Both the US and China have already issued counter warnings to would-be double-dealers who might wish to strike trade deals at the expense of each other’s interests.
On New Year’s Day, the United States and China celebrated 45 years of diplomatic ties.
In a statement marking the anniversary, China’s foreign ministry spokesperson noted that relations between the two economic superpowers “have weathered winds and rains” but have come a long way. Stronger US-China relations contribute to world peace, stability and development, the statement added.
However, after 45 years, and despite the two countries having fostered closer ties, world peace, stability and development seem more elusive than ever.
Given their internal battles, it looks as though the US-China tug-of-war will continue to be a major theme this year. The question is, as the two superpowers duke it out, what will be trampled in the process?
In his New Year message on Monday, Chinese President Xi Jinping made a rare admission — that his country’s economy has struggled.
Reflecting on the role of China in a tumultuous global economy, Xi noted: “Along the way, we are bound to encounter headwinds. Some enterprises had a tough time. Some people had difficulty finding jobs and meeting basic needs.”
China’s economic travails coloured much of 2023, as the superpower recorded disappointing industrial, export and retail performance after the lifting of its strict zero-Covid lockdown measures. This jeopardised growth in the global economy, which has become reliant on China’s barreling expansion since the turn of the millennium.
Moody’s downgraded China’s credit outlook from stable to negative last month citing “structurally and persistently lower medium-term economic growth” as well as the country’s property crisis.
That said, China remains a formidable adversary to the US, which also endured harsh economic headwinds in 2023.
Indeed, towards the end of last year, the International Monetary Fund (IMF) upgraded China’s growth prospects to 5.4% in 2023 and 4.6% in 2024. The US economy, which recorded stronger-than-expected growth last year, is expected to have grown 2.1% in 2023. The IMF has projected the world’s largest economy will grow 1.5% this year.
Xi’s New Year speech was regarded as important for another reason — namely because of the president’s doubling down on the message of the “reunification” of Taiwan and China, which he deemed a “historical inevitability”.
China’s threats of an invasion of self-ruled Taiwan, an important economic player in its own right, are a key source of deteriorating relations between Beijing and Washington. Xi’s harsher rhetoric on Taiwan is partially a reflection of souring US-China relations, a fact which got Washington’s and its allies’ backs up.
Not even two weeks into 2024, the world will witness what could be the next big development in this conflict as Taiwanese voters go to the polls. Xi’s New Year message is seen as being a warning of what fallout awaits in the event of a win by the Democratic Progressive Party’s William Lai Ching-te, viewed by China as a separatist.
If China adopts a more progressive stance on Taiwan and expands its military presence, the Asian superpower could face international sanctions or even a direct conflict with the US.
Meanwhile, another election stands to stir enmity between the two superpowers, this time in the US where candidates are likely to be called on to demonstrate their ability to hold firm against China.
Indeed, neither incumbent Joe Biden nor his Republican rival will be willing to appear weak on America’s greatest adversary — even if this ends up hurting the US economy in the long run.
Donald Trump has already vowed to double down on the protectionist trade policies that characterised his first term, promising to adopt a four-year plan to phase out all Chinese imports of essential goods and to establish new rules to stop US companies from investing in the rival economy.
While US-China relations may have calmed in the wake of last year’s meeting between Biden and Xi, a lot is riding on Beijing’s approach to Taipei beyond the January elections.
In a note published last month, economists from Momentum Investments noted that despite the need for China to focus on its growth prospects, the risk that the superpower will pursue a heavy-handed unification of Taiwan “is higher in the next five years than it has been in the last decade”.
With 2024 being the biggest election year in history — as more than half of the global population heading to the polls, according to The Economist — it can be expected that much of the residual geopolitical uncertainty will only be settled after this year. Some of that disquiet will linger for much longer.
In the meantime, warnings abound about the economic impact of geopolitical fragmentation and what has been called Cold War II.
As IMF first managing deputy director Gita Gopinath put it last month: “With the weakest global growth prospects in decades — and with disproportionate scarring from the pandemic and war slowing income convergence between rich and poor nations — we can little afford another Cold War.”
While two giants, the US and China, battle it out for a bigger place on the global stage, many economies risk becoming even smaller. In this scenario, our common values — peace, stability and development — are pushed further to the periphery.