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Macroscope | Why US moves to contain China’s rise are having the opposite effect in Asia
- As Washington takes steps to reroute supply chains and strengthen strategic partnerships, China is systematically doing the same thing
- In addition to pouring funds into home-grown tech, China is taking pains to integrate economic and security frameworks across Asia – with the support of Russia
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The gloves are coming off in the US-China chip war as Washington announces sweeping trade and investment restrictions on semiconductors. There will be no winners and many losers in this bid for technological, economic and strategic supremacy between the world’s biggest economic powers.
There is far more at stake than just chips as the two economic giants enter their monumental struggle. For example, the International Monetary Fund (IMF) has noted that, “given its strong trade and supply chain links, Asia has a lot to lose in the event of fragmentation where the world divides into separate trading blocs”.
This is of course true, especially in the short to medium term. But what the Biden administration appears to be overlooking in its aggressive-defensive dash to prevent China drawing abreast of, or even overtaking, the US as an economic and strategic rival is that it risks provoking the very process that it wishes to avoid.
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This is in fact precisely what is happening now as the Biden administration doubles down by first orchestrating a wave of economic sanctions against Russia and then by imposing unilateral “security” measures against China in the form of restrictions on key semiconductor exports and investment.
China is reacting by pouring financial and human resources into catching up with the US, as economist and associate professor at the London School of Economics Keyu Jin noted recently in The New York Times. But this is only one element of a much wider (Russo) Chinese initiative designed to counter Washington’s strategies.
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Economists Diego Cerdeiro, Siddharth Kothari and Chris Redl at the IMF warned in a recent blog post that “geopolitical tensions have raised the prospect that strategic competition and national security concerns may trump the shared economic benefits of global trade”.
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