Tech & Supply Chains | France-Germany | US-China
This week’s edition of Sinification looks at the following topics:
Tech and Supply Chains: CICIR analyst Ma Xue analyses the current and future impact of the US’s “partial decoupling” from China.
France-China: France’s National Strategic Review as viewed by a former Chinese ambassador, Sun Haichao.
EU-China: CIIS expert Cui Hongjian comments on the state of the Franco-German tandem and the future of EU-China relations.
US-China: Tsinghua professor and US-China specialist Da Wei reacts to last week’s meeting between Joe Biden and Xi Jinping.
1. Tech and Supply Chains: CICIR analyst Ma Xue analyses the current and future impact of the US’s “partial decoupling” from China
The following passages are from an article that recently appeared in the policy-oriented research journal Contemporary International Relations, published by China Institutes of Contemporary International Relations (CICIR) – an influential think tank linked to China’s Ministry of State Security. Its author, Ma Xue (马雪), is an associate researcher at CICIR’s Institute of American Studies and provides a relatively candid assessment of the US’s recent attempts to “partially decouple” from China, particularly in the tech sector. For another in-depth assessment of the US’s tech policy towards China, see here:
Ma Xue on Biden’s approach to restructuring US supply chains:
“Since taking office, Biden has deliberately downplayed the 'decoupling approach' and has instead emphasised 'supply chain resilience' … This is a reflection of a prudent ‘middle way’ approach which incorporates the views of the two camps mentioned above. The ‘middle way’ holds that the US-China relationship is both ‘zero-sum’ and ‘non-zero-sum’ in nature, and that the US must decouple its supply chain from China in a more precise and targeted manner based on a realistic and long-term perspective. This camp differs from both the ‘restrictionist’ camp of China hawks and human-rights defenders (who are politically in a minority) and the ‘cooperationist’ camp of business-interest groups and global-tech activists (who are not at the centre of the political arena). It [i.e. the ‘middle way’ camp] is mainly represented by political 'moderates', state and local leaders as well as analysts from mainstream think tanks. They are the actual gatekeepers of US-China relations.”
“[Furthermore,] a complete reshoring of supply chains would be costly and would need to be accompanied by strong fiscal policies and protectionist measures. Against a backdrop of high levels of debt, the US clearly lacks appropriate financial instruments [to do so]. A hard decoupling would [also] inevitably increase the costs for businesses and consumers.”
Weaknesses of the US’s strategy according to Ma Xue:
“Current US policy is more flexible, distancing itself from the limitless confrontation and hard decoupling of the Trump era in favour of balancing its economic strategy with its national security [objectives]. Even so, US policy faces a number of constraints that limit the scope, degree and sustainability of its implementation.”
“First, when reducing its supply chain dependence on China, it will be difficult for it to balance resilience with efficiency. Market equilibrium requires both supply and demand forces. When the demand forces are declining, it would be futile for the US government to invest more in the supply side. [Doing so] would not be able to support the formation of a so-called ‘reliable’ supply network. As the potential for US growth decreases, the US economy will become smaller and less dynamic than it should be. It will [therefore] become increasingly difficult for the US to drive the restructuring of its supply chains on the basis of its domestic demand alone.”
“Faced with a sluggish world economy, private companies will find it more difficult to make a profit and will tend to place greater emphasis on short-term solutions that can improve efficiency and productivity, opting for cost-saving measures. This will make US policies to restructure supply chains less effective than expected. China is no longer just a manufacturing base, but a final consumer market for all types of goods. If foreign companies move their supply chains out of China, the cost of re-exporting their goods to China will rise sharply.”
“Second, US tech controls on China face an information and control conundrum [面临信息和控制困境]. In seeking to control the long-term development of technology, the US faces this double conundrum. The first is the information conundrum, where the impact of a technology on society cannot be anticipated early on in its life; the other is the control conundrum, where by the time it is discovered that the impact is not as beneficial as hoped, the technology has become so integrated into the economy and society as a whole that it makes it extremely difficult to control.”
“In February 2022, the Biden administration updated this list [of critical and emerging technologies]. These technologies were not much different from [those selected] under Trump. [Moreover,] the selection criteria and the objectives of these decisions remain unclear.”
“Historically, the US government has worked hard to predict future innovation hotspots and to define the manageable contours of these indeterminate technological fields. In the 1990s, economic competition coming from Japan prompted the US government to draw up lists of so-called critical technologies. Influenced by different interest groups, the US government's definition of the term 'critical' lacked scientific rigour, resulting in lists that were too broad to be of use in policymaking. In hindsight, many of the items designated as ‘critical’ were not, and some of the technologies excluded from the list ended up having a huge economic impact.”
“At the same time, the US's incremental adjustments allow resources to continue to be channelled into China through ‘third countries’, ‘detours’ [绕道] or even ‘transfers’ [转移], thereby allowing China to make adjustments and repairs to its supply chains and thus depriving the US of its deterrent leverage.”
“The US does not have a complete monopoly on cutting-edge research. Furthermore, most technologies are already embedded in high-tech products. As a result, many advanced technologies are not exclusive or indispensable. This means that unilateral US controls are often ineffective and the paths for technology transfers to China are difficult to block. This can also lead to self-inflicted competitive disadvantages and friction with international partners. At the same time, US controls on cutting-edge technologies will accelerate the development of alternative supplies to China. This means that the US has severed its superior strategic leverage, leaving the ‘relatively weaker side’ unconcerned. Further, political controls placed on strategic industries will undermine the US’s future technological competitiveness. US export controls, entity lists and other similar restrictions have reduced the sales of US companies to China and [thus] reduced the revenues that can then be reinvested in R&D. Visa bans and supply chain security requirements have restricted the US’s access to Chinese talent and spare parts. This has imposed higher costs on innovators in the US. Inbound investment restrictions have [also] limited opportunities for US companies to raise capital from and collaborate with Chinese entities.”
“Third, it is difficult for the US to implement policies to strengthen its competitiveness at home … For example, a series of industrial policies [recently] introduced in the US have focused on providing funding for new semiconductor plants. [But] by the time the plant is completed in three years’ time, market demand for semiconductors may have already decreased significantly … Similar policies were implemented in Japan in the 1980s and 1990s. Subsidies were offered to encourage hi-tech industries to move to certain areas. However, it was mostly low-tech companies that ended up being drawn in. This was because even in the presence of subsidies, innovating companies were reluctant to leave industrial clusters where technology and knowledge were concentrated.”
“On the other hand, US investment in domestic infrastructure is prone to being captured by commercial interests. US interest groups [are known to] lobby fiercely for the allocation and channelling of public resources, which [often] leads to changes in the criteria used by government when making such decisions. Ultimately projects that are beneficial to legislators for political reasons will take precedence over those that maximise consumer welfare.”
“Fourth, the effectiveness of US policy is hampered by its allies. In order to restrict China's space for development, the US must unite its allies and coordinate the layout of its supply chains. However, these moves have reduced the strategic autonomy of allies such as the EU and Japan … The US will probably not consider the interests of its allies carefully, but these allies will nevertheless have to shoulder the unpredictable risks and costs associated with Sino-US competition.”
“Some Japanese politicians believe that they should not be forced to choose sides in their already cramped position between China and the United States, but rather should develop a strategy that is not caught up in the antagonism between the two. The Japanese government is therefore focusing on a completely new field of semiconductors, which China and the United States have not yet explored and which will prove essential for future innovation … The truth is that most of the US current allies are nowhere near ready to reduce their economic interdependence with China. Moreover, given that the formulation of US foreign economic policy is heavily influenced by its domestic politics and is [therefore] characterised by considerable uncertainty, it is very difficult for the US to make credible commitments to its allies.”
Ma Xue analyses the US strategy’s current and future impact on China:
“By using the three-pronged approach of constraining China, strengthening itself and uniting its allies, the US is squeezing both the supply and demand sides of China's supply chain.”
“In terms of their impact on China, US policies exert obvious external pressure on China and also affect China's policy choices. US moves relating to its containment of China and to its uniting with its allies will raise the cost of manufacturing in China and encourage part of the middle- and low-end manufacturing industries to give up relocating to the central and western parts of China, [preferring] to move out to Southeast Asian countries where labour costs are lower. This will disrupt China's domestic economy and labour market and exacerbate the adverse impact on the country of China’s ageing population and general shrinkage of its workforce.”
“Although US policies have already created negative conditions for China, China's own flexibility and competitiveness should not be overlooked. At the industrial level, China's huge advantage in terms of market size and its solid manufacturing base make it impossible for countries not to consider their geographical proximity with China when [re]structuring their supply chains. This means that US obstruction is unlikely to undermine China's central position within the Asian economic bloc and, at the technological level, China will use its huge consumer market to drive the rapid commercialisation of innovations.”
“Thus, a decrease in the US's supply chain dependence on China may restrict China's economic choices in the short term, but in the long term, China's economic rise is beyond the US's ability to block.”
2. France-China: France’s National Strategic Review as viewed by a former Chinese ambassador, Sun Haichao
On November 9th, French president Emmanuel Macron unveiled his country’s new national strategic review, outlining France’s major national defence and security objectives for the coming years.
Its release did not attract too much attention in China. China’s Global Times published an opinion piece by Zhao Yongsheng (赵永升), a researcher at the University of International Business and Economics (UIBE) in Beijing, in which Zhao asks whether France will be able to live up to its self-proclaimed role as a "puissance d’équilibres" (balancing power). Although Zhao’s article does not seem to have been researched very thoroughly, his two main points are: (a) France’s strategic objectives will be difficult to realise; and (b) France’s resistance to the US’s attempts to create a bipolar word order is laudable. (So, nothing very surprising there.)
Of more interest is another opinion piece published last week by the Chinese think tank China Foundation for International Studies (CFIS) and written by Sun Haichao (孙海潮), a retired Chinese diplomat who once served as China’s ambassador to the Central African Republic. Sun is now the director of the European Studies Centre at CFIS. While supportive of France’s so-called Gaullist approach to world politics, his article also highlights the country’s declining (yet still important) influence in the world:
“From an analysis of President Macron's speech … [it is clear that] France will continue to play a major role on the international scene, with the European Union as its strategic backbone and the defence of national and European sovereignty as its main focus.”
“In a situation of increasingly acute global geostrategic conflicts and the formation of blocs, France is pushing for a strategy of collective autonomy in order to preserve freedom and sovereignty. By 2030, France aims to play the role of an influential [power] that balances, coordinates and acts as an engine of EU autonomy. It aims to defend multilateral mechanisms based on international law while making its own specific contributions.”
“Macron's speech in Toulon referred to the end of large-scale military operations in Africa's Sahel region as well as to the continuing rise in hostility towards France in Africa. This can only indicate France’s rapidly declining influence in and control over its former African colonies, which is forcing France to change its usual course of action.”
“France today is a very different country from its time under de Gaulle, and Europe in the midst of the Russo-Ukrainian conflict is very different from Europe during the Cold War. France's room for strategic manoeuvring is very different from what it was in the past and the charisma and rallying power of its leaders cannot be compared to what they once were. Its ideals, as outlined on paper [in its strategic review], are far from being realistic [纸面上的理想要成为现实天差地别]. But Gaullism, which remains the main strategic pilar of French diplomacy, will never be abandoned. As a symbol of France's ‘suffering, bravery, vision and sovereignty’, French leaders will always refer to it and seek to implement it.”
3. EU-China: CIIS expert Cui Hongjian comments on the state of the Franco-German tandem and the future of EU-China relations
France’s declining influence in the world was also recently underlined by one of China’s leading voices on Europe-China relations, Cui Hongjian (崔洪建). Cui, amongst other things, is currently head of the Department of European Studies at the Beijing-based think tank China Institute of International Studies (CIIS). His almost weekly commentaries on international affairs continue to be widely relayed by Chinese news outlets and think tanks both within China and abroad. Beyond his scholarly credentials, Cui has also had short spells working at the Chinese Embassy in Jamaica and at China’s Consulate General in Mumbai.
The following excerpts are from two recent opinion pieces by Cui. The first, published last month in China’s Global Times, analyses the changing dynamics and recent weakening of the Franco-German tandem (for differing views on this, see here). The second was published last week by China-US Focus both in English and in Chinese and has since been crossposted by a couple of Chinese outlets including Peking University's Institute for Global Cooperation and Understanding. Having noticed some differences between the Chinese and English versions, I have decided to provide my own translations on the assumption that the Chinese version is a more faithful representation of Cui’s views.
Article 1 – “Why the ‘Franco-German axis’ has gone into standby”:
“Moving from reconciliation to cooperation, France and Germany when on to become the ‘axis’ of the European Union. They were once a model of European great power coordination and a major driver of regional integration. However, in recent years, significant political changes in Europe, and the impact of the Ukraine crisis in particular, have led to a decline of France and Germany’s leadership role within the EU. The space for both countries to be at the helm of European affairs by joining hands [强强联手] has been curtailed and the visibility of the Franco-German axis has been reduced or even put on standby.”
“Varying degrees of inward-looking and conservative policies have weakened foreign policy coordination between the two countries. This is the main issue that has led to the weakening of the Franco-German axis.”
“The basic model [that had so far ensured] that the Franco-German axis could function effectively was that France gave the political direction and Germany provided the economic support. Diplomatically, France was responsible for the south and Germany for the east. But as Germany has gradually increased its economic and political influence, France's economic reforms have failed to create a sufficient foundation on which to continue to base its political leadership [of the EU]. Further reliance on Germany on issues such as EU finances has made France's political leadership even more hollow.”
“The growth of German military power will raise the question of ‘who commands whom’ within the Franco-German axis, especially as the strategic cultures and security concerns of the two countries are not aligned.”
“Worse still, the crisis in Ukraine has increased the influence within the EU of Central and Eastern European countries with Poland at their head. These countries are much more in tune with the US in their stance on Russia and issues relating to European security than they are with France and Germany … Be it based on political beliefs, security objectives or economic interests, it would be very difficult for France and Germany to accept a new ‘power partnership’ [权力搭档] with Poland.”
“Unlike in the past, when disagreements between France and Germany could be overcome through compromise, the differences of opinion between the two sides are now so large that there is almost no room left for compromise.”
Article 2 – “Will China-EU relations be able to enjoy a ‘warm winter’?”:
“Although German Chancellor Scholz's first visit to China on 4 November was belated and its itinerary rushed considering the importance of the relationship between China and Germany, the frank dialogue and in-depth exchanges between the Chinese and German leaders nevertheless reflected the prevailing trend in bilateral relations in which consensus outweighs differences and cooperation outweighs competition. Against a backdrop of a more complex and volatile international landscape, attempts by China and Germany to meet each other halfway may not have an immediate impact on China-EU relations. But as long as both sides are able to engage with each other in a sustainable and positive way, there is hope that China-EU relations may [still] be able to enjoy a ‘warm winter’ amidst the intensification of great power rivalry and the cold wave of de-globalisation.”
“[Europe’s] policy impulse to reduce its dependence on China is reflected in its over-sensitivity to supply chain security. Induced by a US-style manipulative rhetoric of ‘democracy against autocracy’, some European countries have started to emphasise their so-called ‘systemic rivalry’ with China and have sought to push the EU to develop a unified position of increasing pressure on China. [As a result,] the strategic mutual trust between China and the EU has been severely tested.”
“The increasingly entrenched populist political environment, acute domestic tensions and a tendency towards conservative policies form the underlying logic and political imperatives behind Europe's tougher policy towards China. In recent years, European misgivings about, and accusations against, China have often first appeared in the media or in the parliaments of some countries under the guise of popular opinion, which in turn has put pressure on government policymaking. Against a backdrop of fierce political competition, some governments and a small number of politicians have deliberately ignored the positive and cooperative aspects of their [countries’] relations with China in order to protect their positions in power or to achieve personal gain, and have unilaterally adopted a tough, or even confrontational, stance towards China to cater to this so-called public opinion. This creates a vicious circle in which public opinion is misinterpreted and used to exert pressure on governments and these governments then adopt misguided policies to pander to public opinion, which in turn fuel populist sentiment.”
“The US still has considerable sway over Europe. [Moreover,] the conservative political atmosphere in Europe remains particularly strong. Despite the success of Chancellor Scholz's visit to China, he still needs to work hard in order for the German government to maintain an objective, pragmatic and balanced policy tone towards China. The current divisions in Europe will also make it difficult for the [latest] positive exchanges between China and Germany to have a significant exemplary effect [on other European countries] in the short term. Nevertheless, China and Germany’s [recent] step towards one another has undoubtedly acted as a wake-up call for some European countries that are still engrossed in confrontational thinking and has brought a warm current into China-EU relations which have been experiencing a cold wave.”
4. US-China: Tsinghua professor and US-China specialist Da Wei reacts to last week’s meeting between Joe Biden and Xi Jinping
Finally, to complement last week’s reactions to US president Joe Biden’s and his Chinese counterpart Xi Jinping’s meeting on the sidelines of the G20 summit in Bali, I am including a piece by Da Wei (达巍), a respected professor of international relations specialising in US-China relations and director of the Centre for International Security and Strategy (CISS) at Tsinghua University. His piece, entitled “A window of opportunity has emerged to stabilise US-China relations”, has been crossposted by several think tanks and news outlets in China:
“Against the backdrop of the serious challenges that Sino-US relations have experienced in recent years, the meeting between the US and Chinese leaders sent out a positive signal to the world … Although it will certainly be difficult to improve Sino-US relations in the short term, hopes have increased for a halt to the [recent] downward spiral and for a reduction in confrontation.”
“The most important purpose of this meeting was clearly not the specific issues involved at the tactical level [战术层面], but rather the orientation of the relationship at the strategic level [战略层面] as well as sending a signal of stability to the world.”
“Chinese readers may think that there is a relatively large discrepancy between what the US side says and what it actually does, and this is certainly true. However, pressing the other side to make a statement and urging it to match its words with actions can help to ‘downgrade’ differences from the strategic to the tactical level in the context of interstate exchanges. This helps build up mutual trust.”
“China is currently entering a new political cycle and the US has no major domestic political agenda next year. In theory, there is [therefore] a window of opportunity for China-US relations to stabilise next year. The following aspects are worth following:”
“First, whether there can be relatively frequent or even institutionalised high-level exchanges between the two governments.”
“Second, whether a consensus can be formed on a set of major principles of engagement between the two countries and a strategic framework established.”
“Third, whether the two countries can achieve pragmatic results on global and regional issues … such as climate change, public health and food security. The US and China need to produce a number of collaborative achievements as soon as possible to stabilise bilateral [relations] and benefit the world.”
“Fourth, whether the two countries can install a ‘safety valve’ on their bilateral relations … and whether exchanges between the two militaries can be resumed.”
“Fifth, whether people-to-people and cultural exchanges can be restored to pre-epidemic levels … whether flights between the US and China can return to normal next year, whether businessmen and academics are able to travel normally between the two countries with a sense of total security and whether the ‘echo chamber’ that has developed in both countries regarding perceptions of the other can be broken. People-to-people and cultural exchanges are crucial.”
“Sixth, whether some politicians in the US will affect China-US relations … The irresponsibility of some US politicians, along with the shortcomings of the US’s political system, such as government departments acting on their own accord and their lack of internal coordination, have often been negative factors affecting US-China relations. Whether similar incidents within the US will once again cut short expectations of stability in US-China relations next year warrant our extreme vigilance.”
A thousand thanks!