US-China Watch

With the world in flux as never before, macroeconomic insight and analysis is always at risk of chasing a moving target. That is especially the case when it comes to the US-China conflict, driven by the oft unpredictable crosscurrents between the world’s two largest economies and their ambitious geostrategic aspirations. Through the combination of blogging and tracking the rapidly shifting news flow, the weekly updates below will attempt to keep you abreast of the latest developments on the US-China watch.

TPA + IPEF = China Containment

Taking its cue from Nancy Pelosi’s early August visit to Taiwan, the US Congress continues to lead America’s squeeze play on China.  At the same time, the Biden Administration is not too far behind in continuing to pressure China.  The combination of these two developments has important consequences for the US-China conflict.

On September 14, the Foreign Relations Committee of the US Senate, long the lead actor in congressional foreign policy, passed the Taiwan Policy Act of 2022 (TPA) by an overwhelming 17-5 bipartisan margin.  Among other things, the TPA ups the ante on US defense support of Taiwan, with $4.5 billion in direct military funding (over four years) and an additional $2 billion of loan guarantee authority for foreign military financing. This adds significantly to the $14 billion backlog in delivery of weapons Taiwan has previously agreed to purchase from the United States. While Washington believes this recent increase in military support is fully justified in light of PRC aggression in the Taiwan Straits, it runs completely against the grain of the 1982 communiqué — a foundational pillar of the “One-China policy” (as I stressed a month ago) — in which the US agreed to gradually “reduce its sale of arms to Taiwan.” It remains to be seen if the TPA will be considered as stand-alone congressional legislation or folded into the less-contentious broader US defense spending bill likely to be passed before the upcoming midterm elections. Either way, the message is the same.

Meanwhile, the US is pushing ahead with a new geostrategic initiative – the 14 nation Indo-Pacific Framework (IBEF) — that is strikingly reminiscent of the Trans-Pacific Partnership (TPP) that was the signature initiative of the earlier Asian pivot of the Obama Administration.  The first ministerial meeting of IBEF participants, hosted by US Trade Representative Katherine Tai and Secretary of Commerce Gina Raimondo, was held in Los Angeles on September 8-9.  While the IBEF goes beyond the TPP in many respects, especially in addressing supply chains and inequality, the two frameworks have one critical characteristic in common: they both aim to create a new coalition between the United States and an Asia that excludes China. Not by coincidence, both the TPP and the IBEF bear the handicraft of Kurt Campbell — one of the key architects of the Obama pivot and the current Indo-Pacific Coordinator for Biden’s National Security Council.

The TPA and the IBEF are only the latest manifestations of America’s China containment strategy, a key source of conflict escalation between the two great powers. As the US continues to squeeze China, it is hard to believe that China won’t continue to respond in kind.  Today’s meeting in Uzbekistan between two “unlimited partners,” Xi Jinping and Vladimir Putin, is particularly worrisome in that regard.

You can follow me on Twitter @SRoach_econ

Chip Liberation for China?

Accidental Conflict raises the possibility that America’s fixation on Huawei may well be a foil for US neglect of its own innovation and technology imperatives.  The chapter on “Huawei as a Trojan Horse” explores this issue in detail, unmasking false allegations...

read more

NATO Pressures on China

The just concluded G-7 and NATO summits in Europe elevated western concerns over China as a growing geostrategic threat.  Unsurprisingly, the Russian Federation was the focus of this updated threat assessment in light of the unprovoked carnage of its war with...

read more

Tariff Rollback?

Rumors continue to mount of a rollback of US tariffs that the Trump Administration imposed on Chinese products in 2018-19. These actions are being considered by the Biden Administration with the idea of reducing US inflationary pressures, not to correct the serious...

read more
Sign up for Stephen’s Dispatches: