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The Biden’s administration’s China policy review isn’t finished but the answer is in. Kurt Campbell, Biden’s point man on Indo-Pacific policy, last week declared that the “dominant paradigm” between Washington and Beijing would now be one of competition, and the period of U.S. engagement with China had “come to an end.”

For some, that was a foregone conclusion, yet it is more accurately the product of a clear-eyed analysis of Chinese behavior.

Speaking at a Stanford University virtual seminar in honor of Michel Oksenberg, a China hand who served on Jimmy Carter’s National Security Council, Campbell explained that U.S. policy toward China will operate under a “new set of strategic parameters” in which competition will dominate.

That doesn’t mean that cooperation is off the table: Laura Rosenberger, senior director for Taiwan and China at the NSC who spoke with Campbell, added that the U.S. will be “countering China where we need to and cooperating with China where it is in our interest to do so.”

Campbell attributed the harder line to China’s policies, pointing to military clashes with India, intensified military activity in the South and East China seas, pressure on Taiwan and Japan, economic pressure on Australia and “wolf warrior” diplomacy. All this, he argued, underscores Beijing’s comfort with “hard power” and “signals that China is determined to play a more assertive role.”

Campbell is speaking to two audiences (three, if you count the U.S., which I take as given). The first includes U.S. allies and partners who have expressed doubt about Biden’s commitment to a more hard-nosed approach toward China. The administration has been sending this message repeatedly as plainly as possible since taking office; anyone who doesn’t get it by now is being deliberately obtuse.

It would be hard to be clearer: Speaking to “the entire Indo-Pacific and the countries in Europe that want to work with us in Asia,” he repeated that the U.S. is “shifting our strategic focus, our economic interests, our military might more to the Indo-Pacific,” where it seeks to play a “leading role … work with allies, partners and friends.”

In what should be music to the ears of politicians and policymakers, Campbell added that the U.S. knows that it must offer a “positive economic vision” for the region.

U.S. will matters, but so too does its capability, and that requires demonstrations of capacity to show that it can do the job. So, while Biden will soon have to turn those fine words into policies, which is a challenge for every U.S. administration, every show of competence, professionalism and problem solving — like getting millions vaccinated or getting a stimulus package and infrastructure bill passed — reinforces the message of commitment and seriousness. There is a paradox, however: Rebuilding U.S. strength will require investments at home, which will reduce spending abroad. Still, the circle can be squared.

The second audience is China. Campbell explicitly warned China that predictions of U.S. decline, which are apparently common among the policy elite in Beijing, are premature. “One of the interesting things about the United States is our ability to rise up again, almost like a phoenix from the ashes.” This could be a real danger if the Chinese government bases its policy on these assumptions and is overconfident or reckless as a result.

Reaction in China was predictable. While conceding that some competition is natural, foreign ministry spokesman Zhao Lijian said it “is wrong to define the relationship with competition because it will only lead to confrontation and conflict.” Scholars lined up behind the government, casting U.S. policy as intended to contain or restrain China.

It is increasingly apparent, to me at least, that China does not understand what is going on in the United States. It’s sticking with an old game plan, failing to recognize that U.S. thinking has shifted as a result of new insights about China. (Previous U.S. administrations had a good understanding of China, too. What they didn’t have was a pattern of behavior to assess.) Consider a couple of examples.

Campbell noted that while the recent meeting in Alaska was ostensibly between U.S. Secretary of State Antony Blinken, National Security Adviser Jake Sullivan and their Chinese counterparts, Yang Jiechi and Wang Yi, those two men were “nowhere near” within a hundred miles of the inner circle of President Xi, adding that the closest people that he works with they never interact with.

That complaint explains the reluctance of Secretary of Defense Lloyd Austin to meet Chinese Defense Minister Gen. Wei Fenghe. Instead, Austin wants to talk to Gen. Xu Qiliang, vice chairman of the Central Military Commission, a far more powerful and influential post.

China has taken offense at the suggestion, blasting Austin for “turning a blind eye to China’s goodwill and sincerity,” while the nationalist Global Times newspaper called the request “an unprofessional and unfriendly act of disregarding diplomatic protocol and international common practice.” Considering the offense that China has taken when its officials do not meet counterparts that they consider their equals, the response rings hollow. Xi Jinping, for example, threatened to cancel his 2014 visit to the U.K. if he couldn’t meet the queen.

Then, there is the ever more visible gap between Chinese rhetoric for the outside world and that intended for domestic audiences. A recent Brookings Institution analysis, “China as a cyber great power: Beijing’s two voices in telecommunications,” serves up damning examples.

The report notes that as the Chinese government is telling foreign audiences to purchase Huawei products, it is warning domestic audiences of the dangers of reliance on foreign technology. Xi worries that “the control of core technology by others is our biggest hidden danger” and that allowing foreigners to control core technology “is like building a house on someone else’s foundation.”

While foreign governments that express concern about Huawei are accused of exaggerating or practicing politics, China is as alarmed about the use of foreign tech in its national telecommunications networks. Xi supports the use of only foreign technology that is “controllable.”

And as China emphasizes the importance of win-win collaboration when talking about standard setting with foreign audiences, at home the main point is the use of standards to establish technological dominance. Or as Xi famously suggested, interdependence is good if it leaves other countries dependent on China. Beijing should be worried that one of the report’s authors is now working for Campbell as senior director for China on the NSC.

Or in another page from the old playbook, China might be hoping that the U.S. business community will come to its rescue, arguing that access to the Chinese market is reason to forgive Beijing’s other sins. The problem is that U.S. businesses, like those in Europe and elsewhere, are now as inclined to complain about China as compliment it.

It’s fortunate for Beijing then that U.S. financial companies — Goldman Sachs, BlackRock and JPMorgan Asset Manufacturing — are making big bets on China after liberalization measures last year gave them access to the country’s 121.6 trillion Chinese yuan ($18.9 trillion) savings and asset management market. That is the long-anticipated payoff for years of trade negotiations. Perhaps China recognized a need for new advocates after alienating its old allies in the business community.

Unfortunately for Beijing, the Biden administration has signaled that it will no longer privilege those financial interests in dealing with China (a shift I mentioned last year when discussing foreign policy for the middle class). Before he became national security advisor, Sullivan asked in an article last year “Why … should it be a U.S. negotiating priority to open China’s financial system for Goldman Sachs?” The answer seems ever more obvious in an era dominated by competition — and the heads of those companies may well demand hazardous duty pay when they have to explain their policies to an increasingly hostile Congress.

Brad Glosserman is deputy director of and visiting professor at the Center for Rule-Making Strategies at Tama University as well as senior advisor (nonresident) at Pacific Forum. He is the author of “Peak Japan: The End of Great Ambitions” (Georgetown University Press, 2019).

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