The Fundamental Reason Why the US and Europe's Efforts to Counter China Are Failing

 The wars currently ongoing between Russia and Ukraine, and Israel and Iran, have certain commonalities. While they may appear to be driven by geopolitical reasons on the surface, I believe the underlying reason for the United States' active involvement is its effort to contain China and maintain the dominance of the US dollar within the broader context.

The US has only been able to maintain global leadership for less than 100 years. Following its de facto victories in World Wars I and II, the dollar was established as the world's primary reserve currency. By ensuring that all global oil transactions could only be settled in dollars, the US secured control over global finance and gained the power to regulate the industrial sectors of other nations through dollar supply management.

The problem has recently intensified as the Chinese yuan started threatening the dominance of the dollar. China has strengthened its partnerships in Africa, the Middle East, and Russia through the Belt and Road Initiative, expanding the use of the yuan in oil transactions. This is something the US cannot tolerate.

Chinese financial expert Dr. An Yu-hwa noted, "The US raised interest rates to curb inflation by withdrawing the dollars that surged after the subprime mortgage crisis. Usually, in such scenarios, countries with fragile financial structures, such as those in Asia, experience financial crises. However, India, Vietnam, and even China have not seen their growth rates falter. This indicates that the yuan is beginning to demonstrate the capabilities of a reserve currency comparable to the dollar."

Developed countries like the US and Europe find it challenging to advance their manufacturing industries. Due to welfare costs associated with all manufacturing, their production costs are several times higher than those of developing countries in Asia, such as China. When China begins manufacturing a product, its price drops significantly. As a result, developed countries often resort to "ladder-kicking" strategies.

Environmental regulations, climate agreements, and the transition to electric vehicles are all results of such policies. Developed countries that have prospered on cheap fossil fuels now impose regulations on emerging economies, essentially kicking away the ladder. Nevertheless, China has become the world's leading producer of electric vehicles. Furthermore, with the advent of the electric vehicle era reducing oil transactions, the status of the dollar is also at risk. This sense of crisis has led to recent skeptical policies on electric vehicles from the US and Europe.

The attempt to stifle China by blocking semiconductor supplies has not been very effective. Dr. An Yu-hwa attributes this to China's strong manufacturing capabilities, arguing that the reason is not government subsidies but rather the innovation clusters that integrate supply chains of materials, parts, and equipment.

China's robust manufacturing industry is fundamentally supported by these innovation clusters. In the late 1990s, China established innovation clusters in southern Guangzhou, northern Beijing, Shenyang, and eastern Nanjing. As the world's factory, these clusters saw active industry-university collaborations and significant foreign investments, rapidly enhancing the technology of SMEs. This resulted in the establishment of a domestic market foundation and supply chain, which has allowed global companies to emerge and grow robustly.

Of course, China's current economic situation is not without challenges. However, like Japan's material and parts industry, which experienced rapid growth after facing the disaster of the 1985 Plaza Accord with the US, crises often accelerate structural transformation and innovation. Faced with threats to survival, China is fiercely resisting and seeking alternatives. One such initiative is their ambitious plan to change existing semiconductor processes and develop new ones.

The US perspective is also understandable. If it relinquishes the dominance of the dollar, its leadership would crumble in an instant. European countries enjoyed a history of prosperity starting with the opening of sea routes during the Age of Discovery, just 600 years ago. Prior to that, Asia was the dominant region. The US, with its 250-year history, inherited this mantle and flourished. In the grand scheme of history, we are like nomads crossing a swinging bridge.

Our industrial policies are highly dependent on external factors. We face limitations in efficiently utilizing resources due to weak foundational scientific technologies, a narrow domestic market, tensions between the Koreas, US-China conflicts, geographical proximity to China, and unresolved conflicts with Japan. Despite this, we have overcome challenges and will continue to do so. We have global competitiveness in 21st-century leading industries such as batteries, semiconductors, and artificial intelligence. Being the world's top in semiconductors and high-performance ternary batteries and third in AI showcases our nation's fierce growth.

I am not worried. I have witnessed the creative capabilities of numerous startups. Our global network capabilities have improved significantly over the past decade. Our people and companies have ventured into almost every corner of the world, living with determination and vigor. Just as individuals have their dispositions, so do nations. Our nation's resilience and challenge-oriented spirit, having defended against foreign invasions and preserved our country for 5,000 years, are deeply embedded in our DNA.