Yves Tiberghien

What Is the Future of U.S.-China Relations?

At our Challenge of Change Forum last week, we hosted Yves Tiberghien, Professor, Department of Political Science, at the University of British Columbia. He spoke about Asia and the challenges and opportunities in the region, and he sat down with us to answer our questions about China, the U.S., and the future of the relationship.

China seems to be at the center of quite a bit of geopolitical strife. Where do we go from here? Can any of this be resolved in the shorter term? If so, how?

It’s not just China, it’s really the US, China, and the interaction of the two. To me, one particularly worrying geopolitical risk is the US 2024 election. Survey data by Dr. Robert Pape (University of Chicago) on the 600 arrested insurrectionists from January 6th, shows that only 14% are from so-called extremists groups. The other 86% are normal people, and 50% were actually professionals, lawyers, doctors, and business owners. In addition, 9% of Americans think that it’s legitimate to use force and violence to restore Donald Trump – 21 million people with guns. There could be a 10% to 20% chance of a democratic failure in the US in 2024 – a coup basically. To me, that’s what keeps me awake. We’re closer to such a scenario than we think.

Getting back to the China side of things, we are still dealing with a Leninist regime with some darker repressive dimensions. But at least, between 1980 and 2012, they have experienced some institutionalization of term limits, of professionalism in governance, etc. We do see a degree of institutional reversal at the top and increased centralization of power since Xi Jinping took power. We now see more social crackdown as well as a crackdown on e-commerce, on FinTech, on celebrities, on wealthy people. It’s a big cultural moment. But I wouldn’t say that this hardening moment wrecks everything. We’re still way better than the Mao period, and probably better than even the early ’80s.

We also see a society in China that expects more space and freedom. Young people don’t like all this propaganda and ideology, and well, until the pandemic, 200 to 300 million people from China were traveling globally each year. There is also social energy and pressure. The trajectory of Chinese history is never set in stone. It’s nonlinear. Things can happen and surprise us. You have phases of control, followed by phases of openness. That’s the Chinese side of things.

The riskier part is the interaction between the U.S. and China. We see increased securitization and militarization of the relationship in Washington particularly, and also partially in Beijing. We see a new consensus formed in Washington during the Trump years that sees China has a great ideological and systemic threat. This new view gradually dominates many dimensions of the US-China relationship. During the Trump period, this securitization process led to all kinds of new US regulations on what universities and the private sector could do with China and to counter-moves by China. This has become a more difficult environment to operate under.

Trade became increasingly hostile. Under the Trump administration, tariffs on Chinese goods went from 5% or 7% on average to 20%, 25%. It’s the kind of stuff we hadn’t seen since the 1930s. Of course China retaliated. This worries some experts because we don’t yet have a soft landing strategy, we don’t have good guardrails. It’s kind of open-ended.

Normally, the economic actors discount what security actors do, because they each do their things. This separation of economy and security is possible until of course there is a real security crisis or a kinetic incident. Should such an incident happen over Taiwan or the South China Sea or East China sea, then abrupt change would take place and the security logic would overwhelm the economic logic.

To your point, there is a level of unpredictability with China right now, especially around foreign ownership and its crackdown on companies in sectors like technology. This is worrying for investors. Do you see China’s latest moves shaking confidence in China as a market to invest in?

 There are three different drivers behind the recent crackdown on different sectors and companies. One first driver is a regulatory effort to correct market failures and protect consumers or societies against possible abuse. This results from China’s tendency to let new industries and technologies develop freely without much oversight and to do regulatory catchup once problems appear. For example, e-commerce has become too cartelized and monopolistic, preventing new entrants from entering. Private companies have collected massive amounts of data without protection of privacy and intellectual property. Current measures are a response to these problems and those dimensions can be seen as normal. Otherwise, you have a far worse kind of unsafe environment. That’s one component.

The second driver is tit-for-tat confrontation with the US. Each time the US takes regulatory actions against China for security or trade reasons, China retaliates against some targeted foreign-controlled sectors. These sectors or firms can become collateral damage in the conflict.

Then there is a third, more internal logic. Certain sectors are impacted by politics in the runup to the November 2022 party Congress. With the Alibaba IPO, it turns out that some of the owners of Alibaba who would have made quite a bit of money were connected to political rivals of Xi Jinpping. These things are opaque, and there is going to be more of that going on until the November 2022 party Congress.

I’m most worried about the US-China interaction because a mistake can happen very quickly. You just have a high number of ships and planes that are passing by each other. Between October 1 and October 5, during the Chinese National Day period, China sent over 150 fighters into the Taiwanese Air Defense Identification Zone (beyond the actual air space). This was the largest number of such intrusions ever. And of course, the Taiwanese scrambled their own jets. At the same time, the number of operations in the South China Sea by the US and its allies are constantly increasing and coming very, very close to Chinese-occupied islets or ships. All this generates risk. It would just take one you just would take one entrepreneurial or nationalistic ship commander to trigger a big mess.

Twenty years ago, investors believed that China would fall into line with Western values and practices once its economy became mainstream. This hasn’t really happened though. Do you think that could change?

It’s a glass half full or half empty situation. There was never hope that China would actually democratize. The hope was that there would be an opening of society. There’d be more exposure for Chinese society across the board, and, in turn, such exposure was expected to change the expectations and demands of society toward the government. That is still the case.

Indeed, society today is not as closed and unified as in the past. Here and there, we see breakthroughs, we see the Internet wall being breached with sudden waves of strong feelings putting social pressure on the government. That part is proved right. For those who went beyond and hoped that such change would democratize China or completely change the human rights policies, it is not currently happening and was naive.

At the moment, we do witness a burst of nationalist feelings within Chinese society and dimensions of rallying around the flag. This is partly due to growing domestic pride in China’s achievements. But more importantly, such social change is also connected to the international dimension: the more the US puts pressure on China, uses extremely critical words and aggressive sanctions, the more this empowers hardliners and weakens internationalists within society. There is a rallying around the flag because people in China feel attacked and threatened. Likewise on the outside, the Western side, we feel Chinese law is threatening us, and we rally around the flag. That tit for tat dimension hardens everything and could lengthen the current repressive period in China.

Then on the US side, the leadership will make a huge impact, just like Trump had a huge impact. It’s very fluid. In other words, there is more risk than most people anticipate. There are dangers, but nothing is 100% either. We have a spectrum of plausible scenarios.