After China’s leaders opened their country to foreign investment in the early 1990s, US transnational companies flooded in searching for cheap labor and new markets. Foreign direct investment [FDI] in Chinese plants and factories, as well as portfolio investment in Chinese corporate shares, skyrocketed. Established in tax-haven jurisdictions like the Cayman Islands, shell companies – “special purpose entities” – smoothed the way for foreign venture capital, hedge funds, and other speculative interests to take advantage of the boom.
For thirty years, US manufacturing and finance capital profited mightily from these arrangements. By setting conditions on foreign investment and through other measures, meanwhile, China’s strong state strengthened and expanded its own economy. At the same time, continuing a trend which began during the late 1970s and 1980s, US working-class communities experienced prolonged devastation as high-wage jobs were relocated, exported, or simply eliminated. Anger and deepening political disaffection were the results.
Drawing opportunistically on this anger, the unexpected presidency of Donald Trump produced a sea-change in US-China relations. Though there’s plenty of informal everyday racism in the United States, to bring it to bear on political-economic objectives requires organizational work. To rationalize his “America First” economic policy toward China, Trump turned to anti-Chinese racism, for example by referring to Covid as the “Chinese virus” and the “Wuhan virus.”
The Biden administration heightened the stand-off by supplementing Trump’s tariffs with export controls on state-of-the-art semiconductor technologies, AI, and quantum computing – citing both economic and national security. Democrats and Republicans now combined a stepped-up racism with attacks on purported Chinese “subversion.” Laws restricting Chinese nationals from buying property were enacted by fifteen US states, with other such laws pending in twenty others. Academic scientists at US universities of Chinese descent experienced racial profiling and harassment, and many did not feel safe in their jobs; Chinese graduate students were barred from academic laboratories in Florida. Violence inflicted upon Asian Americans rose during the Covid 19 pandemic, and persisted at a high level.
China’s Xi Jinping reciprocated by according new emphasis to nationalistic rhetoric and with defiant economic policies toward the U.S. A dominant political faction in the US then took US aggression up a notch.