Henry “Hank” Merritt Paulson Jr., an American banker and financier, served as the 74th United States Secretary of the Treasury from 2006 to 2009. Prior to his role in the Department of the Treasury, Paulson was the Chairman and CEO of Goldman Sachs. In an article he posted on Foreign Affairs, on January 26, 2023, he wrote that America’s China Policy is not working and warned about the “Dangers of a Broad Decoupling.”
When Russia invaded Georgia in 2008, the US-China relationship was quite different. As Treasury secretary, Paulson worked with Chinese leaders during that financial crisis to forestall contagion, mitigate the worst effects of the crisis, and restore macroeconomic stability. “Today, such cooperation is inconceivable” because the US-China relationship has seriously deteriorated. For one, China’s economy has tripled since 2008 and China has become more assertive. “Without a stable relationship between the United States and China, the world will be a very dangerous and less prosperous place.”
In 2023, unlike 2008, nearly every aspect of Chinese-U.S. relations are ‘interpreted’ through the narrative of national security, even on matters such as job-creating investments or co-innovation in breakthrough technologies: Beijing regards U.S. export controls aimed at protecting US technologies as a threat to China’s future growth; and Washington views anything that could advance China’s technological capability as enabling the rise of a strategic competitor and aiding Beijing’s aggressive military buildup.
“The United States is attempting to organize a coalition of like-minded countries to counterbalance and pressure China, but this strategy is not working as over the long term, it is likely to hurt Americans more than the Chinese people.” In fact, many countries are doing the opposite of what the hardest-line voices in Washington want them to do. Instead of decoupling or de-integrating economically, many countries are deepening trades with China even as they hedge against potential Chinese pressure.
Washington’s effort to counter China is arguably somewhat successful with its European allies but it is not faring well in the global-south. “Chinese-African trade reached a historic high in 2021, rising by 35 percent from 2020.” Saudi Arabia’s largest trading partner is China, and its Vision 2030 reform plan leans heavily on collaboration with Chinese tech firms, including Alibaba and Huawei. Indonesia has actually made Huawei its partner of choice for cybersecurity solutions including government systems.
The one message Washington should take away from the world’s refusal to disengage with China is that this will hurt the US more in the long run.
“The political winds are strong and the desire to punish China even at the United States’ expense is driving many in Congress. Biden will need a lot of courage to be smart and bold in the face of these challenges.”
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