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Macroscope | The trade war has pushed China towards further globalisation, domestic technology development and policy reforms
- China’s trade war with the US could hold back technological development and sow distrust between the world’s two biggest economies. But Beijing has used the rivalry as an opportunity to open up to other countries and stimulate domestic innovation
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The world has been watching developments in the Sino-US relationship with trepidation. Fears of increasing disengagement between the two economic superpowers have given rise to uncertainties about the global economy and financial markets.
At the eye of the storm has been the bilateral trade relationship, within which escalating tariffs over the past 18 months have curtailed trade flows. Although the imminent phase one deal brings some relief, the two sides are still far from striking the kind of comprehensive agreement needed to restore normality.
Trade is not the only area of contention. Cross-border investment has come under increasing scrutiny in the US, with many investments from China deemed national security threats. This has led to an 88 per cent plunge in Chinese investment in the US since 2016.
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Nor are exchanges of people exempt from the increasingly strained relationship. The number of first-time students arriving from China to the US has fallen by 33 per cent since 2016, and the number of Chinese tourists dropped by 16 per cent in the year to end of 2018. There are numerous reports of Chinese scholars, business executives and government officials denied visas to enter the US.
These restrictions will have a short-term economic impact, but more concerning are the long-term consequences of reduced movement of people between the two countries, fuelling further misunderstanding.
The final area of disconnect is in technology, which has received almost as much attention as the trade conflict. Aside from the ban on Huawei and its 5G equipment, the list of Chinese tech firms on the US blacklist has grown rapidly this year. Continued disengagement in this area could slow technological progress in both countries as it hinders cooperation, knowledge-sharing and healthy competition. But the ultimate fear is that the world could be split between two incompatible tech ecosystems, with enormous inefficiencies for economies and societies at large.
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