Big changes not seen in 100 years, but not the ones Xi has in mind

In October 2017, Xi Jinping said the world was experiencing great changes unprecedented in a hundred years. He often uses this emblematic phrase, the events of a century ago being those tumultuous at the end of the First World War, which saw the Bolshevik revolution of 1917, the collapse of European empires and the emergence of the United States. United as a great power, manifested by its decisive intervention in the war. Over the next century, the United States dominated the international system, defeating threats to its primacy from Nazi Germany, Imperial Japan, and the Soviet Union.

For Xi, world history is currently undergoing an equally important change. According to him, the decline of the United States, its political dysfunctions, the changing structure of global power and the rise of China are all irreversible and interrelated trends that can be explained by the laws of Marxist theory of history. His worldview is superbly analyzed in Kevin Rudd's new book, About Xi Jinping: How Xi's Marxist nationalism is shaping China and the worldwhich should be read by scholars, the public and new Trump officials.

Xi believes that the tide of history is moving in China's direction and that a new world order can be shaped with China at its center, due to the rise of the East and the decline of the West . It will be a new era. This does not mean that China will seek to dominate the world as the Soviet Union did during the Cold War. Rather, it will seek to reshape globalization and multilateralism in ways that serve its interests and those of those aligned with China.

Xi is wrong. His theory of history is wrong. His thesis that the West is in decline is an optimistic idea, not an informed analysis. His ideological and analytical rigidity prevents him from seeing the trap he sets for China in relation to the economic foundations of its power.

China cannot impose itself economically against the total weight of the United States, Europe, Japan, India, Great Britain, Australia, Canada, South Korea and others, if they work together. This will be especially true as they increasingly hijack the continued boom of China's heavily subsidized exports of manufactured goods, components and materials. Creating excess manufacturing capacity is a deliberate strategy to concentrate industrial power in China. It has stunted the development of a service-based economy in China, distorted global trade, emptied Western industrial bases, and disrupted industrialization in the South.

China's grip on global manufacturing could be broken if U.S. partners exploit Donald Trump's proposed tariffs by imposing similar tariffs and other forms of market access restrictions and opposing Chinese subsidies, dumping and predatory pricing strategies. Trump's tariffs will work best if they are coordinated with friends so that China cannot circumvent them by flooding other markets. This will require improved supply chain tracking so that China cannot circumvent these trade shields by resorting to workarounds from third countries.

Through a concerted strategy of industrial, investment and financial coordination, global trade could be rebalanced such that China could come under economic pressure to cede its excess capacity to the aforementioned countries. Some would also go to less developed countries, such as Vietnam, Indonesia, Malaysia, Thailand, Argentina, Mexico and Turkey. By remaining on the trail of global manufacturing, China is preventing the development of these countries from taking off. The United States could relocate higher-value, essential manufacturing domestically while helping to distribute lower-value manufacturing across more economies.

The United States and like-minded countries should also ensure that China does not gain easy access to or steal critical new technologies that will drive and sustain higher productivity, such as AI, robotics and quantum computing. American financial power, including the global status of the U.S. dollar and U.S. Treasuries, poses an additional challenge to China.

China's domestic situation is perilous, due to demographic decline, structural economic problems (such as its massive debt overhang and the stifling of the dynamism of its own private sector), and its dependence on energy imports. , resources and food. It is more likely that China will collapse rather than rise to global primacy.

For the United States, meeting the Chinese challenge, including through a trade war, is a prerequisite for the greatness of the second American century. If it succeeds in implementing such a strategy, it will reindustrialize its economy and reconfigure the structure of global trade so that others also benefit, at China's expense. Big changes are underway, not seen in a hundred years, but they are not the ones Xi Jinping thinks are happening.