A A few years ago, as part of a Western delegation to China, I met Xi Jinping in Beijing's Great Hall. When we approached, Xi claimed that China's rise would be peaceful, and that other countries – namely the United States – did not have to worry about the "Thucydides trap", so named for the Greek historian explaining how Sparta's fear of a rising Athens made war between the two inevitable. In its 201
Despite the mutual awareness of the Thucydides trap – and the realization that history is not deterministic – China and the United States seem to fall into it anyway. Although a hot war between the two main powers of the world still seems to be removed, a cold war is more likely.
The United States is blowing China for the current tensions. Since joining the World Trade Organization in 2001, China has reaped the benefits of the global trade and investment system while not complying with its obligations and free riding on its rules. According to the United States, China has gained an unfair advantage of intellectual property, forced technology transfer, subsidies to domestic companies and other state capital instruments. At the same time, the government is becoming more authoritarian and transforming China into an Orwellian state of surveillance.
For the most part, the Chinese suspect that the real goal of the United States is to prevent them from traveling further or to show legal force and influence abroad. In their view, it is only fair that the world's second largest economy (by GDP) will seek to expand its presence worldwide. And leaders would argue that their regime has improved 1.4 billion Chinese material well-being far more than Western gridlocked political systems ever could.
Whatever the side, the stronger argument, escalation of economic, commercial, technological and geopolitical tensions may have been inevitable. What began as a trade war now threatens to escalate into a permanent state of mutual enmity. This is reflected in the Trump administration's national security strategy, which considers China to be a strategic "competitor" that should be included on all fronts.
Therefore, the US severely restricts Chinese foreign direct investment into sensitive sectors and pursues other measures to ensure Western dominance in strategic industries such as artificial intelligence and 5G. It pushes partners and allies not to join the Belt and Road Initiative, China's massive program to build infrastructure projects across the Eurasian land mass. And it is increasing US Navy patrols in the East and South China Sea, where China has become more aggressive in claiming its dubious territorial claims.
The global consequences of a Chinese-American Cold War would be even stricter than those of the Cold War between the United States and the Soviet Union. While the Soviet Union was declining with a failing economic model, China will soon become the world's largest economy and will continue to grow from there. In addition, the US and the Soviet Union traded very little with each other, while China is fully integrated into the global trade and investment system, and in particular interlaced with the United States.
Thus, a full-scale cold war could trigger a new level of balancing or at least a division of the global economy into two incompatible economic blocks. In both scenarios, trade in goods, services, capital, labor, technology and data would be severely limited, and the digital world would become a "brand-new" where Western and Chinese nodes would not connect to each other. Now that the US has imposed sanctions on ZTE and Huawei, China will be scrambling to ensure that its technological giants can source essential inputs internally or at least from friendly trading partners who are not US-dependent.
In this Balkanized world, China and the United States, both expect all other countries to choose a side, while most governments will try to push the needle into maintaining good economic ties with both. After all, many US allies now do more business (in terms of trade and investment) with China than they do with America. But in a future economy where China and the United States control access to key technologies like AI and 5G, the midway is likely to become uninhabitable. Everyone will have to choose, and the world may well go into a long process of balancing.
Whatever happens, the Chinese-American relationship will be the central geopolitical problem of this century. Some degree of rivalry is inevitable. But ideally, both parties would cope with it constructively and allow co-operation on some issues and healthy competition on others. In fact, China and the United States will create a new international order based on the recognition that the (inevitably) growing new power should play a role in shaping global rules and institutions.
If the relationship is mismanaged – with the United States trying to track China's development and include its rise, China is aggressively projecting its power in Asia and around the world – a full-scale cold war will follow and a hot (or a number of proxies wage ) cannot be ruled out. In the 21st century, the Thucydides trap will swallow not only the United States and China, but the whole world.
• Nouriel Roubini, professor at NYU's Stern School of Business and CEO of Roubini Macro Associates, was senior economist for international affairs at the White House's Advisory Council for Economic Advisers during the Clinton administration. He has worked for the International Monetary Fund, the US Federal Reserve and the World Bank.
© Project Syndicate