“The new cold war will last for decades”
The West must redefine how it should behave towards China. Companies are not prepared for this, says Paul Tucker, Harvard researcher, Swiss Re board member and author.
Still smiling: China’s President Xi Jinping and US President Joe Biden met on November 14 at the G-20 summit in Nusa Dua on the Indonesian island of Bali.
Photo: Saul Loeb (AFP)
A few days ago, China’s President accused the US of harming his country, the West has “closed off, encircled and oppressed” China. The Secretary of State warned China would have to “strike back” if the US didn’t stop. Do you understand?
The Chinese style is often quite sharp. I think we’ll be hearing more statements like this as time goes on. It’s a style they’ve shown before towards their Asian neighbors, including Australia and New Zealand. They too should avoid escalation.
In your book you describe four possible scenarios: continuation of the status quo, battle of the superpowers, a new cold war and a new world order. The status quo no longer seems possible. Are we in a new cold war?
We are caught between the battle of the superpowers and a new cold war. This is reflected in the fact that both sides withdraw a little from each other in order to avoid overdependence. On the other hand, the Ukraine war is in a way the first proxy war. Because it would be difficult for Putin to wage this war without Beijing’s consent.
Does China support the war?
Who knows if China is secretly helping Russia or not? I don’t know it. But there is at least tacit support, and I think that is very significant, because without it, it would be difficult for Putin to continue. It’s kind of a pale version of the old cold war.
“I don’t think the West can do anything to slow down China’s growth in the long term.”
In Europe there are voices that lament the dominance of the USA and are therefore rather positive about the rise of China. You take a different position in your book. What is so special about China?
It’s a completely different ideology. It is at odds with the things that shape our way of life. In 2013, a confidential Communist Party strategy paper, Document 9, was leaked that is far too little known. It rejects everything that is dear to us: not only democracy, but also the separation of powers, the rule of law, fundamental rights, freedom of the press, open debate. It forbids the Chinese from promoting or even discussing liberal values. When the United States replaced Britain as the world’s leading power, it was no doubt irritating to the people of London, perhaps annoying, but nothing more. It weakened Britain but did not threaten it.
It’s different with China. Why?
We should ask ourselves: if they treat some of their own people the way they treat the Uyghurs, how would they treat us if they could? We don’t know the answer.
Is it wise to try to slow down China’s development, as the US is trying to do?
I don’t think there’s anything the West can do to curb China’s growth in the long run. Okay, maybe a little, but not to any significant extent. China is huge, has many people, a very large human capital and an extraordinary history of civilization.
Some experts see big problems coming to China because of the shrinking population or the real estate crisis.
That may well be the case. But that’s not going to stop their strength or momentum, so I wouldn’t want to bet all on it.
The old cold war lasted for decades. How about the new one?
I think it will continue for decades, maybe a century. As long as the Chinese regime doesn’t change or the United States doesn’t disintegrate, I see no reason why things shouldn’t just go on like this.
So how should the West deal with a power that rejects our values?
We should do three different things. First, we should avoid over-dependence on China. Second, we should cultivate friendships and seek allies. And third, we should solve our domestic problems.
How do we avoid dependencies?
The West must avoid making itself vulnerable. And I think China should have the same policy towards the West. That way neither side can complain.
Switzerland tries to remain neutral and interfere as little as possible. At the same time, companies should be able to do business with all regimes. Is this a legitimate position?
It’s a question for Swiss people. You can also ask the question the other way around: Do we want governments that act like a kind of morality police to monitor where companies can and can’t do business? Where do we draw the line? I think Western powers can pull them where security and stability are threatened.
So export controls for security-relevant technologies make sense?
Yes, and import controls. The most important thing is that you do not, for example, have parts of your airplanes made by people with whom, God help us, you are at war. But there are many other areas that do not affect our security interests, and that is where cooperation can thrive.
You are a member of the board of directors of the reinsurer Swiss Re, for which China is an important market. How do you assess the risks if US-China relations continue to deteriorate?
I do not speak for Swiss Re in any way.
The problem of dependence on China is a problem for many companies. Will it be possible to do business in both power blocs?
Yes I hope so. In slow motion, trade relations promote understanding and reduce the risk of hostilities, but do not eliminate them. So I don’t want deglobalization.
“I fear that too many executives of multinational companies are not psychologically prepared for what could happen.”
What if tensions continue to escalate?
I’m afraid multinationals will have trouble dealing with it. The Chinese and Western economies are now very closely integrated. It is comparable to the German and British economies before the First World War. This caused great turmoil and confusion in the City of London business community because of the close ties.
Something like this could happen again?
I’m not saying that the future will be like the past. But I fear that too many multinational executives are psychologically unprepared for what could happen. That they have to make a decision or that a decision will be forced upon them. It is therefore important that we pursue a nuanced policy towards China, as I articulate in my book. We want trade, but not trade in dangerous technology.
Can countries like Switzerland maneuver between the two blocs without being crushed?
The US and EU will need to coordinate which technologies can and cannot be traded. I think countries like the UK or Switzerland can get along in such a system. Both are very important economies. They could follow the US and the EU or even sit at the table if there is a coordination mechanism for that.
“We should work closely with those countries with whom we share common values and which we do not fear.”
Where should the West look for friendships and allies?
We should work closely with those countries with whom we share common values and which we do not fear. I’m thinking of South Asia, Africa and Latin America, but also East Asia. This is not the time for the United States and Europe to back away from friendships. Nor should we expect that these countries will all become like the West. Every country has its own history and culture and has to find its own way.
The confiscation of the reserves of Russia’s central bank in response to the Ukraine war could deter many countries from becoming too closely tied to the US. Has the West gone too far?
I don’t think the sanctions have gone too far. But one has to be very careful about using the dollar as a weapon. It reinforces the determination of other countries to avoid using the dollar. That would be a big problem for our system.
Why?
It would make Washington’s security umbrella, which we rely on, more expensive for them. One key is the oil-producing countries in the Middle East. If they switch camps and switch to renminbi billing, it will weaken the West.
Her third piece of advice is not to make mistakes at home. What are you thinking about?
We have political and economic problems. They are currently being exacerbated by inflation.
We are now back in an era of high inflation. Do you think central banks have lost the thread?
A little, yes.
For a long time you headed the Bank of England and were responsible for controlling inflation. Do you regret not being at the helm anymore?
No. It’s a wonderful job to be a central banker and I’ve done it for 33 years. But I’m very happy with my second career.
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