US China hawks grieve in their era of discontent
Apr. 25, 2019
As world leaders descended on Beijing to consult on building out much-needed infrastructure around the globe, a group of Trump administration allies and some of the United States’ biggest China critics gathered at the St Regis Hotel in New York to air their grievances on the current state of affairs.
The meeting of the revived Committee on the Present Danger, an effort borrowing its name from a Cold War-era organization, saw a curious mixture – at times from the same speaker – of alarmist rhetoric and confidence that China was doomed to fail of its own flaws.
Largely absent from the event was a call for the US to form a grand strategy to compete with China’s Belt and Road Initiative. The global infrastructure investment push is being showcased in Beijing during three days of events, contrasting the atmosphere of rivalry on display in New York with one of cooperation.
“China’s not the rising power. We’re not the declining power,” contended Steve Bannon, former White House chief strategist in the Trump administration.
“It’s the Westphalian system that works. It’s freedom that works. What better example do you need than Hong Kong and Taiwan and what the Chinese Americans have done in the United States of America,” he continued.
To prove this, the current relationship must be upended, Bannon stressed. The US needs to play what he referred to as “smashmouth,” though he seemed unsure of what that means in the short term.
“I think we got to walk away from this [the Trump administration’s trade talks with China] right now. We got to start playing hardball, smashmouth.”
At the same time, he suggested that a trade deal was already on its way and that it would represent an “armistice” in an economic war that he said China has been waging for decades.
Brink of collapse
Economist and Asia Times columnist David Goldman spoke at the event and provided a contrarian view among the attendees, calling for a long-term industrial policy and infrastructure investment strategy to maintain relevance on the world stage.
“We need to develop our own Belt and Road competitive initiative in common with the Japanese and South Koreans and others,” Goldman said.
“It’s fanciful to believe that short-term measures can destabilize this Chinese juggernaut.”
But Kyle Bass, founder of hedge fund Hayman Capital Management, argued that China was on the brink of collapse, citing what he referred to as a debt bubble.
“When you look at the money supply in China, if you look at Chinese M2 [one classification of money supply], Chinese M2 in the end last year … hit $32 trillion in an economy of 12 [trillion US dollars]. They’ve printed more money than anyone ever,” Bass said, reiterating that China’s economy is what he has called a “ticking time bomb.”
Goldman argues, to the contrary, that China’s ratio of M2 to GDP has been quite stable for the past several years. Most of the growth, he says, represents savings deposits (assets), not liabilities, and it suggests greater financial stability rather than fragility.
Bass has maintained a short position on the Chinese yuan for years in what has so far proved to be a losing bet. The yuan has been one of the strongest among Asian currencies this year. Last year, Bass acknowledged that he regretted opening the short position as early as he did, but that he still believed it was “the greatest investment opportunity” at the time.
Gordon Chang, a television pundit who has been predicting China’s economic demise for decades, an argument he outlined in his 2001 book “The Coming Collapse of China,” echoed Bass’ sentiments, saying that “[Chinese President] Xi Jinping’s economy is wavering.”
“The United States has saved Chinese communism a number of times,” Chang said, after acknowledging that “China is gaining ground because people think its economy is strong – especially after the global downturn in 2008.”
Dangerous totalitarian regime
The newest incarnation of the Committee on the Present Danger was established in March of this year by conservative political advocates Brian Kennedy of the Claremont Institute and Frank Gaffney of the Center for Security Policy.
In his introduction at the event on Thursday, Gaffney explained why the group, previous iterations of which focused on the Soviet Union and then Islamic Terrorism, was now sounding the alarm about China.
“We believe that the United States faces a similar – indeed a much more dangerous – totalitarian communist regime lead by the Chinese Communist Party … an entity that has for decades actually been at war with the United States.”
While the event in New York represents a “sign of the times,” as some observers have called the shift in US-China relations, others in Washington are sounding a different tone.
Acknowledging the need to cooperate with China while crafting a “grand strategy” for the United States, panelists speaking at the Center for Strategic and International Studies earlier this week suggested that the US could work with China to meet the world’s infrastructure needs.
“I don’t see this – and I’m not sure we all see this – as an either-or game … There are ways in which the US can cooperate [with China] on projects around the world, and we should. As we should with other countries and other companies around the world,” said Peter Raymond, a specialist on Asian economic integration at CSIS.
But the group of panelists in Washington, which unveiled a report with specific policy proposals, did not have an answer for whether or when any concrete policy that could provide a proactive, positive response to China’s ambitious foreign policy would ever come to fruition.
In any event, it is unclear whether the current political climate in the US would allow for constructive cooperation with China.
While lauding the current US president’s efforts to confront China, Bannon on Thursday sounded a tone similar to Donald Trump’s critics’ fears of Russian influence in US politics. But this time it was about China and alleged business dealings with the current favorite to challenge Donald Trump in the 2020 presidential election.
“[Democratic presidential hopeful] Joe Biden has to answer the question: what did you know, when did you know it, and how much money has your family, personally, taken from the most murderous regime [the Chinese Communist Party] of the 21st Century?” Bannon asked to applause before he walked off the stage.