Yan Xuetong: Trajectory of China-U.S. Relations in New International Order

"A bipolar international structure has taken shape" and "counter-globalization has become the norm." Plus, the agenda of the upcoming World Peace Forum.

China announced today (Friday, June 30) that Vice President Han Zheng will attend the opening ceremony of the 11th World Peace Forum and deliver a keynote speech to the forum on July 2. The forum will be held at Tsinghua University with this year’s theme being “Stabilizing an Unstable World through Consensus and Cooperation.”

I've uploaded the agenda of the upcoming forum to Google Drive.

The Secretary-General of the forum is Professor Yan Xuetong, Director of The Institute of International Studies, Tsinghua University, and the chief editor of The Chinese Journal of International Politics. In late April, he made a speech to a gathering of Chinese businesspeople at the 2023 China Qianhai Entrepreneurs Summit, hosted by Cornerstone Capital and guided by the Authority of Qianhai Shenzhen-Hongkong Modern Service Industry Cooperation Zone of Shenzhen.

The transcript was published by Cornerstone Capital, the business consulting company that organized the gathering. Below is a full translation.

阎学通：新国际格局下中美关系走向

Yan Xuetong: Trajectory of China-U.S. Relations in New International Order

I am very grateful to Cornerstone Capital for allowing me to share my understanding of the current international situation with all of you. Ideally, I should stand up to give a report, but due to a fracture in my ankle, it is a bit difficult for me to stand for an hour and a half. Therefore, I will be seated while discussing with everyone today.

The summit assigned me a topic called "The Future of China-US Relations in the New International Order". We need to discuss two aspects: the first being the new international order, and the second being the direction of China-US relations. When it comes to the international order, there is currently a significant difference in everyone's understanding, or rather, a difference in the description or desired view of the current international order.

1 A bipolar international structure has taken shape

Everyone knows that the notion of multipolarity was proposed in the early 1990s after the end of the Cold War. It has been 30 years since then, but the term is still being used, especially among politicians. Multipolarity refers to a process that has been ongoing for over 30 years. However, we haven’t seen any multipolar results yet. Therefore, nobody knows how long this process will continue.

Here is my take. First, why do politicians like to use the term multipolarity? For example,

If Americans don't use the term and choose bipolarity instead, it would be admitting that China and the US are equally powerful. This would be politically incorrect for the United States, as it acknowledges another country in the world is just as powerful as the US, which would never be acceptable for the Americans. This is a derogation of America's international status. In contrast, Russia, India, Japan, Brazil, and European countries are willing to use the term multipolarity because if they use the term bipolarity instead, it would be belittling themselves and admitting that they are inferior to the US and China. Therefore, they must claim that Russia, India, Japan, and Europe are all independent poles, which puts them on an equal footing with China and the US. Similarly, China insists on using multipolarity because if China doesn't, it will be belittling others. If China uses bipolarity, it will mean that China and the US are on the same level while other countries are not. This could upset other countries. I want to impress upon you that insisting on multipolarity is not because the objective world is multipolar but because it is politically correct. It's like complimenting a woman on her beauty, an entrepreneur on their business growth, or a professor on their knowledge. They all serve the same purpose.

So, what is the case in the objective world? After 30 years of discussing multipolarity, we still can't see a multipolar world. Some people argue that the European Union should be considered a pole since it has an economic scale similar to that of China and the US. But that would be strange. If we think of the EU as a whole, its economy is at the same level as China and the US, but this has been the case since the Cold War period. So why isn’t Europe considered a pole during the Cold War? The EU was founded at the end of the Cold War, so why was the post-Cold War period referred to as unipolar? Instead of saying one superpower with multi-great power, why not say two superpowers with multi-great power? In fact, the EU was listed as one pole to justify the idea of multipolarity, not because the EU suddenly became a pole. In recent several years, there have been some changes in the situation. Although it is politically correct to insist on multipolarity as a global trend, decision-makers must face the realistic question of whether to formulate national policies on a multipolar or bipolar structure.

In recent years, the competition between China and the US is putting pressure on more and more countries to take sides. Many Southeast Asian countries are complaining about the competition and pressure from both sides as they don't want to take sides. The complaint is getting more serious due to the increasing explicitness of the bipolar structure. Some politicians have suggested a change, arguing that the concept of multipolarity is incompatible with policies made based on bipolarity. However, implementing policies that are consistent and reasonable remains a practical challenge.

The first person to openly acknowledge the bipolar world was French President Emmanuel Macron. On August 27, 2019, he gave a speech at a domestic work meeting of diplomatic envoys. The speech was later made open to the public as it was deemed unworthy of being kept in secrecy. Macron said that one must admit that Western hegemony may have ended, and the world would ultimately have to revolve around two poles, the United States and China, and Europe would have to choose between them. This statement was politically incorrect in Europe and also in France domestically because the political judgment made in the 1995 fireside chat between former French president Jacques Chirac and China's leader was that the world would head towards multipolarity, not unipolarity. Macron's speech about bipolarity was not well received in France, and many Europeans did not want to hear it because it meant that Europe was not a pole.

But for Macron, he must think hard about what kind of foreign policy France should formulate. For example, why did Macron come to China at this time [recently], facing domestic and international pressure? My understanding is that the bipolar world is an objective reality, and he must make good efforts between China and the United States; otherwise, it will be disadvantageous to France. After Macron first proposed the idea of a bipolar world in 2019, UN Secretary-General Antonio Guterres embraced this view.

At the 74th session of the UN General Assembly in 2019, Guterres said that the world is splitting in two, with the two largest economies creating two independent and competing worlds, each with their own dominant currency, trade and financial rules, their own internet and artificial intelligence capacities, and their own zero sum geopolitical and military strategies. 

What did Guterres mean by a world splitting in two between the US and China? This is not just about the political division but also about physical space, cyberspace, and technology, especially in AI.

As the Secretary-General of the United Nations, Guterres' statements must represent the views of the majority of member states. So, as a political figure in such a position, I think he cannot arbitrarily say anything that goes against the majority's beliefs.

Therefore, I believe that Macron's and Guterres' speeches indicate that a bipolar international structure has already taken shape or that international political figures have begun to admit the formation of a bipolar world since 2019.

In 2021, Guterres reiterated this point at the 76th session of the UN General Assembly. He feared “that the world was creeping towards two different sets of economic, trade, financial, and technology rules, two divergent approaches in developing artificial intelligence, and — and ultimately the risk of two different military and geo-political strategies. This is a recipe for trouble.  It would be far less predictable than the Cold War.” 

In addition to repeating his statement from two years ago about a bipolar world, Guterres also pointed out the characteristics of this bipolar structure and the differences from the Cold War. The current situation is characterized by uncertainty; while the Cold War was marked by intense confrontation, it had more certainty than the current situation. Nowadays, there is much more uncertainty. It is not about the possibility of more wars, but the unexpected events that might occur when making decisions.

2  To build long-term resilience and development abilities

In June of last year, former Prime Minister of Singapore Goh Chok Tong was able to speak more candidly as he was no longer an active politician and did not have to consider political correctness as much. He said the United States would not give up its global leadership position and has planned to establish alliances to contain China's rise. China would not easily give up either, and both countries now see each other as long-term threats. This judgment is critical. One must not expect the situation to improve quickly. It would be helpful to see the current situation as long-term and lasting, and what you might believe as unreasonable and unforgiving today will probably exist for a long time. As an entrepreneur, you must have the ability to survive and thrive in this unfavorable and retrograding environment. In other words, developing through international cooperation under globalization as if we still live in the past may no longer be suitable. Future opportunities will come from decoupling and supply chain disruptions. When an enterprise cannot buy products at the lowest price and the best quality in the world, it provides opportunities for the survival and development of products with higher prices and poorer quality. In short, Goh Chok Tong said this would be a world that splits into two poles between China and the US, where their relationship will be based more on distrust and competition rather than trust and cooperation. This will be a world where countries have to pick sides, and people will build walls instead of bridges. Under the trend of globalization after the Cold War, countries used to seek various opportunities for cooperation to strengthen development. In the future, they will find more opportunities for growth after international cooperation has been terminated or from the impossibility of international collaboration.

There must be a foundation for the bipolar structure. Look at the global GDP share in 1990: the United States accounted for 26%, China had a share of only 1%, Japan had a share of 14%, Germany had a share of 8%, and the UK made up 5%. By 2022, the US accounted for 25% of the world's total, indicating a relative decline without significant changes in the percentage it held. If we compare the GDP of the US with that of Japan, Germany, and the UK, respectively the gap widened rather than narrowed. Japan went from two-thirds of the US in 1990 to less than one-third now, Germany decreased from one-third to less than one-third. The UK went from 5% of global GDP to 3%, accounting for one-eighth of the US now, declining from less than one-fifth back then. So the gap between the US and the major countries in the world is widening, but the gap with China is narrowing. China's share of the global GDP has risen from 1% to 18% last year （2022）, accounting for nearly 70% of the US.

Some people ask, why didn't people talk about a bipolar world when Japan made up 14% of global GDP in the past? The reason is that Japan was only an economic power, not a comprehensive power, so GDP alone was not enough to make it a pole. To illustrate, at the end of the Cold War or in the 1980s, the Soviet Union had a smaller GDP than Japan. However, it was still a superpower because it was a comprehensive national power with nuclear weapons and military power and far superior to Japan in movies, art, painting, and sports. Similarly, China today is a comprehensive power, becoming the second-largest gold medal winner in the Olympics. Comprehensive national power is reflected in various aspects of national strength.

From such a comparison, the US will be very concerned about China's increasing share of the global GDP, from the current 18% to 25% in the future. China's growth didn’t squeeze the US much. What has decreased is the share of countries such as Japan, Germany, and the UK. Theoretically the US should not be worried that China's growth will reduce the share of these countries. If China reaches 25%, it will be on par with the US, and that worries the US. So in terms of the current development trends, the global economy is not doing well, and the outlook is very bad.

3 Digital economy emerges as a primary source of wealth for big powers

I attended a conference at Princeton University earlier this month where scholars from Europe and Asia were present. We had many differences in our discussions, but we reached a consensus that the performance of major economies will not be judged by who is growing faster but rather by whose economy is declining at a slower rate. No major economy can expect strong growth at present. For example, the Ukraine war has affected not only the Russian economy but also that of Europe and other countries worldwide. Therefore, the comparison is not based on absolute strength but on proportions. From an international politics perspective, status, wealth, and strength  are all relative. 

If I, as a student, dropped from 90 to 80 points [in an exam], I am not worried as long as you fell from 99 to 70 points. I would be winning. It is about relative gain, not absolute gain.

It is a proportional or relative strength comparison rather than a comparison of absolute strength in international competition. This is why the three politicians we mentioned earlier all said that a bipolar structure has been formed.

So, what is the difference between this bipolar pattern and the one during the Cold War from an economic standpoint? According to Mr. Guterres, it involves technology, the internet, and the economy this time. And what is this current “economy”? It is the digital economy. The share of the digital economy in the GDP or national wealth of major countries continues to rise, approaching or surpassing 50%. This is because the digital economy grows at 1.5 times the rate of the overall economy (which includes the digital economy). This means that the digital economy will account for an increasing share of national wealth for all major countries. Since the digital economy will become the primary source of national wealth, no major country will focus on non-digital economy areas instead. All major countries focus on the digital economy as a key area for economic development, but they differ in how much they can do. For example, Russia has a national report on developing its digital economy, but it doesn’t have the capability and foundation to do it and can only rely on selling natural resources.

The China-US competition significantly differs from the US-Soviet competition during the Cold War. The competition between the United States and the Soviet Union centers around physical space such as land, sea, air, and space, while the China-US competition takes place in a new space created by humans called cyberspace. The strategic competition between the two countries occurs simultaneously in physical space and cyberspace, where cyberspace plays a significant role in the economic field in that the digital economy is the main source of wealth for major countries. This means that whoever has a preponderance in cyberspace can win this strategic competition. If you have no advantage in cyberspace but only in physical space, you will not win this competition.

So what is a current example? It is the Ukrainian war. Russia has an absolute military advantage in physical space but a disadvantage in cyberspace. So Russia cannot use its absolute military advantage to achieve political goals, resulting in the war being fought in the way it is today, and no one knows how long it will last.

4 The core of the strategic competition between China and the US is digital technology

Why does the digital economy significantly differ from the non-digital economy in the physical space? The difference lies in data.

Many documents and policies are being issued regarding data protection and utilization. Data is a resource of the digital economy, just like oil, coal, minerals, and seawater. There are natural resources that we rely on for production in the physical world. Without these resources, you cannot produce. What is mainly used for production and services in cyberspace? It is data. Therefore, there needs to be technological innovation in the digital economy to solve the challenge of collecting data. The ability to collect data is not through manual statistics but through technological innovation. Take ChatGPT for example, it doesn't entail omniscience, but rather it can gather all relevant information on the internet, analyze grammar, and predict the most probable wording based on context. The technology for collecting data is constantly improving, and competition is all about who has the strongest ability to collect data. In the military, this is demonstrated by the ability to collect intelligence. The key in the competition between major powers, whether in scientific and technological progress or military competition, is the stronger ability to gather information.

Secondly, once the data is collected, what comes next? Data is essentially a large amount of digits and figures, and you need help figuring out what to do with it. That's where data processing comes in. You have to sort through all the data on purchases, taxis, meals, and everything else and then organize it to your needs. This requires technology. Without high-speed processing equipment and technology, you cannot handle such a large amount of data, such as one billion, tens of billions, or even hundreds of billions. Therefore, this requires a piece of technology that can operate at a very high speed.

Thirdly, data technology is analytical technology, and China and the United States are both trying to innovate in this field. Only  after categorizing and separating data can they be understood, thus making scientific innovation be achieved. Even garbage must be sorted before it can be recycled into treasure. This process requires continuous improvement in collection, processing, and analysis techniques. Together, these three techniques can turn useless data into something valuable, like turning wood into tables or chairs. However, having value does not mean it is wealth. If you have a house full of tables that you can't sell, it is still considered junk. That's why a new piece of technology was created - the technology to extract value. This is the technology that creates value from data and turns it into money (aka data monetization). For example, mobile payment platforms provide various services such as ride-hailing, online shopping, and restaurant reservations. Every time you use these services, you generate more data. This leads to a phenomenon that we couldn't imagine in the past - the more we use digital resources such as data, the more they grow. Unlike natural resources, which become depleted as we use them, digital resources have unlimited growth potential. As long as you can turn the unlimited data resource into wealth, your wealth can grow infinitely.

This is why the strategic competition between China and the United States is focused on digital technology innovation. The United States is using its "small-yard, high-fence" strategy to restrict China's digital technology innovation. If it cannot be prevented, then it will be prohibited. This is to slow down China's progress so that the US can maintain the existing technological gap and potentially widen it in the future.

[Editor’s note: former Secretary of Defense of the United States Robert Gates used the term before current National Security Advisor Jake Sullivan did, and it means being protective to critical US technologies and doing so aggressively.]

This is why Guterres repeatedly emphasized the difference of bipolarity between the current situation and the Cold War in the US-China competition.

The US attaches great importance to digital innovation, and to what extent? They believe the core of China-US strategic competition is not ideology but digital technology. The heart of digital technology is the performance of chips in hardware, continuously improving and boosting the research of other basic sciences. The U.S. passed the CHIPS and Science Act in July last year. What is the new regulation? It aims to compete with China in science and technology. In other words, how to curb China's speed of technological innovation from surpassing the United States and to prevent this from happening. Therefore, the government decided to provide $57 billion in government subsidies to local chip manufacturers, $24 billion in tax incentives, and $200 billion in funding for related innovation, training, and research and development in the next five years, with a 25% tax credit for four years to encourage companies such as Intel, Samsung, and TSMC to build factories on US soil. Some provisions restrict the economic and trade investment activities of relevant enterprises in China to enhance competitiveness with China.

As you can see from the first sentence [of the regulation], which mentions "subsidies for technological innovation." You may not think there is any political issue with this statement, right? Because China’s policies also encourage business innovation by implementing incentive-based policies and other rewards. However, this used to be a long-standing reason for the United States to sue China at the World Trade Organization, saying that China conducted unfair competition. They claimed that China provided national subsidies for technological innovation, which is equivalent to using national power to compete with US enterprises, which is unjust. The US demanded sanctions and punishment against such companies. How about now? The US government leads in implementing the American-style national system and technological innovation subsidies. This is the point where the United States has long attacked China. Now they insist that we all subsidize companies and all violate the WTO rules on competition. What is my point? The United States' formulation of this law violates its political principles of free trade and market economy competition. It can be imagined how important this matter is to the Americans. They believe that this is fundamental to whether the United States can win the competition with China, so they have made such a law. This is not a policy; it is a law. The US is willing to violate its own political principles to stop China's technological development and widen the gap with the US in technological capabilities.

5 Anti-globalization, de-globalization and counter-globalization

Against such a backdrop, we all find that uncertainty and technological competition are becoming increasingly intense, and mutual confrontation is worsening as a result. This phenomenon has come to be known as counter-globalization, which represents a significant event that will shape the course of human history. The concept of globalization emerged after the end of the Cold War and was composed of two elements: economic marketization and political democratization. Initially, some countries, like ours in the early 1990s, were opposed to globalization as they perceived it as a form of Americanization. However, after joining the World Trade Organization, we realized that globalization could benefit China, leading to faster economic development. As a result, we adjusted our policies and began to support economic globalization, while continuing to oppose political democratization.

Over the years, what have we achieved through our development? We have become the largest beneficiary of globalization, a fact that is recognized not only by ourselves but also by the international community, including the United States. In fact, I believe that everyone present here today has benefited from globalization in one way or another. While the United States has also benefited, Trump had a different perspective. He did not care whether globalization brought a win-win situation in which everyone benefits equally. Instead, he questioned who was benefiting the most from globalization. Trump claimed that the United States had promoted globalization but ended up being surpassed by China in terms of benefits. This led him to view globalization as a harmful trend for the United States. It's not that the United States cannot benefit from globalization, but rather that China has benefited more significantly.

China does not deny that it has benefited the most from globalization, which is why our current policy still supports continued economic globalization. While the United States has backed off from this position, claiming that if they continue to support globalization, China will continue to benefit more than they do. It's not that the United States cannot benefit from globalization, but rather that China has gained more. This has led to a shift from globalization to counter-globalization.

It is important to distinguish between the concepts of anti-globalization, de-globalization, and counter-globalization, which are often used interchangeably in the media. Anti-globalization represents the views of ordinary citizens and small to medium-sized enterprises (SMEs) who oppose globalization because multinational corporations and large capital can effectively allocate resources globally, leaving SMEs unable to compete. This was exemplified by the "Occupy Wall Street" movement, which protested against multinational corporations and organized large-scale demonstrations against the World Trade Organization's meetings to discuss globalization policies. However, since SMEs lack political power and sovereignty, they are unable to halt the development of globalization, which is driven by multinational corporations and supported by governments.

Despite opposition, globalization has continued to thrive, with annual meetings of the World Trade Organization promoting further globalization with the support of governments. However, in 2016, a backlash against globalization emerged, led by the UK's decision to pursue de-globalization through Brexit, reversing its previous policy of promoting globalization.

What are governments? Governments are actors that possess state power and sovereignty. Recently, they have been terminating or reducing international cooperation and global collaboration. The UK was the first to lead this trend, but due to its small economic size, it had little influence. However, in 2018, the US joined in by launching a trade war against China, advocating for de-globalization policies, including increasing tariffs, banning free trade, and disengaging from global supply chains. As the world's largest economy, the US's shift towards de-globalization marked a significant trend. Moreover, the outbreak of the COVID-19 pandemic in 2020 gave governments a legitimate reason to block globalization.

6 Why should we adhere to the "dual circulation" strategy with a focus on domestic circulation?

What is a pandemic? A pandemic is a negative consequence of globalization. While globalization has brought about many positive changes, it is a double-edged sword that has also caused significant harm. Globalization has made many people wealthy, but it has also resulted in stagnant wages for the middle class and limited improvements in the living standards of the poor. Furthermore, globalization has led to the global spread of pandemics and international cooperation among terrorists. The negative impact of globalization has become increasingly prominent. As a result, many governments have reduced international cooperation and restricted the movement of people, citing pandemic prevention as their justification. This trend has resulted in the widespread adoption of counter-globalization policies by numerous countries, making counter-globalization a historical trend.

In face of the counter-globalization trend, China has proposed a "dual circulation" strategy with a focus on domestic circulation.

“Focusing on domestic circulation” means establishing self-contained industrial chains within the country that do not rely on international cooperation. By reducing reliance on international cooperation, the domestic industrial chains are less vulnerable to interruptions caused by global political events. After all, if everything is interconnected as a result of international cooperation, how can we prioritise domestic circulation?

All major economies have now adopted de-globalization policies, except for one: the European Union. As a union, its members cannot unilaterally decide to withdraw and pursue decoupling policies. However, the outbreak of the Ukraine war in 2022 prompted the EU to recognize the risks of excessive reliance on international cooperation. The war disrupted Europe's oil supply from Russia, resulting in heating, food, fertiliser, energy, and other critical shortages. Consequently, the EU decided on March 11, 2022 less than a month after the conflict began, to reduce its dependence on international industrial chains for food, chips, medicines, raw materials, and digital technology. Instead, these industries will be solely produced within the EU, creating internal industrial chains and reducing reliance on external cooperation.

Last month, I traveled to Europe and found that many countries there are considering reducing economic cooperation with China. They want to avoid potential disruptions to their industrial supply chains due to political reasons, which could pose risks to the development of their companies. Therefore, after negotiations with Chinese officials, the President of the European Commission, Ursula von der Leyen, clearly stated in a press conference that the EU aims to reduce its economic dependence on specific countries.

During my trip to Europe, I also found that it's no longer just European governments who are reducing their reliance on international cooperation, but also European and American businesses. They are reducing links on the industrial chain. For example, if there were 50 countries cooperating before, now they are reducing it to 30. There's a buzzword called "friend-shoring," which means shrinking the industrial chain to only include countries with stable political relations. At a minimum, they are shortening the chain, and some are even producing everything themselves without any cooperation. Unfortunately, this trend has become increasingly prevalent.

From this, we can see the demand for anti-globalization of the SMEs, which combines with the governments’ de-globalization strategy, leading to the current trend of counter-globalization. If the previous wave of globalization lasted for more than 20 years from the end of the Cold War to 2016, then this wave of anti-globalization will likely last no less than 20 years.

So how serious is the situation of counter-globalization? At the opening ceremony of the BRICS Business Forum last June, President Xi said, "Right now, our world is facing drastic changes and a pandemic,  both unseen in a century. Various security challenges keep emerging. The world economy still faces strong headwinds on its path toward recovery, and global development has suffered major setbacks. Where is the world headed: Peace or war? Progress or regression? Openness or isolation? Cooperation or confrontation? These are choices of the times that we are confronted with. Human history, like a river, keeps surging forward, with moments of both calm waters and huge waves. "

7 The world is once again standing at the “crossroads” of history

So, from a philosophical standpoint, it's often said that everything has its opposite and that things tend to balance out in the end. While we know the pendulum will eventually swing the other way, we can't predict exactly when that will happen. Our assessment from June of last year accurately predicted the current situation. And it has only become clearer over the past eight months.

Hence, in February this year, the Chinese government released The Global Security Initiative Concept Paper, which states “Today, our world, our times and history are changing in ways like never before, and the international community is confronted with multiple risks and challenges rarely seen before. Regional security hotspots keep flaring up, local conflicts and turbulence occur frequently, the COVID-19 pandemic persists, unilateralism and protectionism have risen significantly, and traditional and non-traditional security threats are entwined. The deficits in peace, development, security and governance are growing, and the world is once again at a crossroads in history.”

Here the "crossroads" no longer refers to a neutral stance, but the fact that the world is regressing and we are headed towards disaster. Because in Chinese, "crossroads" has always been used to describe a bleak future.

From a political and philosophical perspective, such judgments only provide us with a broad trend. However, from a scientific and academic perspective, we need to determine how long this historical setback will last. Scientific research must provide a time frame for this, as well as the intensity of the regression, that is, to what extent it can regress. Speaking personally, if we take 2016 as the starting point, we have already experienced a setback of 8 years. Looking ahead from 2023, we anticipate at least 10 more years of regression, with the possibility of 20 years or more.

After humans developed the concept of time, it became apparent that time is linear, right? In the past 120 years, our communication technology has advanced constantly, starting from one-way communication with the telegraph, then progressing to the telephone, walkie-talkies, wireless phones, brick phones, and eventually cell phones that can send texts and images. Today, we have smartphones that can even make video calls. The development of human communication technology has been consistently advancing in one direction over the past 120 years and won't regress.

The same goes for economic development. However, I won't reference the grand narratives of human history, such as pastoralism, agriculture, and industry. Instead, let's focus on the past 120 years, during which we've observed a linear progression of economic development from labor-intensive traditional industries to capital-intensive, technology-intensive, and knowledge-intensive processes. Today, we're witnessing further advancements in digital knowledge-intensive processes. In this process, the development has been unidirectional, and there is no possibility of regressing back to the previous stages.

Yet, human political relationships, civilizations, values, and systems can regress. Prior to World War I, there were several wars, but they were relatively small in scale. That period was touted as "the hundred years of peace." However, with the outbreak of World War I, a major regression occurred, with casualties soaring from thousands to millions. This was followed by 22 years of peace, until the onset of World War II, which resulted in even more casualties, with estimates of over 40 million deaths.

Following World War II, progress was made, and although there were still wars, they were significantly smaller in scale, with casualties in the hundreds of thousands at most. The Cold War marked another milestone in progress, and despite ongoing conflicts, casualties were limited to tens or hundreds of thousands. Globalization represented a significant step forward, and although wars still occurred, casualties decreased significantly, with very few exceeding 100,000 deaths.

However, we have now entered the era of counter-globalization where casualties once again climb, signaling a new regression. The Ukrainian Crisis, for example, has resulted in at least 200,000 military deaths in just one year. It is clear that human international politics is caught in a cycle of progress and regression. Currently, we appear to be in a period of regression, and it is important to determine whether we are regressing to the level of the Cold War or even to that of the World Wars. This requires further study and analysis.

Will humanity face another world war? After the outbreak of the Ukraine war, many fear that Russia may resort to nuclear weapons, bringing about global destruction. But is this danger real? Some argue that even without the use of nuclear weapons, major powers may still get embroiled in a world war. Others suggest that if a world war is not possible, proxy wars between superpowers will escalate, and casualties will rise to the millions once again. Can we expect another war where casualties will be counted in millions? These are the questions we must consider today. How far will this regression of history go? Regardless, we have come to a consensus that the regression is happening.

8 A Force of Anti-Globalization

During my trips to Europe and the United States, I attended numerous meetings, but didn't hear a single speaker express optimism about the world's future. Instead, they all said "I am pessimistic," and the best thing they could say was "I was pessimistic, but not as much as you." In other words, being less pessimistic is already considered positive enough.

How will the economy be affected? Well, the economic situation that we see is based on the predictions made by the World Bank. According to their forecast, the economy will only grow by 1.7% in 2023, compared to the expected 3% growth from last year. Initially, it was believed that China's economy would grow after the lifting of anti-COVID restrictions, but that didn't turn out to be the case. We lifted our restrictions on December 7th of last year, but we didn't see any significant increase in economic activity. As a result, the World Bank revised their forecast down to 1.7% growth for this year, with 2.7% growth expected next year. The IMF's forecast, which was made in April, also lowered the growth rate, predicting 2.8% for this year and 3% for next year.

From my personal observations of the World Bank and the International Monetary Fund's predictions for the global economy over the years, the IMF tends to be more optimistic than the World Bank, but their predictions have been proven to be less accurate. In recent years, the IMF's forecasts have consistently overestimated the economy, and it's unclear why. While it is normal for forecasts to be sometimes correct and sometimes incorrect, it is weird for them to be consistently wrong.

Nevertheless, on April 5th this year, the IMF released the World Economic Outlook, which acknowledged the formation of a bipolar world centered around the US and China. The IMF suggested that India, Indonesia, and Latin America are adopting a non-alignment policy to cope with this bipolar structure. They also predicted that global output will decline by 1% in the next five years, indicating negative growth. This means that we may not even achieve zero growth this year or next, and global GDP may decline by as much as 2%. These are the IMF's assessments of the current economic situation.

Then we ask, where did the counter-globalization force come from? Globalization was progressing smoothly, but who suddenly turned the steering wheel and made a U-turn? The contributing factors are being analyzed by many people, and as long as these factors continue to exist, we will not turn back to globalization and will inevitably continue on the path of counter-globalization.

I personally believe that the rise of counter-globalization is a consequence of the harmful side effects that have emerged from the growth of globalization. It's like globalization has given birth to a rebellious child that seeks to counteract its influence. Globalization exacerbates the polarization of international and domestic wealth, and leads to increasingly severe wealth inequality. As a result, ordinary people are becoming increasingly resentful and opposed to globalization.

Let's talk about the international aspect. When our country hosted the G20 summit, the media reported that the G20 represented over 80% of the global GDP. At that time, I happened to be in Vietnam, and in the local newspaper, there was a tiny corner mentioning that China was hosting the G20 summit in Hangzhou. I couldn't help but wonder why Vietnam wasn't more enthusiastic about this event.

It turns out that Vietnam is not a member of the G20. The G20 is like an exclusive club for wealthy nations. How can you expect poor nations to support you when you're enjoying lavish banquets and celebrations, while they struggle to meet even their basic needs? The G20 only represents around 40 countries out of more than 160 economies or nations in the world. They get to share 85% of the global wealth, leaving the rest behind. Can these left-out nations truly support the G20? Will they feel happy? That’s impossible.

There are some individuals who hold a peculiar notion, constantly using per capita measurements to justify the advantages of wealth accumulation. It’s like proudly showcasing their colossal mansions in the neighborhood and going from door to door, handing out flyers, proclaiming that their extravagant residences have contributed to an increase in the average housing size within the community. But can you imagine anyone finding joy in such a declaration?

Hence, the growing disparity between the two extremes on the international stage has resulted in a lack of support for globalization from smaller nations, who perceive it as unjust. However, the more pressing concern lies within our own borders, as the countries that have benefited the most from globalization are experiencing a deepening divide within their own societies.

The United States has been one of the countries that has reaped greater benefits from globalization compared to other Western nations. According to U.S. statistics, around 10% of the population possesses assets worth millions of dollars, although the actual estimate is less than 0.5%. It is reported that 65% of households have assets exceeding $25,000, but in reality, that figure is estimated to be closer to 82%. However, it is important to note that these statistics, whether based on direct calculations or objective observations, do not account for those who are homeless, lack shelter, or resort to begging. This highlights the growing wealth disparity in the United States.

The middle class voices their dissatisfaction, pointing out that while their wages have only seen modest increases measured in thousands over the past 20 years, the fortunes of the rich have skyrocketed into the billions. In a Chinese saying, the concern for inequality outweighs the fear of scarcity, and this sentiment is shared not only in China but also in the United States, Europe, and across the globe. If I earn less and you earn less, I have no qualms. In fact, I am content, especially if you earn even less than I do. However, what truly irks me is when you earn more than I do. It's not about the absolute amount I possess, but the fact that you have more than me, which stirs feelings of discontent. Such is the nature of human beings.

Therefore, the internal wealth disparity brought about by globalization does not solely refer to absolute poverty but rather relative poverty. It's about the increasingly widening gap in wealth ownership. Unicorn companies, led by a few young individuals, accumulate assets worth billions or even tens of billions within just a few years. Now, imagine those individuals who earn only $500 or $850 per month. Can they embrace globalization? It's highly unlikely. Thus, a counter-globalization force has emerged within the general population.

9 The dreadful consequence of Western populism is the fusion of ideology with power

Regarding digital technology, it has accelerated the wealth polarization. Those who are involved in the digital economy experience a faster growth in their wealth than those not involved in this sector. This further accelerates the speed of the polarization of the society and fuels dissatisfaction among the less privileged and the vulnerable groups. This dissatisfaction creates a populist ideology that rejects elites. Populism asserts that elites, who make policy decisions for the nation, create policies favorable only to themselves and not the ordinary people. The reality is that the wealth polarization in the nation is increasingly severe.

When populism emerges and merges with power, it inevitably adopts policies that reject globalization. Populism believes that all of the disasters that befall a nation are due to the policymaker's introduction of external elements, such as immigrants, foreign investment, foreign technology, and foreign capital. Populism argues that these foreign initiatives displace the domestic workforce, take over domestic markets, oppress the local culture, and the easiest way to address these external threats is to cut off all external contact. 

North Korea is the safest. Even though the United States imposes sanctions on North Korea, they cannot sanction me. They say, "I have no relationship with you, why would you sanction me?" The safest option is to have no international cooperation at all. 

Populism is not the result of ideology but the combination of ideology and power. Populism is an ideology that originates within Western countries and initially challenges liberalism in those countries. Populism is not opposed to communist or socialist ideologies; it opposes liberal ideology. It emerged in Western countries and challenged the dominant values of those countries. After gaining strength, populism began to spread from developed countries to developing countries, and gradually, populist ideas also emerged in developing countries. 

A typical example is the case of a police auxiliary officer in Suzhou, China. He detained a young girl wearing a kimono, but later the police released her and apologized to her. I want to ask a question: Why did the auxiliary officer detain the girl? It's not because he held populist ideas such as disliking Japan, Japanese culture, or Japanese clothing. Instead, it was about exercising power and not allowing others to have preferences. It was about exercising power and denying someone's right to choose what clothes to wear because they were foreign, and opposition to anything foreign.

There was also an elderly lady nearby wearing a uniform, a janitor's uniform, and she might not have liked the girl wearing a kimono either; she might have had her own opinions about kimonos. But why didn't the janitor detain the girl? It's because the janitor knows that her uniform doesn't grant her that kind of power and doesn't allow her to prevent others from having different opinions. 

The police officer, on the other hand, believes that his uniform gives him the power to prevent others from having different thoughts. This is how populism combines with power, leading to policies of anti-globalization, anti-immigration, anti-rule of law, anti-elites, and anti-science. It's about being against anything foreign. 

Therefore, when we see Donald Trump come to power in the United States and Boris Johnson in the UK, they adopt policies that aim to reduce globalization, such as reducing international cooperation. The UK does not allow Chinese 5G technology to enter, and the US targets Chinese apps like TikTok, not allowing their use, all as a result of the combination of populist ideology and power, claiming to protect their economic security.

This absence of international cooperation is the safest policy to ensure economic security. It is this belief in economic security that creates the fear of globalization. When populism merges with power, it adopts anti-globalization policies that reject migration, justice, elites, science, and foreigners. Populist ideology and power fundamentally block globalization policy and bring a change of direction that appears reasonable and seeks to ensure economic safety for the country.

After ensuring policy legitimacy for economic security, preventing all international cooperation became legitimate. Why? Because economic security is undefined, borderless, and boundless. You can argue that anything that anyone does is fora threat to economic security. For example, if you open a McDonald's establishment, the Chinese restaurants in the vicinity will say that McDonald's takes away all their business, which threatens their economic stability. Therefore, countries can use any reason to accuse something as a threat to their economic safety. If you wear a Japanese costume, you affect the sales of Chinese clothing. That is why economic security has become the legitimacy foundation of anti-globalization policies.

In summary, what is the trend of anti-globalization? Globalization and digital economics are exacerbating the wealth polarization. The extreme idealism of liberalism and the rise of populist ideologies in conjunction with power generate a general security concept and economic safety becomes the guiding principle for all policies. All of these policies become crucial to ensure economic safety. Under this banner of general safety, with the purpose of promoting economic safety, to counter any international cooperation, populist governments adopt anti-globalization policies. The trend of counter-globalization is created by the government's policies to counteract globalization, not the ordinary people or the big companies.

10 The outlook under the American "Small Yard, High Fence" strategy is hardly optimistic

So, under the trend of anti-globalization, what is the development trend of China-US relations?

In June last year, China released a document called Reality Check: Falsehoods in US Perceptions of China. In this document, a judgment was made about the United States, stating that "the United States is the largest source of chaos in the world order, using all internal and external resources to suppress China without bottom lines. The United States is the inventor and ultimate practitioner of coercive diplomacy. The United States is the largest human rights violator in the world, one of the main threats to peace and stability in the Taiwan Strait, the initiator of the Ukraine crisis, the real threat to regional peace and stability, the largest source of disinformation, the root of the current China-US trade friction, and the largest global hacker empire."

This understanding was further strengthened and politicized in February this year, eight months later, by releasing a document called US Hegemony and Its Perils. In the "Preface," it says, "the United States has acted more boldly to interfere in the internal affairs of other countries, pursue, maintain and abuse hegemony, advance subversion and infiltration, and willfully wage wars, bringing harm to the international community." 

The United States is a political, military, economic, technological, and cultural hegemony. How can this be resolved? How can China solve the relationship with hegemony? "The United States must conduct serious soul-searching. It must critically examine what it has done, let go of its arrogance and prejudice, and quit its hegemonic, domineering and bullying practices.." That is, the United States must first self-criticize, admit its mistakes, and then the relationship can improve. 

Do you think the United States will do this? Which US administration could make such a decision? Do you think it is possible? This is China's understanding of the United States.

How does the United States perceive China? Last year, the US Department of Defense released a report that clearly stated, “The PRC seeks to undermine U.S. alliances and security partnerships in the Indo-Pacific region, and leverage its growing capabilities, including its economic influence and the People’s Liberation Army’s (PLA) growing strength and military footprint, to coerce its neighbors and threaten their interests…The PRC remains our most consequential strategic competitor for the coming decades.”

Defense Secretary Lloyd Austin, fearing that people might not understand, specifically said in a speech, " the PRC is the only competitor out there with both the intent to reshape the international order and, increasingly, the power to do so…Unlike China, Russia can't systemically challenge the United States over the long term. But Russian aggression does pose an immediate and sharp threat to our interests and values.”

Some people think that Russia's war in Ukraine has created a strategic barrier for China, restraining the strategic pressure of the United States on China." From this report, do you think it is possible? Since the outbreak of the war in Ukraine, the United States has not transferred a single soldier from the Asia-Pacific region to Europe, which means that the outbreak of the war in Ukraine does not affect the containment policy of the United States against China in the Asia-Pacific region and the resources and strength used here.

So, I want to tell you that the United States sees China as the biggest and most comprehensive strategic challenge. Both sides regard each other as the main threat. This is the conclusion from our assessment. Looking at the relationship between China and the United States now, it is worse than in 1978 before the establishment of diplomatic relations - that bilateral relationship was better.

I am over 70 years old. When we were young, in the 1950s and 1960s, we grew up criticizing U.S. leaders. Since Nixon visited China in 1972, China has stopped criticizing US leaders by name. After Trump took office, we resumed our named criticism of the United States, calling Mike Pompeo a "common enemy of humanity." How far has the bilateral relationship deteriorated? When I visited the United States, I felt that the American perspective on China had seriously worsened. I encountered Chinese students studying there who said that American students wouldn't openly say it, but everyone knows that they harbor hostility towards Chinese students in their hearts.

The US policy towards China adopts a combination of cooperation, competition, and confrontation. Competition—technology, military, space, talent, finance, investment, trade, these are the core policies; cooperation—climate, energy, etc., these are replaceable; confrontation—human rights, Xinjiang, Tibet, Hong Kong, East China Sea, South China Sea, Taiwan, these are tools, but the real core is in the competitive field. So, to win the competition and make the United States stronger, a club strategy has been adopted, with several countries forming small clubs, the core of which is to exclude China from participation. Others may participate, but China cannot. Looking at the Clean Network Program, G7 Digital Alliance, OPenAI, 5G Alliance, US-Japan-Taiwan-South Korea Semiconductor Alliance, all of these focus on the digital technology field, which is the core. The strategy adopted is the small yard, high wall.

Regarding the “small yard, high fence,” I want to explain specifically that on April 10th, the Deputy Secretary of the US Treasury Department's International Affairs Division just gave an explanation in an interview. This explanation is not aimed at China, but at the American public, to inform them not to misunderstand that the Biden administration wants to decouple completely from China. 

The “small yard, high fence” means "to hinder China's development in technology, not cooperate with China, and reduce ties with China in high-tech fields, while continuing to maintain economic cooperation with China in non-high-tech fields." So, he said that we will occasionally have differences in economic policy towards China and that we will always defend American economic interests. This means that sanctions against China in the high-tech field will not stop but will only increase, not decrease. However, we will never attempt to completely separate the two economies in any way, as this is neither practical nor in our interests. I personally believe that he is describing the current objective economic policy of the Biden administration towards China. It is not comprehensive control; cooperation in non-high-tech fields will continue.

So, what is the development trend? Overall, the trend should be worsening. This year is 2023, and the trend is downward. In the next few years, some years may see a faster decline, while some years may see a slower decline, but the overall trend is downward, and we won't discuss this further.

11. Chinese enterprises must soberly recognize that "counter-globalization" has become the norm

One point I want to discuss is that last year, the United States adopted the Indo-Pacific Economic Framework, which resulted in the strategic balance starting to tilt towards the U.S. side. Originally, East Asian countries, including Japan and South Korea, relied on China for their economies and the United States for security. However, due to the adoption of the Indo-Pacific economic framework, countries participating in it include not only U.S. allies such as the United States, South Korea, Japan, and New Zealand, but also non-U.S. allies such as India, Indonesia, Thailand, Malaysia, the Philippines, Vietnam, and Brunei. This means that reliance on the U.S. for security has not changed, but there has been a differentiation in the reliance on China for the economy. In other words, these countries also want to maintain a balance between the two sides economically. The original strategic balance of relying on China for the economy and the U.S. for security has begun to tilt towards the U.S. direction. I won't go into the specific policies.

Finally, let's talk about Europe. Faced with such Sino-US strategic competition, what are their choices? We have seen many reports in our media recently, with Macron saying, "Europe must fight for strategic autonomy, and we do not want to rely on others for key issues." He specifically mentioned, "If tensions between the two superpowers, China and the United States, escalate, we will have no time or resources to achieve strategic autonomy. We will become vassals, and Europe does not want to be caught in the confrontation between different camps."

This is a very specific issue, meaning they believe that if the United States and China escalate conflicts in the Taiwan Strait region, the U.S. sanctions will cause the entire economic cooperation and industrial chain with China to be disrupted. What should be done? They need to prepare now to reduce the impact of future industrial disruptions. This is what Ursula von der Leyen discussed at the April 6 press conference on reducing risk, citing the example of promoting trade and investment diversification to reduce dependence on specific countries. This has also led to many political concerns about foreign capital expanding production in China and cooperation between foreign capital and Chinese enterprises.

Lastly, I want to say that the trend of counter-globalization has already taken shape, and each of us must treat it as the norm. We have lived in a globalized state for decades, so we think that is the norm. We used to be able to travel with our passports, but that situation before 2019 has ended. Now, it is difficult to go anywhere, and there are obstacles everywhere. This is a fact, and this fact will become a norm in our lives. Therefore, the development of enterprises cannot pin their hopes on the current trend of anti-globalization changing within a few years, so-called re-globalization, but must consider how to formulate their long-term development strategy in the anti-globalization environment.

That's all I have to say. If there are any mistakes, I hope you can criticize and correct them. Thank you all. (Enditem)

Again, the agenda of the upcoming 11th World Peace Forum.

Yan Xuetong says digital space is even more important than people realize