Asia & the Pacific

The U.S. position in the global value chain puts it at a disadvantage, and Washington's confrontational policies are making things worse.

China has at least a 70% dependence on the U.S. and its allies for more than 400 items, ranging from luxury goods to raw materials needed for Chinese industries, a new analysis of trade data has found. (...) The analysis, set to publish Wednesday in the International Security academic journal, uses data from the United Nations Comtrade database, which tracks official global trade statistics. China’s high-dependency exposure was calculated by bundling together trade activity from the U.S. and more than a dozen allies across a range of categories.

In the wake of the global financial crisis of 2008, China began to move away from the market-based approach that had shaped its economic policies for three decades, and toward something that might be termed "party-state capitalism," which involves a high degree of CC control over strategic sectors of the economy. This has led to significant changes in the U.S.-Chinese economic relationship, as both sides have made efforts to secure supply chains, screen inward and outward capital flows, diminish the power of global firms, and reorganize alliances to protect against economic coercion.

In an essay for Harvard Kennedy School Magazine, Henry Lee argues the policies China is pursuing to wean itself off reliance on fossil fuels may also benefit its quest for greater energy security.

Of all the intractable issues that could spark a hot war between the United States and China, Taiwan is at the very top of the list. And the potential geopolitical consequences of such a war would be profound. Taiwan-"an unsinkable aircraft carrier and submarine tender," as U.S. Army General Douglas MacArthur once described it--has important, often underappreciated military value as a gateway to the Philippine Sea, a vital theater for defending Japan, the Philippines, and South Korea from possible Chinese coercion or attack.

Russian military action in Ukraine could trigger an energy crisis even more serious than the one already hitting Europe. As has been pointed out, should the West hit Russia with severe new sanctions, President Vladimir Putin could cut off natural gas exports, leaving the continent shivering through midwinter. Yet there is another potential weapon of Russia’s that’s been less discussed and might be very effective: An ability to disrupt global oil markets, which would directly hit U.S. consumers.

During war, states trade two types of products with their enemies. To maximize revenues, states continue to trade products that are essential to the domestic economy or that their adversary takes a long time to convert into militarily capabilities.

Renewable hydrogen offers significant advantages for China. It can help Beijing meet its climate and pollution goals—at a time when coal continues to dominate—while avoiding increased reliance on imported fuels. As a readily dispatchable means of storing energy, hydrogen can help to address intermittency and curtailment issues as renewable energy increases its share of China’s energy mix. As a sustainable mobility energy carrier, it can power fuel-cell electric vehicles or be the base for synthetic fuels. Finally, renewable hydrogen can open new avenues for developing clean technology manufactured goods for both internal and export markets.

The success of U.S. President Joe Biden's China policy will depend on whether the two powers can cooperate in producing global public goods, while competing in other areas. The U.S.-China relationship is a "cooperative rivalry," in which the terms of competition will require equal attention to both sides of the oxymoron.  Joseph Nye argues that it will not be easy.

It is a critical first step that the financial policymakers of the United States have acknowledged the need for a CBDC, but that realization is not enough.