The United States is in a cold war with the People's Republic of China and urgently needs a presidentially led strategy to win. Without such leadership, Washington's approach to China will be fragmented, contradictory and unfocused. This lack of leadership stands in stark contrast to the approach of Chinese Communist Party (CCP) General Secretary Xi Jinping and his stated approach at the 20th National Congress in 2022 to channel all of China's instruments of power into a “protracted struggle” with the United States, i.e., a cold war.
The United States is particularly cautious in responding to China’s economic aggression. For decades, China has built its geopolitical and economic influence through its “military-civil fusion” and “dual circulation” strategies, which are the Chinese Communist Party’s efforts to build the country’s technological and industrial capabilities for both domestic economic growth and military modernization. Beijing’s dominance in global supply chains is also a deliberate result of policies that hold countries hostage by placing China at the center of production of key economic elements such as critical minerals, semiconductors, and next-generation energy technologies.
And globally, the Chinese Communist Party has gained geopolitical influence through its Belt and Road Initiative, laying the foundations for new economic networks that operate on Beijing's terms in Southeast Asia, Africa, Latin America, the Middle East, and even parts of Europe.
Conversely, aside from sanctions, the United States has not been forthcoming in leveraging its economic might to advance its foreign policy and national security interests. Washington’s efforts to remedy decades of foreign economic policy neglect remain sporadic and inconsistent. Although there have been some attempts by U.S. government agencies to crack down on Chinese economic crimes and tighten advanced technology exports, such as the Treasury Department’s China Military-Industrial Complex Company (CMIC) list and the Justice Department’s current Disruptive Technology Strike Force, these efforts will remain inadequate unless the President himself takes the lead and directs a strategy to reduce China’s malign economic influence.
President Joe Biden, or the newly inaugurated President Donald Trump (the presumptive Republican nominee who may return to power in January next year), should look to the example of former President Ronald Reagan in taking control of China policy. During President Reagan's first term, the Soviet threat was clearly one of his top priorities, as evidenced by the clear and actionable guidance he provided in a series of National Security Decision Directives (NSDDs).
The intent to win the Cold War with the Soviet Union permeated Reagan-era documents, including NSDD 32, entitled “National Security Strategy of the United States,” which properly situated all foreign policy and national security activities in the context of the U.S.-Soviet rivalry. In addition, the Reagan administration also published NSDD 75, entitled “United States-Soviet Relations,” which laid out a clear strategy for the comprehensive national management of the United States to compete with the Soviet Union in the political, military, and economic spheres and to counter Soviet influence globally.
Both the Trump and Biden administrations deserve some credit for overseeing fundamental policy shifts toward what is now a strategic competitor, China, and for attempting to free the U.S. economy from years of lethargic and mindless engagement with the Chinese Communist Party by imposing tariffs and export controls. Yet, nearly eight years after Washington finally acknowledged that it was in competition with China, and after implementing hundreds of millions of dollars in tariffs and a series of prohibitive export and investment controls, the United States is still struggling to reach the level of intensity needed to compete successfully with China.
For example, the Biden administration's risk-averse “narrow garden, high fences” approach (limiting the scope of sectors subject to export controls) fails to address the depth and breadth of the economic threat from China.
Rather than pursue such a narrow approach, the President must direct all relevant U.S. government agencies to fight this new Cold War, as Reagan did with the Soviet Union. Presidential leadership is needed to develop a dedicated “U.S.-China Economic Competition Strategy.” While Reagan’s NSDD 75 provided a comprehensive strategic approach across military, economic, and diplomatic domains, China’s distortion of the global economy demands that the U.S. have a dedicated economic strategy to address the complexity of this challenge. This document should issue clear policy guidance on how Washington can protect the U.S. economy, reduce China’s ability to compete, and build a new global economic power center.
Securing the U.S. economy must be at the center of the new strategy. Beijing’s success in undermining the U.S. economy through unfair trade practices, deindustrialization by creating an uneven playing field through massive subsidies to Chinese companies, and intellectual property theft has already been well documented by the Trump and Biden administrations, as well as by Congress. The President, through the NSDD, must provide a framework to address that economic aggression. New policy guidance must be far more aggressive in restricting Chinese investment in the U.S. and U.S. investment in China. Moreover, U.S. government officials need clear guidance on export control policy, the scope of bilateral trade, and the future of permanent normal trade relations with China.
The President needs to provide clear guidance on Washington's approach to targeted decoupling with China. The Biden Administration's export control policy, currently focused on semiconductors and artificial intelligence-enabled chips, is a good start. But it goes beyond that. The new economic competitiveness strategy must be forward-looking and identify many more sectors that are fundamental to the overall health, prosperity, and security of the United States. Sectors to consider include pharmaceuticals, biotechnology, information and data technology, and critical materials.
In these particular sectors, the approach should be one of complete decoupling from the Chinese economy. The United States cannot afford to be dependent on China for critical parts and inputs in these sectors. Biden must take the lead on this issue and ensure his administration follows through on its plans, or risk facing political and bureaucratic resistance. Such strong presidential leadership is not being demonstrated.
For example, President Biden's Executive Order on Foreign Investment places the onus on the Treasury Department to identify which “national security technologies” will be subject to new investment restrictions. The risk with this approach is that the Treasury Department will be hesitant to go beyond the Administration's narrow “narrow yard, high fences” approach, given the economic and political implications. Instead, the President should be more prescriptive, leveraging the existing Critical and Emerging Technologies List. This list identifies a much stronger set of technologies that the United States should not help China develop through U.S. capital.
Moreover, the Treasury and Commerce departments still have incentives to continue their economic engagement with China. The primary job of these agencies is to promote US business and global financial stability, and this perspective has meant that they have distorted their approach, focusing more on the health of the Chinese economy than on winning existing conflicts. This is a short-sighted approach. The post-pandemic environment, where US economic growth is surging while China’s is slowing down significantly, is evidence that the US is not as dependent on China as many think. Washington needs to protect its economy from predation, whatever the cost to the Chinese economy.
The United States can and should coordinate the efforts of military planners at the Department of Defense to deter Chinese aggression and, if possible, reverse China's ability to undermine U.S. interests, while also going on the offensive with economic measures.
Washington needs a campaign to deny and undermine China’s ability to undermine U.S. national security. For example, the bureaucracy needs expanded guidance specifically targeting all inward and outward investments, exports, and data transfers that could help China modernize its military. Moreover, economic measures could enhance military deterrence. Given Chinese aggression in Taiwan, the Philippines, and elsewhere, the United States needs an economic deterrence plan that identifies economic “snap spots” and other financial targets to impose costs on the Chinese Communist Party and weaken its confidence to launch military attacks against the United States or its allies.
Mobilizing the legal system to target malign Chinese actors operating on behalf of the Chinese Communist Party is another course of action the President should order, using the full scope of existing U.S. laws to hold the Chinese Communist Party accountable for its role in fentanyl production, intellectual property theft, sanctions evasion, human rights violations, and other criminal activity.
This could be achieved by leveraging policy tools already in place, such as the Uyghur Forced Labor Prevention Act, the Transnational Criminal Organized Crime Sanctions Regulations, expanding and enforcing the Treasury Department's CMIC list, enforcing the ban on TikTok if ByteDance does not divest, and enforcing laws against other bad actors as President Trump has done against Huawei. No legal strategy of this magnitude has yet been undertaken by a U.S. president against the Chinese Communist Party and would undoubtedly require action against China's largest state-owned enterprises and financial institutions. Such a move would provoke a harsh response from Beijing.
The US President needs to make clear that it is essential to work with Washington's international allies and partners to build a new global economic center. Biden will need to direct his administration to prioritize the use of foreign economic policies, including trade agreements, aid, and development tools, to maximize US economic engagement with countries needed to give Washington an advantage in the competition with China.
Fundamental principles of this approach should include: To prevent the further expansion of the Chinese Communist Party's economic influence; Prioritize America's engagement with like-minded nations. Facilitate the fair economic and legal framework in which the United States excels; and Partnership Working with close allies to counter China's economic influence.
Mutual shared prosperity is the foundation of a successful global economic strategy, and nothing is stronger than trade relationships between like-minded nations. As a result, the President should empower the U.S. Trade Representative to pursue bilateral trade agreements that will help accomplish America's decoupling efforts while strengthening our position as the world's economic partner of choice. This could start with sectoral trade agreements, such as critical minerals, semiconductors, and pharmaceuticals, and continue until political capital is available to pursue more comprehensive trade agreements.
Similarly, the U.S. president, in charge of development and financial aid, should direct the U.S. Agency for International Development and the Development Finance Corporation to support projects that provide strategic value to host countries, a key area of the U.S.-China rivalry, and ensure that the U.S. gets a return on its investment.
The United States won the first Cold War. But that required a strong military and aggressive economic activity in tandem, and in the context of China, Washington is insufficient. Presidential leadership is now needed if the United States is to negate the Chinese Communist Party's global economic ambitions and once again ensure the American Dream and global economic freedom for decades to come.
