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US-China tensions and the need for perspective

Whether it is a trade war, a tech war, or both, the increasing use of the word ‘war’ is worrying.

The concepts of geopolitics and foreign policy may well have their roots in 431 BC, when war broke out between Athens and Sparta. 

“It was the rise of Athens and the fear that this instilled in Sparta that made war inevitable,” wrote famed general and historian Thucydides. Athens was thriving, which Sparta saw as a challenge to its supremacy. The Spartans gambled on a preventive war (and won).

Fast forward to 1907. A rapidly developing Germany realised its navy could rival that of the British Empire. A naval arms race was soon underway. Then came World War I.

Germany, like Sparta, had fallen into the Thucydides Trap – a term used by Harvard professor Graham Allison to capture the idea that:

‘Rivalry between nations, especially when one great power threatens to displace another, almost always leads to war.’

 

Source: Harvard Thucydides’s Trap Project

The Trump White House seems hell-bent on keeping China at bay – even though China is likely to grow at a rate of 6% in 2019, significantly lower than the 8.25% average of the past decade. The two juggernauts have nonetheless already been crossing swords.

Before 2008, China basked in double-digit growth rates. It was not going to be an emerging market for ever. Since 2005, its share of the world economy has more than tripled from 5% to 16%. China has contributed around 1% to global growth in recent years.

What is more captivating is that if the world economy has grown by 2.8% per annum on average over the last 30 years, and China is accounting for around one third of global growth, its 6% growth in today’s monetary terms is equivalent to 15% growth a decade ago.

China is clearly ready to sit at the big boys’ table – and the US feels threatened.

Understandably, perhaps. “It is not possible to pretend that this is just another big player,” former Singapore prime minister Lee Kuan Yew said in a 2013 interview.

“This is the biggest player in the history of the world.”

The tech threat – it’s not just about market share

China’s top global brands include Lenovo, Alibaba, Haier, Hisense – and, of course, Huawei.

Huawei has captured 28% of the world market by offering high-quality products at a low price (thank the Chinese government for the subsidies.) It has also leapfrogged past its Western rivals in manufacturing next-generation 5G cellular networks. 

But why the fuss over 5G? Well, there are some who say it will change ‘everything’.

It will deliver dramatically enhanced speed of wireless communications, massive bandwidth and super low latency. We will be able to send much more data far more quickly to a dramatically greater number of devices, machines and institutions – from cars and mobile phones to home appliances, in sectors ranging from healthcare to finance and government. This is what the Fourth Industrial Revolution is all about.

The power, speed and capacity of 5G networks will enable not just espionage but sabotage as well.

Huawei is facing international scrutiny over its ties with the Chinese government amid fears that Beijing could use its technology for spying. The company denies this, yet doubts have been raised.

Germany’s secret ‘Huawei’ session

According to Reuters, the German cabinet was to hold a secret session yesterday (Wednesday, January 6) to discuss safeguard measures regarding Huawei’s possible participation in building Germany’s 5G network. 

The Wall Street Journal says US President Donald Trump is preparing “an ambitious plan to ramp up the government’s role in speeding next-generation technologies such as 5G wireless and artificial intelligence, two key areas of competition with China”. 

In his State of the Union address yesterday, Trump said he would work with lawmakers on an infrastructure package that would include “investments in the cutting-edge industries of the future.”

The US’s concerns were highlighted by the arrest of Huawei’s chief financial officer Meng Wanzhou in Canada in December on charges of fraud linked to violating international sanctions against trade with Iran. Washington soon confirmed that US prosecutors were attempting to extradite her.

To illustrate the scale of this dispute, Canada’s former ambassador to China John McCallum was immediately fired after he said the Huawei executive had “strong arguments” for fighting extradition to the US.

Fighting talk

There is a lot of fighting talk here. Incidentally, Huawei was founded in 1987 by a former officer of the Chinese People’s Liberation Army, Ren Zhengfe. Chinese telecomms equipment maker ZTE took a punch last April, when the US department of commerce banned American companies from selling components to it for seven years.

Washington has now announced that all government agencies and contractors will stop procuring Huawei equipment, saying that their products would provide a back door for Chinese spying efforts. This is ironic given that Stuxnet, a malicious computer worm that emerged in 2010 and shut down Iran’s uranium-enrichment facilities is believed to have originated from the US National Security Agency.

Huawei is a $92 billion company in revenues alone, which puts it 72nd on the Fortune 500 list of top global companies. Meng’s arrest is not just about intellectual property and technology – a line has been drawn, and where best to state your intent than on one of China’s biggest brands, which outsells Ericsson in network equipment and Apple in smartphones.

Perspective

If Beijing is in fact using Huawei products to spy on the West, it should perhaps not come as a surprise – this is the civilisation that produced Sun Tzu, author of The Art of War.

Yet in addition to being a great military strategist, Sun Tzu was a philosopher, and in his words: “What enables the wise sovereign and the good general to strike and conquer, and achieve things beyond the reach of ordinary men, is foreknown.”

As Singapore’s Lee noted in that 2013 interview, while competition is inevitable between China and the US, conflict is not.

The world’s leaders would do well to remember this.

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“China is likely to grow at a rate of 6% in 2019, significantly lower than the 8.25% average of the US over the past decade” This can’t be true.

“China has contributed around 1% to global growth in recent years.” more like 1 percentage point of the global growth rate.

Some aspects of this article does not make sense. Certainly WWII was not caused by “rivalry” and I doubt if WWI was. China “cheats” by subsidizing their businesses and currency and steals technology. Doubt if USA is “hell bent” on keeping China “at bay”. They just want to level playing field a bit.

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