China's ambitions and prospects amidst the COVID19 pandemic and US-China confrontation

Year of Publication
Toshiya Tsugami
Organization Name
European University Institute
U.S.-China confrontation
Implicit government guarantees
Reverse financial repression
Following the fundamental transformation of U.S. policy toward China, China's policy toward the United States has also undergone a fundamental transformation. It has abandoned the prospect of a turnaround and recovery in Sino-American relations and is ready to launch a protracted and enduring struggle with its formidable rival, the United States. Behind this is the fact that China is performing best among the world’s major countries to conquer the COVID-19 pandemic and recover the economy. At the same time, Western countries are unable to escape from the quagmire of dichotomy between infection prevention and economic recovery. Moreover, the government of the U.S., which has long advocated Western democracy, is obstructed by a widening political division between citizens. Xi Jinping’s administration has confidence that ‘the correctness and superiority of the Chinese system have been proven’ and optimism that ‘time will be on China's side’ if it fights an enduring war. However, substantial government interference has reduced the efficiency of the Chinese economy, and the imposition of ‘implicit government guarantees’ has seriously distorted the distribution of wealth. Even if China's economy can sustain growth in the short term, it will face stagnation in the long run. China's belief that the stalemate of the Western democracies proves China's righteousness overlooks this fate. If worldwide globalisation recedes in the future, inflation might return sometime in the 21st century, and the financial security of governments in U.S., China, and all the world's major countries with excessive debt problems could collapse. If this happens, governments will no longer be able to centrally control and exercise power as they have in the past, and there will be a decentralisation of power. The future of the 21st century may see cataclysmic changes beyond our imagination, and the U.S.-China confrontation may be no more than an interlude in the eternal flow of such history.
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