As the reality of the new Cold War with China looms larger by the day, assessments of Beijing’s position there vary. In the first Cold War, the USSR was mighty. Still, also its position was lionized by the Allies and by Moscow’s propaganda for opposite reasons – to spur drama and competitiveness on the Western Front or boost confidence in the Soviet homes.

Then what is the actual situation of China presently? Here is an attempt at a dispassionate perception of the Chinese position now. What we see is a kaleidoscope of alternatives between bad choices.

China is a trade superpower, and as David Goldman noted, its position is growing, and the great reshoring is not happening.^[1] But are the threats against China’s commerce just a charade?

China is a trade superpower, which is good if buttressed by soft power (laws, culture), financial might, political alliances, and the military.

But China, on all other fronts, is weaker than the US. Its surpluses can become a liability in the blink of an eye. Purchase orders can be transferred slowly elsewhere or cut off suddenly by force majeure, as happened with gas supplies from Russia. After all, cars aren’t as necessary as gas. I can still drive an old vehicle but can’t turn on my lights without gas.

China is pushing for a greater trade surplus in the apparent belief that greater foreign dependency on its goods is a bigger reassurance of its political security. At the same time, it wants yuan internationalization against the dollar and a military that is better matched against the US. All of this opens a challenge on multiple fronts where China’s surplus can be targeted against Beijing at any given time.

In fact, the surplus bubble can burst when it is bigger, and it may hurt China more. If it hurts the US also, the American pain can be useful to be directed against the Communist Party and fuel resentment. China should then explain that its exports are not a way to blackmail or bind the US, but that may be difficult because of China’s competing ambitions against the dollar and the US military.

If China, seeing this, cuts surpluses, it will also cut its income while the domestic market of individual consumers is not picking up at the desired speed. At the same time, one of the main drivers of growth, real estate, is collapsing, and the other driver, infrastructure, is cratering domestic coffers with ever-bigger debts.

On Russia, Moscow’s triumph is impossible. If the war stops, the US will call it a victory, and Russia will be turned against China—or it will be a burden sandbagging China for the foreseeable future. If the war drags on, this will bleed China’s credibility, as Beijing is trying to move out of its domestic public support for Russia, but it can’t shed it too fast.

Domestically, China has done fine with the end of the zero-Covid policy and fine with the new appeal to entrepreneurs and recalibrating EU ties… but far from enough.

Foreign and domestic investors have been burned in China in the past and see the gloomy prospects of the country increasingly at odds with the US. They will take years, if not decades, to be reassured to return unless great opportunities are provided. After 1989, Hong Kong and Taiwan businessmen, formerly ousted from China, were called in and given top choices for fast money, mainly in real estate and electronics. They picked the opportunities and stayed on.

The problem is, are many fast and ample opportunities available to be gifted to potentially loyal billionaires? After 1989, there was no open and paramount hostility from the US or neighboring countries; many in those countries were of two minds about Beijing. China was not a threat, and the world grappled with the messy Soviet fallout. Now the situation is very different.

Something can be attempted, and something can also work, but most likely not on the scale of the 1990s. It is the second time capitalists were promised everything but things turned sour for the whims of the unfathomable and mysterious political leadership. Of course, sudden turns are not unique to China. There are also political and financial crashes in capitalist countries, but the mechanism is transparent, there is an open debate, and one can forecast and prepare.

China’s efforts with Europe are positive but signal a break in the EU on Russia. Some want to talk to Moscow, while others don’t. But Beijing’s failure to deliver a clear result to Macron about Moscow will have weakened its hand. Moreover, France can strain its transatlantic ties to the limit because of its history with the US. But France will never break these ties for another country. So, if push comes to shove, neither France nor any other European country will choose China over the US.

Beijing’s difficult predicament can be exemplified by the Easter military drills around Taiwan, which ring eerily in Western Christian ears when Easter is the time for peace. China’s military drills around Taiwan are a dull instrument and may backfire: They are just propaganda for Taiwan’s president. Still, China can’t just do nothing; its domestic audience will get angry at the inaction.

It has to do something, but what can it do in the present circumstances? Threaten Taiwan, which will goad the island and other countries to search for closer ties with the US, prodding China to more PLA posturing, and so forth…

It is also about how to frame the present friction with the US. China wants a state-to-state discussion where the two countries split interests, almost like a second Yalta. The US doesn’t want that; it wants to talk about international rules, which Beijing should first abide by.

China seems to think something like this: The US split the world with the USSR in Yalta; it can do it now with us.

America seems to think: The USSR was not part of global trade and was confined to its own bloc. Plus, we fought a recent and cruel war with the Soviets against the Nazis; we agreed on some basic ground rules, and Russians are culturally Westerners, so we understood each other. China is now a commercially integral part of the world and still doesn’t open its market, and its currency is not fully convertible.

This is the real problem—an issue with international market rules that, at the time, Washington didn’t have with Moscow. Plus, no recent war was fought with China, and the Chinese, being of a different culture, are more difficult to understand; thus, how can we split something with them when we don’t understand them in the first place?

China is in a corner and may struggle to get more breathing space. But this struggle could also turn against it, as its failure to accept the existing rules could be portrayed as China’s obstinate bad faith.

In some ways, this is like the old Chinese story of the tricky monkey trying to fight the Buddha just to find out it is playing into Buddha’s hand.

The Journey to the West (Xiyouji) is also the story of the difficult conversion of China to Buddhism in the first centuries of the Christian era, culminating in the 7^th century Tang dynasty. Perhaps the same is happening now with Western modernity.

The real question is, how can China become a Buddha, too? The answer in Xiyouji was, surrender to Buddha. Who is Buddha now, and what would be surrendering to him now?

China needs to find a new idea to get out of its corner. Americans simply do not believe whatever the Chinese are saying and want facts that Beijing is presently unable to deliver.

Surely China can still bet on the collapse of the American system, a transatlantic split with Europe, the political surge of the global south, et cetera. Plenty of evidence points in this direction – a systemic failure of America, the collapse of capitalism. Surely capitalism and America will fail sooner or later, but when exactly? In a couple of years or a century? All these bets failed in the past; there is no certainty they will succeed in the future.

Meanwhile, time could not be on China’s side and could be short. Western double feat against Covid and Russia have convinced many Washington is on a winning streak, and US domestic priorities, the potentially divisive presidential elections next year, might push America into pressing on its only unifying agenda – opposition to China.

Then, perhaps, it should consider what it can do to hedge these bets. But this has to be sorted with all its domestic priorities, and things get very tangled in many contradictory necessities. Here, more struggle for more breathing space could be the most likely response waiting for the dust to settle on the Russian front and observing how the post-Covid policies will be faring with the economy. After all, there is no imminent danger, and Beijing might still have some time to deliberate over these thorny subjects, which can be extremely tricky to handle and lead to wrong decisions, as happened with the Zero-Covid policy or with the Russian invasion of Ukraine.

It could last until the summer or autumn when Russia and the domestic economy will present a clearer, possibly rosier picture. But if the picture then will be darker, Beijing will have wasted even more time.

^[1] https://asiatimes.com/2023/04/the-great-re-shoring-charade/