America Must Rise to China’s Challenge, But Not in the Manner Donald Trump Imagines

Robin Mills

AFP Photo: Aamir Qureshi

Almost nothing is bipartisan in US politics today – except confronting China. Despite the very different styles and worldviews of Donald Trump and leading Democrats, Washington’s conventional wisdom has rapidly converged with on the threat of its superpower rival. This competition will play out in world trade, energy, maritime East Asia and, perhaps, the Gulf. Regardless of who wins in America’s November elections, it is almost inevitable that tension will ratchet up in Washington as China senses the moment, and attempts to take its opportunity, to overtake the United States.

Of course, the Chinese economy currently is in no great shape. It was already slowing before the coronavirus crisis, with the trade-war headwinds, a falling working-age population and a massive accumulation of corporate debt. It will further suffer from the slump in its main customers: 20 percent of its exports last year went to North America, 20 percent to Europe, 10 percent to oil exporters. On the other hand, America’s dreams of “energy dominance” have evaporated with the fall in energy prices. It is in any case not clear why the US ever wanted to beef up its role as a supplier of raw materials – oil, gas and soybeans – in a contest over the high-tech future.

Against such somber realities, the Trump administration has been spoiling for a fight to distract November’s voters from the White House’s failing performance during the coronavirus pandemic. China holds about $1.1 trillion of US government debt and American officials have reportedly discussed cancelling part of it as reparation for pandemic damage; so what has been considered the world’s safest financial instrument would immediately become one of its most risky, open now to political interference just like any third world bond. The dollar’s dominance would be immediately undermined.

Other officials posit seizing Chinese assets, as though the US itself has no overseas assets of its own and has never committed offences. Attempts to sanction Chinese firms would make it imperative for Beijing to develop a financial architecture that is not reliant on the US (which, incidentally, would mean the effective end of sanctions against Iran and other states).

America’s demonization of China and Beijing’s attempt to usurp America’s global leadership raise the specter of globalized chaos in a manner never before possible to anticipate. Superpower confrontation, a weakening of global trade and economic connections, democratic retreat from Washington to Budapest to Ankara, greater poverty and food insecurity and the growing reality of climate damage all make up a recipe for state breakdown and proxy wars in vulnerable countries.

American military power across the Middle East has been understood to be about protecting its oil and gas supplies and those of its increasingly disillusioned allies against threats including, firstly, the old Soviet Union, then Saddam Hussein, Iran and terrorist groups. Yet the presence of the Fifth Fleet in Bahrain also is a powerful threat to China, a reminder that the US controls the source of 45 percent of its oil imports and 16 percent of its liquefied natural gas.

For its part, China has carried out some anti-piracy operations from its base in Djibouti at the southern gates of the Red Sea and has built up Gwadar port in Pakistan, near the Strait of Hormuz. The Chinese military is not (yet) present in Gwadar, and it did not participate in either the US-led or European naval missions in the Gulf. Nor did it mount an independent patrol as Japan, India and South Korea did, following a string of attacks on shipping last year which were blamed on Iran. But as Chinese interests and investments in the Gulf mount, littoral countries may come under growing pressure to choose sides.

Two pipelines – Russia’s East Siberian Pacific Ocean pipeline for oil and the Power of Siberia pipeline for gas –are key parts of diversifying Moscow’s exports away from the mature European market. These, along with routes from central Asia, are also a key insurance policy for China against interruptions to sea-lanes. Clearly, China has been thinking strategically and for the long-term.

In point of fact, China’s main response to its hydrocarbon vulnerability has been to seek to dominate the energy industries of the future: solar panels, batteries, electric cars, rare-earth minerals and ultra-high-voltage grids. These are also sources of future economic and environmental advantage.

Curiously, it has also stepped up investment in its own oil production, despite high and probably uncommercial costs. In reality, the hydrocarbon potential of the South China Sea is exaggerated. Yet China has intensified harassment of seismic survey ships and rigs operating within the exclusive economic zones of Malaysia and Vietnam, even threatening projects led by the oil champions of the US and Russia, ExxonMobil and Rosneft.

Beijing’s goals here are probably more about control of the sea-lanes and strategic islets than the subsurface resources. This is thus a direct challenge to America’s insistence on free navigation rights in the area.

An administration led by Joe Biden would be more careful, strategic, competent and multilateral in challenging the rise of China. But domestic politics and the reality of a rising power confronting the incumbent make the pressure for a harder line from both sides near-irresistible. If not diverted, this trend is ominous for the world’s politics, energy supply, economy and environment.

 

Robin M. Mills is CEO of Qamar Energy, and author of “The Myth of the Oil Crisis.”