Two Summits

May 19, 2023

All eyes are on the G-7 summit this weekend (May 19-21) in Hiroshima, Japan—a painfully historic setting for a world in turmoil. The issues are many but three seem likely to get the greatest attention—the war in Ukraine, climate change, and China. While there is some overlap—especially, China’s unlimited partnership with Russia and the imperatives of collaboration in addressing global warming—US President Joe Biden appears to be pushing other G-7 leaders to join him in resisting China’s alleged economic coercion. There has been considerable talk that this latest effort will involve restrictions on outbound FDI (foreign direct investment) into China’s critical technology sectors, such as artificial intelligence and quantum computing. We’ll know soon enough.

Meanwhile, in an obvious effort not to be outdone by the G-7, Xi Jinping launched a preemptive summit of his own May 18-19—the inaugural China-Central Asia summit in the ancient Chinese capital city of Xi’an. This thinly veiled tit-for-tat was accompanied by China’s own counter to the economic coercion debate—a comprehensive report by the Chinese Ministry of Foreign Affairs that focuses on the hypocrisy of what it alleges to be the long history of coercive diplomacy practiced by the United States.

The comparison between these competing approaches underscores several aspects of the deepening US-China conflict. For starters, the two summits are strikingly different in economic terms. The G-7 currently accounts for about 30% of world output in 2023, according to the IMF’s preferred purchasing-power parity metric. Of that share, the US, at 15.5%, makes up a little more than half the G-7 total. By contrast, the newly assembled China-Central Asia group accounts for just 19.6% of world GDP, more than ten percentage points less than the output share of the G-7. Moreover, China, at 18.9% of world GDP, accounts for fully 96% of the combined GDP of the six nations that participated in this summit. That’s right, the tiny economies of the other five nations of Central Asia in attendance at this summit—Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan—collectively account for just 0.7% of world GDP in 2023, according to the IMF.

That gets to an important related point. To call the Central Asian summit a China-centric gathering understates the obvious: China dominates most of its engagements with its partner nations. Xi Jinping used his opening speech in this week’s summit to drive that point home with five former Soviet states. He has done the same with the now nearly ten-year old BRI, the unlimited partnership with Russia, and the new RCEP trade pact. Moreover, this approach also applies to China’s Global Security Initiative, the Global Development Initiative, as well as its Global Civilization Initiative, all of which underscore Xi Jinping’s increasingly ambitious efforts at global power projection. Such are the new harsh realities of a dual-bloc world, one that does not lend itself well to conflict resolution between two superpowers.

The ”hide and bide” of Deng Xiaoping is no longer China’s guiding principle in foreign affairs. The new muscularity of Xi Jinping’s rejuvenation-focused Chinese Dream is a recipe for counter-punching whenever global power is exercised by the other side. The G-7’s forthcoming Hiroshima communiqué will provide a strong indication of what China is up against—and what might then be expected in response. More on that next week.

You can follow me on Twitter @SRoach_econ

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