G2

Before diving into this newsletter, I want to make it clear that the views expressed here are mine alone. I aim to be objective and avoid offending anyone. This is not an academic paper, and I won't be providing sources. I encourage you to do your own research, which has become incredibly easy in the Web 3.0 era with the help of AI. I expect many of you to disagree, and I welcome your comments.

To start each newsletter, I collaborate with AI to request an image that encapsulates the topic. For this issue, two distinct types of images emerged: one depicting a symbiotic relationship and the other illustrating confrontational coexistence. Over the last fifty years, the G2 relationship has shifted from the former to the latter. It is essential to note, however, that during this time, China has never engaged in war—a fact that deserves acknowledgment and provides for hope.

Historical Context: The Origins of the G2

To understand the G2 dynamic, we need to go back to the Cold War, specifically during the Nixon administration. In 1969, a seven-month conflict erupted along the Manchurian border, likely due to the Sino-Soviet split. While this event is relatively unknown in the West, it set off a chain reaction in global diplomacy. Tensions escalated as both sides amassed troops, with the USSR even threatening to use nuclear weapons. This compelled China to negotiate and establish the Ante Bellum border while also seeking an "Alliance de revers" with the United States.

This marked the entry of two pivotal figures into history: Henry Kissinger and Deng Xiaoping. In his book On China, Kissinger described the agreed-upon strategy against the USSR: "As soon as the polar bear's toes cross the border, cut them!" Deng Xiaoping, who had studied Marxism-Leninism in France, became China's Paramount Leader in 1978. Under his leadership, China embraced strategic cooperation with the U.S. and adopted market-oriented reforms, sparking exponential economic growth that lifted hundreds of millions out of the poverty trap.

The Shifting Dynamics of Trust

Ten years after the border war, the USSR, which already had an agreement to position troops along the Chinese border in Mongolia, decided to invade Afghanistan. China, sharing a border with Afghanistan, collaborated with the US to undermine the USSR's invasion. During this time, the US likely agreed to export dual-use technology to China. It is important to note that this invasion, along with the anti-missile Star Wars program initiated by the Reagan administration, are widely regarded as two pivotal events leading to the collapse of the USSR in 1989.

The following “decade”, spanning twelve years until September 11, 2001, marked the post-Cold War era. During this period, the West focused on the fragmentation of the USSR for both security and economic purposes. Space became a key domain for cooperation to prevent the proliferation of sensitive technologies. This era saw Lockheed Martin integrating the renowned RD-180 engine into its new Atlas III & V rockets, NASA accommodating a Russian module MIR (Peace) on the International Space Station and agreeing to pay for astronaut launches aboard the Soyuz spacecraft from Kazakhstan. Europe also invested in its Spaceport in French Guiana to facilitate the launch of the Russian Soyuz. To balance this heightened activity with the former USSR, China’s Long March rockets were used to launch US commercial satellites.

In 1996, during the launch of an Intelsat satellite built by the Palo Alto-based company Space Systems Loral aboard a Long March 3B rocket, a significant diplomatic chain reaction was triggered. The rocket crashed during takeoff, and sensitive components of the US-made satellite were recovered by China. The subsequent investigation inadvertently transferred missile technology to China. In response, the US Congress classified all satellite technology as munitions, subjecting their export to the stringent ITAR (International Traffic in Arms Regulations) regime. At the time, Arianespace dominated the commercial space transportation market, while Hughes Satellite Systems led in commercial satellite manufacturing, each holding a 60% market share. This incident effectively froze the international commercial space sector. It was during this period that I met the Honorable John Bolton, a prominent neo-conservative and Under Secretary of State for International Security, who played a key role in resolving the issue. This event, due to its political visibility and lasting international impact, marked a turning point in US-China trust.

The subsequent decade, from 2001 to the election of Xi Jinping as China’s Paramount Leader in 2012, often referred to as the post-post-Cold War era, witnessed profound changes. More significantly, the US embarked on an extended military campaign against Muslim terrorism in the Arab and Muslim worlds, including the controversial invasion of Iraq, which China and other nations opposed. Meanwhile, Russia saw Vladimir Putin orchestrate a coup d’état to replace the ineffective Boris Yeltsin, using the opportunity to address the Chechen conflict. China, in turn, leveraged the situation to suppress the Uyghur Muslim population and further isolate Tibet.

Diplomatic Efforts and Missed Opportunities

This was the period when I became directly acquainted with China and had the tremendous opportunity to meet H. Kissinger. At the time, I was a Senior Fellow at the Center for Strategic and International Studies (CSIS) in Washington, DC, where I led the Space program.

By then, the relationship between the US and China had evolved into a highly complex dynamic, with differing viewpoints within each political party in the US. Some believed that low-cost Chinese products benefited the American public, while manufacturing US-designed products at low cost in China (like Apple’s iPhone) was advantageous for businesses. Others highlighted China's disregard for basic human rights. There were those who saw China as a communist country that nevertheless embraced foreign investment and operated on a capitalist market economy—an economic system that had lifted more people out of poverty than any other in human history. Some critics focused on China's cultural tendency to overlook intellectual property rights, while others emphasized China's role in missile technology proliferation, notably with North Korea and Pakistan.

Despite these varied perspectives, conventional wisdom suggested giving China time to evolve into a democracy as its internal economic engine and wealth grew. The famous adage “Trust but Verify” applied, encapsulating the belief that China was behaving as a responsible global stakeholder. Concurrently, a geopolitical containment strategy had been implemented. The first row of this containment comprised close Pacific allies such as Japan, South Korea, and Taiwan, while the second row included Australia and India.

On the Chinese side, confidence was buoyed by steady double-digit economic growth and successful penetration into former Western colonies through a “we are different” rationale that encouraged both trade and indebtedness. Within China, there were two prominent camps. The first was content to aim for second place, focusing on surpassing Europe to establish a G2 partnership and avoiding actions that might provoke the US or challenge its leadership. The second, younger camp was unapologetically ambitious, believing that China would surpass the US by 2025 and should embrace its destiny as the global leader. This group adhered to the concept of China’s “manifest destiny”. During this time, I had the opportunity to meet China’s Minister of Research and Technology, who expressed his admiration for the US federal organization for research and development (then funded by a $150 billion annual budget) and its contributions to innovation, security, and wealth. He candidly admitted that the Chinese government had studied the system and was in the process of replicating it.

Diplomacy is often seen as the art of maintaining dialogue—whether through ambassadors, envoys, or sherpas—even during major disagreements or conflicts. This dialogue may be formal or informal, direct or indirect (often referred to as shadow diplomacy). While some diplomats are satisfied with maintaining dialogue and preserving the status quo, others strive to foster cooperation. At CSIS, we aimed to act as a catalyst for bilateral cooperation in civilian space initiatives, particularly human spaceflight. Our goal was to replicate the successful cooperation achieved with the USSR during the Cold War. If you are interested, you can find the Declaration of Beijing, which we drafted in 2008 after a successful international summit we organized with the Chinese Association for Astronautics, on my website.

My Chinese counterparts were intelligent, optimistic, and deeply fascinated by the US. Although they lacked democracy and political freedom, they seemed to enjoy freedom in other areas. They made considerable efforts to launch this cooperation. Ultimately, however, we failed.

Lingering Mistrust and New Chain Reactions

Lingering mistrust from the Long March 3B rocket disaster in 1996 was a significant obstacle. Another major event in early 2007 triggered a series of diplomatic and geopolitical chain reactions. China used a ground-based interceptor to destroy one of its low-Earth orbit (LEO) satellites traveling at 8 km/s. While this demonstrated impressive technological capability, it also caused massive pollution in LEO. The explosion created debris that spread widely and posed risks to other satellites, potentially setting off a chain reaction. This type of capability remains a critical vulnerability for LEO assets like SpaceX’s Starlink. Reports suggest that the same interceptor was used in 2010 and 2013 to intercept ballistic missiles. This further eroded trust, as China failed to behave as a responsible global stakeholder.

The G2 Era and Xi Jinping's Leadership

Up to 2012, Europe held the title of the world's largest economy, but China's rapid ascent posed a significant challenge. That same year, I introduced the concept of the G2 in Brussels (details available on my website). This period also marked the beginning of a new era with Xi Jinping's election as China's paramount leader. Xi quickly consolidated power, halting China's gradual shift toward democracy. Under his leadership, personal and business freedoms became increasingly constrained, and China adopted a more authoritarian stance.

Interestingly, this era also saw a steady decline in China's GDP growth, while the U.S. entered a phase of consistent economic expansion. In 2012, the U.S. had surpassed Europe economically (pre-Brexit), and despite slower growth, China overtook Europe in 2021. Without Brexit, this milestone would have occurred in 2024. Thus, the G2 era was firmly established.

Xi Jinping's leadership aligned with the more aggressive faction within China, which sought to assert the nation's power on the global stage. Unlike Europe, which embraced "peace dividends," China maintained and expanded its hard power capabilities. Its military investments included a massive army, a robust navy with nuclear submarines and aircraft carriers, and a fifth-generation air force. However, China's forces remain untested in battle, and questions linger about their interoperability. The Space dimension is here paramount, and despite significant investments in systems like Beidou (the Chinese GPS), Qianfan (the Chinese Starlink) and anti-satellite weapons (ASAT) to deny US dissymmetric advantage, China still lags. Emerging technologies like drones, which have proven pivotal in Ukraine, however, could level the playing field.

China's Soft Power and Neo-Colonial Strategies

On the soft power front, China has established an impressive international presence by indebting nations across Asia, Africa, Europe, South and Central America. Through initiatives like the Belt and Road Initiative (BRI) started in 2013, China finances the development of infrastructure using Chinese technology, equipment, and standards. This financing forces Global South states into indebtedness while flooding wealthier countries with Chinese telecom equipment—most of France’s fiber networks are powered by Huawei—and electric vehicles, as seen with BYD’s surge in Europe. This strategy also fuels China’s trade surplus. Such achievements have been supported by the world’s leading commercial navy and numerous acquisitions of critical infrastructure abroad, including ports and airports in places like Panama and France. This neo-colonial approach further enables China to seize mineral resources and “export” Chinese laborers to mine them. In the US, concerns have emerged that the previous administration’s open border policies may have allowed tens of thousands of young men allegedly linked to the Chinese People’s Liberation Army to enter the country.

Simultaneously, China has pursued, and largely succeeded in, acquiring foreign technology to bridge gaps in its own capabilities. To achieve this, it has employed a range of strategies:

·    Compelling foreign companies to manufacture goods in China and train Chinese workers to access the Chinese market.

·    Integrating into the supply chains of foreign companies abroad, often as equity partners of lower-tier suppliers within the defense industrial base.

·    Flying surveillance balloons over foreign territories.

·    Purchasing real estate near sensitive locations such as military bases.

·    Utilizing Advanced Persistent Threats (APTs) to hack various systems, including national critical infrastructure and US government information systems.

The Cyber Dimension and Evolving Confrontation

This highlights the critical nature of cyberspace, the fifth dimension of modern warfare. Alongside the Army, Navy, Air Force, and Space Force, the Cyber Force operates in the shadows of cyberspace. China seems to have made significant strides in this domain. After extensively extracting intellectual property from the West, it turned its focus to personal data. In 2015, the Office of Personnel Management (OPM)—the agency responsible for managing US civil servants and the clearance process—was hacked. Over the course of three years, Chinese hackers exfiltrated sensitive data from OPM’s information systems. This breach is now a case study in many US cybersecurity programs.

More recently, reports revealed that Chinese hackers targeted US telecom operators, intercepting messages from political campaign teams on both sides, and also infiltrated the Department of Treasury. These incidents, which occurred under Democratic leadership, exposed vulnerabilities and were perceived by many as a sign of weak governance. Such actions are wholly unacceptable.

The result of this aggressive strategy is that the G2 relationship has shifted from synergetic to confrontational. The COVID-19 crisis further highlighted global dependence on China's supply chain, exposing vulnerabilities. Recognizing this shift, much of the US industry has adapted to the new reality. The "ABC" strategy—Anything But Chinese—has gained significant traction, aiming to exclude China from supply chains entirely.

While Steve Jobs once told President Obama that it would be impossible to stop manufacturing the iPhone in China, Tim Cook later informed President Biden that production could be transferred to India. This shift reflects the dramatic changes in US-China dynamics. A notable outcome of this evolution is the collapse of US Foreign Direct Investment (FDI) in China. Once totaling $100 billion annually, US FDI in China has now plummeted to nearly zero.

The Road Ahead: Confrontation or Cooperation?

The Trump administration, along with many Democrats, now recognizes that the US may be on a collision course with China. This sentiment is reinforced by the apparent fragility of China’s economic engine, mirrored by the struggles of its real estate market—a reality increasingly felt by the Chinese people. The future no longer appears as bright as it did two decades ago. In this context, China might take the risk of invading Taiwan, much like Russia’s decision to invade Ukraine.

Despite the steady decline in economic growth and the collapse of its real estate market, China still boasts a significant bright spot: a record trade surplus of one trillion dollars in 2024, including a $300 billion trade surplus with the US.

In response, the US is expected to impose significant tariffs on Chinese exports. This is not merely a trade war—it runs deeper, targeting the very pillars of China’s economic strength. Echoing Reagan’s strategy, the Trump administration has also initiated the ambitious Golden Iron Dome of America project aimed at intercepting intercontinental missiles targeting the Homeland. Advances in technology since the 1980s have enabled the US Missile Defense Agency (MDA), with its $10 billion annual budget, to deploy several operational systems, including the Standard Missile 3 on the Aegis ships (developed by Raytheon and Lockheed Matin) and the Ground-Based Interceptor (developed by Boeing). It is likely that a Space component with high energy lasers will enhance this multilayered architecture.

On the soft power front, while China is striving to land a crew on the Moon, the US may delegate this milestone to its robust commercial space ecosystem, allowing NASA to focus its efforts on Mars exploration.

Conclusions

In this context, many States and many companies will have to choose carefully between the US and China. The “et en même temps” coined by E. Macron will not work.

it is difficult not to view the extended peace deal in the works with Russia as a potential “alliance de revers” aimed at containing China to the north. However, permitting Russia—the “polar bear”—to claim parts of Ukraine could set a dangerous precedent, emboldening China in its aspirations to annex Taiwan.

This geopolitical “ménage à trois” takes us back to where it all began in 1969, the year of the first Moon landing, and signals the necessity of engaging in multilateral diplomacy once again, a diplomacy that could lead to sustainable world peace. But that discussion is one for another newsletter.