Country Report: China (July 2022)
In mid-2022, Chinese analysts reflected on Sino–US relations under the Biden administration, prospects for improvement, and whether the two countries are entering a “new Cold War.” While largely pessimistic about the prospects for significant improvements in the bilateral relationship, they were nevertheless not uniformly convinced that the two countries are on the verge of a new Cold War. Analysts assessed the implications of the new AUKUS partnership for Chinese strategic interests, arguing that it will embolden US partners to intervene in regional issues, hamper regional stability, and degrade global non-proliferation norms. Chinese observers also explored the digital competition between China, the United States, and the EU, arguing that the United States seeks to maintain its digital hegemony against the increasing digital capabilities of China and the EU’s assertions of greater “digital sovereignty.”
In Guoji Guancha, 2022, no. 2, Jia Qingguo argues that there is little room for improvement in Sino–US relations in the short-term, but that the two countries’ shared interests and the high costs of confrontation suggest that relations will be stable in the medium to long term. Jia notes that his views on whether the US and China are entering a new Cold War have become more pessimistic. A few years ago, he believed that China and the United States were unlikely to enter a cold war because of the lack of ideological competition (Jia argues that the United States has tried to export its ideology, but China has not done the same) and because of their extensive economic integration, particularly in terms of investment and trade. Furthermore, Jia believed that, in contrast to the United States and the USSR during the Cold War, China and the United States were not engaged in a large-scale military confrontation (acknowledging the more limited tension in the South China Sea and the Taiwan Strait), were not engaged in proxy wars in third countries, and were not in an arms race. Jia argues that, at the time, many observers believed that the deterioration in Sino–US relations was primarily caused by the Trump administration and that the relationship would improve once Biden took office. However, Jia expresses frustration that the Biden administration has continued the Trump administration’s tough line on China, and has intensified its ideological attacks (for example, on human rights and by seeking cooperation with other democratic states against China). Furthermore, he argues that the two countries had reached the brink of conflict over Taiwan and that, despite close economic and trade relations, the decoupling of science and technology, and of trade and economic ties more broadly, continues. He concludes that even if the new Cold War has not yet arrived, it no longer seems so far away—though efforts might still be taken to prevent its occurrence.
Jia contends that Sino–US relations have deteriorated to this level for five main reasons. The first is the impact of the belief in the “Thucydides Trap” in both China and the United States. Jia rejects the historical validity of this argument, referencing important cases in which the emergence of a rising power did not lead to war (for example, the UK never sought to militarily contain the rise of the United States). Nevertheless, he believes that what matters is whether people believe that a rising power will lead to conflict with established powers: the popularity of the Thucydides Trap argument leads people to act as if the premise is valid, giving rise to conspiracy theories and perceptions of threat in both China and the United States. Jia believes that this has led Americans to misinterpret Chinese efforts at peaceful development in the South China Sea and the East China Sea and through its Belt and Road Initiative in sinister ways. China, in Jia’s view, has then responded to US provocations with a tit-for-tat approach (in Jia’s view there are misperceptions on both sides, but the US is responsible for egging on Chinese responses).
The second reason for the deterioration in Sino–US relations is the difference between the two countries’ systems and values. For many years after Sino–US rapprochement, US observers were not very concerned, partly because China was relatively weak and partly because China deemphasized ideology in its foreign policy after reform and opening. However, in recent years many former US proponents of engagement have become frustrated that China’s political system and values have not evolved toward those of the United States and have begun to view China as a threat to liberal democracy. This has created a backlash against engagement policies and increased support for a harsher policy toward China. Jia argues that the Biden administration (unlike the Trump administration) genuinely believes in the superiority of American values, so it has sought to both challenge China and to cooperate with other countries that share similar values to constrain China. This shift in the US approach has occurred just as China has increasingly emphasized CCP leadership, ideological work, modern and Sinicized Marxist values, and a political system of socialism with Chinese characteristics. In this context, the bilateral problems that attract the most attention have gradually shifted from those that involve a conflict of interests to those that involve a conflict of values or identities, which makes them more difficult to resolve.
A third cause of the deterioration in bilateral relations is the “Trump effect.” For Trump, only interests matter, not values or norms, and the US has no responsibility in its foreign policy beyond maximizing its own interests. Trump believed that the United States had allowed itself to be taken advantage of by other countries and launched a trade war—largely aimed at China—in response. Later, Trump blamed China for the Covid-19 pandemic to distract the American public from his failure to prepare. Trump’s actions, Jia charges, magnified long-simmering anti-Chinese sentiment in the United States and provoked anti-US sentiment in China, substantially damaging bilateral relations. Facing a difficult reelection campaign, Trump further instigated anti-Chinese sentiment (Jia contends that he might even have sought to create a military conflict in the Taiwan Strait), putting bilateral relations on the verge of a “complete breakdown.”
The fourth reason for poor bilateral relations is the impact of US elections. Jia argues that US presidential cycles follow a predictable pattern: to be elected, the opposition candidate must criticize the incumbent for being too soft on China, and, if elected, the new president must fulfill this campaign promise to implement a tougher China policy. After one or two years, the new administration realizes that these tough policies harm US interests and moderates its policies. The transition from Trump to Biden followed this pattern, but the Trump policies that Biden has criticized as too soft are already much tougher than those of past administrations. Biden has expressed his determination to cooperate with China where possible, but also to unite with democratic allies to counter Chinese aggression and to promote human rights. Furthermore, in contrast to the past, the Biden administration faces unanimous bipartisan calls to be tough on China, and must demonstrate this toughness to achieve his domestic legislative priorities.
Finally, China and the United States have a history of negative interactions that predates the Trump administration. During the Obama administration, the two sides clashed over the South China Sea and the TPP, which excluded China. China’s efforts to improve bilateral relations through dialogue and negotiation were dashed by the Trump administration’s policies. The Biden administration has continued what China sees as provocations, particularly on Hong Kong and Xinjiang. Jia blames the United States for these negative interactions, which have then exacerbated the deterioration of the bilateral relationship.
In the short term, Jia is not optimistic that Sino–US relations will improve. He argues that each of these five trends is likely to continue. In this context, the shift from a conflict of interests to a conflict of identities will continue. While conflicting interests can be resolved through some form of compromise over how benefits are distributed, conflicting identities focus on issues of right and wrong, which leaves little room for compromise. Consequently, while China and the United States may be able to cooperate on urgent issues like crisis management and climate change, there will be limited room to improve their relationship and a high risk that the relationship further deteriorates. Nevertheless, Jia is less pessimistic about the medium to long term. Given the two countries’ many shared interests and the high costs of conflict, greater cooperation and stability is possible.
In Guoji Wenti Yanjiu, 2022, no. 2, Wu Xinbo assesses the state of Sino–US relations under the Biden administration. Wu argues that the Biden administration has maintained the basic approach of the Trump administration toward China, while trying to adopt a competitive strategy that better advances US interests. At the same time, he lauds China for its resolute response to US “containment” and “provocation.” While the strategic competition of the Trump era was characterized by uncertainty and conflict, Wu argues, strategic competition during the Biden era is more predictable and manageable. Furthermore, Wu asserts, China seeks to make competition more benign, increase the room for cooperation, and manage the differences between the two countries.
Wu contends that the Biden administration, like its predecessor, views China as the most significant competitor to the United States and as a challenger to the existing liberal world order. Worried that China regards the United States as weak and that the Republican party will attack the administration for being weak on China, Biden seeks to demonstrate US strength by adopting a tough policy toward China. This has been particularly evident in US criticism regarding Xinjiang and Hong Kong, the decision to maintain the trade war that began under Trump, efforts to coordinate with the EU, the Quad, AUKUS (which Wu refers to as an “‘Anglo-Saxon’ anti-China axis”), and some Southeast Asian countries against China, and in the US military position in the South China Sea and the Taiwan Strait. Wu argues that this US policy is akin to a “quasi-Cold War,” with strategic competition occurring in the dimensions of values, institutions, strength, and international influence—at a time when, from Wu’s perspective, the advantages of China’s approach to development and governance and the weaknesses of US institutions have become evident.
Like Jia, Wu argues that the Biden administration’s China policy has been more constrained by domestic politics than that of previous administrations. Although Wu believes that Biden’s China team is more professional than Trump’s, he contends that its policy implementation has been no more successful. For example, he charges that Biden’s decision to retain high Trump-era tariffs has contributed to high inflation in the United States and disappointed the US business community. Furthermore, he asserts that many US allies and partners have resisted US efforts to convince them to coordinate against China.
Wu holds a much more positive view of China’s policy toward the United States since Biden’s inauguration. The Chinese foreign policy approach has three main aspects. First, China has provided more assertive guidance on the boundaries of the bilateral relationship by establishing a set of bottom lines and underlying principles. Second, China has “fought resolutely” against what it sees as provocative and confrontational US positions. This includes the more confrontational diplomacy evident at the bilateral meeting in Anchorage in March 2021, as well as China’s more aggressive position toward Taiwan, responses to US sanctions on Chinese officials over Hong Kong and Xinjiang (which Wu sees as a “pretext”), and pushback on US investigations into the origin of Covid-19. Wu characterizes all these policies as part of a struggle against US hegemony and power politics, and as essential to defending China’s sovereignty and its security and development interests. Third, China has actively engaged third parties, such as Russia (of particular importance after Russia’s invasion of Ukraine), Germany, France, ASEAN, Iran, and various partners in Africa and Latin America.
Wu argues that China has typically responded to a new US administration by first trying to determine the broad framework for the bilateral relationship and then addressing specific problems. After Biden came to office, however, Chinese diplomats found that they could not agree on a general framework with their US counterparts, so they have instead shifted toward an issue-oriented approach. At the same time, since the Anchorage dialogue, Chinese diplomats have been trying to increase their discursive power by shaping the information environment.
In the near term (until about 2025), Wu argues that bilateral relations will have four main characteristics: First, the US will be unmotivated to improve bilateral relations because of domestic political constraints, the tough attitudes of Biden’s foreign policy team, and Biden’s own weak leadership; the Chinese leadership, recognizing this, will be unwilling to offer concessions for improved relations. Second, periods of tension and easing will alternate as the two countries try to cooperate on shared global challenges despite continued difficulties over issues like the Taiwan Strait and the South China Sea. Third, engagement mechanisms will increase because the two countries must address practical issues related to the economy, trade, diplomacy, and the military. Finally, the bilateral relationship will involve both cooperation and competition, and a key task will be to define the upper limit of cooperation and the lower limit of competition and confrontation.
Until about 2030, Wu asserts, two key structural factors will drive trends in the bilateral relationship. The first is the two countries’ domestic politics. In the United States, Wu argues, hegemonic thinking, geopolitics, ideology, and racism have negatively impacted popular opinion toward China, while political polarization has incentivized the United States to use its China policy to advance domestic priorities. In China, confidence in development achievements has caused a more negative perception of the US approach to governance and of US foreign policy, resulting in more resistance to US hegemony and power politics. The second structural factor is the shift in the two countries’ relative power. As China’s relative power increases, it becomes more confident and the United States becomes more anxious. The United States has taken a more aggressive position toward China as it tries to defend its hegemonic position, while China has combined elements of offense and defense as it promotes “great power diplomacy with Chinese characteristics” and tries to overcome US efforts to contain it. In this context, bilateral relations in the short- to medium-term will involve negative perceptions of each other, increasing confrontation, and a higher risk of conflict.
Wu concludes that the Biden administration will allow for more predictable bilateral relations, even if they do not significantly improve. Since it will not be possible to eliminate or reduce competition, the two countries must reshape the nature of the competition itself to allow more opportunities for cooperation and to avoid conflict. Although Wu is pessimistic that bilateral relations will improve during the remainder of the Biden administration, he does believe that the stability of the relationship will allow the two countries to adopt a more benign form of competition and decrease the risk of conflict.
In an interview published in Dangdai Meiguo Pinglun, 2022, no. 1, Wang Jisi reflects more expansively on the evolution of the United States and its relations with China. Wang argues that the United States is not in economic decline in a global sense, but only in comparison with China, whose share of global GDP increased from 1.7% in 1980 to 17.4% in 2020 (by comparison, the US accounted for approximately a quarter of world GDP in both 1980 and 2020). Nevertheless, Wang asserts that the Western world as a whole is in economic decline: in 2001, the economies of the top ten developed countries contributed 64% of world GDP while the top ten developing countries contributed 12%; in 2020, the top ten developed countries contributed only 47.3% while the top ten developing countries contributed 26.7%. If the US is in decline, Wang contends, it is in terms of soft power: Americans—and others in the West—have become “disillusioned” with democracy and questions how a country whose president “incited” its citizens to storm the Capitol could serve as a “beacon” to others around the world. Compared to other once-hegemonic powers, the United States has a number of advantages, including favorable demographic trends, extensive natural resources (in particular oil and gas), and unmatched technological capabilities. These advantages will help the United States to preserve its international status for many years to come.
Reflecting on contemporary US foreign policy, Wang argues that Americans blame other countries (particularly Mexico and China) for their lack of economic and social wellbeing. He argues that this populist, nationalist tendency in foreign policy has been fairly consistent between the Trump administration’s “America First” policy and Biden’s “middle-class diplomacy.” While the Biden foreign policy, like that of Trump, prioritizes US interests, Wang argues, it takes a more multilateral approach. Biden is more open to immigration, more focused on the real economy, and more interested in domestic infrastructure. Like Jia and Wu, Wang believes that the United States has adopted tougher language toward countries like China to satisfy domestic voters.
Wang asserts that the Biden administration’s China policy has three main aspects: to strengthen the United States (for example, by building its economic and technological power), to adopt a multilateral approach against China (for example, through the Quad, AUKUS, and cooperation with other democratic countries), and to avoid domestic policy failures while capitalizing on domestic policy mistakes made by China. China’s power has increased relative to that of the United States; the United States, recognizing that it will not be able to weaken China, has instead tried to increase its competitiveness relative to China and to isolate China diplomatically. The United States also has a negative view of China’s recent efforts to consolidate the power of the CCP, which China sees as a way to increase its global power and ensure its continued development.
Wang argues that US policy toward China differs from its containment of the USSR during the Cold War because of its differing views of Chinese and Russian civilizations. The United States believes that Western civilization builds upon ancient Greek and Roman civilizations (later combined with Christianity) that generate “universal values” which guide progress. China believes that its 5000-year-old civilization points the way toward progress, and that Eastern and Western civilizations can productively coexist, but the United States finds it hard to accept the legitimacy or benefits of non-Western civilizations. The United States, in Wang’s view, believes that the differences between Eastern and Western civilization lead to natural tensions and inevitable competition. This has made relations more challenging as China’s strength increases relative to that of the United States.
By contrast, although the USSR promoted atheism, it was still influenced by Western civilization and by Christianity in the form of the Orthodox Church (today, Wang notes, Putin actively uses the Orthodox Church to advance his policies). This means that both the USSR and the United States arose from the same Western civilization, and the only difference was whether they chose to transform the world through Marxist-Leninism or Anglo-Saxonism. By contrast, China not only has a different civilizational origin, but has also adopted a Sinicized version of Marxist-Leninism. Although China is unlike the USSR, Wang claims, because it is not trying to actively export its political ideology, its international influence is growing and other countries increasingly look to it as an example, which leads the United States to believe that conflict between China and the US is inevitable.
Furthermore, Wang argues that Westerners have a deeply held belief that white Europeans and Americans (especially from Anglo-Saxon, English-speaking countries) are the truest representatives of Christian and Protestant civilization, as opposed to African Americans, Latinos, or Muslims (the reference to adherents to a non-Christian religion, as opposed to those with family origins in a particular geographical place, is somewhat confusing here). From this perspective, Westerners cannot accept Chinese domination of the world (in a racial sense) even though they cannot change the fact that demographic shifts are occurring and that Western cultural and religious influence have declined.
Wang argues that there are many differences between the current US–China relations and Soviet–US relations during the Cold War, which limit the applicability of the “Cold War” analogy. First, a world made up of two competing blocs will not develop; the US would like to form a bloc but cannot attract other countries to join its side and oppose China, while China, Wang argues, is not trying to build a bloc. Consequently, although China and the US may emerge as the two most powerful states, the world order would differ significantly from the bipolar world of the Cold War. Second, Wang asserts, the competition between the United States and China arises from nationalism and competing interests, rather than from an ideological confrontation. He argues that the United States is no longer the monolithically Anglo-Saxon civilization it was during the Cold War, but is now also multicultural, and that Americans are unlikely to accept government efforts to promote a unifying ideology (the United States was, contrary to Wang’s assertion, not a monolithically Anglo-Saxon civilization during the Cold War, but it is true that those from other backgrounds had far less power to shape foreign policy compared to the present). Wang does, however, recognize that China is trying to use Chinese civilization to strengthen domestic cohesion. Finally, China and the United States are economically connected, unlike the United States and the USSR, and even a “partial decoupling” would be very difficult to achieve.
Asked if the close economic ties between the UK and Germany prior to World War I indicate that economic ties might not prevent conflict between China and the United States, Wang contends that the economic integration between China and the United States is far more extensive. This makes it difficult to launch surprise attacks; moreover, neither country wants to go to war (and each recognizes that they are both nuclear powers). Wang believes that both parties are rational and will discuss their challenges through communication channels. While he thinks conflicts such as political disputes, trade wars, cyber wars, and information wars are possible, he thinks a full-scale violent war is “unimaginable.”
In Guoji Wenti Yanjiu, 2022, no. 3, Chen Xiaochen and Chen Hong evaluate the Australia–UK–US (AUKUS) trilateral security partnership first announced in September 2021. Chen and Chen first define the features of the AUKUS partnership. Like an alliance, AUKUS is composed of a small number of sovereign states, is focused on military and security cooperation, and is directed against a third party—China. However, it differs from a traditional military alliance because it does not include a clear obligation to use force in the event of an attack upon one of the parties.
AUKUS is guided by the respective military strategies of the US, the UK, and Australia. From the US perspective, the implementation of the Indo-Pacific strategy requires a multi-party military bloc, which neither the Quad (focused on political diplomacy) nor the “Five Eyes” alliance (focused on intelligence cooperation) can satisfy. AUKUS also supports the implementation of the US “integrated deterrence” strategy, which combines military deterrence with technological, industrial, and other advanced capabilities. Meanwhile, AUKUS allows the UK to advance its “Global Britain” strategy by expanding its naval presence in the Indo-Pacific, enhances the UK’s scientific and technological capabilities as it seeks to “become a science and technology superpower,” and creates jobs in areas related to military technology. Finally, AUKUS strengthens Australia’s ability to respond to what it perceives as a threat from China and to implement the Indo-Pacific strategy promoted by the US. AUKUS will increase the funding, equipment, and technical support available to the Australian military and boost Australia’s ability to implement its “Pacific Step-up” strategy, through which it seeks to consolidate its influence in its immediate neighborhood (an area that includes the Southwest Pacific, Southeast Asia, and the Indian Ocean).
AUKUS is focused on military cooperation projects. In its first action, the US and UK supported Australia’s efforts to acquire nuclear submarines. In December 2021, the three parties drafted a list of priorities, involving stronger interoperability and cooperation in the areas of cyberspace, artificial intelligence, quantum computing, and underwater capabilities (with technology and funding going from the United States to Australia and the UK). This cooperation accelerated after Russia invaded Ukraine in February 2022. In April, the three parties announced that they would cooperate on research and development of hypersonic and anti-hypersonic weapons, expand their electronic warfare capabilities, and increase information sharing.
Chen and Chen argue that AUKUS will have extensive and complex impacts. They expect it to consolidate the US–UK and US–Australia alliances and to solidify the role of both the UK and Australia in the US Indo-Pacific alliance system. Although the UK has been weakened by Brexit, it maintains significant strategic assets in the Asia-Pacific region, including military bases, commercial networks, and the Commonwealth of Nations, and will develop stronger cyberspace capabilities. Meanwhile, by enhancing interoperability, AUKUS will increase Australia’s military dependence on the United States and make Australia a key “hub” in US military strategy. At the same time, by binding Australia more closely to US policy toward China, AUKUS will weaken the position of Australians who seek strategic autonomy between China and the United States and strengthen those who subscribe to the “new Cold War” thinking. In addition, Chen and Chen anticipate that AUKUS will make some US allies and partners feel more confident about intervening in regional security issues. They argue that countries such as Japan, India, Canada, New Zealand, and several in Europe have reacted positively to the establishment of AUKUS and the message it sends about the three countries’ commitment to use military cooperation to back the Indo-Pacific strategy and contain China.
Chen and Chen further contend that AUKUS will disturb the Asia-Pacific regional order by pushing countries to choose sides between China and the United States. They believe that AUKUS will disrupt the ASEAN-centered regional order in Southeast Asia by making a regional arms race more likely, making it harder for ASEAN members to avoid picking sides, and weakening “ASEAN centrality,” leading to more disagreement among member states about how to respond to geopolitical issues raised by great powers. Furthermore, they assert, AUKUS counteracts the trend toward greater autonomy for Pacific island countries by making policies related to their security without their input, weakening their collective “Pacific voice” by exposing differences among them, and perhaps even involving the use of territory and waters under their control by AUKUS members for military deployments under the integrated deterrence strategy.
Finally, Chen and Chen argue, AUKUS will negatively impact the existing international system and global norms. They charge that Australia’s development of nuclear submarines challenges non-proliferation norms regarding the behavior of non-nuclear weapons states, and worry that it will set an example for other countries to develop their own nuclear submarines. They also contend that AUKUS directly threatens the integrity of the South Pacific Nuclear Free Zone (to which Australia is a party). At a broader level, AUKUS can only justify its existence through a sense of shared threat; Chen and Chen claim that AUKUS is premised on the existence of an ideological conflict between the three like-minded countries and China, and then uses those shared values as a justification to try to militarily contain China, thereby damaging peace and development.
Chen and Chen argue that AUKUS may become the linchpin undergirding the US Indo-Pacific strategy. In comparison to the Quad (in which the US views India as an “unreliable partner”) and the Five Eyes partnership (in which the US views New Zealand as a weak link because of its efforts to pursue economic ties with China), the US views the UK and Australia as more dependable supporters of US foreign policy. Practically speaking, through the AUKUS partnership, the three countries seek to establish a secure supply chain that will support the Indo-Pacific strategy. Nevertheless, Chen and Chen note that AUKUS still faces many constraints. First, by signaling that the US does not fully trust all the members of the Quad and the Five Eyes, it may fracture relations among these allies and negatively impact the US ability to implement its Indo-Pacific strategy. Second, ASEAN and Pacific Island countries have taken steps to shore up their regional coordination. Southeast Asian countries support “ASEAN centrality” and prefer not to choose between China and the United States; concerns about Australian nuclear submarines have caused some ASEAN members to seek closer ties to China. Meanwhile, Pacific island countries have increased their advocacy of the “Blue Pacific” and clearly asserted that AUKUS is incompatible with their vision of a nuclear-free region. Third, Chen and Chen assert, AUKUS runs afoul of global development norms by prioritizing the geopolitical interests of the three member countries over the development needs of other states and by using ideological and racial lines to create a small, exclusive bloc. Chen and Chen conclude that China should combat the negative influence of small geopolitical cliques typified by AUKUS and support Southeast Asian and Pacific Island countries’ efforts to maintain regional peace and security in order to defend the international order, advance global development, and create a more peaceful world (the idealistic tone belies the fact that these policies are also in China’s strategic interests).
Digital Competition between the US, China, and the EU
In Guoji Luntan, 2022, no. 3, Zhu Zhaoyi and Chen Xin assess US–China–EU relations in the context of US digital hegemony. Zhu and Chen argue that the United States seeks to suppress the digital capabilities of both China and the EU in an attempt to maintain its hegemonic power. The United States has long benefited from a first-mover advantage dating back to Bill Clinton’s promotion of the “Information Superhighway.” US companies like Google, Apple, Amazon, and Facebook established themselves as dominant global players and the US government pushed other countries to open their communications markets, maintain an open internet, and allow for the free flow of data, while setting the rules for the digital economy. More recently, however, the emergence of China’s digital economy (particularly in the fields of artificial intelligence, 5G communications, and e-commerce) and the EU’s increasing focus on data protection regulations and digital taxes have chipped away at US digital hegemony.
China’s digital economy has grown rapidly since the establishment of the first export-oriented telecommunications equipment manufacturers in the early reform period. As of 2020, China’s digital economy accounted for 38.6% of GDP, with widespread access to 5G networks in urban areas, a quarter of total retail transactions occurring online, and increased digital governance capabilities. The rapid growth of China’s digital economy has prompted US concerns: the United States accuses Chinese firms of profiting unfairly by blocking market access for US companies and by copying foreign technologies and worries that China’s increasing technological independence will be a model for other countries. Zhu and Chen assert that the United States is particularly concerned about China’s rapid progress in manufacturing information and communications technology. They criticize the United States for accusing China of “cyber protectionism” and for underemphasizing the failure of US companies to abide by Chinese legal regulations. (Not surprisingly, they do not acknowledge that many of the disagreements between US companies and Chinese officials have been related to requirements that the companies censor information and to the use of digital information by Chinese authorities to limit civil liberties).
Meanwhile the EU’s increasing focus on “digital sovereignty” also challenges US digital hegemony. Despite the EU’s technological and scientific knowledge base, it has not produced many major digital technology firms. Nevertheless, Germany and France have recently tried to jumpstart the digital field and the European Commission has sought to impose a digital services tax which would directly impact the major US technology giants (some member countries, such as France and Spain have recently imposed such digital taxes). Furthermore, the European Parliament has recently passed legislation related to data protection, digital services, and digital markets.
Zhu and Chen argue that the United States has responded to these challenges to its digital hegemony by “abusing” domestic laws to limit Chinese companies’ access to US markets, particularly through the Committee on Foreign Investment in the United States (CFIUS), an inter-agency body responsible for regulating foreign investment in US companies to ensure national security. Zhu and Chen are dismissive of national security concerns, arguing that CFIUS is instead a tool for protectionism and techno-nationalism. They further contend that the United States has used the International Emergency Economic Powers Act (IEEPA) and Section 301 investigations to suppress Chinese digital technology companies and they criticize the 2018 CLOUD Act, which compels US-based companies to turn over data when a warrant or subpoena is issued regardless of the location of the servers on which the data is stored (this law, they contend, conflicts with China’s 2017 Cybersecurity Law, which prohibits foreign companies from transferring overseas data that is collected in China, and supports US efforts to extend its law enforcement capabilities outside its borders).
Since both China and the United States are home to strong digital technology companies, they are competing vigorously for the right to set international digital rules (implicit is the assumption that a government will advance the interests of domestic companies). Zhu and Chen criticize the United States for downplaying the key role of US government support in creating the US digital technology sector while chiding the Chinese government for doing the same, and decry the US habit of cautioning the EU and other allies that China, as an authoritarian state, may use digital technologies for nefarious purposes. Zhu and Chen also contend that the US has sought to limit China’s innovation and development by moving its supply chains out of China and refusing to share key information. Furthermore, they assert, the US has allied with the EU to block the expansion of Chinese technology companies overseas and to prevent Huawei from playing a role in 5G network construction by claiming national security concerns.
At the same time, Zhu and Chen argue, Europe has tried to increase its digital sovereignty through measures such as the 2018 General Data Protection Regulation (GDPR) and other pieces of legislation drafted by the European Commission, while the US has tried to protect the interests of its digital giants. The US has charged that the GDPR is a protectionist measure, rather than a law aimed at protecting user privacy, and argues that privacy regulations limit access to the big datasets necessary for technological advances. The US government has also aligned with US companies in opposition to proposed EU legislation.
In this context, Zhu and Chen contend, the EU has become a balancer in the trilateral digital competition. For now, the EU is unable to complete on technological grounds with China and the United States, and its power comes instead from its ability to create rules than constrain Chinese and US technology giants and allow European companies to emerge. Influenced by the United States, the EU sees China as an “economic competitor” that is pursuing “technological leadership” and has consequently taken steps to regulate Chinese companies. Nevertheless, the EU and China launched a high-level digital technology dialogue and signed an investment agreement in 2020, and China has opened up to EU investment. In addition, a lack of consensus within the EU on boycotts of Chinese technology has created some opportunities for Chinese manufacturers. Despite competition between the EU and the United States, however, their ideological and cultural similarities incline them both to limit China’s market access.
Faced with this situation, Zhu and Chen argue, China must craft a nuanced policy response. China should respect the EU’s digital sovereignty and increase cooperation with Europe. China should also recognize that competition with the United States will continue and strengthen China’s independent research and development capabilities. Moreover, China should take a broader approach to the digital economy by strengthening its presence in markets outside Europe and the United States, such as ASEAN, the Middle East, and Africa. Finally, China should advance an open digital economy and cultivate professional talent. By demonstrating China’s strength, Zhu and Chen believe, China can win other countries’ respect and cooperation.