More than three decades after the end of the Cold War, commentators are struggling to explain a new era of great power competition, this time between China and the U.S.-led West.
The problem is that there are too many unknowns about this new era: Is the West’s estrangement from China caused by the United States, or by China itself? With many of Europe’s leading companies deeply rooted in the Chinese market, does Europe risk being at the mercy of Beijing? How should the United States counter China’s attraction to many countries in the Global South?
Three new books help clarify the contours of a new type of Cold War, though they are still hazy. All three discuss the challenge China poses to the U.S.-led world order from a Western perspective, and one in particular looks at the future of German industry. The overall impression is that this superpower contest is quite different from the 45-year conflict between the Soviet bloc and the capitalist West, but it may be no less consequential.
Ann Stevenson Yang, an American who lived in China for 25 years and served as head of the U.S.-China Business Council in Beijing during the frenzied U.S.-Chinese business courtship of the 1990s, now believes that decades of “engagement” between China and the West is a costly illusion. “Many of the Western frameworks for understanding China are in fact shadow plays, dramas played out inside a light box, with the real events happening in the dark realms outside the illusion,” she writes. Wild Ride.
A big part of this shadow play, she argues, was Beijing’s attempt to convince the West that it was a benign giant committed to its “peaceful rise” and win-win outcomes for both foreign and Chinese companies. But this pretense has now been abandoned.
“The Xinjiang concentration camps, the betrayal in Hong Kong, hostage diplomacy, the focus on national security issues, the intense secrecy around COVID-19, and above all its economic weakness have shown the world that China’s apparent desire to integrate into the global governance system is temporary, tentative and opportunistic,” Stevenson Yang writes in his highly insightful and readable report.
Another reality is floating around twice as much Germany and China By Andreas Fulda, an academic at the University of Nottingham. Fulda has assembled a vast body of evidence to gradually expose the alarming predicament plaguing Europe’s largest economy: decades of outsourcing its manufacturing to China and its energy needs to Russia have left Berlin increasingly at the mercy of authoritarian states.
He finds that successive German chancellors — Helmut Kohl, Gerhard Schröder, Angela Merkel and Olaf Scholz — have been complicit in kowtowing to Beijing, each of whom, to varying degrees, downplayed concerns about human rights and China’s growing strategic assertiveness in order to kowtow to Chinese leaders and secure markets for German companies.
The folly of this approach became clear on February 24, 2022, when Russia’s full-scale invasion of Ukraine and the “strategic partnership” between Beijing and Moscow revealed the magical thinking behind Germany’s long-standing mantra: Handel’s Journey (Changes through Trade). Fulda writes: “The Russian war of aggression belied a central tenet of German foreign policy: that economic engagement with authoritarian states would lead to democratic political reforms and promote peace in world affairs.”
In seeking engagement with China, Germany has found itself caught in the crosshairs. From Volkswagen to Siemens, some of Germany’s biggest companies are enslaved to a country marked by “authoritarianism,” “toxic nationalism,” and human rights abuses, Fulda writes. Now, China’s rapid technological advances are leaving some of these companies fighting for their commercial futures.
The most striking example in Fulda’s scathing exposé is that of Volkswagen, the German car company that formed a joint venture with Chinese state-owned giant SAIC in the 1980s and was one of the earliest European car companies to enter the Chinese market, reaping huge benefits.
Like other foreign automakers in China, VW was forced to transfer technology to its Chinese partners, helping to develop a competitive Chinese industry that now eclipses VW. Anyone who has been to China knows the change this represents: German cars are now as ubiquitous as the construction cranes that once lined city skylines, symbols of China’s rise.
VW once reigned supreme with about 40% of all passenger cars on China’s roads — a share that has been declining over the past decade but still held at a healthy 14.5% last year — but the danger now is that VW is fading into the rear-view mirror of China’s fast-growing electric vehicle market, which represents the country’s future.
Former VW CEO Herbert Diess acknowledged the company’s declining position: “China probably doesn’t need VW, but VW needs China a lot,” Diess said in 2021. Indeed, in its desperate bid to catch up on electric vehicles, VW announced it would invest $1.1 billion in an electric vehicle development center in China in 2023 and move its cutting-edge research and development activities from Germany to China.
Fulda writes that all of this is reminiscent of the collapse of Germany’s solar industry, once a global force promoted by President Barack Obama and others, since around 2012 as competition from China intensified.
Fulda presents several case studies in a dense, 200-plus page argument, but one of his main points is that Germany has long been manipulated by Beijing, both politically and commercially, and that this “strategic blindness” can only be remedied by a more forceful approach to countering Chinese pressure.
But so far there are few signs of a stronger tone. In June 2023, Scholz’s government acceded to a Chinese demand that journalists not be allowed to question visiting Chinese Premier Li Qiang at a press conference in Berlin. Fulda quoted one German journalist as saying at the time, “This is clearly a threat from China. If we don’t do this, there will be no press conference.”
But the reality is, it’s hard to stay strong when the enemy holds your destiny, or at least part of it, in their hands. Oriana Skyler Mastro reflects on this: UpstartSuch interdependence is one of the distinctive features of Cold War 2.0.
“Rising powers and established hegemons have never been so economically intertwined,” wrote Mastro, a Stanford University China expert. “China owes at least $860 billion in U.S. public debt, 12% of its total foreign debt. Trade between the U.S. and China was around $690 billion in 2022… The U.S. will also remain the largest destination for Chinese outbound investment in 2022.”
The United States has never faced a comparable competitor before: in the 1980s, the Soviet Union’s GDP was about half that of the United States, while China’s GDP in 2021 is already 76% of that of the United States. This is one of the reasons why China’s appeal is growing internationally, especially in areas where the United States is not as strong.
Mastro’s thought-provoking book explores policy options from a U.S. perspective and shows how China has successfully exploited gaps in the U.S.-led world order.
Beijing has exploited America’s blind spots by lobbying developing countries to elect Chinese candidates to head international organizations and by forging free trade agreements with many “global southern” countries, while also strengthening its economic, military and strategic power.
“Thirty years ago, the idea that China could challenge the United States economically, globally, or militarily was unthinkable,” Mastro wrote. But in 2021, as President Joe Biden’s team of new administration officials met with their Chinese counterparts in Alaska, it was clear that the tables had turned.
China’s top diplomat at the time, Yang Jiechi, responded to the series of U.S. accusations, vehemently arguing that “the United States has no right to say it wants to engage in dialogue with China from a position of strength.”
All three books represent Western commentary on China. Little space is devoted to exploring the Chinese perspective on the world’s emerging superpower’s tumultuous impact on the West – another feature of the new Cold War. As Beijing withdraws the hospitality it once showed to foreigners and imposes strict censorship on its own thinkers, the narrative surrounding China’s rise is increasingly being written by outsiders. This only serves to further erode trust and feed the suspicions that are polarizing the world.
A Wild Ride: A Short History of Opening Up and Closing Down the Chinese Economy Ann Stevenson Yang V Jones £12.99, 176 pages
Germany and China: How Entanglement Undermines Freedom, Prosperity and Security Andreas Fulda Bloomsbury Academic £65, 258 pages
Emerging Power: How China Became a Great Power Oriana Skylar Mastro OUP £22.99/$29.99, 336 pages
James Kinge is the FT’s Europe and China correspondent.
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