[Turning Point Approaches] "Growing Economic Uncertainty in Jung... US-China Conflict Unlikely to Intensify"

Interview with Professor Choi Jin-baek of the Korea National Diplomatic Academy
Careful Mode Amid COVID-19 Spread... Managing Situation While Maintaining US-China Dialogue

[Asia Economy Reporter Jeong Hyunjin] "The Chinese economy is amid considerable uncertainty. COVID-19 is the biggest issue and current concern. The US-China conflict remains quite deep, so I expect that next year it will not intensify further but continue as a 'managed competitive relationship.'"

Professor Choi Jin-baek of the China Diplomacy Center at the Korea National Diplomatic Academy made this forecast about the Chinese economy in an interview with Asia Economy on the 28th of last month. Professor Choi believes that under the Biden administration's strong restrictions on China's advanced technology development last year, neither the US nor China wants an unexpected clash. The Biden administration's unexpectedly good performance in the US midterm elections last November reduced the need for changes in China policy. In this context, he suggested that South Korea should maintain close cooperative relations with neighboring countries and be prepared for joint responses if problems arise.

The following is a Q&A with Professor Choi Jin-baek.

- This year is effectively the first year of 'With COVID.' How do you expect the Chinese economy to perform?

▲ COVID-19 has become a significant burden for China. Achieving this year's target of 5.5% growth is impossible. Internally, they said 5.2~5.3% would be acceptable, but the COVID-19 situation has made it difficult. According to the Central Economic Work Conference of the Chinese leadership held in December last year, there were statements like 'We must significantly raise the growth rate' and 'We are willing to support private enterprises extensively.' I think this has considerable significance. One of the most important policies emphasized by President Xi Jinping is 'common prosperity.' Since this is the first year of Xi's third term, I thought he would push this strongly. However, because the internal economic situation is so bad, I think they are considering leaving some room rather than pushing their policies too aggressively. We need to watch closely. This can be seen as an indication of how bad the internal situation is for such decisions to be made. My diagnosis is that the Chinese economy is under considerable uncertainty. Because of this uncertainty, they are setting policy directions like this.

- With COVID-19 spreading in China, is there a chance they will return to lockdowns?

▲ It will not be easy. I think President Xi's authority has been severely damaged by this issue. Even an authoritarian leadership must communicate with the people, clearly state plans, and gain their understanding. The biggest problem this time was the lack of sufficient explanation during the transition to 'With COVID.' Even if they return to lockdowns, explanations for such measures are necessary, but that will be difficult.

- With companies like Apple moving away from China, will China's position in the global economy decline?

▲ The de-China trend will inevitably affect the Chinese economy. Two to three years ago, according to a survey by the American Chamber of Commerce in Beijing, many answered that they had no plans to leave China. But in the last one to two years, this has changed significantly. Countries including South Korea are moving toward diversification rather than focusing solely on China. The Chinese government has said it will support private enterprises, but the key is how much trust this will give to companies, especially foreign ones. Much trust has been lost due to the pandemic policies. The Chinese leadership will have to make considerable efforts to restore it.

- Will US-China competition become more intense next year?

▲ It will not intensify more than now next year. The conflict is already quite deep, so continuing as is is already a significant burden for China. China hopes for a breakthrough, but the US has no intention of that and will try to maintain the current state. The US also faces inflation issues. The more the US-China conflict intensifies, structurally inflation will proceed. The Biden administration's unexpectedly good performance in the November midterm elections can be interpreted as the American public accepting continued pressure on China. Therefore, this policy will likely continue as is. However, since the pressure level is already quite high, it probably will not be strengthened further. They will manage the situation stably. According to the G20 meeting last November, when President Xi and President Biden met and talked, it seems they agreed to manage the situation for now.

- Will US-China dialogue continue?

▲ They will continue dialogue to manage the situation. Neither side wants unexpected major problems. They will maintain communication channels to avoid misunderstandings. Through this, the position of both President Biden and President Xi is to move toward a 'managed competitive relationship.' From the US perspective, competition is inevitable, but they do not want a clash. The US has already applied pressure that has clearly harmed China, making it difficult for China to catch up in advanced technology sectors, so the policy is effective. Previously, there was speculation that China's economy would surpass the US around 2035, but this year, talk has started that China may never catch up with the US. Seeing this, the US probably thinks management is sufficient.

- How should South Korea respond amid US-China conflicts?

▲ South Korea must fundamentally accept that the globalization we once enjoyed is no longer present and accept this situation and reality. We usually think only about ourselves, the US, and China. But we are not alone; there are countries like Europe, Japan, and Australia. We need to build close ties with these countries and respond jointly when problems arise. In the saying 'When whales fight, the shrimp's back is broken,' if there is only one shrimp, its back will break, but if there are hundreds of shrimp, even whales cannot act recklessly.

◆ Choi Jin-baek Professor

▲ Bachelor in Korean History, Seoul National University ▲ Master in Political Science and Diplomacy, Seoul National University ▲ PhD in Political Science, University of Chicago ▲ Professor at Korea National Diplomatic Academy (2017~)