policy – which is what the Russian dictator would have done. Xi remains considerably more risk-averse than him.
My take
This is a dramatically more challenging domestic and global environment than China has experienced in decades … and it’s only going to get worse. But while China faces “stormy seas,” I think on balance it still has substantial upside. That’s why things like AUKUS and the Quad keep popping up: not because the US and its allies think China’s power has peaked, but because they know that it will continue to increase.
A “Chinese century” may not be in the cards, but another decade of reasonably robust economic growth and increased international influence is very likely.
Readers, tell me what you think: Has China’s power peaked already or does it still have room to grow?