Internal rebalancing of China and the US can help them steer clear of a new Cold War

There is to be a new occupant of the White House. But the repercussions from the storming of the Capitol building by supporters of President Donald Trump on Jan 6 are still being felt and Trumpism is still reverberating among his supporters. Likewise, a committed group of Washington hawks, represented by US Secretary of State Mike Pompeo, are desperately rushing through their to-do list on China, hoping to consolidate their legacy of get tough on China in the form of a new Cold War.

Outside of government buildings, analysts and scholars are debating whether the two countries have already fallen into the trap of a new Cold War. Some say yes, and the Joe Biden administration can only try to bring about a détente, while others say no, and China should work with the Biden administration to avoid such an outcome. The reality is that during the Donald Trump era, the United States launched a "whole of government" attack on China, and for obvious reasons, Trump did not win. Now with his administration trying to force its approach on its successor, people are waiting for an uneasy new start for bilateral relations in the coming months.

The new Cold War warriors seem to have all the evidence they required to rerun the winning strategy they employed in the first Cold War. They point to a rising "revisionist" high-tech power governed by a communist party, operated on a socialist political-economic system. Hence, the new Cold War is supposedly wearing two jackets at the same time, one called the Thucydides' trap and the other the clash of civilizations. Of course, since the current antagonism began with a trade war, this unnamed Cold War has a prequel called "decoupling". All in all, China and the US could be "destined for (some sort of) war" due to the significant differences in their histories and cultures, values and norms, institutions and laws, interests and intentions.

But are these differences bound to be confrontational or even directional toward a Cold War? Is there really a trap that no matter who's in charge of Washington and Beijing, an ideological clash is unavoidable? The answer is no, and both sides are laying a new foundation to bridge the bilateral relations across dangerous waters.

On the Chinese side, dual circulation has become the new development paradigm. This is a critical adjustment of the development strategy after the pre-reform self-reliance and the reform era's export-oriented strategies. When China was playing economic catch-up, the international circulation was the center of economic activity and China granted preferential policies toward foreign investments and foreign exchange earners, which resulted in curing the capital shortage but also generated a high level of dependency on foreign markets.

Now that China has become the top trading and foreign reserve country in the world, a new strategy must be implemented to address the imbalance within the economy. Limited international market capacity, increased foreign supply instability and vulnerability, insufficient development of advanced or emerging technologies and innovative capabilities, and the rising risks from total debt and the challenges of an aging society, are all calling for a shift in government priorities and policies. As such, China's 14th Five-Year Plan (2021-25) and"2035 Vision" will focus on developing its vast and growing domestic market and building an innovation-based green economy. China has a strong incentive to maintain regional and global stability so that it can secure a favorable external environment. Whether from a geopolitical or an ideological perspective, China will remain a nonaggressive power with a vested interest in improving the current global order, not weakening, abandoning, or destroying it for the purpose of establishing or restoring a China-centered "sphere of influence".

On the US side, middle class renewal is becoming the central theme of the Biden administration. Biden knows the futility of building walls, inciting racism and forcing "reciprocity" on others to rid the damage of automation, digitization and globalization. There has been tremendous inequality hiding behind the fa?ade of edited Wall Street statistics and the real reform of the US tax, education, healthcare, justice systems are long overdue. The COVID-19 pandemic has only made it more difficult to leverage fiscal and monetary policies to facilitate meaningful changes.

But the Biden administration probably won't let this "good crisis go to waste" and a new deal that involves a more resilient supply chain, larger investment in renewable energy and infrastructure, improvement of the welfare system and more progressive tax structure could be offered. If Biden is putting the US house in order first, then neither the neoliberal expansionism nor the Trumpian "America First "unilateralism will fit. Biden has to find a third road that is built on a revised globalism, with restrained power and ambition but re-engaged responsible diplomacy.

In the post-pandemic era, the internal rebalancing of both the US and China is creating new energy and opportunity for more cooperation and coordination. Expanding the Chinese market could welcome more US products, global reduction of carbon emission and energy transformation may create new demand for China-US joint green tech development, US infrastructure modernization would benefit from Chinese investment and participation, and there are much to be anticipated from a new "Chimerica" circulation based on the self-improvement of both. When common interests sprout and prosper in a new era, the talk of a new Cold War trap will quietly perish.

The author is a research fellow at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences. The author contributed this article to China Watch, a think tank powered by China Daily.

The views do not necessarily reflect those of China Daily.