Chartbook 249: The "war in sight" scare of February 2023 & its aftermath - learning to manage the Sino-US confrontation.

The world is watching the Middle East in a state of high tension. Will the conflict escalate and expand? The prospect is nightmarish enough. But just imagine if this crisis were happening not now, but at the beginning of 2023.

Why would that have made a difference? In the region itself, the configuration of forces was broadly similar. The struggle in Ukraine was raging, then as now. The decisive difference, as Edward Luce points out in a typically insightful column in the FT, is to be found not in the Middle East, but on the other side of the world, in relations between the United States and China.

Earlier this year we were confronting a truly terrifying slide towards open confrontation between the USA and China.

What played out in public was first Pelosi’s visit to Taiwan in August 2022, which seemed to put in question the “one China” policy. Then, as Luce described it:

In October, Biden took the world a step closer to full blown economic bipolarity. The US commerce department issued orders to shut off China’s access to advanced semiconductors. This action was taken on the basis that Chinese leader Xi Jinping’s drive for “civil-military fusion” meant China’s economic development could no longer be disentangled from its accelerating military reach. Jake Sullivan, Biden’s national security director, reassured nervous US and allied chipmakers and suppliers that this would be a “small yard” with a “high fence” — the scope of affected commercial activity would be limited. Yet he added Washington was considering similar restrictions on US-China biotechnology and clean energy ties. The effects on swaths of economic activity — from artificial intelligence and quantum computing, to critical minerals, batteries and commercial drones — are hard to quantify.

Then, despite an apparent deescalation at the G20 in Bali in November, in February 2023, the balloon crisis exploded. How the overflight by a Chinese balloon was allowed to escalate into a major international incident, is a mystery apparently even to Biden administration insiders. Astonishingly, the need to parry attacks from Fox news took precedents over managing relations with Beijing. The outcome was the cancellation of Blinken’s scheduled visit.

The tension was compounded by a leaked email in late January 2023 in which an Air Force General spoke about 2025 as the likely date for war. One might be tempted to dismiss this as a matter of loose lips. But from the most senior levels of the US command chain there came off the record confirmation that 2025 was, indeed, the timeline on which war seemed quite possible.

It seemed that there was nothing to slow the escalation. Communication between Washington and Beijing was at a low.

On 28 February 2023 Rep. Mike Gallagher (R-Wis.) launched the first hearing, of the House select committee on the Chinese Communist Party (CCP) with a flaming declaration of ideological warfare: “This is an existential struggle over what life will look like in the 21st century, and the most fundamental freedoms are at stake. The CCP is laser-focused on its vision for the future — a world crowded with techno-totalitarian surveillance states where human rights are subordinate to the whims of the party.”

He gave notice that henceforth, whether in government or business, anyone failing to fall into line with the new hard line on China would be prima facie suspect of at least unwitting connivance with the CCP.

So heated was the mood that some of the most influential voices amongst the commentariat in Washington decided it was time to raise the alarm. Fareed Zakaria, Max Boot and Ed Luce all weighed in.

Zakaria described Biden’s response to the balloon as one of panic and called for a more reasoned response:

China is a serious strategic competitor, the most significant great-power challenger the United States has faced in many decades. That is all the more reason for Washington to shape a rational and considered foreign policy toward it — rather than one forged out of paranoia, hysteria and, above all, fears of being branded as soft.

Max Boot warned against the:

dangers of blundering into war with China. The United States should continue to support Taiwan and to deter China, but should also keep lines of communication open and avoid needless provocations such as recognizing Taiwan’s independence

Ed Luce, took the argument one step further:

If Taiwan did not exist, would the US and China still be at loggerheads? My hunch is yes. Antagonism between top dogs and rising powers is part of the human story. The follow-up is whether such tensions would persist if China were a democracy rather than a one-party state. That is harder to say but it is not obvious that an elected Chinese government would feel any less resentful of the US-led global order. It is also hard to imagine the circumstances in which America would willingly share the limelight. All of which suggests that loose talk of a US-China conflict is no longer far-fetched. Countries do not easily change their spots: China is the middle kingdom wanting redress for the age of western humiliation; America is the dangerous nation seeking monsters to destroy. Both are playing to type. The question is whether global stability can survive either of them insisting that they must succeed. The likeliest alternative to today’s US-China stand-off is not a kumbaya meeting-of-minds, but war.

The coincidence of these pieces in March and April warning of the risks of escalation was no accident. It reflected the state of alarm inside the beltway.

I sought to make sense of the situation with a piece in the FT pointing out the way that what Karl Polanyi called the “peace interest” - the business interests previously vested in globalization and specifically in America’s economic relations with China - had been sidelined.

It will be some time before the administration memoirs appear describing the escalation over the winter of 2022-2023 from the inside. What made it possible? How far did it go? It will be many more years before the internal documentary record is accessible. But this moment may well come to be regarded as the first, bona fide war scare of our new era of Sino-US confrontation.

The intensity of the escalation did not transmit with full force to the broader public or the Europe. It was felt above all within the policy-making and opinion-shaping loop in Washington. But, if you were to any degree exposed to that echo chamber it was, as Ed Luce puts it, “nerve-jangling”.

Of course, what we face today is nothing like the proxy war waged between the Soviet Union and its Arab allies, Israel and the United States in 1973. But imagine, if our current anxiety about a widening conflict in the Middle East, was playing out against the backdrop of the apparently uncontrolled escalation in Sino-US tension earlier this year.

We do not face that scenario because, as Luce recognizes, the Biden administration had since the spring made a determined effort to reestablish lines of communication with Beijing. There is no deescalation or detente or resolution of any of the key issues. As I argued in a piece for Foreign Policy discussing Janet Yellen’s speech on Sino-US economic relations, the terms for an economic detente she offered to China were clearly unacceptable. Washington speaks of a “small yard with a high fence”. Yellen graciously pointed out that it was perfectly possible for China to find ways of growing that did not challenge America’s global leadership. But who can seriously expect Beijing to confine itself to pursuing economic growth in all areas other than those that Washington chooses to label as strategically significant? Nevertheless, that Washington was at least thinking about the terms for coexistence was a step forward.

Since June Yellen, Blinken and Raimondo have all visited China. Nothing concrete came of those meetings but after the antagonism of earlier in the year, channels of communication reopened. Now Chinese foreign Minister Wang Yi is arriving in Washington, the first such visit since pre-COVID times. And there is at least the prospect that Xi may attend the APEC summit in San Francisco, which would be significant following his decision to snub the G20 in India.

As I described it in this newsletter apropos of Yellen’s seemingly inconsequential visit to Beijing, these contacts do not offer the resolution of any of the fundamental tensions between China and the USA. But they are steps towards learning to manage the relationship. As Jake Sullivan, this week pointed out in an article in Foreign Affairs: “High-level and repeated interaction is crucial to clear up misperception . . . and to arrest downward spirals that could erupt into a major crisis.” And that matters around the world.

China has significant influence over Iran. Thanks in part to the USA turning a blind eye on sanctions, Iran has become a major oil supplier to China. As Sullivan notes:

The deal that China brokered this year between Iran and Saudi Arabia partially reduced tensions between those two countries, a development that the United States also wants to see. Washington could not have tried to broker that deal, given the lack of U.S. diplomatic relations with Iran, and it should not try to undermine it.

Now Luce suggests the White House will connect the dots: “Should Hizbollah, Tehran’s proxy army, open a second battle front in Israel, the chances of one of the two US aircraft carriers in the region striking Iran will rise. Were China still refusing to take America’s calls — as was the case five months ago — that risk would be greater.” “In today’s Middle East, America’s ability to talk to China could be the difference between a regional war and its absence. … The more they can converse, however, the lower the existential risk.”

After the uncontrolled escalation we witnessed in early 2023, the reality of existential risk has to be taken deadly seriously.

***

Thank you for reading Chartbook Newsletter. It is rewarding to write. I love sending it out for free to readers around the world. But it takes a lot of work. What sustains the effort are voluntary subscriptions from paying supporters. If you are enjoying the newsletter and would like to join the group of supporters click below. As a token of appreciation you will receive the full Top Links emails several times per week.