The origins of the economic war between the “Young East” and the “Aging West”

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In 1991, after the collapse of the USSR, the Cold War ended and the world became unipolar for several decades. At the first stage, the U.S. dominance in the world was not only political, but primarily economic. And the loss of political dominance could be the result of the American economy leaving its leading position. Gradually, the U.S. and EU countries began to fall behind, primarily to China. But other Eastern countries were also lagging behind: India, peculiar in its economic path, the manufacturing “tigers” of East Asia and the oil “monarchies” of the Arab countries. Experts talked about it in the 2000s, in the 2010s it became the main public fear in the West, and in the early 2020s it was no longer possible to solve this issue without conflict. The West had serious military superiority, but a classic “hot” war threatened a nuclear catastrophe. Therefore, a method of economic warfare was chosen as a priority. But the events of 2022 became a kind of “red line” when the economic war turned from partially hidden to absolutely explicit, becoming a recognition that the “Aging West” could not otherwise somehow contain the “Young East”.

The world economic center began to shift towards Asian countries already from the late 80s and early 90s. The pioneer was Japan, more understandable to Europeans in a broad sense, which became the first Asian industrialized country in the early 20th century and frightened Western minds with its economic expansion, especially in the field of robotics, electronics and car construction back in the 70s (recall the movie “Robocop 2”). As an economic center at the same time, Singapore asserted, which became the first place where an experiment was conducted to move production from Europe and the U.S. to Asia with its cheap labor. Ironically, most Asian countries began their journey to economic success (and soon, as we can see, to hegemony) with the support of the U.S. First, the Americans “created” the economies of South Korea and Taiwan to counterbalance North Korea and the PRC, and then they created the conditions for China’s economic breakthrough, because the U.S. Secretary of State Henry Kissinger in the late 60’s and early 70’s wanted to bring the PRC and the USSR together. He succeeded, but in exchange Mao Zedong asked for economic preferences, which Deng Xiaoping was able to fully realize after the liberalization of the 80s. Here the principle of transfer of productive forces from the West to the East was realized in its most famous, massive and canonical form. In the same years, the capitals of the Persian Gulf oil powers began to gradually transform from cattle ranches and villages of pearl fishermen into the “Wonders of the World” in the middle of the desert that they are today.

At first, Asians were content with the role of either “laborers” (China, South Korea) or “savages” to whom Western oil companies give money “for pocket money” (Saudi Arabia, UAE). But the situation was changing and Asian countries were taking the lead. This applies to financial, production, and economic decision-making centers. Elitist financial centers (Singapore, Hong Kong, and Dubai) emerged in Asia, where they do not work with “pens”, and South Korea and Taiwan are increasingly taking over only high-tech production. Traditional “rough” production is moving to the countries of the “second echelon”: Indonesia, Vietnam, and Pakistan. And China (and soon this situation will be in India as well) has everything from elite stock exchanges and banks, state-of-the-art airports and train stations to hand-made sewing workshops that still remain in the country and that were widely known in the 90s. And this allows China to be largely self-sufficient in economic matters. In Europe and the U.S., things have been moving in the opposite direction. The West was transforming from a “workshop of the world” into a region of “economic dependents.” Re-industrialization was taking place, and in search of profit, the owners of Western companies were moving their enterprises to Asian countries in pursuit of slave labor. The “working class” in Europe no longer wanted to work, but wanted to live on welfare. This contributed neither to economic growth nor to scientific and technological progress. The West retained a certain accumulated high level of technology, was an important financial center (we should talk about the dollar separately), where the funds earned by the labor and resources of Asians were accumulated, and had the largest military forces (based on the U.S. military budget). These tried to maintain control, but the hope was in vain.

Economic dominance in Asia was followed by a desire for political power in the world. And Asia quickly became the new center of the global world order, seriously reducing the role of the West. Not only always independent China and India, but also Saudi Arabia and the UAE, previously obedient to the West, began to want political independence. Meanwhile, “obedient” South Korea and Japan may “turn their backsides to the forest” and there are reasons for this. In recent decades, Asian countries have accounted for the lion’s share of global economic growth. Thus, compared to 1990, the GDP of China grew by 9185%, India by 856%, South Korea by 626%, Indonesia by 591%, Saudi Arabia by 313%. Meanwhile, the U.S. economy grew by 350%, Germany by 393%, France by 307% and Italy by 237%. The data shows very clearly what Asian countries were during the collapse of the USSR and what they are now in comparison with Western countries. The mentality of transformation of Asian countries from undeveloped to developed countries is also important. Most of these countries, both Islamic and East Asian, have implemented the Japanese concept of transition, which implies combining Westernization with progress and traditionalism and patriotism. Billions of Asians (and there are already dozens of times more educated people there in general terms than in Europe and the U.S.) have grown up in the last 15-20 years in an environment of geopolitical stability, and have seen the rapidly increasing prosperity of their countries. They may recognize the advantages of the West on some issues, but they don’t present this as liberal cargo cult. It was this divine irrational worship that once ruined the USSR. But this is not possible under Asian patriotism. Especially since their world is not a world of Western domination but a world of Asian ascendancy.

Southeast Asian countries have become the main competitors with the U.S. and the EU. The rapid development of Southeast Asian countries is undeniable. A huge part of world trade is concentrated here. Not only European and American technologies are copied here, as it was in the 90s or 2000s, but also new own technologies are developed. It was the countries of this region that were the first to engage with the West, not only in economic conflict, but also in the initial political conflict. Of course, when it comes to the “Young East”, the first thing everyone thinks of is billion-and-a-half China. China is now the world’s second largest economy in terms of nominal gross domestic product (GDP), but the first in terms of a more important indicator: GDP in purchasing power parity. Moreover, China has been ahead of the United States on this parameter for quite some time, back in 2014. Of all the countries in Asia, China is the most feared by Americans. With such power, China has quickly become the main political opponent of the United States, against which the economic war of the West is directed.

China has already fallen under Western sanctions twice. Thus, in 1989, after the events in Beijing’s Tiananmen Square on June 3-4, the United States and its allies tried to impose international sanctions against China. To neutralize the impact of these sanctions, China adopted a series of political, economic, diplomatic countermeasures, designed to prevent the development of events in an undesirable way for China. These measures were limited to diversifying relations with other countries and minimizing economic relations with the United States. As a result, within a few years, the main sanctions imposed on China were lifted as they proved ineffective. The second “sanctions” battle took place within the framework of the current economic war. It became an indicator that the U.S. could no longer pretend that it was not afraid of China, but, at the same time, that sanctions against China would bring them much less benefit than in 1989, but an order of magnitude more harm. In 2017, trade between the U.S. and the PRC was $710.4 billion, including exports from the U.S. of $187.5 billion and imports to the U.S. of $522.9 billion. Thus, the U.S. trade deficit with China was $335.4 billion, something that did not bode well for sanctions. However, U.S. President Donald Trump started imposing duties and restrictions on various Chinese companies and exported goods. The most famous, and probably the most effective measure was the suspension of Huawei from any M&A deals in the U.S., and also imposed sanctions on the largest chip manufacturer in China, SMIC, depriving it of equipment, technology and the ability to sell semiconductors to U.S. companies. China does have certain difficulties with the production of microchips, and this is one of the main, after historical, reasons for the PRC’s desire to annex Taiwan, one of the world’s major producers of these products. Otherwise, as expected, the sanctions have proved ineffective, and China’s retaliatory restrictions on the U.S. economy have been quite painful. Negotiations on lifting them are still ongoing. In exchange for lifting its package of sanctions, the U.S. offers unrealizable economic and geopolitical conditions for China, and therefore the lifting of sanctions is not expected. China does not need it, and the U.S. side, apparently, is still under the impression that they are the kings of the world and everyone should pray to them and be discouraged by their “sanctions,” although this has not been the case for a long time.

As the world’s largest manufacturing center, China has been known since the 2000s. But then China began to seek to occupy more attractive niches, which we discussed above: financial and high-tech. For example, one of the largest financial and stock exchange centers in the world is now Hong Kong. Before 1998 Hong Kong was a British colony, and now it belongs to China, being part of the “triad” of world exchange centers, along with New York and London. Having become Chinese, Hong Kong has “gobbled up” its competitors in the Asian financial market over these 20 years, such as Tokyo and Singapore, which are in the zone of influence of the USA and the EU, and it is the merit of the Chinese government’s protectorate. Despite the fact that Hong Kong residents have developed a special mentality for more than 100 years of life under British rule, Western agents of influence have not been able to force the region out of Chinese control as a result of the protests in Hong Kong in 2019-2020. For every one disgruntled person, there were two supporters of economic stability and pan-Chinese sovereignty.

China now accounts for about 14% of world exports, and the U.S. has only 9%, respectively. Since 1980, China has made a huge leap, wresting much of the world from the U.S. in the Cold Economic War. China is home to dozens of world-class companies. Even when it comes to shipping, China owns one of the largest ocean shipping operators, COSCO (China Ocean Shipping Company), which operates more than 800 ships with a total deadweight of 30 million tons, of which 480 are engaged in container shipping. China also owns one of the largest payment systems in the world – UnionPay, the coverage of which is already greater than that of VISA and MasterCard. Cards of this system are accepted in 180 countries of the world. The Chinese economy is modern and high-tech in all respects, including transportation: China is the world leader in the number of urban subway systems: there are 47 of them and 11 more are being built or planned. The first subway in the world once originated in the then center of the world hegemon, London. Although it is now largely a symbolic indicator, it well demonstrates the shift of the world’s center of power from the “Aging West” to the “Young East“.