Decades of foreign investment only strengthened the Chinese Communist Party.
The White House released President Donald Trump’s National Security Strategy on Dec. 5, touting his role in the United States’ shift in its relationship with China and previewing his strategy to regain dominance in the Indo-Pacific and elsewhere via financial incentives.
“President Trump single-handedly reversed more than three decades of mistaken American assumptions about China,” the report reads.
Rather than facilitating openness and democracy in China, the decades of investment only strengthened the authoritarian regime, it said.
“China got rich and powerful, and used its wealth and power to its considerable advantage. American elites—over four successive administrations of both political parties—were either willing enablers of China’s strategy or in denial,” the report states.
The president’s strategy for a reversal relies on American dominance in key technologies and defense equipment, a strong capital market, and coordination with allies with similar values.
Competition for Influence
According to the document, U.S.–China trade has been imbalanced from the beginning, and now the Chinese regime has “recycled perhaps $1.3 trillion of its trade surpluses” to loan to other countries. This is a feature of the regime’s flagship Belt and Road Initiative, in which the loans are then used to contract Chinese companies to build energy, transportation, and strategic infrastructure.
“China’s state-led and state-backed companies excel in building physical and digital infrastructure,” the report states. Meanwhile, “America and its allies have not yet formulated, much less executed, a joint plan for the so-called ‘Global South,’” it notes.
But the United States, Europe, Japan, South Korea, and other partners together hold $7 trillion in foreign assets, and international financial institutions hold $1.5 trillion, far outpacing the Chinese regime, according to the report.
A suite of factors makes the United States “the global partner of first choice,” including high-tech cooperation, arms sales, and access to capital markets, as outlined in the strategy, pointing to Trump’s trip to the Middle East in May. Agreements were signed during that trip, resulting in billions of dollars in investments from both sides, centered on access to American artificial intelligence (AI) technologies.
Trump’s strategy is that the United States should cooperate with allies in Europe, Asia, and Africa to form a coalition that leverages their financial and technological advantages, touching on private sector-led discussions and deregulation for these key sectors.
The document notes that low-income countries have become “economic battlegrounds” as China has moved its factories to these middlemen countries to adapt to U.S. tariff policies, creating imbalances and dependencies.
Rather than relying on China’s overcapacity, strategic alignment with the United States can offer long-term investment, according to the document, enabling growth for low-income countries while preserving the strength of the dollar.
“With the world’s deepest and most efficient capital markets, America can help low-income countries develop their own capital markets and bind their currencies more closely to the dollar, ensuring the dollar’s future as the world’s reserve currency,” the report reads.
The strategy for rebalancing trade with China will focus on nonsensitive sectors to pursue a “genuinely mutually advantageous economic relationship.”
