US-China cold war will force the EU to choose sides, experts say

The US-China rivalry is descending into a new “cold war” that is fracturing the world into two blocs and will force the EU to choose sides, experts said at the 50th St. Gallen Symposium on Thursday.  

Speaking at a session moderated by David Bach, IMD’s Dean of Innovation and Programs, they expressed concern that the EU is in danger of becoming a hapless plaything in the escalating tensions between the world’s two biggest economies.   

Ann Lee, a leading authority on China’s economic relations, rejected claims made by America’s top diplomat Antony Blinken on Tuesday, who tried to downplay the country’s tensions with China during a separate conference.   

“If you look at what the US has done in the last few years in terms of stepping up tensions with China, like starting a trade war, like imposing restrictions on US companies being able to sell semiconductor chips to China, or forbidding Chinese companies from investing in US or European tech companies…it shows the US is trying to move towards a cold war with China.”  

But she drew a contrast with the first cold war between the US and Russia, pointing out that China is one of America’s largest trading partners and there are official diplomatic relations.   

Simon Evenett, Professor of International Trade and Economic Development at the University of St. Gallen, said the “decoupling” of the US and China was evident in the drive by both sides to more closely scrutinize foreign direct investment, especially under the Donald Trump administration. But so far, US-China investment flows seem to belie the rising geopolitical tensions.  

Evenett suggested the capitalist motive to maximize shareholder returns clashes with the political rivalry between the superpowers. “Any degree of decoupling is possible. The question is, at what price?” he asked. “Unfortunately, these issues are often framed solely in terms of national security. The economic, business and social benefits of engagement are overlooked. That conversation needs rebalancing.”