China Soft-Peddles US Rhetoric, Measures

With time on its side, Beijing waits for Washington to exhaust itself

Jul 21, 2020

By: Toh Han Shih

China has reacted in a relatively mild and conciliatory manner against the US’s tough rhetoric and hostile measures, including economic sanctions and sending two carrier battle groups into the South China Sea.

The latest US measures against China include tougher screening of Chinese investments and sanctions on 11 Chinese companies.

On July 18, Cui Tiankai (above), the Chinese ambassador to the US, told Fareed Zakaria in a CNN interview: “We are always ready and open to work together with the US government, any administration.”

But the US is not so cooperative. On July 20, US Secretary of State Michael Pompeo tweeted: “Dialogue-at-all-costs diplomacy does not work—it never has, and it never will. The CCP's (Chinese Communist Party’s) unilateral aggression, intellectual property thievery, and broken promises on their actions in the South China Sea prove that.”

At a conference on the Committee on Foreign Investment in the United States (CFIUS) on July 15, US Assistant Treasury Secretary Thomas Feddo said the US Treasury Department will adopt tighter screening of overseas investments, with China as a key target.

In the short term, CFIUS, the US Treasury Department committee which screens out foreign investments that threaten US national security, will issue formal enforcement guidelines, Feddo said. The US Treasury Department will soon finalize a rule which it proposed on May 21, Feddo disclosed. The proposed rule would require a transaction to be filed if the foreign investor in a US firm were to need export control authorization to transfer the US company’s products or technology to its home country.

CFIUS will vigorously enforce requirements for potential foreign investors to file information with the US government and actively engage with US allies on scrutinizing foreign investments in the US, Feddo added. “It’s essential to US national security that our allies and partners develop and maintain effective national security-focused investment screening processes.”

The Treasury Department has recently engaged with a number of international allies, including the G7 Finance Ministers, Australia, Canada, and the United Kingdom, Feddo revealed.

China is a major concern for the US, Feddo said: “Others want to displace us; for example, in 2017 Beijing released a plan to become the global leader in AI (artificial intelligence) development by 2030,” adding that from 2012 to 2018, China was the biggest source of foreign investment applications with CFIUS, while in 2007, the UK, Canada and Australia were the top three sources.

Chinese investments in the US plunged from a peak of US$45 billion in 2016 to US$5 billion in 2019, according to Rhodium Group, a US consultancy.

On July 20, the US Commerce Department announced it has sanctioned 11 Chinese companies over alleged human rights violations in the Xinjiang Uyghur Autonomous Region, a Chinese province with a significant Muslim Uyghur population. Under these sanctions, the companies face restrictions on access to US technology and commodities. The sanctioned companies include a Changji Esquel Textile, a Chinese subsidiary of Esquel Group, a major Hong Kong textile and apparel manufacturer.

In a speech on July 7, US Defense Secretary Mark Esper said China, then Russia, are the top strategic competitors of the US. Yet the response to Esper’s hawkish words by Chinese Foreign Ministry spokesman Wang Wenbin was dovish. At a press conference of the Chinese Foreign Ministry in Beijing on July 20, Want said, “We are committed to developing a China-US relationship featuring non-conflict, non-confrontation, mutual respect and win-win cooperation. In the meantime, we firmly uphold our sovereignty, security and development interests.”

An article in the Global Times, a nationalistic Chinese newspaper, took a harder line to Esper’s speech. The state-owned newspaper said China isn’t afraid of an accidental military incident with US forces. The article added, “China certainly won’t mess around in the first place. But if the US reaches out to provoke, China won’t sit back and take it.”

Surprisingly for such a jingoistic newspaper, a Global Times editorial on July 17 said, “If the US government wants to shape a new cold war against China, it will need China’s fierce response to mobilize the entire US society and Western world. China must avoid such confrontation.”

Beijing’s soft approach is a “feeler” to see what the US response is and to see if the ‘trial balloon’ results in a change of tack by the US, said Dane Chamorro, a Singapore-based partner of Control Risks, an international risk consultancy. “China may also be ‘testing’ the US administration to see if there are in fact any ‘soft liners’ left.”

“There is a point at which the relations become so bad that either side may want to see them improved. China has obligations on trade to meet and this is US election season so they may want to see what the result is if they offer an olive branch,” Chamorro said.

US-China relations are deteriorating over a range of issues, including trade, technology, developments in the South China Sea, Taiwan, Hong Kong and human rights, said Lynn Kuok, a Shangri-La Dialogue Senior Fellow for Asia Pacific Security at the International Institute for Strategic Studies, which is headquartered in London. “These have become increasingly intractable because they have at their heart less the individual dispute per se, but what each means for broader US-China competition.”

The Cold War analogy is not very helpful in describing the current Sino-US tensions, since the US and Chinese economies are far more integrated now, Kuok said. “Uncoupling them in their entirety will come at great cost and the US will not be able to hurt China’s economy, without also greatly hurting itself – and vice versa.”

Second, China today is economically much stronger than the Soviet Union was, Kuok said. China is the second-largest economy in the world; measured in purchasing power parity it surpassed the US in 2014, she added.

If US President Donald Trump loses thUS presidential election to Joe Biden in November, US-China relations will become more predictable, Chamorro predicted. “But the distrust of China is across both parties. It is a systemic conflict that will probably last for the next generation at least.”

Toh Han Shih is a Singaporean writer in Hong Kong.

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