Exclusionary policy based on competition against China causes surging nationalism and economic collapse.

The Biden administration’s rhetoric and policy toward China have featured an imbalance between these two impulses, favoring restrictive and exclusionary measures at the expense of both competitive and cooperative opportunities for mutual gain. Washington’s orientation toward China is not so much about engaging in competition as about cutting off competition. That sends a signal to Chinese leaders that the world the United States seeks has no room for China’s success. This strengthens the hand of those in China arguing for more confrontational responses and exacerbates popular nationalism in China. At the same time, it sends a signal to the American public that constructive relations with China are impossible, bolstering those voices in U.S. politics calling for more extreme forms of China exclusion and strengthening nativist currents that feed off the image of nefarious foreigners. These escalatory dynamics in both countries now threaten to harden zero–sum pressures in the global system into a permanent structure of hostility, in which each country would organize its own society and international partners to undermine the other, dramatically increasing the likelihood of violent conflict. The tentative diplomatic exchanges that in recent months have temporarily cooled overheated rhetoric on both sides will ultimately be overwhelmed by the now deep–seated logic of exclusion and confrontation — unless officials on both sides sharply reorient toward a shared project of revitalizing the global system around an inclusive common good. …. It also poses, in Xi Jinping’s words, “challenges of unprecedented severity to the country’s development.” Since the global financial crisis, Chinese growth, government revenue, and regular people’s strategies for establishing their families and saving for retirement have all been based on a huge real estate bubble. The leadership has been trying to find a way to deflate the bubble without setting off a crisis for a decade. But that requires a different source of growth to replace the bubble, and Chinese leaders have concluded — like U.S. leaders thinking about problems in the U.S. economy — that the solution is developing high–tech sectors while modestly reducing domestic economic inequality to increase consumer demand and political legitimacy. Exclusionary U.S. policies thus threaten to cut off the Chinese economy’s escape route from the danger of financial collapse.