Ask Adam Anything on China

Episode Summary

Executive Summary: This special listener-Q&A episode of Ones and Twos focuses on China’s economic and geopolitical trajectory. Adam Tooze argues that fears of China weaponizing U.S. debt are overstated, that China’s leverage lies more in trade, technology, and supply chains, and that Taiwan requires deterrence rather than broad economic provocation. He also explains why China is not simply “fascist,” how its managed currency works, and why he is more cautious—but not fully bearish—on China’s long-run growth prospects.

Main Topics: China’s possible economic leverage against the U.S. (Priority: 5/5): The hosts discuss whether China could economically retaliate against the United States by selling Treasuries or restricting key exports. Tooze argues Treasury sell-offs are unlikely to be effective or strategically attractive, while targeted controls on materials, components, and firms are more plausible. Taiwan, deterrence, and U.S.-China escalation (Priority: 5/5): A listener asks how U.S. business interests can help keep Taiwan safe. Tooze says commercial ties alone will not deter Beijing; what matters is credible deterrence without provocation, and current U.S. tech controls may heighten tensions rather than reduce them. Is China becoming fascist? (Priority: 4/5): The episode examines whether modern China resembles fascist regimes more than communist ones. Tooze acknowledges nationalist, authoritarian, and militarized features, but rejects the label as analytically imprecise and argues China must be understood on its own historical and political terms. How China’s managed exchange rate works (Priority: 5/5): Tooze explains China’s currency regime, including long-running exchange management, reserve accumulation, and the effects of capital controls. He contrasts the earlier era of likely appreciation with the current likelihood of depreciation if liberalized now. China’s growth slowdown and middle-income trap debate (Priority: 5/5): The conversation weighs whether China’s rise is plateauing. Tooze agrees growth has become more difficult and policy matters enormously, but he is not yet convinced China is locked into a Japan- or Brazil-style stagnation path. Technology competition and U.S. controls (Priority: 4/5): The final China question addresses U.S. restrictions on advanced technology. Tooze argues these controls may push China to invest harder in domestic alternatives and algorithmic workarounds, making the tech race more uncertain rather than decisively favoring the U.S.

Key Arguments: China is more likely to respond to pressure through targeted trade and technology restrictions than by dumping U.S. Treasuries, which would also hurt China and may not create the intended financial shock. Apple is a major potential pressure point because China depends on Apple as both a market and a production base; limiting Apple activity would be a serious warning shot. Business interdependence alone will not keep Taiwan safe; only credible deterrence, preferably without unnecessary provocation, can lower the risk of coercion or blockade. Calling China “fascist” captures some surface features like nationalism and authoritarianism, but it obscures the regime’s own historical logic and is better seen as rhetorical condemnation than rigorous analysis. China’s currency is not freely floating; it has long been managed through exchange controls, reserve accumulation, and interventions that supported export-led growth. If the renminbi were liberalized now, the likely outcome would be depreciation, not appreciation, because of weaker growth prospects and interest-rate differentials with the U.S. China may be slowing and facing structural problems from excessive investment and weak consumption, but it is still a middle-income economy with room to grow and a policy state capable of shifting course. U.S. tech restrictions could accelerate Chinese self-reliance, especially in semiconductors and AI-related capabilities, because they force China to solve problems through domestic investment and workarounds. Tooze is more pessimistic than before about China’s immediate trajectory, but not convinced by a definitive “middle-income trap” narrative. Comparisons of defense spending suggest China is not obviously more militarized than the United States, despite the visible symbolism of Chinese military power.

Data Points: BetterHelp discount: 10% off the first month - Sponsored ad offer for listeners at betterhelp.com/ones.twos Foreign Policy subscription discount: 50% off first month or first year - Promo for Ones and Twos listeners at foreignpolicy.com/subscribe using code TWOS Podcast anniversary: Nearly 2 years - The episode is framed as a special listener-question edition marking the podcast’s second anniversary Foreign holdings of U.S. Treasuries: At the lowest point in more than a decade - Tooze notes Chinese Treasury holdings have fallen but says this reflects portfolio reshuffling, not a sell-off Chinese defense spending as share of GDP: 1.7% - Tooze cites Stockholm International Peace Research Institute-style comparisons to argue China is not obviously more militarized than the U.S. U.S. defense spending as share of GDP: Just under 3% - Used to compare U.S. and Chinese militarization levels China’s population referenced: 1.4 billion people - Tooze says China’s investment-led model transformed the lives of 1.4 billion people China’s investment share of GDP: 40% to 60% at its most extreme - Cited as evidence of an investment-heavy growth model with diminishing returns Chinese growth in a bad year: Around 5% per annum - Tooze says even a weak year for China could still outgrow the U.S. in raw terms U.S. policy framing: “Small yard, high fences” - The term used to describe U.S. restrictions on advanced technology exports to China Global users on BetterHelp: Over 5 million people globally - Sponsored ad claim about the therapy platform Therapist network size: 30,000 therapists - Sponsored ad claim about BetterHelp’s platform Live session rating: 4.9 out of 5 - Sponsored ad claim based on 1.7 million client reviews

Pivotal Quotes: "“The big prize here… is Apple.”" — Adam Tooze: On the most likely corporate target if China sought to retaliate economically against the United States "“A strategy of deterrence without provocation.”" — Adam Tooze: On how the U.S. should approach Taiwan security and broader China policy "“It’s less analytically illuminating… than it is perhaps useful as a form of opprobrious talk.”" — Adam Tooze: On the claim that China is better described as fascist than communist

Implications: The episode suggests China policy is entering a riskier phase where trade, tech, and security are intertwined. Listeners should expect more uncertainty around Taiwan, supply chains, and semiconductor controls, with retaliation and unintended escalation remaining real possibilities.