Takshashila Discussion Document - The looming United States pivot towards containing China’s influence

Executive Summary

The United States has played a big role in the economic and political transformation of China since the Sino-Soviet clashes in 1969. This long run seems to be nearing its end. Citing evidences from recent developments, with respect to macroeconomics and trade, we demonstrate that US has decided to counter the rise of China.

We argue that the US has begun to take rather seriously, the possibility that it is facing a deliberate challenge from China. This constitutes a decisive and an important shift in the US policy towards China, which has, for the most part in the last quarter century ranged from benign neglect to active encouragement.

It is not the first time however, that the US will be following this trajectory. The US had also facilitated Japan and West Germany’s rise after the World War II, in response to the Soviet challenge. However, by the eighties, as these two economies succeeded too well and US felt that its exports were no longer competitive, US was able to successfully contain the two rising economic powers.

We contend that US has reached the same policy reversal point vis-a-vis China. Recent economic downturns have only exposed the sheer scale of China’s economic vulnerability, presenting US with a golden opportunity to wrest geopolitical advantage, once again.

Authors