U.S.-Sino Relations: Why Economic Codependence Affects Everybody

In the peak of their polar opposite economic crises, the United States and the People’s Republic of China (PRC) juggle both national and economic security–but often with repercussions that only add to their existing issues all the more. 

On Aug. 9, the President of the United States (POTUS) Joseph Biden signed and Executive Order on Addressing United States Investments In Certain National Security Technologies And Products In Countries Of Concern. The order, passed specifically in response to concerns raised foreign investments inadvertantly supplying Chinese military efforts, adds restrictions upon American foreign investments in the People’s Republic of China (PRC).

In his staement, President Biden explained, “Rapid advancement in semiconductors and microelectronics, quantum information technologies, and artificial intelligence capabilities by these countries [including the PRC, the Special Administrative Region of Hong Kong and the Special Administrative Region of Macau] significantly enhances their ability to conduct activities that threaten the national security of the United States,” [emphasis added].

The order requires U.S. private equity and venture-capital firms to disclose certain transactions and investments, as Biden shared: “the development of more sophisticated weapons systems, breaking of cryptographic codes, and other applications that could provide these countries with military advantages,” such as Goldman Sachs who had invested in a fast-rising Chinese artificial intelligence company, 4Paradigm, which then won an unpublicized contract with the Chinese military in 2021. 

The order prevents the U.S. from self-sabotaging themselves in the event that China does decide to invade Taiwan–yet it does not factor out self-sabotaging our own economy right now. While the intent of the order was not to decouple economies and stifle China’s recent mixed market economy, slowing foreign investment in China further contributes to the deflating of its economy–and the inflating of ours.

 Trade between the two nations began with the U.S.-China Relations Act of 2000 was signed by President Clinton and granted “Beijing permanent normal trade relations with the United States and [paved] the way for China to join the World Trade Organization in 2001,” the Council of Foreign Relations states. Since then, open trade and investments have been proven vital to the U.S. and Chinese economies. 

But with increasing American desires for domestic manufacturing, Americans have already been expecting escalating prices for years while the the Chinese population endures the pitfall of their living conditions, native currency value, and job market.

The Chinese Communist Party (CCP) continues to strictly cling to military expansion to attain Taiwan for its booming technology market. Within the past two years, China has transitioned from using the U.S. dollar as a reserve currency as an intermediary to the Chinese Yuan; the Chinese Navy has maintained the title of the largest in the world; through U.S. sanctions in Russia since the start of the Russian-Ukrainian war in February 2022, China has seized the opportunity to become Russia’s primary supplier in the war with common goods and key technology; and Beijing has used assets from foreign investments to supply the resurgence of military spending and fight for the South China sea’s oil and natural gas reserves–all of which occurred simultaneously to the unemployment rate for workers ages 16-24 reaching a record high of 21.3% in June 2023.

The new order is seemingly Biden’s first-ever forceful move in geopolitics since his presidency began–especially considering his widespread support from Republicans for continuing former president Donald Trump’s efforts to curtail trade with Beijing during his presidency. However, it is vital that law-makers and economists in Washington are ready to provide safety nets for the public in the understanding that the U.S. and Chinese economies–and therefore standards of living–are codependent, even if they are in opposite correlation. 

In his state department press briefing, State Deputy Spokesperson, Vendant Patel, assures reporters that the U.S. has been active in responding to each motion that presents itself as a threat to U.S. national security. 

“Our approach to the PRC (People’s Republic of China) has been consistent from the beginning,” Patel explained. “And part of that…is not just investing within ourselves, in the United States, but also, deepening our alliances in convergence with our partners and allies–including of course, the Republic of Korean (ROK) and Japan,” Patel stated.

The United States has been deepening alliances with Guam, Japan, the Phillipines, Australia, and more islands in the  South China Sea in trade and militarization. The Insider writes, “The 2023 National Defense Authorization Act, signed into law this month, authorizes funds for military construction projects throughout the Pacific, including at major US bases and smaller outposts, such as Tinian in the Northern Mariana Islands, a US territory.” And in September 2022, the Australia-United Kingdom-United States security pact (AUKUS) announced a deeper cooperation on the construction of newer defense technologies in Australia–that most notably including eight nuclear-powered submaries.

But if all the United States’ government has solely been focusing on is its physical national security, what goes to say that our nation will not crumble from within by the economy that supports us all? When the U.S. Dollar (USD) dominates all other forms of currency in world trade, U.S. companies will see a decline themselves. The housing crisis in America is not getting any better; and prices, interest rates, college tuition, and debts continue to be on the rise. If the threat of Chinese aggression in the Pacific is one that just accelerates the United States into the recession it has been perpetually trying to prolong, how could we ever remain intact and secure if Taiwanese invasion were to occur?

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