Economic Battle Of The Titans: USA Vs. China. Who Wins?

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When Richard Nixon went to China, it was to open that country to products from US manufacturers. But things have changed dramatically over the past 48 years. As the old expression goes, “Be careful what you wish for. You just might get it.” Or as Sting put it in a song, “I will turn your face to alabaster when you’ll find your servant is your master.”

First, a disclaimer. Nothing that follows should be construed as an apology for or approval of Chinese policy initiatives. The western world has plenty of grievances against the Chinese for the cutthroat way they compete in the economic sphere. Then again, the United States has done much the same since 1945. What’s sauce for the goose is sauce for the gander, my old Irish grandmother liked to say.

China To End Reliance On Foreign Technology

Lost among the noise over impeachment and Brexit this week was a bombshell announcement from the Chinese government. Based on a report by the Financial Times (subscription required), a story in The Guardian this week claims the Chinese government, following an order from the Communist Party central office issued earlier this year, has notified all government offices and public institutions they must cease using all foreign computer equipment and software within three years.

Analysts have told the Financial Times that 30% of the mandated substitutions would take place in 2020, 50% in 2021, and 20% in 2022. In all, somewhere between 20 and 30 million computers will need to be replaced, which will be a huge plus for Chinese computer manufacturers but a big loss for US companies such as Microsoft, Dell, and HP. On the software side, Microsoft’s Windows would appear to be hurt the most by the change in policy.

What’s going on here? On the one hand, China encourages the use of domestically produced products, which is one of the things foreign competitors have been complaining about for decades. On the other hand, the Trump maladministration has turned international trade into a cagefighting match with its xenophobic policies that not only target Chinese computer and software companies like Huawei but also discourage US universities and research labs from relying on Chinese scientists, which it claims are all secretly spying for Mother China.

The Trump administration banned US companies from doing business with the Chinese telecommunication company Huawei this year and Google, Intel, and Qualcomm announced they would end all cooperation with Huawei.

Last May, Hu Xijin, the editor of the Global Times, which is a semi-official news organ for the Chinese government, said the withdrawal of sharing by US tech companies with Huawei would not be fatal for the company because Huawei has been planning for this conflict “for years” and it would prompt the company to develop its own microchip industry to rival America’s.

“Cutting off technical services to Huawei will be a real turning point in China’s overall research and development and use of domestic chips,” he said in a social media post. “Chinese people will no longer have any illusions about the steady use of US technology.”

By excluding China from western know-how, the US government has made it clear the real battle is about which of the two economic superpowers will have a technological edge over the other in the decades to come.

China & Renewable Energy

Another area where China is leading the world is in renewable energy. Yes, it still has lots of coal-fired generating plants, but is replacing them as quickly as possible and cancelling plans to build more. (It has no compunction about selling coal-fired technology to other countries, however.)

In an op-ed piece for The New York Times on December 9, John Kerry and Ro Khanna argue, “We see more focus [in the US] on tariffs than building wind turbines and solar farms. We should not be spectators in shaping our own future, or the world’s. We should pledge that by the end of the next decade, America will surpass China and win the clean energy race.” Kerry is a former US Secretary of State and Khanna is a US Congressman whose district includes Silicon Valley.

“Earlier this year, the Global Commission on the Geopolitics of the Energy Transformation reported that China became the world’s largest producer, exporter and installer of solar panels, wind turbines, batteries and electric vehicles, followed by Japan and Germany. The United States ranks fourth.”

“Unless we have a strategic plan, China may become the OPEC of the 21st-century energy industry. It’s folly to replace a world order too dependent on Middle East oil with one that’s too dependent on Chinese technology. America can mobilize around a national strategy to lead the world in clean technology that will attract bipartisan support from both coasts and the heartland.”

And what would such a plan look like? Kerry and Khanna have a few suggestions.

We could add two zeros to the end of the budget for ARPA-E, the Advanced Research Projects Agency-Energy, taking it from a few hundred million to tens of billions of dollars. We could double the budgets for the Energy Department’s Office of Energy Efficiency and Renewable Energy and Office of Science. The aggregate current level for those two would increase to around $18 billion from about $9 billion. Each support renewable energy research and are critical for the type of disruptive innovation necessary to meet the scale and urgency of the climate challenge.

Energy is the largest market the world has ever seen. Four to five billion people consume energy today. That figure will increase to nine billion in 30 years. Today we have 2.3 million clean energy jobs. A national strategy focused on winning the clean energy race can create millions of new jobs, considering solar panel installer and wind turbine technician jobs are already expected to grow at around 60 percent over the next decade.

The EV Revolution

Kerry and Khanna also have some thoughts about electrifying the transportation sector. One involves EV rebates that are available at the time of sale. Another argues for dramatically expanding America’s railway infrastructure, noting that a train trip from New York City to Chicago today takes up to 21 hours, but an equivalent journey in China takes only 4½ hours.

They point out that China today produces more electric vehicles than all the other nations of the world combined. Many scoff at the idea of Chinese cars on American roads, but those people would do well to look back at the history of Volkswagen, Toyota, Honda, Hyundai, and KIA. All of them built crappy, low-cost cars to begin with and all have ascended to the highest levels of the global automotive industry. GM, Ford, and Chrysler seem incapable of selling cars successfully in any market other than North America. That is an ominous sign for US manufacturers in the future.

Trump, Xi Jinping, & The Art Of War

China is a formidable foe. Like the US, it has expansionist ambitions that border on imperialism, especially in the world of economics. While the US is holding many nations at arm’s length — preferring to call them “shithole nations” — the Chinese are busy building roads, cities, airports, utility grids, and other infrastructure throughout Southeast Asia, Africa, South America, and the Middle East. Where the US relies on military might, the Chinese base their actions on economic power.

Make no mistake. The US and China are now locked in a titanic struggle to see which country will dominate the global economy, and the US, with its inward looking protectionist policies would seem to be at a distinct long-term disadvantage.

Sun Tzu, the fabled Chinese authority on the art of war, had this to say about all conflicts. “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”

Ask yourself, does the US government as presently constituted know its enemy? Donald Trump, who knows nothing of warfare and ran away from serving in the military during the Vietnam era like the coward he is, says breezily that tariff wars are easy to win. That doesn’t seem to be the case, as the trade war with  China drags on and one with no end in sight.

History might have some useful insights for America as it girds up its loins for battle with the Chinese. When the decision was made to send American troops to Vietnam, only three scholars in America knew anything about the history or culture of that country. None were consulted, according to the book Fire In The Lake. The result was a humiliating defeat brought about largely because no one in the United States knew the enemy they were about to engage.

The US global war on terrorism has been going on for more than 17 years in Afghanistan and nearly as long in Iraq. Trillions of dollars have been squandered and tens of thousands of Americans killed or maimed in both conflicts with no clear victory in sight. Once again, American leaders knew next to nothing about their opponents in either country before beginning military campaigns.

Today, the people in charge of US economic policy don’t even know what they don’t know, starting with the person at the very top. But it’s a sure bet the Chinese know their enemy very well and are following the precepts of struggle set forth by Sun Tzu centuries ago. No doubt they are familiar with this axiom: “If your opponent is of choleric temper, seek to irritate him. Pretend to be weak, that he may grow arrogant.” Now who do we know who might be vulnerable on that score?

Is The Best Way To Save The Planet Competition Or Cooperation?

Here’s a thought. What if China decides to cool its portion of the Earth by injecting sulfur particles over the US? Might not geo-engineering turn out to be as much an offensive weapon as a tool to combat global heating?

In the end, beating each other’s brains out over whose solar panels get to be installed where may be self-defeating. It seems pretty clear the nations of the world are going to have to cooperate if they are to have any hope of preventing the Earth from becoming an overheated orb where only cockroaches and trilobites can survive.

Tariff wars may be easy to win, but that begs the larger question of what is best for humanity and all the other plant and animal species which share the Earth with us? The head of the US government thinks the best way forward is to force the world to do what will enrich him personally. He cannot conceive of actually governing, only pandering to his base. His strategy is much like that of a 6-year-old child who threatens to hold his breath until he turns blue. That’s a short-term strategy at best and not a very good one at that.