The Chinese central bank is now supposed to step in. It aims to supply the economy with sufficient funds through low interest rates to enable more investments. However, it remains unclear how this aligns with the prime minister’s announcement on Tuesday to take on fewer credit risks in the future, writes Finn Mayer-Kuckuk.
Low interest rates typically increase the level of risk in an economy. Those who don’t have to pay much interest are less concerned about the quality of their projects. This contradicts the fundamental idea of current economic policy, which aims to avoid creating high risks again, as seen in the real estate market. Economists therefore expect a significant degree of micromanagement of credit allocation by the government.
They will want to select which industries benefit from loose monetary policy and which do not – a classic pattern that will also leave its mark on the stock market. Because subsidies for individual sectors fuel stock prices. How this aligns with the statement of the new head of the securities regulator is equally unclear. They aim to prioritize fairness and combat market manipulation to protect small investors. A lofty goal, considering that manipulation is significantly promoted by government interventions.
China’s policy practices the ignorance of possible negative side effects to perfection. Just as it ignores the massive criticism from abroad regarding the tightening of security laws in Hong Kong. The so-called Article 23 provokes great concern among Americans and Europeans about a deterioration of the business climate, something Hong Kong desperately wants to avoid. However, a U-turn is still out of the question.
National security takes priority above all else in the People’s Republic and its special administrative regions. Where national security may be used synonymously with securing the power monopoly of the leadership elite. In this context, the business climate is at best of secondary importance.
While China’s premier is not facing the press at this National People’s Congress, at least the economic planners answered questions from the media on Wednesday – within the framework of what is usual in China. According to this, the central bank plays a leading role in maintaining the ambitious growth target of around five percent for the current year. It wants to provide enough money to the economy to enable investments. However, it remained unclear how this aligns with the premier’s announcement on Tuesday to accept fewer credit risks in the future.
The format of the press conference on Wednesday at the NPC was new. Five top economic planners were present:
On Tuesday, it remained unclear how the government plans to achieve its growth target. China’s economy is as large as the EU’s, and achieving a five percent increase requires a significant amount of goods and services. However, the traditional drivers of growth are currently absent. These were real estate investments and infrastructure projects by municipalities and provinces. Both areas have collapsed under their debt burden.
However, a looser monetary policy is intended to help other sectors to invest more again. “China’s monetary policy toolbox is still abundant,” said PBoC chief Pan Gongsheng. “There is still plenty of room for monetary policy.” This means: lower interest rates and easier financing for new projects.
However, low interest rates usually increase the risk level in an economy. Those who do not have to pay much interest do not pay as much attention to the quality of their project. This contradicts the basic idea of current economic policy, which aims to avoid creating such high risks again as in the real estate market. Economists, therefore, expect a considerable amount of micromanagement of lending by the government. It will want to select which sectors benefit from loose monetary policy and which do not.
There is also concern about a devaluation of the yuan, which could exacerbate imbalances in world trade. If interest rates in China fall and rise elsewhere in the world due to inflation, capital will leave China and go where interest rates are higher. Although Chinese goods are in demand worldwide and the exchange rate of the yuan should rise, this creates downward pressure, explains Horst Löchel, professor at the Frankfurt School of Finance & Management. This makes Chinese goods even cheaper and, therefore, more in demand. However, China already has huge trade surpluses with the US and the EU, which annoys economic policymakers in the other blocs.
Meanwhile, the China Securities Regulatory Commission (CSRC) wants to create new investment channels so that Chinese investors do not only invest in real estate. It wants to fight stock market manipulation and thereby protect mainly small investors. “As a regulatory authority, we must ensure fairness, especially in a market dominated by small investors,” said the new CSRC chief Wu Qing at the press conference.
The quality criteria for listed companies should also be raised. Wu hopes for more investments, especially through long-term funds. “We will crack down hard on fraud, market manipulation, and insider trading,” he said. The Chinese securities market has shrunk for three years in a row, among other things due to the sluggish economy, regulatory measures, and a real estate crisis. Shortly afterwards, Wu took over as head of the CSRC and tightened the screws on short selling and securities fraud.
China categorically dismisses criticism of a tightening of the security law in Hong Kong. On Wednesday, Vice Premier Ding Xuexiang spoke of a social consensus on the law, which everyone wants to see passed as soon as possible. Ding shared this assessment in discussions with delegates from the National People’s Congress Political Consultative Conference from Hong Kong and Macau. This was reported by the public broadcaster Radio Television Hong Kong (RTHK).
Ding derived his assessment from the result of the four-week consultation phase for the so-called Article 23 of the Basic Law. According to this, about 13,000 opinions were received from the Hong Kong public, of which, according to the government, 99 percent were positive. Article 23 gives Hong Kong its own security law with greater reach and harsher penalties compared to the previous version, which was issued by the central government in Beijing in 2020.
However, the clear result can also have other reasons. In the almost four years since the introduction of the security law, people have become cautious about expressing political opinions if their views do not align with those of the city government. Political dissent is pursued and punished harder than ever in Hong Kong.
A survey by the Hong Kong opinion research institute Pori shows that the consultation may not actually reflect the mood among citizens. According to this, public trust in February fell from 46 to 39 percent compared to the previous month, while mistrust in the government increased from 38 to 42 percent. Public trust in Hong Kong’s future has also decreased by 16 percentage points. Pori sees a direct connection to the “aggressive campaign of the city to pass its own security laws”.
Foreign governments and organizations are increasingly concerned about the development. The US Embassy in Beijing expressed serious concerns about the extraterritorial reach of Article 23. It criticized that the law restricts the right to freedom of expression of foreign citizens. The representation of the European Union fears that the law will create a lot of uncertainty and further narrow the scope for business activities in the financial metropolis. Non-governmental organizations expect even more restrictions on the already drastically curtailed civil rights and see a high potential for danger in exercising journalistic work.
The Hong Kong government reacts sensitively to criticism from Europe and the USA. It defended its plans. The statements by the USA are untenable and defamatory. Hong Kong argues that it wants to close gaps and loopholes that exist in the current form of the security law in order to create political stability and a good business climate.
“The Hong Kong government repeatedly states that it wants more companies in Hong Kong and that we should promote and expand relations between people,” quoted the Japanese business newspaper Asia Nikkei an EU diplomat on condition of anonymity. There is fear that interaction with Hong Kong civil society will be severely hampered. The vague definitions of criminal offenses, which can be flexibly interpreted by investigative authorities to criminalize actions, are behind this.
Last week, EU Foreign Minister Josep Borrell emphasized the importance of the work of civil society on International NGOs Day, without explicitly mentioning Hong Kong. It is often stigmatized by laws on “foreign agents” or other legislative and administrative measures to hinder legitimate activities, the diplomat said.
The National Security Law currently covers four criminal offenses: secession, undermining of state power, conspiracy with foreign forces and terrorism. In contrast, Article 23 penalizes seven offenses: high treason, secession, rioting, subversion against the central government, theft of state secrets, political activities of foreign organizations in the city and the facilitation of contact between local and foreign institutions.
Actions that are suspected of being able to trigger “serious internal unrest in China” are now also formulated more concretely, but “modern forms of espionage” are also integrated into the legislation. This particularly concerns foreign companies and organizations because, as the law was presented at the end of January, it does not detail where espionage begins according to the legal interpretation.
The USA fears that Hong Kong wants to create a basis to “eliminate dissenting opinions through fear of arrest and detention“. It accuses China of undermining international obligations and the principle of “One Country, Two Systems”, agreed upon when Hong Kong was returned from Britain to the People’s Republic until 2047.
Former Hong Kong lawmaker Ted Hui considers the broader interpretation and harsher penalties of Article 23 to be a means of political persecution with drastic consequences for the Hong Kong diaspora abroad. “If Hong Kongers abroad have called for an invalid or protest vote, they could only be charged with minor electoral offenses so far. With Article 23, people can now be charged with external interference, with substantially higher penalties,” Hui said in an interview with Table.Briefings.
The draft also provides for the expansion of police detention without charge. Detainees could then also be prevented from contacting a lawyer of their choice. Prison sentences can no longer be reduced due to good conduct.
86 non-governmental organizations had already called on China in mid-February in a joint statement to resist Article 23 internationally. Amnesty International urged Hong Kong authorities not to advance or pass laws “that ignore recommendations from United Nations experts”.
FBI Director Christopher Wray recently upped the ante in America’s anti-China campaign. In congressional testimony on January 31, he sounded the alarm over intensified Chinese hacking activity and warned that US infrastructure – telecommunications, energy, transportation, and water – is acutely vulnerable to the Chinese state-sponsored hacker group Volt Typhoon. Front-page coverage by the New York Times added to the sense of urgency.
A few days after Wray’s testimony, a joint report from the FBI, the Cybersecurity and Infrastructure Security Agency (CISA), and the National Security Agency (NSA) provided detailed documentation of the Volt Typhoon threat. More front-page coverage by the Times duly followed. And then came the outage of a major cellular network on February 22. Suddenly, cyber fears have taken on a life of their own.
Largely ignored in this frenzy is an important conditionality to Wray’s warning. China, he alleged, was “prepositioning” for future conflict. That is not the same as Russian President Vladimir Putin massing troops on Ukraine’s border in late 2021 and early 2022. In Wray’s words, Volt Typhoon could be expected to attack US critical infrastructure, “If or when China decides the time has come to strike” (my emphasis).
Thus, the FBI, in concurrence with CISA and the NSA, is basing its very public alarm purely on conjecture about China’s future intent, not on any concrete information of an imminent cyberattack. Far be it for me to doubt the veracity of the US intelligence community’s evidence on Volt Typhoon; I would merely point out that this is circumstantial evidence that has revealed absolutely nothing about the likelihood of action. For those who remember the dire, but erroneous, warnings about Saddam Hussein’s supposed weapons of mass destruction, which the United States used to justify the invasion of Iraq in 2003, this is no small concern.
Having recently written a book about the potential of false narratives to trigger an accidental conflict between the US and China, I worry a lot about over-zealous emphasis on circumstantial evidence. I also worry about the hypocrisy of the allegations of Chinese cyber prepositioning. Recall that the US deployed the Stuxnet computer virus against Iranian nuclear centrifuges back in 2010.
In a remarkable new book, The Politics of Language, David Beaver and Jason Stanley describe such leaps of faith as cases of “presuppositional resonance”: unsubstantiated projections of tangential (circumstantial) information that are marshaled to justify a politically expedient course of action. The current US political agenda vis-à-vis China is a classic example of this tendency.
Wray’s presuppositional warnings do not come out of thin air. He has a long history of anti-China fearmongering. In the summer of 2020, as that year’s presidential election campaign was heating up, Wray joined three other senior officials from Donald Trump’s administration (Secretary of State Mike Pompeo, Attorney General William Barr, and National Security Adviser Robert O’Brien) in a succession of carefully orchestrated anti-China tirades. Once a lead actor in Trump’s political theater, Wray has been unwavering in his strident Sinophobic views ever since.
The FBI director’s fixation on Chinese cyber threats has an unfortunate historical precedent that harks back to the first Cold War. The “red baiting” that targeted the Soviet Union and alleged Communist sympathizers back then is aimed at China today.
The bipartisan anti-China campaign in Washington seems dead set on backing the Chinese into a corner. That has become increasingly evident in the past three years, as the Biden administration has continued to prosecute the trade and tech wars that Trump started. Former Speaker of the House Nancy Pelosi compounded the pressure campaign with her 2022 visit to Taiwan, which poured salt on one of China’s most sensitive open wounds.
Similarly, under the leadership of US Representative Mike Gallagher – a soon-to-be retiring Republican from Wisconsin – a new bipartisan House Select Committee on China has used a combination of carefully staged hearings, threatening letters to US companies, and multimedia stagecraft to lead a crusade against China. It was hardly surprising to see the committee welcome Wray with open arms to its hearing on January 31.
Countless other US politicians have jumped on the bandwagon. There probably is not a single member of the US Congress – Democrat or Republican – who is willing to take a principled stand in favor of US re-engagement with China. Anyone tempted to do so will be accused of Munich-like appeasement. Although President Joe Biden came close to re-engagement at the Woodside Summit with Chinese President Xi Jinping last November, his administration remains unwavering in imposing escalating restrictions on Chinese access to advanced technology.
To be sure, China hasn’t made it easy. The surveillance balloon incident early last year – to say nothing of a “no limits” partnership with Russia, a country prosecuting a barbaric, illegal war of aggression – feeds America’s China-bashing politics. Wray’s cyber alarms amplify these presumed threats. In the end, however, this pressure campaign could backfire. Increasingly aggressive US actions have been stoking precisely the kind of hostile Chinese intentions that paranoid US politicians fear most. That is true regarding Taiwan and is also the case now with cyber security. America needs to be very careful of what it asks for.
All this points to a new chapter in the US-China conflict – trade and tech wars now reinforced by a cyberwar. Notwithstanding Biden and Xi’s denials, this conflict has cold war written all over it. The original Cold War came dangerously close to being hot, especially during the Berlin Crisis and the Cuban Missile Crisis. Could the risks of cyberwar take us that close again? Do we have the trust-based capacity to temper those risks? Wray’s fearmongering provides worrying answers to those questions. Grave danger lies ahead in the growing drumbeat of US-China cyberwar.
Stephen S. Roach, a faculty member at Yale University and former chairman of Morgan Stanley Asia, is the author of Unbalanced: The Codependency of America and China (Yale University Press, 2014) and Accidental Conflict: America, China, and the Clash of False Narratives (Yale University Press, 2022).
Copyright: Project Syndicate, 2024.
www.project-syndicate.org
In the National People’s Congress, the representatives of China’s minorities stand out, particularly dressed in traditional attire. They are not only meant to showcase local customs but also represent the internal unity of the People’s Republic. However, some of the bureaucrats seated directly behind them might be frustrated, as the towering headdresses sometimes obstruct their view of everything happening on stage.
The Chinese central bank is now supposed to step in. It aims to supply the economy with sufficient funds through low interest rates to enable more investments. However, it remains unclear how this aligns with the prime minister’s announcement on Tuesday to take on fewer credit risks in the future, writes Finn Mayer-Kuckuk.
Low interest rates typically increase the level of risk in an economy. Those who don’t have to pay much interest are less concerned about the quality of their projects. This contradicts the fundamental idea of current economic policy, which aims to avoid creating high risks again, as seen in the real estate market. Economists therefore expect a significant degree of micromanagement of credit allocation by the government.
They will want to select which industries benefit from loose monetary policy and which do not – a classic pattern that will also leave its mark on the stock market. Because subsidies for individual sectors fuel stock prices. How this aligns with the statement of the new head of the securities regulator is equally unclear. They aim to prioritize fairness and combat market manipulation to protect small investors. A lofty goal, considering that manipulation is significantly promoted by government interventions.
China’s policy practices the ignorance of possible negative side effects to perfection. Just as it ignores the massive criticism from abroad regarding the tightening of security laws in Hong Kong. The so-called Article 23 provokes great concern among Americans and Europeans about a deterioration of the business climate, something Hong Kong desperately wants to avoid. However, a U-turn is still out of the question.
National security takes priority above all else in the People’s Republic and its special administrative regions. Where national security may be used synonymously with securing the power monopoly of the leadership elite. In this context, the business climate is at best of secondary importance.
While China’s premier is not facing the press at this National People’s Congress, at least the economic planners answered questions from the media on Wednesday – within the framework of what is usual in China. According to this, the central bank plays a leading role in maintaining the ambitious growth target of around five percent for the current year. It wants to provide enough money to the economy to enable investments. However, it remained unclear how this aligns with the premier’s announcement on Tuesday to accept fewer credit risks in the future.
The format of the press conference on Wednesday at the NPC was new. Five top economic planners were present:
On Tuesday, it remained unclear how the government plans to achieve its growth target. China’s economy is as large as the EU’s, and achieving a five percent increase requires a significant amount of goods and services. However, the traditional drivers of growth are currently absent. These were real estate investments and infrastructure projects by municipalities and provinces. Both areas have collapsed under their debt burden.
However, a looser monetary policy is intended to help other sectors to invest more again. “China’s monetary policy toolbox is still abundant,” said PBoC chief Pan Gongsheng. “There is still plenty of room for monetary policy.” This means: lower interest rates and easier financing for new projects.
However, low interest rates usually increase the risk level in an economy. Those who do not have to pay much interest do not pay as much attention to the quality of their project. This contradicts the basic idea of current economic policy, which aims to avoid creating such high risks again as in the real estate market. Economists, therefore, expect a considerable amount of micromanagement of lending by the government. It will want to select which sectors benefit from loose monetary policy and which do not.
There is also concern about a devaluation of the yuan, which could exacerbate imbalances in world trade. If interest rates in China fall and rise elsewhere in the world due to inflation, capital will leave China and go where interest rates are higher. Although Chinese goods are in demand worldwide and the exchange rate of the yuan should rise, this creates downward pressure, explains Horst Löchel, professor at the Frankfurt School of Finance & Management. This makes Chinese goods even cheaper and, therefore, more in demand. However, China already has huge trade surpluses with the US and the EU, which annoys economic policymakers in the other blocs.
Meanwhile, the China Securities Regulatory Commission (CSRC) wants to create new investment channels so that Chinese investors do not only invest in real estate. It wants to fight stock market manipulation and thereby protect mainly small investors. “As a regulatory authority, we must ensure fairness, especially in a market dominated by small investors,” said the new CSRC chief Wu Qing at the press conference.
The quality criteria for listed companies should also be raised. Wu hopes for more investments, especially through long-term funds. “We will crack down hard on fraud, market manipulation, and insider trading,” he said. The Chinese securities market has shrunk for three years in a row, among other things due to the sluggish economy, regulatory measures, and a real estate crisis. Shortly afterwards, Wu took over as head of the CSRC and tightened the screws on short selling and securities fraud.
China categorically dismisses criticism of a tightening of the security law in Hong Kong. On Wednesday, Vice Premier Ding Xuexiang spoke of a social consensus on the law, which everyone wants to see passed as soon as possible. Ding shared this assessment in discussions with delegates from the National People’s Congress Political Consultative Conference from Hong Kong and Macau. This was reported by the public broadcaster Radio Television Hong Kong (RTHK).
Ding derived his assessment from the result of the four-week consultation phase for the so-called Article 23 of the Basic Law. According to this, about 13,000 opinions were received from the Hong Kong public, of which, according to the government, 99 percent were positive. Article 23 gives Hong Kong its own security law with greater reach and harsher penalties compared to the previous version, which was issued by the central government in Beijing in 2020.
However, the clear result can also have other reasons. In the almost four years since the introduction of the security law, people have become cautious about expressing political opinions if their views do not align with those of the city government. Political dissent is pursued and punished harder than ever in Hong Kong.
A survey by the Hong Kong opinion research institute Pori shows that the consultation may not actually reflect the mood among citizens. According to this, public trust in February fell from 46 to 39 percent compared to the previous month, while mistrust in the government increased from 38 to 42 percent. Public trust in Hong Kong’s future has also decreased by 16 percentage points. Pori sees a direct connection to the “aggressive campaign of the city to pass its own security laws”.
Foreign governments and organizations are increasingly concerned about the development. The US Embassy in Beijing expressed serious concerns about the extraterritorial reach of Article 23. It criticized that the law restricts the right to freedom of expression of foreign citizens. The representation of the European Union fears that the law will create a lot of uncertainty and further narrow the scope for business activities in the financial metropolis. Non-governmental organizations expect even more restrictions on the already drastically curtailed civil rights and see a high potential for danger in exercising journalistic work.
The Hong Kong government reacts sensitively to criticism from Europe and the USA. It defended its plans. The statements by the USA are untenable and defamatory. Hong Kong argues that it wants to close gaps and loopholes that exist in the current form of the security law in order to create political stability and a good business climate.
“The Hong Kong government repeatedly states that it wants more companies in Hong Kong and that we should promote and expand relations between people,” quoted the Japanese business newspaper Asia Nikkei an EU diplomat on condition of anonymity. There is fear that interaction with Hong Kong civil society will be severely hampered. The vague definitions of criminal offenses, which can be flexibly interpreted by investigative authorities to criminalize actions, are behind this.
Last week, EU Foreign Minister Josep Borrell emphasized the importance of the work of civil society on International NGOs Day, without explicitly mentioning Hong Kong. It is often stigmatized by laws on “foreign agents” or other legislative and administrative measures to hinder legitimate activities, the diplomat said.
The National Security Law currently covers four criminal offenses: secession, undermining of state power, conspiracy with foreign forces and terrorism. In contrast, Article 23 penalizes seven offenses: high treason, secession, rioting, subversion against the central government, theft of state secrets, political activities of foreign organizations in the city and the facilitation of contact between local and foreign institutions.
Actions that are suspected of being able to trigger “serious internal unrest in China” are now also formulated more concretely, but “modern forms of espionage” are also integrated into the legislation. This particularly concerns foreign companies and organizations because, as the law was presented at the end of January, it does not detail where espionage begins according to the legal interpretation.
The USA fears that Hong Kong wants to create a basis to “eliminate dissenting opinions through fear of arrest and detention“. It accuses China of undermining international obligations and the principle of “One Country, Two Systems”, agreed upon when Hong Kong was returned from Britain to the People’s Republic until 2047.
Former Hong Kong lawmaker Ted Hui considers the broader interpretation and harsher penalties of Article 23 to be a means of political persecution with drastic consequences for the Hong Kong diaspora abroad. “If Hong Kongers abroad have called for an invalid or protest vote, they could only be charged with minor electoral offenses so far. With Article 23, people can now be charged with external interference, with substantially higher penalties,” Hui said in an interview with Table.Briefings.
The draft also provides for the expansion of police detention without charge. Detainees could then also be prevented from contacting a lawyer of their choice. Prison sentences can no longer be reduced due to good conduct.
86 non-governmental organizations had already called on China in mid-February in a joint statement to resist Article 23 internationally. Amnesty International urged Hong Kong authorities not to advance or pass laws “that ignore recommendations from United Nations experts”.
FBI Director Christopher Wray recently upped the ante in America’s anti-China campaign. In congressional testimony on January 31, he sounded the alarm over intensified Chinese hacking activity and warned that US infrastructure – telecommunications, energy, transportation, and water – is acutely vulnerable to the Chinese state-sponsored hacker group Volt Typhoon. Front-page coverage by the New York Times added to the sense of urgency.
A few days after Wray’s testimony, a joint report from the FBI, the Cybersecurity and Infrastructure Security Agency (CISA), and the National Security Agency (NSA) provided detailed documentation of the Volt Typhoon threat. More front-page coverage by the Times duly followed. And then came the outage of a major cellular network on February 22. Suddenly, cyber fears have taken on a life of their own.
Largely ignored in this frenzy is an important conditionality to Wray’s warning. China, he alleged, was “prepositioning” for future conflict. That is not the same as Russian President Vladimir Putin massing troops on Ukraine’s border in late 2021 and early 2022. In Wray’s words, Volt Typhoon could be expected to attack US critical infrastructure, “If or when China decides the time has come to strike” (my emphasis).
Thus, the FBI, in concurrence with CISA and the NSA, is basing its very public alarm purely on conjecture about China’s future intent, not on any concrete information of an imminent cyberattack. Far be it for me to doubt the veracity of the US intelligence community’s evidence on Volt Typhoon; I would merely point out that this is circumstantial evidence that has revealed absolutely nothing about the likelihood of action. For those who remember the dire, but erroneous, warnings about Saddam Hussein’s supposed weapons of mass destruction, which the United States used to justify the invasion of Iraq in 2003, this is no small concern.
Having recently written a book about the potential of false narratives to trigger an accidental conflict between the US and China, I worry a lot about over-zealous emphasis on circumstantial evidence. I also worry about the hypocrisy of the allegations of Chinese cyber prepositioning. Recall that the US deployed the Stuxnet computer virus against Iranian nuclear centrifuges back in 2010.
In a remarkable new book, The Politics of Language, David Beaver and Jason Stanley describe such leaps of faith as cases of “presuppositional resonance”: unsubstantiated projections of tangential (circumstantial) information that are marshaled to justify a politically expedient course of action. The current US political agenda vis-à-vis China is a classic example of this tendency.
Wray’s presuppositional warnings do not come out of thin air. He has a long history of anti-China fearmongering. In the summer of 2020, as that year’s presidential election campaign was heating up, Wray joined three other senior officials from Donald Trump’s administration (Secretary of State Mike Pompeo, Attorney General William Barr, and National Security Adviser Robert O’Brien) in a succession of carefully orchestrated anti-China tirades. Once a lead actor in Trump’s political theater, Wray has been unwavering in his strident Sinophobic views ever since.
The FBI director’s fixation on Chinese cyber threats has an unfortunate historical precedent that harks back to the first Cold War. The “red baiting” that targeted the Soviet Union and alleged Communist sympathizers back then is aimed at China today.
The bipartisan anti-China campaign in Washington seems dead set on backing the Chinese into a corner. That has become increasingly evident in the past three years, as the Biden administration has continued to prosecute the trade and tech wars that Trump started. Former Speaker of the House Nancy Pelosi compounded the pressure campaign with her 2022 visit to Taiwan, which poured salt on one of China’s most sensitive open wounds.
Similarly, under the leadership of US Representative Mike Gallagher – a soon-to-be retiring Republican from Wisconsin – a new bipartisan House Select Committee on China has used a combination of carefully staged hearings, threatening letters to US companies, and multimedia stagecraft to lead a crusade against China. It was hardly surprising to see the committee welcome Wray with open arms to its hearing on January 31.
Countless other US politicians have jumped on the bandwagon. There probably is not a single member of the US Congress – Democrat or Republican – who is willing to take a principled stand in favor of US re-engagement with China. Anyone tempted to do so will be accused of Munich-like appeasement. Although President Joe Biden came close to re-engagement at the Woodside Summit with Chinese President Xi Jinping last November, his administration remains unwavering in imposing escalating restrictions on Chinese access to advanced technology.
To be sure, China hasn’t made it easy. The surveillance balloon incident early last year – to say nothing of a “no limits” partnership with Russia, a country prosecuting a barbaric, illegal war of aggression – feeds America’s China-bashing politics. Wray’s cyber alarms amplify these presumed threats. In the end, however, this pressure campaign could backfire. Increasingly aggressive US actions have been stoking precisely the kind of hostile Chinese intentions that paranoid US politicians fear most. That is true regarding Taiwan and is also the case now with cyber security. America needs to be very careful of what it asks for.
All this points to a new chapter in the US-China conflict – trade and tech wars now reinforced by a cyberwar. Notwithstanding Biden and Xi’s denials, this conflict has cold war written all over it. The original Cold War came dangerously close to being hot, especially during the Berlin Crisis and the Cuban Missile Crisis. Could the risks of cyberwar take us that close again? Do we have the trust-based capacity to temper those risks? Wray’s fearmongering provides worrying answers to those questions. Grave danger lies ahead in the growing drumbeat of US-China cyberwar.
Stephen S. Roach, a faculty member at Yale University and former chairman of Morgan Stanley Asia, is the author of Unbalanced: The Codependency of America and China (Yale University Press, 2014) and Accidental Conflict: America, China, and the Clash of False Narratives (Yale University Press, 2022).
Copyright: Project Syndicate, 2024.
www.project-syndicate.org
In the National People’s Congress, the representatives of China’s minorities stand out, particularly dressed in traditional attire. They are not only meant to showcase local customs but also represent the internal unity of the People’s Republic. However, some of the bureaucrats seated directly behind them might be frustrated, as the towering headdresses sometimes obstruct their view of everything happening on stage.
