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US-China Tensions Over Alleged Spy Balloon, Ukraine Threaten Trade

https://ift.tt/twxXlHM experts say the confrontation between the U.S. and China over a suspected spy balloon is spilling into the economic sphere as investors express concerns about the future of U.S.-China trade and a growing number of U.S. lawmakers and officials push for a tougher stance against Beijing, starting with faster action on economic issues.

U.S. Deputy Secretary of the Treasury Wally Adeyemo on Tuesday warned China and companies in China that they will face action by the U.S. and its allies if they help Russia evade sanctions.

“Fundamentally, we think, like other jurisdictions, China has to make choices about what they are willing to do, whether they want to be part of the global system that represents 50% of the global economy or whether they want to strengthen their ties with Russia,” Adeyemo said at an event in Washington.

The U.S. first detected the balloon over Alaska on January 28. The balloon drifted east into Canada and then back into the U.S. China claimed it was a weather balloon, not a spy craft, but the U.S. shot it down on February 4 over the Atlantic Ocean off South Carolina.

U.S. fighter jets detected and shot down three more airborne objects between February 9 and 12.

The U.S. Commerce Department subsequently blacklisted six Chinese entities linked to the Chinese balloon program and, on February 16, China responded with sanctions on two U.S. defense contractors.

Gary Hufbauer, trade expert at the Peterson Institute for International Economics, said the two countries remain motivated to maintain economic and trade relations, but the strained bilateral relations pose challenges.

Hufbauer told VOA Mandarin in a phone interview on February 21 that, “the strength of the economic ties was much stronger than the negative political tension between the two countries. However, if relations get much worse than they are now, the political forces will be stronger than the economic forces.”

The growing risks are making some investors anxious about increasing production and investment in China.

According to a survey by the U.S.-China Business Council, a lobbying group representing more than 200 U.S. companies operating in China, 87% of respondents said the tensions have affected their business operations.

Craig Allen, president of the council, told VOA Mandarin via email on February 22, “Increased US-China tensions create a lot of uncertainty and are a concern for our members. The recent balloon incident and the war in Ukraine further complicate an already complicated situation.”

War in Ukraine

Some experts believe that if China’s involvement in Ukraine deepens, the U.S. and its allies will curtail their economic cooperation with Beijing.

China has strengthened economic ties with Moscow since it invaded Ukraine a year ago. China-Russia trade hit a record $190 billion last year, but that is far less than the $690.6 billion trade between China and the U.S. over the same period.

Secretary of State Antony Blinken said on February 18 that U.S. intelligence suggests China is considering assisting Russia with weapons and ammunition.

Gerard DiPippo, senior fellow with the Economics Program at the Center for Strategic and International Studies, said the multiple warnings from the U.S. to China in recent days show that Washington believes Beijing is considering aiding Russia.

DiPippo told VOA Mandarin on February 21 in a phone interview, “If in fact China is detected as sending weapons to Russia, which as far as I know has actually not happened yet, there will probably be some sanctions … And I think the broader point [is] it’s going to sour what remained of goodwill to try to resume talks.”


The U.S. House Financial Services Committee is drawing up legislation targeting U.S. companies operating in China in hopes of preventing U.S. banks from funding the development of technology that could end up being used in China’s military or surveillance, according to Politico, a political news site.

The Politico report pointed out that China hawks in Congress have also been pushing for legislation to establish a new federal oversight body to review and prevent American companies from investing in Chinese industries that may affect U.S. national security.

The Biden administration is rolling out a similar executive order to prevent U.S. technology from being used by China to enhance its military power.

Earlier this month, the Center for Security and Emerging Technologies at Georgetown University published a report citing U.S. investment in China’s artificial intelligence industry as an example of U.S. investment bringing intangible benefits beyond capital to Chinese companies, including expertise, mentorship and name recognition.

Paul Triolo, senior vice president for China and technology policy lead at Albright Stonebridge Group, told VOA Mandarin that the key areas of U.S. foreign investment scrutiny will be advanced semiconductors, artificial intelligence and quantum computing.

Samantha Howell, research assistant at the Technology and National Security Program at the Center for a New American Security, said investors should expect more technology export restrictions in the near term.

“A lot of these technologies are dual use and inherently difficult to monitor, so the Biden administration faces the daunting task of figuring out how to foster innovation and collaboration while also protecting national and economic security,” she told VOA Mandarin via email on February 21.

Experts also see the future direction of the U.S. and Chinese economies depending in part on how China responds to U.S. warnings related to Ukraine. They pointed out that it is difficult for China to ignore the economic pressure that Russia has been subjected to by the West following its invasion of Ukraine.

DiPippo said China is “fairly cautious with the United States usually. They’re more aggressive in terms of things like economic coercion with smaller countries but the United States doing things like retaliating, for example, either for the trade war or the balloon or export controls, they’re quite restrained because I think they’re aware that the United States still has a lot of economic power.”

Adrianna Zhang contributed to this report.

Author webdesk@voanews.com (Jie Xi)
Source : VOA

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