Financiers in the U.S. go nervous as Washington fantasies of a war against China

By Vijay Prashad 
The fragility of U.S. power was clear when a small Chinese startup released the DeepSeek machine learning program. The U.S. stock market Nasdaq shuddered, with technology stocks collapsing. This collapse is not a minor matter for the U.S. economy. During the post-COVID-19 inflation (2021), foreign investors began to slow down their purchase of U.S. debt. Then, after the U.S. seized $600 billion in Russia’s foreign exchange assets (2022), many central banks moved their own holdings away from the long-arm jurisdiction of the United States. U.S. Treasury bills languished.
Financiers in the U.S. are now nervous. In 2024, foreign investors put over $1 trillion in technology stocks into U.S. stock markets. With the DeepSeek downturn, will these investors move away from what now appears to be a mirage of possibilities? With U.S. President Donald Trump hellbent on a tariff war with the world, and with the lack of appetite among foreign investors to hold U.S. Treasury bills, who will fund the astronomical debt of the United States? Will the United States fall headfirst into a financial vortex?
Would it be possible for the United States to take the emergence of DeepSeek as a warning and invest its wealth into the creation of new technologies and infrastructure to restart a faltering economy? Will technology billionaires put the massive profits of their companies into research and development rather than usurping other companies to give them influence over society? It would be valuable if the media in the United States took these questions seriously and held debates across the length and breadth of society. Instead, the U.S. is now captivated by much shallower discussions: What do you think of Donald Trump? Should the U.S. capture Greenland? How many more migrants should the U.S. border patrol deport? That is the range of discussion. There is no broad consensus that asks the U.S. billionaire class to put its wealth into an economy that is sputtering on the fumes of its past.
During the administration of Joe Biden, the U.S. tried to secure public funds for infrastructure. The American Society of Civil Engineers released a study in 2021 that showed a $3-trillion ‘infrastructure investment gap’, which included basic infrastructure for drinking water and sewage ($1 trillion) and surface transportation ($1.2 trillion). This bill did not include investments for high-tech infrastructure. The CHIPS and Science Act (2022), meant to decouple U.S. tech firms from China, had provided the National Science Foundation, the Department of Energy’s Office of Science, and the National Institutes of Standards and Technology with $26.8 billion. However, the Federation of American Scientists argues that the U.S. Congress underfunded the programs by $8 billion. It is important to point out that in the same year, China spent $496 billion on its high-tech investments (8.3 percent higher than in 2023). That is why, before the DeepSeek announcement, Trump gathered Sam Altman (OpenAI), Larry Ellison (Oracle), and Masayoshi Son (SoftBank) to announce a private sector investment of $500 billion into U.S. machine learning development. That was on January 22. The DeepSeek announcement was on January 27. It sunk the ebullience of Trump’s press conference.
The White House should have read a study that was published in August 2024 by the Australian Strategic Policy Institute (ASPI). ASPI, which is partly funded by the Australian government, has developed a two-decade-long technology tracker. It studies 64 critical technologies from machine learning to biotechnology to quantum technology to see which country has the lead in developing these branches of high tech. The findings published in August 2024 are astounding and bear careful attention: “The U.S. led in 60 of 64 technologies in the five years from 2003 to 2007, but in the most recent five years (2019–2023) is leading in seven. China led in just three of 64 technologies in 2003–2007 but is now the lead country in 57 of 64 technologies in 2019–2023, increasing its lead from our rankings last year (2018–2022), where it was leading in 52 technologies.” It is worth reading these numbers again because they might not have registered properly. In most critical technologies, China is ahead of the United States and has gone ahead of the United States in less than two decades.
Stop China
If the United States cannot raise funds for research and development and keep pace with the rate of increase of technological progress in China, then the U.S.—which has relied upon technological superiority—will face a serious existential threat to its place in the world. The whispered debates in Washington are not about whether the U.S. can catch up with China, but whether the U.S. can prevent the rise of China. In other words, if the U.S. cannot accelerate its technological development, then can it stop China from its development?
One of Donald Trump’s main advisors on China is Elbridge A. Colby, the grandson of former CIA chief William Colby. In 2021, Colby published a book called Strategy of Denial: American Defense in an Age of Great Power Conflict (Yale University Press). In the book, Colby argued that if the U.S. cannot advance its own goals, then it needs to deny its adversaries the opportunity to rise, particularly in East Asia. There is something anachronistic about the book because China is already a major power not only in Asia (where it is the main trading partner of most countries) but across Africa and Latin America. To build a regional coalition, as Colby suggests, to hem in China has already been U.S. policy and it has faltered (India, which was enthusiastic about the Indo-Pacific Strategy, for instance, has now become lukewarm about the Quad). In an interview with the New Statesman, Colby shows why diplomatic isolation and a possible war to humiliate China is the only possible strategy. “If China dominates over half of global GDP, it will shape everything around its economy. We’re not going to be able to industrialize. They’re not going to let us ban TikTok. We’re not going to have Apple, Microsoft, and Alphabet. Those are going to be Chinese companies. The best universities are going to be in China.” This appears, to men like Colby, as a near-foregone conclusion. Colby is not a “China hawk,” but a realist, and it is from that perspective that he suggests that a U.S. military build-up in East Asia is necessary and a war over Taiwan is likely.
On the day of the DeepSeek announcement, on 27 January, the RAND Corporation released a report with a startling title, “The Chinese Military’s Doubtful Combat Readiness.” RAND argued that the People’s Liberation Army had been damaged by politics and by conscription and that it would not be battle-hardened to face an attack from the United States. This was also the conclusion of the U.S. Department of Defense’s “Military and Security Developments Involving the People’s Republic of China 2024”: “Despite its rapid progress, the force has not yet demonstrated the type and scale of sophisticated urban warfare or long-distance logistic capabilities that would likely be required for operations against Taiwan or major contingencies overseas.” These assessments are dangerous. They suggest to the United States government that a war against China is winnable, the madness of which is beyond belief.
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This article was produced by Globetrotter. Vijay Prashad is an Indian historian, editor, and journalist. He is a writing fellow and chief correspondent at Globetrotter. He is an editor of LeftWord Books and the director of Tricontinental: Institute for Social Research. He has written more than 20 books, including The Darker Nations and The Poorer Nations. His latest books are On Cuba: Reflections on 70 Years of Revolution and Struggle (with Noam Chomsky), Struggle Makes Us Human: Learning from Movements for Socialism, and (also with Noam Chomsky) The Withdrawal: Iraq, Libya, Afghanistan, and the Fragility of U.S. Power