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A Daft Policy: The US Economic Strangulation of China

The broad lament from commentators about global economic growth is that China is not pulling its weight. Not enough is being done to stir the sinews and warm the blood, at least when it comes to the GDP counters. And many such pundits hail from countries, most prominently the United States, which have done everything they can to clip the wings of the Middle Kingdom even as they demand greater strides in its growth. “China’s 40-year boom is over,” declared the Wall Street Journal last month in a tone of some satisfaction. “The economic model that took the country from poverty to great-power status seems broken, and everywhere are signs of distress.”

Under the Trump administration, the war against the Chinese economy began in earnest. Somewhere in the order of $360 billion in tariffs were slapped on Chinese products, a central pillar in the Make America Great Again platform. This was despite a 2019 study by economists Xavier Jaravel and Erick Sager claiming that increased trade with China raised the purchasing power of the average US household by an impressive $1,500 between 2000 and 2007. “These gains from lower prices were broadly shared across all income groups in the economy, although they were proportionally larger for low-income groups (with gains about 15 percent larger than average.”

The downside to such throbbing growth in purchasing power has been the “China Shock” phenomenon: the loss of jobs occasioned by increased trade with a country able to command an enormous low-wage workforce. This was grist to Trump’s populist mill, a spur to protectionism that has gone gonzo under the Biden administration.

Going even further than Trump, Biden has threatened Chinese companies with delisting from the US stock exchange in 2024 in accordance with the Holding Foreign Companies Act of 2020. The value at stake there: $2.4 trillion.

On August 9, President Joe Biden signed an executive order restricting outbound investment to China, Hong Kong, and Macau. Broadly speaking, China is a country “of concern” either exploiting or having the ability to exploit “certain United States outbound investments, including certain intangible benefits that often accompany United States investments and that help companies succeed, such as enhanced standing and prominence, managerial assistance, investment and talent networks, market access, and enhanced access to additional financing.”

The order proceeds to make nonsense of a core premise of US investing, forever cradled by the artificial assumption that open markets are an unhindered reality. Openness only ever makes sense if it favours the trader and investor. As the order continues to state, “certain United States investments may accelerate and increase the success of the development of sensitive technologies and products in countries that develop them to counter United States and allied capabilities.”

To that end, the advancement of such countries “in sensitive technologies and products critical for the military, intelligence, surveillance, or cyber-enabled capabilities” to their betterment with the aid of US investments constituted “an unusual and extraordinary threat to the national security of the United States,” a state of affairs that deserved the hyperbolic tag of “a national emergency”.

A discomforting feature of such executive actions is that they constitute provocations that feed the incentive for further conflict. On the one hand, it encourages China to pursue a more autarkic form of development, focusing on self-reliance as it weans itself off the nutriment from US investments. But such policies can also encourage a state of desperation with few options.

On the latter point, history offers a bleak example. In the lead-up to the attack by Imperial Japan on Pearl Harbour in December 1941, the Roosevelt administration added a generous dose of acid to the diplomatic mix to encourage conflict. To stifle Japan’s military efforts in Asia, individuals such as Secretary of War Henry Stimson, Treasury Secretary Henry Morgenthau and Interior Secretary Harold Ickes resoundingly endorsed a policy of economic strangulation. Secretary of State Cordell Hull, however, felt that such matters as oil sales to Japan could still continue on a case-by-case basis, a policy that came to be stomped upon by zealots in the State and Treasury departments.

A colourful streak of US historiography on this point, one dismissed by high priest orthodoxy as ambitiously deluded, even clownish, suggests that the opportunistic President Roosevelt wished to provoke Japan into an attack on the US that would also commit Washington to war with Germany. One need not endorse that view to see the dangers of the economic strangulation policy, one marked by such standouts as Washington’s termination of the 1911 commercial treaty; the signing of the Export Control Act of July, 1940 which authorised the president to license or prohibit the export of essential defence materials; and the July 26, 1941 order freezing Japanese assets in the United States. On August 1, 1941, a ban on oil exports to “aggressor countries” including Japan led to a resource crisis that eventually emboldened the militarists to strike.

The State Department entry on the subject by the Office of the Historian, hardly a den of radical rabble-rousers, had to concede that, facing “serious shortages as a result of the embargo, unable to retreat, and convinced that US officials opposed further negotiations, Japan’s leaders came to the conclusion they had to act swiftly.”

Next time China’s current economic lethargy is discussed like that of a nutrition deficient patient, the relentless assault and cornering, notably in the sectors of investment now regarded as crucial for continuing US hegemony, should be considered. It also augurs poorly for global security: economic strangulation can sweeten the instinct for war. In the case of Xi’s China, it will most likely result in a greater, if haughtier resilience.


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  1. Steve Davis

    William Morris (1834 – 96) warned that the competition so revered by liberals is just a veiled form of warfare.

    Liberalism is no more than a flimsy structure built on pretensions.

    The only competition they approve of is to see the working poor competing for jobs.

  2. Phil Pryor

    China has an internal huge market, further potential, an ability to foresee, plan, achieve, well above the average weight of most others, including the dodgy and shivering USA, beset with Donaldisms, Hunterisms, Murdochery Muck. China also has power, some well networked support areas, everywhere, resources actual and potential in areas of control, while the west is sure to decline and we hear less of advances from famous old nations, e.g. Germany, France, U. K. Europe may drift, a little away from NATO and the USA, as they see irritating dead weight in future requirements of some obedience and submission. The USA cannot continue to surge as its core society is now vulnerable to various dissolutions and decaying. But, who really knows? An alignment in future with more strength in a connection of China, Asia in tow, India, more of Europe and even Russian resources and markets might see the USA rather isolated. But no-one knows what will happen with ruthless application of A I. We won’t.

  3. GL

    The first thing that usually pops into mind when I hear about the behaviour of the US nowadays is:

    The US is incapable of thinking that it will ever be number two, although it will be if the orange skinned mutant number two gets in again because it will number two all over the country and the rest of the world.

  4. A Commentator

    I can’t imagine the CCP being so hypocritical that they would complain about trade being used to advance economic and foreign policy objectives. timely to recall the precipitous sanctions the CCP applied to Norway because they objected to the awarding of the Nobel Prize.
    Countries can choose their trade partners, and Australia has also recently experienced the sensitivity of the CCP

  5. Canguro

    China has its own perspective on global affairs, being informed by their millennial-aged culture and their historic relationship to other countries; they were an advanced and cultured society relative to those in Europe when people were still at hunter gatherer or early agrarian stages and America had yet to be colonised.

    They are also starkly aware of the propensity of western nations to exploit them; re. the Opium Wars, re. the Concessions experience and the barbaric behaviour of occupying western powers, and I would argue that they have no illusions when it comes to dealings with the foreign devils.

    Given the above as platform experiences in terms of relationships with the western countries it’s little surprise that they take the view that they do. Who could argue otherwise?

  6. A Commentator

    All countries have their own perspectives on global affairs, and old cultures and countries are just as entitled to this as newer, contemporary ones.
    The fact that the CCP imposed trade sanctions on Norway because of their sensitivity about the awarding of the Nobel Prize, says more about the CCP than it says about Norway

  7. Terence Mills

    You probably heard that China is saturating European markets with well made, well priced EV’s to the extent that the Europeans are seeking to block imports. But, the big problem is that the biggest export market for BMW, Audi and Mercedes is…………… guessed it, China.

    So do you ‘cut off your nose to spite your face’ as the old saying would have it ?

  8. Steve Davis

    AC says “I can’t imagine the CCP being so hypocritical that they would complain about trade being used to advance economic and foreign policy objectives.”
    This is a poor attempt to excuse criminal trade practices by the US, by implying that China’s position on trade and that of the US are basically identical. Nothing could be further from the truth.

    The US uses illegal trade sanctions that kill infants and the vulnerable, to achieve regime change in countries that refuse to allow exploitation of their natural resources.

    The US engages in high seas piracy by stealing oil cargoes going from Iran to China. CNN 10.9.23 “The US govt seized nearly 1 million barrels of Iranian crude oil allegedly bound for China, according to newly unsealed court documents and a statement released by the Department of Justice on Friday.”

    The US has invaded Syria and is stealing Syrian oil. Syria has urged the United Nations to take action against the United States for its occupation of portions of Syrian territory and illegal extraction of natural resources in those areas.
    From Newsweek 20.8.20 “Syria has accused President Donald Trump of stealing the country’s oil, after U.S. officials confirmed that a U.S. company has been allowed to operate there in fields under the control of a Pentagon-backed militia.”
    According to Newsweek “Trump again voiced his view on the Syria mission: “As you know, in Syria we’re down to almost nothing,(military) except we kept the oil. But we’ll work out some kind of a deal with the Kurds on that. But we left, but we kept the oil.” Well, they kept the oil, but didn’t leave.

    It’s worth noting that a site called has an article refuting the US theft of oil from Syria, but despite a lot of fast talking it’s clear from the article that there’s two facts they were unable to hide — the US is in Syria illegally, and US troops control a significant portion of Syrian oil production. Like, “we’re guarding it but we ain’t stealing it.” A gangster demanding protection money from a corner store has more integrity.

    When it comes to trade practices and using trade as a weapon, the US is out of control.

  9. Clakka

    it’s a schemozzle, and we’re all up to our gills in it. It goes by the shady name of ‘strategic security’, probably because collectively they all can’t agree on a suitable euphemism whilst they line up like smiling like toothy Cheshire Cats.

    It’s when any are prohibited or abstain from the line-up one has to be wary of the snicker-snack of all. Just like now!

  10. The AIM Network

    Sorry about that, Clakka. Your comment went into moderation when it shouldn’t have.

    A simple glitch.

  11. Clakka

    No probs.

  12. New England Cocky

    @ Steve Davis: Thank you for correctly noting the two faced, self-serving political strategies freely utilised by politicians in the USA (united States of Apartheid).
    Why does any country having the US as an ally require any other enemies?

  13. GL

    The genius, cognitive ability and competency of The Donald:

    And, no doubt, we would buy them from the Yanks so you could effectively double or triple that cost.

  14. Steve Davis

    My pleasure NEC, in fact, it’s my very great pleasure, as you can probably sense.


  15. A Commentator

    What about America!!! is the common rebuke/refrain when the the CCP or Putin regimes are criticised. In my opinion, these attempts at distraction, the “look over there tactics” are lacking in substance.
    Generally the “look over there” tactics are conspiracy theories and exaggerations.
    Nonetheless, I’m entirely comfortable with a multi polar world, where the importance of the US is diminished. But not when this means increasing the international prestige and influence of expansionist autocratic regimes such as Putin’s and the CCP. The CCP can hardly complain about the use of sanctions/trade limitations to advance their foreign policy and economic objectives

  16. Steve Davis

    AC says “What about America!!! is the common rebuke/refrain…these attempts at distraction…are lacking in substance.”

    I wonder if AC would have the courage to tell the family of a child who died as a result of US sanctions, (there has been thousands) that their grief was lacking in substance.

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