China and the US have become fierce rivals for global leadership and economic dominance. This competition is paying a heavy price. The competition between these two economic powers is leading to further conflicts and dividing the nations. As resources are spent on finding each other’s weaknesses and winning allies, poor nations find it increasingly difficult to cope with rising inflation and problems. An economic war can turn into a military conflict at any time. China and the United States have reached a dangerous level at this time, and its effects are being felt all over the world even before the open confrontation between them begins.
Under Donald Trump, the US government launched a formal and aggressive program to undermine Chinese economic prospects. Tariffs were imposed on Chinese exports and Chinese companies operating in the US were discouraged through a number of measures. After Trump, Joe Biden did not change these policies much but continued the anti-China policies. China responded by imposing tariffs on American companies, discouraging American exports. Recently, the US government has launched a program to restrict the Chinese government’s access to the latest US-made machinery and technology. Special technology parks are being built where new software and machinery will be kept highly secure. Due to this policy, many American companies are being forced to move their production facilities from China to other parts of the world. Ignoring the fact that these American companies make huge profits from China and Asia. The economic race between China and the United States and the breakdown in relations are causing inflation to rise around the world.
The US and China are highly dependent on each other. China’s rise is mainly due to American policies and American companies shifting production units to China. Learning from the expertise of these companies, China developed into an industrialized world and became a major country within a few decades. Americans, on the other hand, gained access to a much larger market where they could sell their products directly, producing their goods efficiently with cheap labor and low costs. The trade volume between China and the US is still in the billions of dollars, but it is steadily declining. If this interdependence and austerity between the two countries had continued, the world could have witnessed trade booms, but unfortunately this has not happened, American companies are relocating from China.
Europe is caught in the middle of the economic competition between China and the US. French President Emmanuel Macron made it clear in his recent press conference that Europe is not in a position to abandon Russia’s cheap fuel, nor can it end its partnership with China. His views were also appreciated by other European leaders that Europe should not be a victim of China-US aggression. Both countries are economic giants, while Europe is already suffering from economic depression due to the Ukraine war. The increase in defense spending and the reduction in Russian fuel supplies have sent shockwaves through European markets. At present, China is in a position to deal with inflation and poverty, generate revenue and maintain economic momentum. Many nations are being forced to make choices that will ultimately lead to the division of the Western and Eastern blocs. US-China conflict and adversarial mindsets are pushing the global economy into crisis. Price volatility, credit and funding problems are pushing poor countries into default. Countries like Lebanon have been in default for the past three years. A split between China, the IMF and the World Bank led Sri Lanka to declare default due to a lack of loans and funding for poor countries. Turkey’s currency has lost a lot of value in weeks and so has Pakistan. Any country with a negative trade balance is headed for economic default and international institutions are not in a position to provide relief because of the differences between the US and China. Both countries are building alliances that can compete with each other in development.
The US, India, Australia, Japan and Canada are strengthening alliances while China is taking steps towards revitalizing the Silk Road in the form of the One Belt One Road project and CPEC. BRICS is trying to replace the dollar as the world’s reserve currency. Many nations are already trading in their own currencies, many nations hold their national reserves only in dollars, and if the dollar depreciates, these nations can easily move forward. The first shock will be felt by the United States, the rest will be felt by the countries that are completely dependent on the American economy and the dollar in the international market. The world should not forget what happened when economic conflicts turned into military conflicts. Pakistan is one of the countries that have been affected by the rise in international fuel and food prices. A historic negative trade balance has forced the economy to its knees. Adverse trade has harmed the economy, focusing on improving the trade balance will help to overcome this crisis. Pakistan needs to focus on its industrialization, self-reliance, technology transfer and investment through joint ventures with China. Pakistan’s trade deficit has crossed 40 percent in the last few months despite a lot of expansion in the economy. There are more possibilities. Political leaders and business community should provide favorable peace and stable conditions for investors and industrial enterprises moving towards Pakistan. The country has all the human resources and capacity. The obstacle is because it is now or never time for Pakistan.
(The writer is Chairman of Jinnah Rafi Foundation)
