China-US Ties Appear at a Turning Point

FILE PHOTO: Chinese and US flags flutter in Shanghai, China July 30, 2019. REUTERS/Aly Song
FILE PHOTO: Chinese and US flags flutter in Shanghai, China July 30, 2019. REUTERS/Aly Song
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China-US Ties Appear at a Turning Point

FILE PHOTO: Chinese and US flags flutter in Shanghai, China July 30, 2019. REUTERS/Aly Song
FILE PHOTO: Chinese and US flags flutter in Shanghai, China July 30, 2019. REUTERS/Aly Song

Four decades after the US established diplomatic ties with communist China, the relationship between the two is at a turning point.

Tensions have reached new heights on what has always been a rocky road, as the ambitions of a rising superpower increasingly clash with those of the established one, The Associated Press reported.

China ordered the closing of the US consulate in the southwestern city of Chengdu on Friday, in rapid retaliation for the closing of its consulate in Houston.

Two weeks ago, China's Foreign Minister Wang Yi asked aloud if relations could stay on track. On Thursday, US Secretary of State Mike Pompeo delivered an answer: The time has come to change course.

“The old paradigm of blind engagement with China simply won’t get it done," he said in a speech at the Richard Nixon Presidential Library in southern California. “We must not continue it. We must not return to it.”

It was Nixon's visit to China in 1972, the first by an American president since the communists took power in 1949, that upended a Cold War paradigm and paved the way for the normalization of relations in 1979.

The United States had been a close ally of then-Chinese leader Chiang Kai-shek in World War II and for three decades recognized Taiwan as the government of China after Chiang fled there when he lost the battle for control of the mainland to the communists in 1949.

Relations between Washington and the communist government in Beijing began to thaw in the 1970s, as China's ties with the Soviet Union deteriorated and leader Mao Zedong sought a counterweight to its more powerful neighbor.

A new leader, Deng Xiaoping, visited the US in 1979 after the establishment of diplomatic ties, smiling for photographers as he tried on cowboy hat outside Houston. The consulate that is being shut opened later the same year. It was China's first in the United States.

Setting aside political differences, a democratic US and communist China promoted economic, social and cultural links that were briefly interrupted a decade later by China's military crackdown on the 1989 pro-democracy demonstrations in Beijing’s Tiananmen Square.

Relations grew exponentially in the following years, with heavy investment by US businesses in China and an accompanying Chinese trade surplus that has reached $350 billion annually.

As China has grown into the world's second-largest economy, behind only the US, it is increasingly viewed as a competitor, both economically and militarily, and a potential challenger to the Western-led democratic model that has dominated the post-World War II era.

Election-year politics in the US are fanning the flames, as President Donald Trump appears to be using friction with China to drum up support among his base. Yet, whether or not he is reelected in November, underlying tensions will remain.

“We are looking at a structural change in the relationship, which will continue even if Trump does not get a second term,” AP quoted Steve Tsang, director of the China Institute at London’s School of Oriental and African Studies, as saying.

American and Chinese battleships are constantly jockeying for position in the South China Sea, a vital shipping lane in the Asia-Pacific region.

The US is leaning on its allies to exclude Chinese telecom leader Huawei from their mobile networks, raising the specter of cybersecurity. On human rights, the US is imposing sanctions over Chinese policies in Hong Kong, Tibet and Xinjiang.

Tougher US views on China have now been “baked into the system,” Tsang said.

Pompeo's speech was only the latest in a series of sharp criticisms aimed at China by Cabinet-level officials, including Defense Secretary Mark Esper and Attorney General Bill Barr.

Although Trump earlier played up what he called a warm relationship with Chinese leader Xi Jinping, communication between the sides has fallen to new lows.

“The kind of engagement we have been pursuing has not brought the kind of change in China that President Nixon hoped to induce,” Pompeo said. “The truth is that our policies – and those of other free nations – resurrected China’s failing economy, only to see Beijing bite the international hands that fed it.”

Chu Yin, an international relations professor at University of International Relations in Beijing, said Americans who advocated engagement are disappointed that China's economic growth and the emergence of a middle class has enhanced the legitimacy of the ruling Communist Party rather than sparked democratic change.

Trump’s domestic political strategy has added some explosive elements to the structural problems in the relationship, he said.

“China will not take Pompeo’s speech seriously. It is the last cry of a lame duck,” Chu said. “China wants to have dialogue with a US politician who is more commensurate with the status of a major country.”

He declined to forecast the future, saying: "Let us be more patient at this turbulent time.”



To Get Their Own Cash, People in Gaza Must Pay Middlemen a 40% Cut

A destroyed branch of the Bank of Palestine in the Tal al-Hawa neighborhood of Gaza City is seen Wednesday, July 9, 2025. (AP)
A destroyed branch of the Bank of Palestine in the Tal al-Hawa neighborhood of Gaza City is seen Wednesday, July 9, 2025. (AP)
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To Get Their Own Cash, People in Gaza Must Pay Middlemen a 40% Cut

A destroyed branch of the Bank of Palestine in the Tal al-Hawa neighborhood of Gaza City is seen Wednesday, July 9, 2025. (AP)
A destroyed branch of the Bank of Palestine in the Tal al-Hawa neighborhood of Gaza City is seen Wednesday, July 9, 2025. (AP)

Cash is the lifeblood of the Gaza Strip’s shattered economy, and like all other necessities in this war-torn territory — food, fuel, medicine — it is in extremely short supply.

With nearly every bank branch and ATM inoperable, people have become reliant on an unrestrained network of powerful cash brokers to get money for daily expenses and commissions on those transactions have soared to about 40%.

"The people are crying blood because of this," said Ayman al-Dahdouh, a school director living in Gaza City. "It’s suffocating us, starving us."

At a time of surging inflation, high unemployment and dwindling savings, the scarcity of cash has magnified the financial squeeze on families — some of whom have begun to sell their possessions to buy essential goods.

The cash that is available has even lost some of its luster. Palestinians use the Israeli currency, the shekel, for most transactions. Yet with Israel no longer resupplying the territory with newly printed bank notes, merchants are increasingly reluctant to accept frayed bills.

Gaza’s punishing cash crunch has several root causes, experts say.

To curtail Hamas’ ability to purchase weapons and pay its fighters, Israel stopped allowing cash to enter Gaza at the start of the war. Around the same time, many wealthy families in Gaza withdrew their money from banks and then fled the territory. And rising fears about Gaza’s financial system prompted foreign businesses selling goods into the territory to demand cash payments.

As Gaza’s money supply dwindled and civilians’ desperation mounted, cash brokers' commissions — around 5% at the start of the war — skyrocketed.

Someone needing cash transfers money electronically to a broker and moments later is handed a fraction of that amount in bills. Many brokers openly advertise their services, while others are more secretive. Some grocers and retailers have also begun exchanging cash for their customers.

"If I need $60, I need to transfer $100," said Mohammed Basheer al-Farra, who lives in southern Gaza after being displaced from Khan Younis. "This is the only way we can buy essentials, like flour and sugar. We lose nearly half of our money just to be able to spend it."

In 2024, inflation in Gaza surged by 230%, according to the World Bank. It dropped slightly during the ceasefire that began in January, only to shoot up again after Israel backed out of the truce in March.

Cash touches every aspect of life in Gaza

About 80% of people in Gaza were unemployed at the end of 2024, according to the World Bank, and the figure is likely higher now. Those with jobs are mostly paid by direct deposits into their bank accounts.

But "when you want to buy vegetables, food, water, medication -- if you want to take transportation, or you need a blanket, or anything — you must use cash," al-Dahdouh said.

Shahid Ajjour’s family has been living off of savings for two years after the pharmacy and another business they owned were ruined by the war.

"We had to sell everything just to get cash," said Ajjour, who sold her gold to buy flour and canned beans. The family of eight spends the equivalent of $12 every two days on flour; before the war, that cost less than $4.

Sugar is very expensive, costing the equivalent of $80-$100 per kilogram (2.2 pounds), multiple people said; before the war, that cost less than $2.

Gasoline is about $25 a liter, or roughly $95 a gallon, when paying the lower, cash price.

Bills are worn and unusable

The bills in Gaza are tattered after 21 months of war.

Money is so fragile, it feels as if it is going to melt in your hands, said Mohammed al-Awini, who lives in a tent camp in southern Gaza.

Small business owners said they were under pressure to ask customers for undamaged cash because their suppliers demand pristine bills from them.

Thaeir Suhwayl, a flour merchant in Deir al-Balah, said his suppliers recently demanded he pay them only with brand new 200-shekel ($60) bank notes, which he said are rare. Most civilians pay him with 20-shekel ($6) notes that are often in poor condition.

On a recent visit to the market, Ajjour transferred the shekel equivalent of around $100 to a cash broker and received around $50 in return. But when she tried to buy some household supplies from a merchant, she was turned away because the bills weren’t in good condition.

"So the worth of your $50 is zero in the end," she said.

This problem has given rise to a new business in Gaza: money repair. It costs between 3 and 10 shekels ($1-$3) to mend old bank notes. But even cash repaired with tape or other means is sometimes rejected.

People are at the mercy of cash brokers

After most of the banks closed in the early days of the war, those with large reserves of cash suddenly had immense power.

"People are at their mercy," said Mahmoud Aqel, who has been displaced from his home in southern Gaza. "No one can stop them."

The war makes it impossible to regulate market prices and exchange rates, said Dalia Alazzeh, an expert in finance and accounting at the University of the West of Scotland. "Nobody can physically monitor what’s happening," Alazzeh said.

A year ago, the Palestine Monetary Authority, the equivalent of a central bank for Gaza and the West Bank, sought to ease the crisis by introducing a digital payment system known as Iburaq. It attracted half a million users, or a quarter of the population, according to the World Bank, but was ultimately undermined by merchants insisting on cash.

Israel sought to ramp up financial pressure on Hamas earlier this year by tightening the distribution of humanitarian aid, which it said was routinely siphoned off by militants and then resold.

Experts said it is unclear if the cash brokers’ activities benefit Hamas, as some Israeli analysts claim.

The war has made it more difficult to determine who is behind all sorts of economic activity in the territory, said Omar Shabaan, director of Palthink for Strategic Studies, a Gaza-based think tank.

"It's a dark place now. You don't know who is bringing cigarettes into Gaza," he said, giving just one example. "It's like a mafia."

These same deep-pocketed traders are likely the ones running cash brokerages, and selling basic foodstuffs, he said. "They benefit by imposing these commissions," he said.

Once families run out of cash, they are forced to turn to humanitarian aid.

Al-Farra said that is what prompted him to begin seeking food at an aid distribution center, where it is common for Palestinians to jostle over one other for sacks of flour and boxes of pasta.

"This is the only way I can feed my family," he said.