USCNPM: Bob Kapp on Decoupling and Economic Interdependence

By Tang Jie.

1. In 1947, George Kennan’s famous telegram “The Sources of Soviet Union Conduct” was published in Foreign Affairs, and established the foundation of the U.S.’ containment strategy towards the Soviet Union entering the Cold War.

An article was recently published in Foreign Affairs titled “The Sources of Chinese Conduct” discussing similarities between Kennan’s strategy of containment and the contemporary U.S. strategy towards China. Do you think the U.S. is heading into a second Cold War with China?

Although the title of this article suggests a conscious attempt to mimic Kennan, and perhaps to achieve some of Kennan’s mythic stature, the article on China is just one of a great many articles in Western languages attempting to define the central characteristics of foreign policy making — and of policy-making in general — in contemporary China. 

The term “Cold War” comes easily to the tongue in the U.S. and became popular as the global contest between the U.S. and the USSR crystallized in the years following the Second World War. But there was only one “Cold War,” and any attempt to characterize Sino-American relations, now or in the future, by the use of that very specific term, which referred to a specific conflict between the U.S. and the USSR, would be ill-advised and misleading. 

The United States and China may find themselves locked into an uneasy relationship of long-lasting frictions, disagreements, or even (hopefully not) “proxy” conflicts played out in third countries, but the very nature of Sino-American relations as they have developed since 1979 makes it silly to apply the term “Cold War” to future American-Chinese relations.

2. China is now considered the primary rival of the U.S., and there is a saying that the American economy will eventually be “decoupled” from the Chinese economy. Do you think decoupling is a real possibility?

Change is constant. Nations grow and shrink. Their economies develop into different stages. Their social demographics change over time (e.g., the future size of the Chinese work force will be smaller than it was thirty years ago). No single moment in the U.S.-China relationship will last forever. 

We cannot know whether the U.S. and China will find within themselves the vision and the flexibility to adjust to each other’s changing priorities and changing ambitions. If they cannot, a long period of relative disconnection is possible. But the attempt to build an impenetrable wall between a “Chinese zone” and a “U.S. zone” in world economic affairs would be futile, expensive, and ultimately self-defeating, even though the attempt might seem politically attractive to certain leaders and certain elites in both countries.

4.  What do you think is Trump’s ultimate goal regarding China? What does he want from China? 

I can’t speak for Trump; I don’t know him and I have no contact with his staff or members of his cabinet agencies. My opinion of Trump as a human being is low, and I prefer not to elaborate on my low regard for him, or for his presidency, in this format. It is not a matter of being “afraid” of Trump. It is a matter of what is appropriate to say, on the record, and of to whom I am saying it. I am not interested in providing ammunition to anyone, especially anyone remotely connected to the propaganda apparatus of the People’s Republic of China (PRC) and the Chinese Communist Party, by commenting harshly on Trump or his administration or his policies.

5. There is speculation that the American government will block Chinese listings on the American stock market. Do you think this will happen?

I do not think that the U.S. will force the de-listing of all PRC-headquartered/PRC-invested firms from American stock exchanges. On the other hand, there is a long history of Chinese firms failing to provide complete information as to their finances, their investors, et cetera, as required by American accounting standards. This problem is not new.

It may well be that individual Chinese firms which, having listed on the New York or other stock exchanges, proves unwilling or unable to reach transparency levels required by law or by accepted professional standards in the U.S., and such firms may face the possibility of de-listing if they do not comply with U.S. requirements. Any attempt to claim “Chinese characteristics” will not be accepted.

6. Some experts have warned that the Chinese government might attempt a mass selloff of American bonds if tensions rise to a breaking point. Do you see this as a possibility? 

I am not sufficiently well informed to comment on that, other than to note the commonly accepted wisdom that a massive sell-off of such bonds would reduce the value of the bonds themselves and thus entail potentially very serious losses for Chinese bondholders.

7. As the United States approaches the 2020 elections, can we expect to see the trade war cool? Do you think a new president will establish friendlier relations with China?

My personal view is that the current frictions with China will not prove to be decisive factors in the 2020 national election, unless the U.S. and China become involved in military hostilities (e.g. in the south China sea or elsewhere). The increase in prices in U.S. markets resulting from U.S. tariffs on Chinese imports may be cited by opponents of the current administration, but those opponents are themselves vigorous advocates of “tough” American treatment of China because of China’s widely recognized behaviors (as listed in the original “301 report” and then in Lighthizer’s initial negotiating agenda with Beijing).

If Trump is defeated, I would expect the new American administration to turn its attention to minimizing or reversing the damage that the current administration has inflicted upon virtually every aspect of American foreign policy and foreign relations, and that a new American administration would make a sincere effort to re-establish some of the stabilizing forms of cooperation between the U.S. and China that characterized the decades preceding 2017. 

Nevertheless, the national day parade in Beijing last month, with its emphasis on China’s very advanced strategic weapons, is a clear suggestion that the U.S. represents the largest single threat to China’s own advance, and, unless Beijing is prepared to join with a different American administration in finding common ground and rebuilding essential lines of communication and cooperation, no amount of changing American foreign policy emphasis post-Trump will suffice to turn this tortured relationship back onto more stable and productive pathways.