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U.S. Congress has passed a 1.9 trillion-dollar stimulus plan, while China has convened its biggest annual political event called the Two Sessions. The Two Sessions refer to the back-to-back meetings of China’s two major political organizations—the National People’s Congress and the Chinese People’s Political Consultative Conference. Every year, international eyes are on this key political event in China, as it determines the country’s overall policy direction. This year’s event drew special attention all the more because China was the only major economy in the world to post positive growth in 2020 amid the COVID-19 pandemic. 

Here is Cho Yong-chan, director of the America China Economic Research Institute, to discuss economic strategies of the U.S. and China in the post-COVID-19 era and how South Korea should cope with them. 

China aims for this year’s economic growth rate of above 6 percent. It is a relatively modest goal, compared to major global forecasters’ projections of around 8 percent. There are four reasons for the lower-than-expected growth target. First, the U.S. may slap retaliatory tariffs on Chinese products if the two countries fail to implement the first phase of their trade agreement. 

Second, if the central government sets a high growth target, local governments tend to set their own goals even higher and employ a growth strategy led by massive investment. This may generate some side effects such as inflation, the housing bubble, heavier debt, financial risks and false reports. Third, China had presented high GDP growth goals in previous years in order to create more jobs. But it doesn’t have to do so now, as the working-age population in China is expected to decrease to 700 million in 2050 from 896 million in 2019. Lastly, countries will focus more on quality than on quantity when it comes to growth in the post-pandemic era. 

Chinese Premier Li Keqiang placed a strong emphasis on stable growth while delivering a report on the work of the government. 2021 marks the 100th anniversary of the founding of the Communist Party of China, and Chinese President Xi Jinping may begin a potential third term in 2022. During this politically crucial period, China prioritizes sustainable economic growth. It has set the fiscal deficit-to-GDP ratio for this year at around 3.2 percent, 0.4 percentage point lower than 3.6 percent last year, in an apparent move to manage the post-COVID-19 economy in a stable manner. Notably, China refrained from provoking the U.S. during the latest Two Sessions. 

During its recent political gathering, China touched on its five-year economic development plan, the 14th of its kind, and the long-term goals for 2035. The plan calls for boosting domestic demand, as indicated in the country’s so-called “dual circulation” strategy. China also announced a policy to increase research and development spending by more than 7 percent annually with the purpose of achieving technological self-reliance. But China did not mention target figures for exports, imports or exchange rates at all, much less trade issues with the U.S. Clearly, China doesn’t want to upset the U.S. 

Back in 2015, China announced its national strategic plan called “Made in China 2025,” which seeks to turn China into a global manufacturing powerhouse by 2025. 

But the U.S. and European countries claimed that the plan is designed to protect Chinese companies through market-distorting government subsidies and accused China of violating its commitments to the World Trade Organization. Apparently having the criticism in mind, China has focused on science and technology this time around, rather than manufacturing.

Still, China seems to be actively preparing for a battle with the U.S. for global supremacy. During the Two Sessions, China expressed its commitment once again to nurturing next-generation core technologies related to semiconductors and batteries. In an effort to strengthen competitiveness in the manufacturing sector, it decided to provide extensive support to eight industries including new energy vehicle industry. It also unveiled a plan to invest in seven high-tech areas including AI and biotechnology. The U.S., meanwhile, will execute massive stimulus measures. 

The 1.9 trillion-dollar pandemic relief package includes a plan to provide up to 1,400 dollars per person. Goldman Sachs predicts that the aid package will help lift the U.S. GDP to 6.6 percent and lower the unemployment rate to 4.5 percent this year. The U.S. Federal Reserve says it will continue its monetary-easing policy until 2023. Following vaccinations, new infections have been on the decline in the U.S. A report says that the rescue package will prompt American consumers to spend a lot of money down the road, especially in leisure activities, entertainment and eating out---the activities they have refrained from over the past year. The revitalization of the U.S. economy is expected to lead to a sharp increase in South Korea’s exports to the U.S. 

Domestically, the U.S. employs aggressive pump-priming measures to revive the economy. Outside the nation, the U.S. is seeking to expand the role of the Quadrilateral Security Dialogue known as Quad consisting of the U.S., Japan, India and Australia. It is widely believed that the four-country security consultative body has the purpose of keeping China in check. Leaders of the four countries held the first-ever Quad summit on March 12. 

U.S. President Joe Biden is expected to implement his vision to contain China in earnest by using the Quad alliance. 

Conflict between the U.S. and China has not deepened for the past year, as both countries have been busy handling the pandemic. But in the post-COVID-19 era, they will likely continue to fiercely compete in seven areas: trade, technology, human rights, finance, infectious disease control, diplomacy and military. 

The U.S. is rushing to forge alliances to counter China’s tech development and is presenting the vision of a new D-10 group of ten leading democracies. It is preparing international sanctions over China’s crackdown on Uighurs in Xinjiang. China, for its part, will implement the digital yuan ahead of the 2022 Beijing Winter Olympics to possibly shake the current dollar key currency system. China may also restrict exports of rare-earth elements and sell U.S. Treasury bonds. 

If the so-called new Cold War between the U.S. and China intensifies, the strong dollar trend will continue. That will prompt foreign capital to flow out of emerging economies, reduce investment and add uncertainties to the global economy. 

U.S. Secretary of State Tony Blinken and Secretary of Defense Lloyd Austin will visit Japan and South Korea this week. The Northeast Asia visit by the high-ranking U.S. officials is interpreted as a message that the U.S. is seeking to form an anti-China coalition with its allies. 

If South Korea refuses to join this coalition, the South Korea-U.S. alliance will weaken and Seoul will be sidelined from North Korean nuclear negotiations. It may also suffer an economic blow, like U.S. tariff imposition on Korean cars. 

But if South Korea turns its back on China and sides with the U.S., China may restrict exports of rare earth materials to South Korea or take some retaliatory measures similar to those over Seoul’s decision in 2017 to deploy a U.S. missile defense system in South Korea. 

For South Korea, it is important not to make enemies. Korean firms have to come up with Plan B quickly in preparation for the worst-case scenario. The country needs to build new supply chains for its key industries including semiconductors, automobiles and display products. Unfortunately, South Korea has no clear national strategy to strike a delicate balance between the U.S. and China. The Korean government should swiftly build a multi-layered security frame and create strategic communication channels with both the U.S. and China. 

China is preparing to surpass the U.S. through its economic plans and goals, while the U.S. has made it clear that it will block the attempt. For South Korea, the key is how to manage conflict between the two superpowers. It is urgent for Korea to devise long-term strategies aimed at maximizing national interests.