Beijing’s new world order

Just over 30 years since the cold war ended, commentators are struggling to describe a new era of great power competition, this time between China and the US-led west.

The problem is that so much about this new era is unclear. Is the growing estrangement between the west and China being driven by America or by China itself? With so many of Europe’s leading companies deeply embedded in the Chinese market, is Europe in danger of falling hostage to Beijing’s will? How should the US counter China’s magnetism to many countries in the global south?

Three new books help bring definition to the still fuzzy but emerging contours of a new type of cold war. All three take western perspectives on the challenge that China poses to the US-led world order and, specifically in one book, to the future of German industry. The overall impression created is that this round of superpower struggle — though very different from the 45-year stand-off between the Soviet bloc and the capitalist west — may prove no less consequential.

Anne Stevenson-Yang, an American who lived in China for some 25 years and headed the US-China Business Council in Beijing during the heady years of courtship between US and Chinese business in the 1990s, now sees the decades of “engagement” between China and the west as a costly illusion. “Much of the framework through which the West has understood China has actually been a shadow play, a drama acted out inside a lightbox while the real events are taking place in the darkened area outside the illusion,” she writes in Wild Ride.

A big part of this shadow play, she argues, involved attempts by Beijing to convince the west that it was a gentle giant committed to a “peaceful rise” and “win-win” outcomes for foreign companies and their Chinese counterparts. But this facade has now been flung aside.

“The internment camps in Xinjiang, the betrayal of Hong Kong, hostage diplomacy, intense focus on national security issues, truculent secrecy around Covid-19, and, most of all, economic weakness have shown the world that China’s apparent desire to integrate into the global system of governance was temporary, provisional and opportunistic,” writes Stevenson-Yang in her highly perceptive and readable account.

Another double dose of realism runs through Germany and China by Andreas Fulda, an academic at Nottingham University. Step by step Fulda amasses a welter of evidence to expose an alarming predicament undermining Europe’s largest economy: that decades of outsourcing manufacturing to China and energy needs to Russia have made Berlin increasingly beholden to authoritarian states.

He traces the fawning complicity of successive German chancellors — Helmut Kohl, Gerhard Schröder, Angela Merkel and Olaf Scholz — to Beijing. Each of these figures in varying degrees has played down concerns over human rights and China’s growing strategic assertiveness in order to flatter Chinese leaders and chase markets for German companies.

The folly of this approach was exposed on February 24 2022. Russia’s full-scale invasion of Ukraine — along with Beijing’s “strategic partnership” with Moscow — revealed the magical thinking behind Germany’s long-standing mantra of Wandel durch Handel (change through trade). As Fulda writes: “Russia’s war of aggression . . . falsified a key tenet of German foreign policy: the belief that economic engagement with autocracies would lead to democratic political reforms and promote peace in global affairs.”

By seeking to engage with China, Germany has ended up entangled. Some of its biggest companies — from Volkswagen to Siemens — find themselves in thrall to a country characterised by “strongman rule”, “toxic nationalism” and human rights abuses, writes Fulda. And now, China’s rapid technological advances have left some of these corporations fighting for their commercial future.

German cars have been as ubiquitous a symbol of China’s rise as the forests of construction cranes that used to punctuate city horizons

The starkest example presented in Fulda’s pungent exposé is that of VW. The German car company reaped handsome rewards from being one of the earliest European car companies to enter the Chinese market by forming a joint venture with SAIC, a state-owned Chinese giant, in the 1980s.

Like all other foreign carmakers in China, VW has been obliged to transfer technology to its Chinese partners over time, thus helping to foster a highly competitive Chinese industry that is now eating VW’s lunch. Anyone who has visited China will know the transformation that this represents: German cars have been as ubiquitous a symbol of China’s rise as the forests of construction cranes that used to punctuate city horizons.

VW once reigned supreme with a market share of about 40 per cent of all passenger cars on Chinese roads. Although that share has trended down over the past decade, it still stood at a healthy 14.5 per cent last year. The crisis now, though, is that in the fast-growing electric vehicle segment of the market — which represents China’s future — VW is vanishing into the rear-view mirror.

Herbert Diess, VW’s former chief executive, acknowledged his company’s diminished status. “China probably doesn’t need VW . . but VW needs China a lot,” Diess said in 2021. Indeed, in a desperate attempt to catch up in electric vehicles, VW announced in 2023 a $1.1bn investment in an electric car development centre in China, shifting its cutting edge R&D efforts out of Germany and into China.

All this, Fulda writes, is redolent of the demise of Germany’s solar power industry — once a world force championed by the likes of President Barack Obama — which collapsed due to the intensity of Chinese competition from about 2012 onward.

Fulda provides several case studies over more than 200 densely argued pages. But one of his main points is that Germany — both politically and commercially — has allowed itself to be manipulated by Beijing over many years. This “strategic blindness” can only be remedied by a more robust approach to countering Chinese pressure.

So far, however, there is little sign that a stronger tone is likely. In June 2023, the Scholz administration agreed to China’s demand that journalists should not be allowed to ask Li Qiang, the visiting Chinese premier, questions at a press conference in Berlin. Fulda quotes a German journalist as saying at the time “clear Chinese blackmail: either like this or there will be no press conference”.

But, in truth, it is hard to be robust when your adversary holds your fate — or at least part of it — in its hands. Oriana Skylar Mastro explores this in Upstart. Such interdependency is one unique characteristic of cold war 2.0.

“Never before have a rising power and the established hegemon been so economically intertwined,” writes Mastro, a China expert at Stanford University. “China holds at least $860bn in US public debt, representing 12 per cent of the foreign owned debt. Trade volume between the US and China measured just about $690bn in 2022 . . . The United States also remains the largest destination for outbound Chinese investment in 2022.”

The US has never faced a comparable competitor. In the 1980s, the Soviet Union’s GDP was about half that of the US but China’s in 2021 had already reached 76 per cent of US levels. This is one reason why China’s magnetism, especially in parts of the world where the US is less strong, is gaining traction internationally.

Mastro’s thought-provoking book, which explores policy options from a US perspective, shows how China has successfully exploited gaps in the US-led global order.

Whether it be enlisting developing countries to vote for Chinese candidates to head international organisations or forging free trade agreements with many countries of the “global south”, Beijing has been adept at capitalising on America’s blind spots. It has also built up its economic, military and strategic strength.

“Thirty years ago, the idea that China could challenge the United States economically, globally and militarily was unfathomable,” Mastro writes. But by 2021, at a meeting between President Joe Biden’s new team of officials and Chinese counterparts in Alaska, it was clear that the tables were turning.

Yang Jiechi, then China’s top diplomat, pushed back against a series of US accusations and snapped: “The United States does not have the qualification to say that it wants to speak to China from a position of strength.”

It is true that these three books all represent western commentaries on China. They devote little space to exploring Chinese perspectives on the convulsive impact that the world’s emerging superpower is having on the west. This is yet another characteristic of the new cold war. As Beijing withdraws the welcome it once extended to foreigners and imposes strict censorship on its own thinkers, the narrative that surrounds its rise is increasingly written by outsiders. This only further eviscerates trust and nurtures the suspicions that propel a polarising world.

Wild Ride: A Short History of the Opening and Closing of the Chinese Economy by Anne Stevenson-Yang Bui Jones £12.99, 176 pages

Germany and China: How Entanglement Undermines Freedom, Prosperity and Security by Andreas Fulda Bloomsbury Academic £65, 258 pages

Upstart: How China Became a Great Power by Oriana Skylar Mastro OUP £22.99/$29.99, 336 pages

James Kynge is the FT’s Europe-China correspondent

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