In the escalating contest between the West and the rest, it is now clear that the West—while still packing the more powerful punch—is weakening. In the Asia-Pacific, the US navy’s stance has shifted from dominance to deterrence. In the economic sphere too, the US has switched from being on the offensive—technology bans, trade restrictions and financial sanctions—to playing defence. Washington has put up a tariff wall around the US market. And Western support for Ukraine has not stopped Russia. Mao Zedong, the founder of the People’s Republic of China, had declared somewhat ahead of time that the East wind prevails over the West wind. That may now be beginning to happen.
For years, Western analysts and journalists misread both China and Russia. The latter was portrayed as economically vulnerable and Vladimir Putin as the President who can be politically challenged, perhaps even terminally ill. China’s collapse has been forecast for decades; more recently it has been seen as beleaguered. Russia has withstood Western sanctions unexpectedly well, it has gained the upper hand in the war with Ukraine, and Putin has been elected to a fresh term in office. China, meanwhile, remains one of the fastest-growing economies with comparable income levels.
Supply chains, currency, NATO
The steep tariffs announced by the US on some Chinese products do not signal a full-scale trade war because they target items that China does not sell much in the US. So, the signaling may be primarily to US President Joe Biden’s domestic political base. Regardless, China remains the dominant producer of many of the targetted products, and can find other markets. It is the US importers who may struggle to find alternative sources of supply for some items. China could also route supplies through factories in third countries. Meanwhile, American consumers will bear the cost through inflation.
Such defensive ploys (the flip side of a subsidy-laden policy to revive American manufacturing) contrast with the offensive thrust of earlier moves by the US. The hope was that aggressive moves would box in America’s enemies. Without a doubt, the sanctions have hurt, but their impact has been partial. Russia has continued to grow as it found new customers for its oil and gas, while Europe has lost a vital source of cheap energy, thereby hobbling economies like Germany’s.
Both Russia and China have developed payment systems that bypass the dollar—95 per cent of Russia-China trade is now in local currencies—and even banking communication systems such as the Society for Worldwide Interbank Financial Telecommunications (SWIFT). Russia now holds more renminbis in its reserve armoury than dollars. And China has been switching to gold—it has bought vast quantities in the past 18 months. The People’s Bank of China’s 2,250-tonne gold hoard accounts for less than 5 per cent of total reserves, but is the highest ever.
In terms of technology, China moved earlier and faster than other countries and now occupies a pole position in the clean-energy fields of electric mobility, solar power, and lithium batteries. Beijing also moved ahead of the pack to secure supplies of the special materials needed for these industries and may have put a lock on some of those markets. The country may now be ready to break through tech barriers in electronics, life sciences and defence manufacturing.
Huawei, for instance, recently surprised the West by showcasing smartphones loaded with 7 nm (nanometre) chips. The country’s largest chip maker, Semiconductor Manufacturing International Corporation (SMIC), is reportedly making 5 nm chips for Huawei. As part of Made in China 2025, the country has set a target of 70 per cent self-sufficiency in chipmaking by next year.
Moreover, Western pharmaceutical firms have acknowledged China’s emerging leadership in biopharma and life sciences, especially in places like BioBay, a mega-hub for innovation in Suzhou, near Shanghai. In the defence sector, China is building a fourth aircraft carrier, which may be nuclear-powered. It signals that Beijing is crossing another technology threshold. The bald fact is that it is too late to shut the technology door on China.
On the security front, Western commentators worry about possible convulsions if Russia gets its way in Ukraine, and further carves up the half-destroyed country. Matters could get worse if Donald Trump returns as US president and carries out his threat to hobble the North Atlantic Treaty Organisation (NATO).
Given the extreme limitations of European defence forces, in terms of manpower, equipment, fighting, and production capacities, all of Europe would suddenly start feeling more vulnerable than at any point since the start of the Cold War. European defence budgets have belatedly gone up to the targeted 2 per cent of GDP, but it will be at least a decade before Europe can hope to be viable in its defence without the assurance of US support—not to mention the US nuclear umbrella.
Also read: Iran can heal after Raisi’s death. New president likely to continue his policies
East wind is blowing
In comparison, Moscow and Beijing have grown closer, while scoring diplomatic gains around the world. Russia played a successful card in Syria and now receives drones from Iran. China brokered the normalisation of ties between Iran and Saudi Arabia last year. In Africa, China is outspending the US, on a continent that needs lots of money, while one country after another is booting out French and American soldiers and inviting in Russian soldiers for security support.
Even in Southeast Asia, countries whose economies are closely inter-linked with China—and getting even more so—do not wish to choose between the US and China. It doesn’t help that the US frequently shows itself as an unreliable support pillar, as seen in its arms supplies to Ukraine. Nor does it help Western credibility with the ‘Global South’ when Washington adopts hypocritically contradictory stances on Ukraine and Gaza.
Western commentators argue, with reason, that China has long been single-mindedly pursuing a mercantilist course, promoting industries with massive government support and running huge trade surpluses without allowing its currency to appreciate. Therefore, they argue that China has asked for the West’s belated countermeasures. Fair enough. However, what they don’t add is that China has intensely competitive domestic markets. For example, no fewer than 139 companies produce electric vehicles. Only the fittest will survive, and companies like BYD Company, therefore, emerge as potential world-beaters.
Still, it would pose a challenge for China’s manufacturing capabilities if major export markets were denied to it. But as India’s experience shows, tariff walls do not necessarily keep out Chinese products. Indeed, Beijing could soon be in a position to play tit-for-tat on both technology and market access. That seems a more likely response to Western pressure than Japan’s approach in the mid-1980s when Tokyo reined in its exports and got the yen to appreciate. In today’s world, whether in security matters, technological development, manufacturing, trade prowess or diplomatic heft—in short the global power balance—the East wind is blowing harder than before.