The United States Should Compete Rather than Block China

Martin Rodriguez Rodriguez , Contributor

Jorge Heine, former Chilean ambassador to China, discusses US-China relations. Martín Rodríguez Rodríguez reports. 

I sat down with Jorge Heine at the Boston University faculty club in late October for a wide-ranging interview discussing the Chinese real estate bubble, climate diplomacy, big tech companies, Blackrock’s foray into China and international trade. Mr. Heine, a former Chilean Cabinet minister who holds a PhD in Political Science from Stanford and is a prolific author, was also, from 2014-2017, the ambassador of Chile to China, and is currently a research professor at the Pardee School of Global Studies at Boston University.

The conversation starts in Spanish but swiftly switches to English, “a lot could get lost in translation,” Mr. Heine says, and I quickly realize this seasoned diplomat will be very careful with his words, but to my surprise, will not dodge the inquisitive line of questioning I brought for our conversation. 

Apropos the international context, Mr. Heine believes we are at the dawn of a Second Cold War. He said as much in a 2020 Foreign Affairs Latinoamérica article that received some pushback but, in retrospect, he says he feels vindicated by events, “if anything, things have gotten worse between the United States and China since then.” He is concerned about the implications of a world divided into rigid blocs, as “Latin America went through a very difficult period in the first Cold War, with very negative effects on the politics of the region, and we are very concerned that something similar might happen with an upsurge of a second Cold War.”

Regarding China’s economy, his assessment of the disappointing annualized 4.9% third-quarter growth comprises power shortages and the technology sector crackdown. Unprompted, he brings up the situation of Evergrande, a property developer with $300 billion in debt in the brink of default, “we will see how that situation will be resolved; hopefully, it will be resolved satisfactorily, but it speaks to the Chinese real estate bubble that has been accumulating for quite some time. I sense that the Chinese government will find a way of solving the issue, but, in the meantime, there are many questions as to how that would move forward.”

What about the technology sector? China successfully excluded American tech giants from its market and was able to keep Silicon Valley at bay. In fact, just very recently, LinkedIn, the only Western social media platform operating in the country, announced that it would shut down. I probe if Mr. Heine thinks the West should adopt a reciprocity policy regarding Chinese tech companies, or instead let Chinese-owned TikTok take its American rivals, such as Facebook, for a ride. 

Mr. Heine explains that China’s reserving these virtual spaces for Chinese companies obviously raises the question of whether Western countries should do something similar. However, he points out this could lead to technological bifurcation and “whether we will move from having a single internet to several internets, which in some ways defeats the whole purpose of having it.” In his view, one of the most significant challenges we face “is that if we move towards a sort of a split internet, the costs would be considerable for all parties involved, and we might end up with severe communications problems. My thought is that whatever we can do to avoid that both from the Chinese side and the Western side is better.”

At the same time, he raises a critical point about technology giants’ relationship with the state. “I sense that the rise of Chinese tech companies presents challenges to the Chinese government that, in many ways, are quite comparable to the challenges posed by Big Tech to the US government. I see a lot of parallels there, and in that sense, it is important to understand that these are challenges that are common to many countries around the world and for which few governments have been able to come up with appropriate responses.” 

A different kind of challenge is the one raised by George Soros, who suggested in the Wall Street Journal that by accommodating to the Chinese authorities, BlackRock struck a Faustian bargain with the Chinese Communist Party, putting American national security at risk and calling for Congress to pass legislation to curb the financial flows that American investment firms can funnel to China. 

This time Mr. Heine starts his answer with a question: “Do we want to continue escalating tensions between the US and China?” With command of the details, he describes the deep level of interdependence between the two economies and concludes “the whole idea of decoupling, which is something that Mr. Soros’s proposal points at, is not very constructive and would entail significant costs for both countries and for the world economy “. He adds, “it seems to me the best way forward and the most constructive one is to look for ways to work together rather than imposing such bans.”

On supply chains, he is skeptical about nearshoring.  “The nearshoring hype from last year was a bit of a mirage (…) Even shifting parts of the supply chain to Vietnam, which you could argue is not that much nearshoring, has proved to be a lot more difficult than was expected. If that has been difficult, you can imagine what it would mean to move plants from China to, let’s say, Mexico or Colombia.”

With the upcoming COP 26 conference in Glasgow, we turn our attention to Climate Change. Mr. Mr. Heine starts by disabusing the notion elucidated by climate czar John Kerry and the Biden Administration that, because of its importance, climate change could be a “critical standalone issue.” In his view “obviously, there are linkages between these issues, and it is not as easy as to say we will confront you on this, but we will cooperate on this other matter.” He continues, “China’s position has been that it doesn’t quite work that way, and if the US is keen to continue to exacerbate tensions on some issues, that raises a question mark about how serious the United States is committed to cooperation.”

As an example of the complexity involved, he points out that the United States has been particularly keen to denounce human rights violations in Xinjiang. Still, as it happens, the region is where around half of the world’s supply of polysilicon, a critical raw material for solar panels comes from, so he asks, “If you boycott products made in Xinjiang, are you also boycotting solar power? It is a complex set of issues.”

We have been conversing for a while. I have a final question but hesitate to ask. It is based on a book written in the 90s by a very influential Chinese scholar and current member of the Standing Committee of the Chinese Communist Party,  Wang Huning, after he visited more than thirty American cities and close to 25 universities: America against America. Mr. Heine was surely not expecting this question.  With caution he replies that “what the book does is identify the tensions that exist within the United States and the contradictions in this country. Right now, you have seen the big tensions that were so apparent in the last election and what followed.” He would not say if American decision-makers should read it or not, and I declined to press him on the matter.

After the brief detour, Mr. Heine happily returns to our topic of discussion and argues the way forward for the US in this great power struggle should be to compete, to show that it is better at doing things than China, “to build a better mousetrap.” He thinks US actions that seek to bar Chinese investments and trade with Latin America are not helpful, and laments that several big Chinese construction projects in Panama have been suspended due to US pressure. For him, “the right approach is to compete rather than to block.”

Martin Rodriguez Rodriguez is a Venezuelan policy entrepreneur working at the intersection of government and the private sector and always keen on creating good and necessary trouble. He is a section D partner.