One of the key lessons of the Covid pandemic is what it taught the rest of the world about the Chinese Communist Party (CCP). The CCP understands power politics and plays smashmouth—it plays to win. But if it is going to take a hit, it is going to ensure the rest of the world, and especially the U.S., does too. At the dawn of the outbreak in Wuhan the CCP understood the deadly impact this virus would have on China and thus ensured that it would become a global pandemic. It facilitated its spread to the outside world while restricting travel within the People’s Republic of China (PRC) to hinder the contagion. The CCP understood that it was going to take a serious blow and sought to control the damage to the PRC’s economy. At the same time, it wanted the U.S. and the West to suffer hurt to their economies. This response provides evidence that the CCP both understands and deals in "relative power”—where a state’s might is not only how much power it has in an absolute sense, but how much it possesses in relation to other states, particularly its enemies.
The current news of an economic downturn in the PRC is another major challenge for Beijing, and if pressed is likely to get much worse. The collapse of its real estate market and stock market, great debt and instability in the banking sector, and demographic problems are only the start of the PRC’s problems. Foreign investors are beginning to recognize that the PRC is no longer the place to invest and are fleeing. The PRC has taken major economic hits and appears to be on the verge of a major economic decline.
That is positive news for the U.S. in this new Cold War struggle with the PRC. But it also contains considerable dangers. The first is that all those U.S. financiers and businesses who are heavily invested in the PRC’s economy will be damaged by the PRC’s economic downturn. In turn, that will have a negative effect on the U.S. economy. Those investors and businesses should have never engaged with the PRC because their investments, knowledge, and assistance aided the enemy’s growth. But they did. The costs of their folly will be borne by all Americans.
Second, Communist leader Xi Jinping will seek to maximize his relative power, even in the domain of losses, just he did with Covid. As his economy tanks, he will do his utmost to hurt the U.S. Of course, he already is through his efforts to undermine the U.S. dollar as the world’s reserve currency, the ability of the U.S. to ship goods around the world, and U.S. businesses, as well as by attacks on the American people through fentanyl and the hollowing out of American communities. However, it will get worse. An attack on Taiwan will be one theater. Xi certainly wants to conquer it with the destruction of Taiwan’s chip industry being perhaps the most important measure that is relatively easy to accomplish and that will effect a tremendous change in relative power. It will send the U.S. and other Western economies into a deep recession or even depression. That’s smashmouth, and that is what the U.S. should expect.
In addition to the very real threat of a military invasion, Xi can also hurt the U.S. through cyber-attacks on the U.S. infrastructure as FBI Director Christopher Wray identified, and on other targets, including banking, Social Security Administration, and medical facilities. In the latest alarming development, on Wednesday media reports revealed that PRC hackers were in U.S. infrastructure for up to five years. Xi can employ his Fifth Column of young Chinese men who have come across an open border, some of whom are certainly People’s Liberation Army soldiers and Ministry of State Security agents, who will act as saboteurs and will provide the muscle for other covert action attacks, assassinations, and in election interference.
So, the next time you go to a Target, Walmart, or any other retail store turn over the product you want to buy and find out what nation it is made in, as there is a 90% chance it will be made in the PRC. Or ask yourself how much of your retirement 401K account is being invested in the PRC via companies from the S&P 500. Hence, while the PRC’s economy has great problems, there is no guarantee it will fail anytime soon if we keep funding it. Americans need to play smashmouth too. This country must decouple from the PRC and prepare our national defenses to stop a PLA military action against Taiwan, Japan, or the Philippines that will directly, and immediately, destroy American national security.
Americans need to expect that as Xi weakens, he will do his utmost to hurt the U.S. within America, and by targeting its allies and partners. His atrocious behavior during Covid was an important warning, but it is going to get worse. The U.S. needs to understand that, prepare for it, and be willing to go smashmouth against Xi and the CCP.
James E. Fanell and Bradley A. Thayer are authors of Embracing Communist China: America’s Greatest Strategic Failure.