**The risk now is that China, at pains to close its tech gap with the west, will leverage its dominant role in producing and refining rare-earths metals – which are crucial for the green transition – to retaliate against the US sanctions and trade restrictions. China has already increased its exports of electric vehicles by almost 700% since 2019, and it is now starting to deploy commercial airliners to compete with Boeing and Airbus**
US and China are on a collision course that could risk conflict - Nouriel Roubini
G7 sought deterrence without escalating new cold war but Beijing responded with rage
Thu 1 Jun 2023
the US secretary of the Treasury, Janet Yellen, expressing hopes for a visit to China soon – relations remain icy.
In fact, far from thawing, the new cold war is getting colder, and the G7 summit itself magnified Chinese concerns about the US pursuing a strategy of “comprehensive containment, encirclement and suppression”. Unlike previous gatherings, when G7 leaders offered mostly talk and little action, this summit turned out to be one of the most important in the group’s history. The US, Japan, Europe and their friends and allies made it clearer than ever that they intended to join forces to counter China.
Moreover, Japan, which currently holds the group’s rotating presidency, made sure to invite key leaders from the global south, not least the Indian prime minister, Narendra Modi. In reaching out to rising and middle powers, the G7 wants to persuade others to join its more muscular response to China’s rise. Many will probably agree with the depiction of China as an authoritarian, state-capitalist power that is increasingly assertive in projecting power in Asia and globally.
the US secretary of the Treasury, Janet Yellen, expressing hopes for a visit to China soon – relations remain icy.
In fact, far from thawing, the new cold war is getting colder, and the G7 summit itself magnified Chinese concerns about the US pursuing a strategy of “comprehensive containment, encirclement and suppression”. Unlike previous gatherings, when G7 leaders offered mostly talk and little action, this summit turned out to be one of the most important in the group’s history. The US, Japan, Europe and their friends and allies made it clearer than ever that they intended to join forces to counter China.
Moreover, Japan, which currently holds the group’s rotating presidency, made sure to invite key leaders from the global south, not least the Indian prime minister, Narendra Modi. In reaching out to rising and middle powers, the G7 wants to persuade others to join its more muscular response to China’s rise. Many will probably agree with the depiction of China as an authoritarian, state-capitalist power that is increasingly assertive in projecting power in Asia and globally.
Meanwhile, the western-Chinese tech and economic war has continued to escalate. Japan is imposing restrictions on semiconductor exports to China that are no less draconian than those put in place by the US, and the Biden administration is pressuring Taiwan and South Korea to follow suit. In response, China has banned chips made by the US-based Micron.
With the US chipmaker Nvidia quickly becoming a corporate superpower – owing to soaring demand for its advanced chips to power AI applications – it, too, will probably face new constraints on selling to China. US policymakers have made clear that they intend to keep China at least a generation behind in the race for AI supremacy. Last year’s Chips and Science Act introduced massive incentives to reshore chip production.
The risk now is that China, at pains to close its tech gap with the west, will leverage its dominant role in producing and refining rare-earths metals – which are crucial for the green transition – to retaliate against the US sanctions and trade restrictions. China has already increased its exports of electric vehicles by almost 700% since 2019, and it is now starting to deploy commercial airliners to compete with Boeing and Airbus.
So, while the G7 may have set out to deter China without escalating the cold war, the perception in Beijing suggests that western leaders failed to thread the needle. It is now clearer than ever that the US and the broader west are committed to containing China’s rise.
Of course, the Chinese would like to forget that the current escalation owes as much, if not more, to their own aggressive policies as to US strategy. In recent interviews marking his 100th birthday, Henry Kissinger – the architect of America’s “opening to China” in 1972 – has warned that unless the two countries find a new strategic understanding, they will remain on a collision course. The deeper the freeze, the greater the risk of a violent crack-up.
• Nouriel Roubini is professor emeritus at the Stern School of Business and the author of Megathreats: Ten Dangerous Trends That Imperil Our Future and How to Survive Them.
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