China’s belt-and-road initiative is China's strategic answer to the US containment strategy. China has claimed the whole of the South China Sea and has militarised many islands there. It is building up a modern naval force.
It cannot challenge the US’s maritime power but can deny the US Navy moving freely in the South China Sea and Taiwan Straits with asymmetrical capabilities. China was never a maritime power but it will be one regionally.
China is showing its model of political and economic governance is viable. As democracy flounders in many western countries, its socialist capitalism with Chinese characteristics may prove to be an attractive alternative to liberal western democracy.
Lastly, China is seen to be ruled by one strong authoritarian man with a vision to realise his China dream - that is, Make China Great Again.
Military conflict is not imminent between the US and China. The Chinese do not want it, nor can the US justify it. So the US has chosen the economic weapons, starting with trade tariffs. Trade tariffs are being imposed on the grounds of national security. The World Trade Organisation is being ignored.
The argument is tariffs will not just protect US jobs and industries but also slow down China's growth and damage its economy. Initially, Chinese officials called it ‘economic terrorism’. Now, they change it to ‘economic bullying’. A better term may be ‘economic containment’.
Yes, tariffs are being enforced, ostensibly against everyone who has huge trade surpluses with the US, but the big target is China. Smaller countries like Mexico, Canada and South Korea will bend to the US’ will - but not China. It is not just because China is huge. It is also because it's humiliation by foreign powers in the last century is deeply etched in its memory.
President Trump's arithmetic is simple: if you export three times more to me than I export to you, I can hurt you more than you can hurt me. I will surely win in an all-out trade war. And indeed, China is more vulnerable than America in a tariff tit-for-tat.
But, as Martin Wolf wrote in The Financial Times, “the President's demands on tariffs and imports are ridiculous. No sovereign state could accept them”. He concluded “this may be a decisive moment for the relations between the world's two greatest powers”.
From trade, it could move into other economic and non-economic areas like education, currency manipulation and technology and increased sales of arms to Taiwan. Expect the two countries to lock horns for a long time. President Trump needs the political gain but President Xi cannot lose political face.
The Chinese are worried about President Trump. They do not think he is erratic or impulsive. They look at the people he has picked for his Administration, they see Trump has acted on his election rhetoric. He is the first president to bash China on three fronts - trade, ideology and military.
How is China responding? So far China has responded with restraint, with a statesmanlike manner. It is not looking for a fight but it cannot just turn the other cheek.
China is reacting to the US trade tariffs on its products and levying the same rate of tariffs on American imports up to the same value. At the same time it is signalling the dispute can be resolved with negotiation - but not with a gun pointed to his head.
China tries to occupy the high moral ground. At Davos earlier this year, Xi Jinping championed the cause of free trade and multilateralism. A few months later, he confirmed China's position in Bo’ao. China's foreign minister Wang Yi said ''China and US can compete but need not be rivals, if anything, we need to be partners”.
One People’s Liberation Army general proclaimed China will not enter into an arms race. China's defence expenditure is about 1.3 per cent of GDP, while the US and Russia have consistently kept theirs at above 3 per cent. Nevertheless, at the 19th Party Congress last October, President Xi Jinping said ''China will complete the modernisation of its armed forces by 2035 and achieve a world class military by 2050 that could fight and win wars”.
This bravado will only reinforce American views a strategic battle against China must begin now.
Thomas Friedman wrote in The New York Times that US and European government officials and business leaders had made it crystal clear to him what's going on right now is nothing less than a struggle to redefine the rules governing the economic and power relations of the world's oldest and newest superpowers. This is not just a trade tiff.
The executive Vice President of the Chinese Foreign Ministry’s research institute concurs: “This is a defining moment for US-China relations; it is about a lot more than trade and tariffs, this is about the future.”
According to Friedman, the trade hardliners in the Trump administration believe this is a fight worth having now, before it is too late, before China gets too big. But is it just the trade hardliners? What about the military hardliners?
The battle is joined. The US is pursuing its trade tariffs aggressively, while China is responding calmly. On the surface anyway.