Read: Things weren’t always this bad
The United States, meanwhile, is probably facing a reordering of its trading relationships (and possibly of its trade disputes, too). Contrary to Trump’s boasts, few U.S. firms are “reshoring,” or moving production back to the United States from China. (In the American Chamber of Commerce in China survey, fewer than 6 percent said they were considering such a shift.) That means the trade deficit that so irritates the president will likely be reapportioned across different countries. For China, the changing face of global manufacturing puts pressure on Chinese firms to “move up the value chain,” as economists call it. No longer able to rely on basic export manufacturing to sustain employment, China’s business owners will have to learn to produce higher-quality, more innovative goods to keep the country’s growth miracle alive. That’s what Beijing’s contentious industrial policies—fostering cutting-edge sectors from electric vehicles to microchips with state support—are designed to do.
But here, too, the dispute with the U.S. is potentially wreaking havoc. The Trump administration has been taking steps to keep vital U.S. technology out of Chinese hands—most dramatically, by banning American firms from selling critical components such as microchips to several important Chinese tech companies, including the telecom giant Huawei. Such measures, combined with Beijing’s obsession with controlling homegrown technology, could separate the U.S. and China digitally, with consumers in each using different software and gadgets. Beijing has already started that process by erecting the Great Firewall to block many American internet firms from operating in the Chinese market. That’s one reason why Chinese netizens live in a distinct online universe, microblogging on Sina Weibo rather than Twitter; and searching on Baidu, not Google.
The growing distrust between the U.S. and China is starting to pull apart their citizens in the real world as well as the digital one. Legislation has been introduced in Congress that would bar any Chinese scientists associated with its military from studying or researching in the United States. This month, Beijing’s Ministry of Education issued a warning to Chinese students “of the need to strengthen risk assessment before studying abroad” in the U.S. Huawei, meanwhile, recently booted Americans from its R&D operations at its Shenzhen headquarters. A Huawei spokesman said the company is reviewing its responses to Washington’s actions.
This realignment of business, technology and people is also taking place among nations. As China and the U.S. drift apart, a new pattern of global relations may be emerging. For instance, China and Russia are probably friendlier today than they were for most of the period when both were Communist. Russian President Vladimir Putin showed up at Xi’s hotel with ice cream to celebrate the Chinese leader’s birthday while the two attended a conference in Tajikistan this month. Italy boldly broke ranks with the U.S. and some of its European allies earlier this year to become the first G7 country to sign on to Xi’s controversial infrastructure-building program, the Belt and Road Initiative. For many countries with economic ties to China but strategic alliances with the United States, straddling the fence between the two will becoming more and more difficult.
