The bargain that China’s leading leaders concluded with Elon Musk perfectly illustrates why the Trump administration’s multiple setback in Beijing in terms of trade, technology and security largely failed. And it also shows why the team behind elected US President Joe Biden needs to come up with a radically different approach to competing with America’s most powerful competitor.
To entice the billionaire CEO of Tesla and Space X to build Giga Shanghai in the midst of Trump’s trade war, they provided him with fringe benefits and special favors (such as tax cuts and cheap loans) and gave his organization extraordinary access to power. Apparently, Tesla’s local unit has a channel to President Xi Jinping himself, According to Bloomberg Businessweek. What did Musk get out of the deal? Privileged access to the world’s largest electric vehicle market by far – and wealth innumerable.
Many thanks to China, he is now the world’s richest man.
Tesla’s Giga Shanghai.
Photo: Costfoto / Barcroft Media / Getty Images
This Week in the New Economy
What did China get? Leading technology. Musk came up with research and development, not just production lines. His presence forced local rivals to improve their game. China’s indigenous automakers have never managed to win the domestic vehicle for internal combustion vehicles against American, German and Japanese brands. Now, with Musk’s help, the country is on track to dominate the new era of electric mobility.
So much for Trump’s trade war: the US trade deficit with China today is about the same as when the Republican took office. At the same time, Derek Scissors, a resident scholar at the American Enterprise Institute, writes American investment in China now probably exceeds $ 1 trillion, much of which rolls in during Trump’s office.
This is how China wins the bigger Asian competition with the US, one that will define the early part of the 21st century. As the US political system unravels, China’s leaders are focused on attracting foreign technology, the key to what they call ‘comprehensive national power’, which means economic as well as military power.
A military vehicle carries China’s DF-21D ‘carrier killer’ missile in Beijing’s Tiananmen Square in 2015.
Photographer: Greg Baker / AFP
Trump’s somewhat more successful attempts to push China back into the security arena – for example, US warships now regularly sail through Chinese artificial islands full of military installations in the South China Sea – nevertheless faced similar realities to those he faced on the economic front. The rapid acquisition of technology in China has decisively shifted the balance of power in the western Pacific, a fact that has been clear to U.S. military strategists for some time.
In his must-read book “The Kill Chain, ”Christian Brose, a former chief of staff of the Senate Armed Services Committee, describes how the Information Age bypassed large sections of the U.S. military. To name just one example, the F-22 and F-35A fighter jets still rely on pilot radio to share basic data; their software on board can not talk to each other. Meanwhile, China’s fully autonomous swarms are planning intelligent combat drones as they prepare for an ‘AI arms race’, a ‘quantum arms race’ and a ‘genre editing arms race’, one that will deliver biologically enhanced warriors for a new military frontier. In all of these areas, China is rapidly catching up or leaving a faltering America in the dust.
‘The problem is that America is it play a losing game, ”writes Brose.
Kurt Campbell
It is this dilemma that the incoming Biden administration is now facing. An essay in Foreign Affairs by Kurt Campbell, Biden’s newly appointed orator in Asia, and Brookings Institution scholar Rush Doshi acknowledges the great scope of the challenge.
Its prescriptions include a massive investment in the kind of weapons China has long used, including rockets and missiles; distribution of U.S. forces wider in the region as U.S. military bases now put ducks; and the encouragement of new military and intelligence partnerships between regional states.
Economically, Campbell and Doshi focus on America’s role in strengthening supply chains, standards, investment regimes, and trade agreements.
“The negotiation of Beijing’s role in this order is the most complicated element of the overall pursuit, ”they write, with considerable understatement.
Will the Chinese leadership fall into such an arrangement? Their ultimate goal is to negotiate Washington’s exit from the current Asian order – or push it out – and then establish a new organizing principle based on Chinese priority. Beijing’s ambition fueled by China’s irresistible lure large consumer markets.
Xi’s embrace of Tesla is part of China’s broader strategy. Of course, there is no guarantee that Musk will succeed in its largest market outside the US. It is possible that he will be ostracized as soon as Chinese rivals overtake Tesla, or that he will be caught in the crossroads of technology competition between the US and China. and is forced to choose side. For now, however, he is all-in.
“I love China,” Musk said at a meeting with Prime Minister Li Keqiang, who immediately stormed in 2019. offered him a residential green card.
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