Imagine if a superpower declared war on a great power and no one noticed. Joe Biden launched an all-out economic war against China this month — all but forcing the US to halt its rise — and for the most part, Americans failed to respond.
Certainly, the Russian war on Ukraine and domestic inflation are drawing attention. But history will likely record Biden’s move as the moment when the US-China rivalry came out of the closet. America has now pledged to do anything but fight a real war to stop China’s rise.
It’s not clear that corporate America, or its foreign counterparts, have fully digested what lies ahead. For decades, serious companies have based their growth models on having a China strategy – whether it’s by exporting to China or manufacturing there, or both. Unless a company’s product is, for example, luxury goods or agricultural commodities, Biden’s technology decoupling will hit the mark. Its escalation also marks a definitive break from decades of US foreign policy that assumed China’s global integration would tame its rise as a great power.
America’s conversion to China’s containment is twofold. It was one thing for Donald Trump to target Huawei and ZTE, the Chinese telecom conglomerates, and push for managed trade. It is another matter for Trump’s Democratic successor to isolate China’s entire high-tech sector. It is noteworthy that no prominent voices have been voiced in either political party against the decoupling between the US and China. Washington’s Chinese politics now is about which party can get more right from the other.
There are two major risks to Biden’s gamble. The first is that America is now close to the implicit goal of regime change in China. The new restrictions are not limited to the export of high-quality US semiconductor chips. They extend to all advanced chips made with US equipment. This includes almost any non-Chinese high-end exporter, whether based in Taiwan, South Korea, or the Netherlands. The ban also applies to “U.S. persons,” which includes both green card holders and U.S. citizens. That is a binary choice between America or China. Most will choose the US. But there are tens of thousands of Chinese green card holders who will now be inclined to believe Beijing’s claim that there can be no such thing as divided loyalties.
The blow to the Chinese economy will be far greater than the word ‘semiconductor’ implies. Biden’s move is based on the premise that any advanced chip can be used by the Chinese military, including for the development of nuclear weapons and hypersonic missiles. It also aims to undermine China’s goal to dominate global artificial intelligence by 2030. But all such chips are dual-use, meaning the US is now committed to blocking China in all sorts of civilian technologies that are part of a modern economy.
In most American and many Western eyes, such moves seem like a reasonable response to decades of Chinese intellectual property theft that has fueled military growth. In Chinese eyes, it will appear as if the US wants to keep Communist China permanently under its thumb. It’s not a big jump from that to regime change.
The more imminent risk is that the gamble by Biden may prompt Xi Jinping, the president of China, to speed up his timetable for the reunification of Taiwan. The island nation is by far the largest maker of high-end chips in the world. That Biden’s move came shortly before China’s 20th party congress, which ends Saturday with a likely third five-year term for Xi, is noteworthy. Many China viewers think Xi wanted to leave the party congress behind before turning to his vow to solve the Taiwan problem. Biden had made a violent solution to China’s Taiwanese policy more likely. He might as well have made Xi think. We will find out.
What we do know is that national security is once again the lens through which Washington sees the world. Rest in peace “the world is flat” and the “end of history”. The US has approved a zero-sum measure that sees China’s rise as at the expense of America. You could say Biden is responding too late to what China has been talking about for years – with Xi’s growing insubtlety. But that is not reassuring. It means that the world’s hegemony and its only serious rival are now seeing each other through the same lens. As is usually the case in history, no one else gets much to say.
Will Biden’s gamble work? I don’t enjoy the prospect of finding out. For better or worse, the world just changed with a whimper, not a bang. Let’s hope it stays that way.