Calls for Sino-US decoupling defy common sense

In February, Liu Guangyuan, commissioner of the Office of China’s Foreign Ministry in the Hong Kong Special Administrative Region, held an important meeting with the US consul general to Hong Kong and Macao, Gregory May. Trying to prevent the US from turning Hong Kong into a protruding frontline of Washington’s new strategic campaign against China and putting a floor under deteriorating Sino-US relations, Liu drew three red lines and asked the US to stop interfering in Hong Kong affairs.

Before the meeting, a spokesman of the commissioner’s office condemned May’s earlier slanderous remarks about the special administrative region’s rule of law and the interpretation of the National Security Law for Hong Kong (NSL) by the Standing Committee of the National People’s Congress.

Liu drew three red lines by asking the US not to endanger Chinese national security, not to engage in political infiltration in Hong Kong, and not to smear and damage Hong Kong’s bright and prosperous future for development. Fairly speaking, the NSL does not provide an all-out panacea for safeguarding national security. While there is no longer violent confrontation on the streets, national security in the city remains vulnerable to heightened geopolitical tensions. Liu’s three red lines have brought to the fore the risk of a US-led defamation campaign to destabilize the SAR and weaken China.

Xia Baolong, director of the State Council’s Hong Kong and Macao Affairs Office, has recently reminded Hong Kong to work on risk management and have preparatory plans because of the existence of some destructive forces in the city. In spite of the fact that some of the core national interests and values of the US and China are in direct conflict with each other, we cannot downplay the important roles played by their interdependent economic ties and the need for their joint efforts to deal with common global challenges in anchoring their overall relationship.

As Kevin Rudd has correctly pointed out, there is nothing inevitable about a Sino-US war (Kevin Rudd, The Avoidable War (New York: PublicAffairs, 2022)). He proposes setting up a bilateral framework for managed strategic competition that embraces defined areas of cooperation to arrest a slide into a full-on cold war. As far as Hong Kong is concerned, the three red lines can set specific Hong Kong-related rules to better manage Sino-US strategic competition and prevent unregulated competition from harming Hong Kong’s well-being and American economic interests in the city. Taking a broader perspective, the entrenched interdependent economic ties between China and the US are the sources of deep discomfort for the proponents of decoupling.

Decoupling is easier said than done. Regrettably, such economic common sense has been abandoned by the proponents of decoupling. What is certain is that economic and trade cooperation is the bedrock of their bilateral ties. In a report published in November, the Brookings Institution said the US must forge a durable, productive relationship with China, adding that both sides share common interests in both bilateral and multilateral areas, and that cooperation is needed.

According to David Dollar, decoupling is unrealistic. It’s a losing strategy, and the notion that offshore manufacturing production can be brought back to the US through trade protectionism is naive (David Dollar, Forging an Alternative Economic Strategy for Dealing with China). In fact, trade between the US and China is on track to break records, a signal of resilient links amid the heated national security rhetoric in Washington and fears of decoupling (Daniel Flatley, US-China Trade is Close to a Record, Defying Talk of Decoupling).

Critics of economic decoupling, notably the US Chamber of Commerce, warn it will disrupt existing supply chains, exacerbate delays in production, and force some companies and consumers to pay more (Stephen DeAngelis, Complete Decoupling from China is Not the Answer). Of most concern is the high likelihood that many US allies are unwilling to follow suit because of their close economic ties with China. It does not make sense for US allies to sacrifice their economic interests and jump on the decoupling bandwagon. Even if some US allies expressly support the US-led decoupling, they may find some way around the strict letter of the decoupling mechanism.

Turning to the financial sectors, JPMorgan Chase, and Morgan Stanley were given the go-ahead by the China Securities Regulatory Commission to buy out their local partners in January and February. Much ink has also been spilled analyzing whether the huge wealth management business in the Guangdong-Hong Kong-Macao Greater Bay Area will help push up the performance graphs of major US financial institutions. Most of them are eager to capture the economic opportunities in the GBA.

Like the mainland, Hong Kong enjoys close economic ties with the US. McDonald’s, Citibank, Microsoft, Google, Facebook and Boeing are famous brands in the city. It’s worth noting that Greater Bay Area Airlines recently ordered 15 737-9 MAX aircraft from Boeing. In 2017, the US was Hong Kong’s second-largest market for goods. US companies have established more than 1,200 regional headquarters or offices in Hong Kong. There are also close educational ties between the US and Hong Kong. For example, the Massachusetts Institute of Technology opened its first-ever innovation node in Hong Kong in 2017.

Although analysts see little hope of quick rapprochement between the two superpowers and although the Biden administration feels that the US is overly dependent on China, most business executives do not want to decouple. During a press briefing at China’s two sessions, Foreign Minister Qin Gang accused the US of irrational and hysterical behavior and of wanting to suppress China’s rise at all costs. Since Sino-US relations are locked in a stalemate, we do not see much wiggle room for them to iron out the least-complicated irritants in their relationship. Nevertheless, the US should not press too hard against China’s bottom lines in order to put a floor under the bilateral relations. Liu’s three red lines form part of China’s bottom lines. 

Junius Ho is a Legislative Council member and a solicitor. 

Kacee Ting Wong is a barrister, part-time researcher of Shenzhen University Hong Kong and Macao Basic Law Research Center, and chairman of Chinese Dream Think Tank.

The views do not necessarily reflect those of China Daily.