US trade with China: ‘Small yards, high walls’
Chamber delegation a 'bridge' for Beijing. Is the US getting China policy right?
A delegation of former US officials organized by the US Chamber of Commerce is visiting Beijing this week to meet with senior government officials including Chinese Premier Li Qiang.
Premier Li, China’s No. 2 government official, told the delegation on February 28 that China and the US should strengthen economic and trade ties and Washington should avoid ‘decoupling’ from China, according to Chinese media.
"Strengthening economic and trade cooperation is a win-win situation for both countries," Li told the US business representatives according to Reuters which cited China state radio.
"Seeking decoupling and building 'small yards with high walls' do not align with the fundamental interests of both sides," Li said.
Li referenced the November 2023 meeting in San Francisco between China President Xi Jinping and US President Joe Biden in which the two leaders agreed to promote practical cooperation between the two countries.
“China is willing to work with the United States to implement the important consensus reached by the two heads of state and promote the healthy and stable development of bilateral relations based on the principles of mutual respect, peaceful coexistence, and win-win cooperation,” Li told the Chamber delegation, according to Xinhua.
“China will open its door wider to the outside world and will continue to strive to create a market-oriented, legal and international first-class business environment to provide more support and convenience for American and other foreign companies to invest and operate in China.”
“It is hoped that the American Chamber of Commerce and entrepreneurs will continue to play a bridging role to promote more communication and mutual understanding between the two countries,” Li said.
The ‘small yards’ phrase is a specific reference to the national security policy adopted by the Biden administration restricting trade with China in advanced semiconductors, quantum computing and artificial intelligence. These technologies are used in development of weapons of mass destruction, hypersonic missiles, autonomous systems, and mass surveillance.
“Many of you have heard the term ‘small yard, high fence’ when it comes to protecting critical technologies. The concept has been citied at think tanks and universities and conferences for years. We are now implementing it,” National Security Adviser Jake Sullivan said at a think-tank briefing introducing the Biden administration’s strategy in 2022.
The US Chamber has urged the Biden administration to implement a cautious trade policy with China by striking a balance between national security and economic interests.
"We can deploy targeted export controls and other safeguards in sectors where our national security is at risk without cutting off the wider trade flow that is so important to our own economy," Chamber President and CEO Suzanne Clark said in a 2023 speech in Washington.
Biden Cabinet officials have echoed that framing and sought to ease Chinese concerns that the US is attempting to stifle China’s technological development by describing their policy as “de-risking,” not decoupling.”
How scary is China, really?
The US military views China as a near-peer competitor and likely adversary in the Pacific. The Biden administration has held punitive Trump-era tariffs in place and added new restrictions.
But does the US misunderstand China? Is Washington getting policy toward Beijing right, or is it suffering from “threat inflation?”
The Carnegie Endowment for International Peace posed these questions and more to David Rennie, the Beijing bureau chief of The Economist magazine since 2018, in an interview on February 27.
“China’s rise is enormously disruptive, so we should not be complacent, but I also don’t think we should be panicking,” Rennie said.
“I am not that comforted by the idea that their military isn’t as strong as America’s or that their economy has some serious problems because I think that Vladimir Putin is giving us an obviate lesson in Ukraine that a declining, economically weak country with a fairly unimpressive, or under-performing military, if it is intently focused on a goal that matters more to the aggressor than it does to the West, then that can be rather effective,” Rennie said.
The US should be engaged in an “extremely clear-eyed attempt to constantly measure exactly how large (China’s) ambitions are and try to listen to them on their own terms about the world order that they would like to see.”
China’s defense spending, smarter
China’s rapid increase in military spending since 2000 has been more efficient and focused on smart investments in naval and air power, bringing it closer in capabilities to the US than top-line comparisons would suggest, two defense analysts write in RealClear Defense.
Peter Robertson, economics professor and dean of the University of Western Australia’s Business School, and Wilson Beavers, a senior policy analyst for defense budgeting at The Heritage Foundation, argue “headline numbers mask the even more rapid modernization of the People’s Liberation Army.”
“China’s inflation-adjusted military spending is at least three times larger than it was in the year 2000 and by some counts is hundreds of millions of dollars larger than the official numbers suggest. Yet even these dramatic top-line estimates do not tell the whole story of China’s military rise, because it has also increased efficiencies within its defense budget – meaning that, unlike the United States, China isn’t just spending more, it’s spending smarter.”
— William Roberts