AVOIDING A ‘COLD WAR TRAP’

Samantha Amerasinghe reviews China’s Fifth Plenum and Biden’s China policy

The Chinese Communist Party (CCP) released its proposals for formulating the 14th Five Year Plan (FYP) (2021-2025) and 2035 vision at its Fifth Plenum held on 3 November. And the plenum laid out much of the economic ambitions that will drive the country’s 14th FYP.

Moreover, it highlighted Beijing’s move towards consolidating self-sufficiency through strategic initiatives including ‘dual circulation,’ urbanisation and infrastructure plans while also acknowledging the possibility of improved Sino-US relations under a Joe Biden administration.

Biden’s victory at the US presidential election offers China an opportunity to reset its US policy and turn a new leaf in the bilateral relationship. Even if Biden pursues a hawkish stance on China, he is likely to do so with more restraint.

An outline of the 14th FYP will be formulated based on the proposals and passed at the annual National People’s Congress meeting in March. The proposals emphasise the quality of growth with a focus on ensuring efficiency, inclusiveness, sustainability and security in an increasingly volatile global environment.

The plenum confirmed President Xi Jinping’s authority within the CCP, paving the path for his reelection in 2022 while highlighting Beijing’s commitment to doubling China’s real GDP and per capita income by 2035 relative to 2020, and raising it from the present US$ 10,000-20,000 by 2035 to achieve middle income status. This implies annual average growth of 4.6 percent in the next 15 years.


According to the World Bank, China is an upper middle income country with a gross national per capita income of US$ 10,410 in 2019 – the threshold for high income status is 12,535 dollars.

The IMF estimates that China’s economy is set to overtake 56 countries in the world’s per capita income rankings over the quarter-century through 2025. By then, China will rank 70th in the world with a per capita GDP (adjusted for purchasing power) of US$ 25,307 in 2025, placing it close to joining the richest one-third of nations.

‘Dual circulation’ is a priority with a huge focus on import substitution in tech, supply
chain upgrades, upgrading of infrastructure and food security. This refers to the strategy – first mentioned by Xi in May  – of relying mainly on ‘internal circulation’ supplemented by ‘external circulation.’

It will ensure that China avoids over-reliance on a global economy facing growing de-globalisation pressure and heightened geopolitical tensions.

Developing a strong domestic market is the cornerstone of China’s new development strategy. China has identified innovation as a core future growth driver, and the latest proposals suggest increased state support for developing strategic cutting-edge fields such as AI and aerospace technology.

The authorities will also place more emphasis on national security while climate action with a renewed emphasis on reducing China’s total carbon emissions and promoting clean energy is a priority in the reform agenda.

As for US-China relations, many believe the Biden administration will stress ‘national competitiveness’ and present a repackaged version of Trump’s ‘America First’ policy stance given the bipartisan consensus on being tough on China.

Biden’s team, wary of falling into a ‘Cold War trap,’ has called for the US to work with its allies, which together with the United States account for more than half of the world economy, to counter China’s rise and perceived challenges to the international order.

The plenum confirmed that Beijing will become more aggressive in reshaping global governance and trade.

However, the two nations will likely cooperate in areas where their interests converge. Common ground can be found on renewable energy and easing trade tensions but expect Biden to take a tougher stance on China’s alleged human rights violations.

Biden has promised to rejoin the Paris climate agreement and Xi recently committed to achieving carbon neutrality by 2060. The Biden government may take the baton from the Trump administration on building an alliance in the Indo-Pacific region to counter China’s rising influence, and will likely remain vigilant on China’s Belt and Road Initiative (BRI). As regards Taiwan, its less provocative approach will likely lead to a de-escalation of cross strait tensions.

On the trade front, the Biden administration is likely to turn to multilateral mechanisms such as the WTO, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), to promote reciprocal treatment and curb the competitive advantage of China’s state owned enterprises.

To check China’s influence in the Regional Comprehensive Economic Partnership, an economic bloc representing around a third of the world’s GDP and population, the US may consider reversing its withdrawal from the Trans-Pacific Partnership, which has evolved into the CPTPP. Restrictions on technology transfer to China will likely remain.

It’s uncertain whether Biden will be able to fundamentally change the competitive dynamic in US-China relations. Finding a balance between competition and cooperation would be crucial but increasingly difficult to achieve. American and Chinese policymakers will be able to find areas of cooperation, but whether these are strategic in value and can offset diverging interests is an open question.

The Biden administration will be tasked with thinking more creatively about strategies to address the challenge of ‘competing with China’ including those that seek to constrain or blunt the latter’s power as it grows and diversifies.