Growing U.S.-Chinese rivalry and Chinese migration

Both U.S. and Chinese leaders play down the prospects of a new Cold War, but they never sound convincing. Vast shifts in the world economy are driving a new rivalry, for which a series of regional wars are creating dangerous flash points.

The international political and economic order is rapidly changing. The U.S. and Europe increasingly resort to protectionism, industrial policy, and the so-called friend-shoring of supply chains to source from allies only. The U.S. establishment is all but openly admitting its need to put a check on China’s economic and geopolitical rise. Meanwhile, Russia has joined the club of isolated and sanctioned pariah states. However, the size of its economy, and its role as one of the world’s largest energy exporters, changes the nature of the anti-Western coalition, also affecting the US-China rivalry.

For the last several years, the U.S.-China relationship has progressively deteriorated. A recent report by RAND Corporation, the main think tank of the US national security establishment, urges moves to avoid misunderstanding Chinese intentions and motives through open dialogue and careful diplomacy. The spiral of deterioration of the bilateral ties seems unstoppable, with trade wars, rising export and investment controls, mutual securitization of the various parts of the relationship such as scientific cooperation, and geopolitical flash points including Taiwan and the South China Sea.

Today, China accounts for 18% of global gross domestic product (GDP). However, it comprises only 13 percent of global consumption while accounting for 32% of global investment and 31% of global manufacturing. If China manages to maintain the growth rates of 4 to 5 percent, which seems reasonable, for the next decade while keeping its current investment-heavy model, its share of the global GDP would rise to 21%. Consumption, however, would still be less than 15 percent of the global total, while investment would climb to 38 percent and manufacturing to 36 percent. That would require the rest of the world to cede even more of its manufacturing capacity to China. With its current growth model, China simply has no alternative besides going out and competing globally.

Leading western powers are clearly no longer willing to accommodate China’s industrial growth as they enact protectionist measures and invest heavily in the domestic industry, e.g., the Biden administration has ushered in a new government spending manufacturing investment cycle. That leaves China with few options. One is to rebalance the economy toward domestic consumption, requiring an unprecedented shift in the country’s political economy. Another is to intensify the search for new markets, leading to increased global assertiveness.

The war in Ukraine has had a profound influence on the U.S.-China rivalry. Russia is now China’s fifth-largest trading partner, not only a crucial supplier of energy and agricultural goods, but also a major recipient of industrial exports, particularly important in the context of enduring overcapacity. The economic relationship between Russia and China is highly asymmetrical, giving China an upper hand in the negotiations over the natural gas pipeline in Siberia. The Chinese side understands that without the European market, Gazprom has practically nowhere to turn to sell its gas. And yet, politically, the Kremlin is far from being China’s vassal as some analysts claim.

An interesting event in the U.S.-Chinese rivalry is the sudden Chinese migration to the U.S., which continues at a record pace, with 30,000 Chinese arrested for illegally crossing the U.S. border nationwide since October 2023. The comparable number for 2022 was 342 people followed by 24,000 for the full fiscal year 2023. There has an explosion in immigration from China under the Biden administration. Most Chinese migrants are entering through the San Diego border region, where border agents have been completely overwhelmed by the massive influxes.

National security concerns have been raised with the ongoing trend as Customs and Border Protection cut the number of questions its processors were required to ask Chinese nationals from roughly 40 to just five. Many also destroy or discard their passports or ID cards on the Mexican side of the border, making it much harder for the U.S. to verify their identity and their country of origin, and complicating deportation. Many of the Chinese migrants also appear to be motived by economic reasons, rather than feeling life-threatening oppression from the Chinese communist regime.

The influx of Chinese nationals also raises security fears, as the country’s government is known to aggressively infiltrate the U.S. Numerous federal investigations into Chinese spying are still underway and a report released recently revealed Chinese nationals have snuck onto military bases and other sensitive U.S. sites more than 100 times in recent years. It does seem odd that more than 30,000 Chinese are coming to the U.S. in recent months. Is this part of a Chinese strategy to infiltrate the U.S. or are the Chinese finally tired of the oppressive regime and want to get out of there? Regardless, U.S.-Chinese relations are worse than in many years and there are no improvements in sight.