Bob Chen on implication for China after Trump-Zelenskyy spat

There may not be any more free rides for China, but this might also be a real opportunity for us to go global

The following article is adapted and translated from a WeChat blog article from friend-of-channel Bob Chen, in which he did something he is always great at: sharp analyses merging politics and economics. Specifically, he looked at what the Trump-Zelenskyy spat and the US-EU rift would mean for China. I especially love his analysis of the 3 key reasons for keeping US hegemony (maintaining dominance of dollar, energy security and global trade ), and how those reasons been eroded in this new era.

Before we start though, there is a small announcement I would like to make too. I just started another newsletter called

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, which covers the market intelligence and Data-as-a-Service industry in China - basically our own industry. In the first essay, I discussed the differences between China and the US in this regard. This newsletter will be ideal if you also work in our industry as well.

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Implication for China after Trump-Zelenskyy spat

Originally written by Bob Chen, edited by Robert Wu

Last week’s public spat between Trump-Vance and Zelenskky has thrown Europe and Ukraine into a new crisis. Yet, with the ongoing U.S.-Ukraine drama and the growing rift between the U.S. and Europe, China might actually shake off the bad luck it has faced on the international stage since 2022 and regain its momentum.

The capital markets have already cast their votes. When the U.S. lashes out globally, especially against its allies, the valuation pressure on China is gradually easing.

In 2022, China’s international position was unusually bad. Russia acted on its own, leaving little time for China to react, essentially forcing China to take sides. Since siding with the U.S. was not an option, this move damaged China-Europe relations, pushing Europe closer to the U.S. It also made it difficult for China to stand firmly on moral grounds, even causing domestic public opinion to split on this issue.

Now, the U.S. has taken a step back, leaving Europe bewildered. Looking at China, Europe now sees a country that doesn't stir up trouble, has influence over Russia, and is indispensable in mediation.

The U.S. has always had a tradition of isolationism and returning to its own backyard. From Jefferson to the eve of World War I, Americans who focused solely on their own interests stood in stark contrast to the elite with their global intelligence networks, desires for power projection, and international volunteerism. The former naturally asks, why should we spend hundreds of billions of dollars aiding other countries overseas? What’s in it for us?

Indeed, this question requires some complex thinking to answer. It involves explaining the entire post-war international order, what the U.S. gained from it, and what it gained from the trade system. But people like JD Vance, representing the "country folk," only care about what they lost in trade.

If you ask Deepseek what the U.S. gained from the international system it led after the war, it summarizes it well. But all these answers are subject to being overturned today.

The benefits include the seigniorage of the U.S. dollar. The big brother provides protection and security guarantees, which is why everyone considers the dollar safe. This allows the U.S. to collect seigniorage, engage in quantitative easing, and borrow money. (But why can Japan, a protected ally, borrow more than America? Why are Chinese bonds also popular? Is the cost of seigniorage too high?)

Second, stable energy supply. The U.S., once driven into recession by high oil prices, heavily supported Israel, projected power in the Middle East, and participated in the War on Terror and the Iraq War. (But today, the U.S. is the world's largest oil producer.)

Third, the stability of global trade routes, including the Strait of Malacca, the Suez Canal, and the Red Sea, relies on U.S. military projection and protection. (But the biggest beneficiary of the global trade system is no longer the U.S. In fact, the U.S. sees itself as a victim. The biggest beneficiary is China, which has benefited from trade and is catching up to the U.S.)

Because these fundamental questions cannot be answered, the arguments for core tenets of America’s long-held international strategy, such as the balance of power and offshore balancing, have become shaky.

From a purely rational perspective, spending a few hundred billion dollars that can be freely printed to contain Russia, using Ukrainian lives to fill the front lines, is a very cost-effective move for the U.S. But the new generations of Americans are asking, what if we just let Russia have Ukraine? What if Russia controls Eastern Europe? Can’t Europe protect itself? Russia can’t swallow all of Europe, can it?

Some may worry, "What if China also becomes expansionist?" An extreme isolationist American might answer: With the Pacific and Atlantic protecting us, what do distant wars have to do with us? What’s the return on our aid? What price do we pay for deterrence and protection? If we can make a fortune through corporate competitiveness, technology, and the Internet, why bother managing the international order at all?

The West has grown too accustomed to a world under the U.S. security umbrella. When security becomes negotiable, the problem is that the credibility of deterrence is now diminishing, and it may cost even more in the future. When the security dilemma returns, the world will inevitably restart an arms race. This is not a good thing for the globe. I don’t believe China will try to fill this vacuum in the short term but will just go as it flows.

For China, as the biggest beneficiary of stable international trade and order, we may indeed gradually take on more responsibilities. Let’s not forget that the U.S. international intelligence network and the export of commercial values were both the pillars and the products of maintaining such order. We need time to build a system like this as well. There may not be any more free rides for China, but this might also be a real opportunity for us to go global.