By NewsDrum Desk

London/Los Angeles: US Speaker Nancy Pelosi’s visit to Taiwan has elicited a strong response from China: three days of simulated attack on Taiwan with further drills announced, plus a withdrawal from critical ongoing conversations with the US on climate change and the military.

This strong reaction was predictable

President Xi Jinping had earlier warned President Joe Biden not “to play with fire”. Of course, if Pelosi’s visit hadn’t gone ahead, the Biden administration would have faced a strong reaction from both parties in Congress for not standing up to China’s threat to Taiwan or human rights issues regarding Tibet and Xinjiang, not to mention Hong Kong.

So where does it leave trade between the world’s two leading powers? How business trumped ideology Consider the not-too-distant past. The US supported the Republic of China against Japan in the Pacific war of 1941-45. When the Chinese leadership fled to Taiwan in 1949 following the victory of Mao Zedong’s communists in the Chinese civil war, Washington continued to recognise the exiled regime as China’s legitimate government, blocking the People’s Republic of China (PRC) from joining the United Nations.

This shifted in 1972 following President Nixon’s historic visit to China (in a move to isolate the Soviets). The US now recognised the PRC as China’s sole government and accepted its One China policy. It downgraded its Taiwan relations to merely informal, while affirming a peaceful settlement to the mainland communists’ claim that this was a breakaway province that had to be assimilated.

This opened US-China trade, ending a US trade embargo in place since the 1940s. Economic ties proliferated in the 1980s under Mao’s eventual successor, Deng Xiaoping, helping the Chinese economy to multiply while the US enjoyed lower consumer prices and a stronger stock market.

Western manufacturing firms either outsourced to Chinese firms or set up operations themselves. They benefited from cheaper production and – for those outsourcing – not having to own factories or deal with labour issues. In turn, the Chinese gained tremendous manufacturing capability.

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https://www.newsdrum.in/international/china-us-tensions-how-global-trade-began-splitting-into-two-blocs-73420.html