Sino-American relations seem to be at a crossroads, though exactly where the relationship is headed is anyone’s guess. President Trump’s scattershot approach to public diplomacy and policymaking has thus far sparked more questions than answers. Is he acting irresponsibly and provoking unnecessary conflicts, or is he shrewdly testing Beijing’s resolve before he challenges it on trade and security matters? Will he successfully maintain America’s leading regional role, or will his nationalism encourage the other Asia-Pacific nations to make their own deals with China? Will these nations be gradually drawn into a China-led regional order?
There is no denying the sheer scale of U.S.-China relations. As former secretary of state John Kerry stated in 2014, “The U.S.-China relationship is the most consequential in the world today, period, and it will do much to determine the shape of the 21st century.” Yet “consequential” does not mean “amicable” or “mutually beneficial.” While advocates for greater bilateral engagement can cite many reasons for optimism, especially the formidable economic ties between the two nations, others make a plausible case that the importance of these ties is overstated.
The root causes of bilateral friction outnumber the sources of cooperation, though a U.S.-China military conflict is by no means inevitable. This essay suggests that the new administration can maintain a balance in the Western Pacific if it actively engages China in a few key areas of mutual interest.
Sources of Engagement
First, the positives. The two nations share an interest in a stable, peaceful Pacific rim—especially a peaceful, nonnuclearized Korean Peninsula. Washington, DC policymakers know that any effort to limit North Korea’s nuclear ambitions will have to involve China, and Beijing has a clear interest in limiting the Pyongyang regime’s provocative gambits. Moreover, a lasting reduction in Korean tensions would create a peace dividend that would allow China to further develop its northeastern provinces.
America and China’s vast economic ties give each side a stake in the stability and growth of the other. “Chimerica”—Niall Ferguson and Moritz Schularick’s term from a decade ago—is still a useful heuristic. In 2015, the two nations traded $660 billion in goods and services, and China overtook Canada as America’s top trading partner. Beijing’s purchases of U.S. Treasury securities have not only stimulated Chinese exports, but they have also contributed to low U.S. interest rates. (As of November, China held $1 trillion in U.S. debt.)
China has, for many years, sought the resources of developing nations, and it now seeks to invest more into stable, developed economies. Its overproduction in some sectors, especially steel, makes this transition even more important. Chinese investment in the U.S. real estate market passed the $300 billion threshold between 2010 and 2015. Chinese business entities invested a record $45 billion into the United States in 2016—triple the 2015 figure, and up from almost nothing a decade ago. American businesses put $75 billion in foreign direct investment into China in 2015. If the two nations complete and ratify the U.S.-China Bilateral Investment Treaty, such investment would surely increase.
Beijing and Washington consult on a variety of other issues. They have notched some notable environmental achievements, including President Obama and President Jinping’s joint signing of the Paris Agreement last September. The annual U.S.-China Strategic and Economic Dialogue explores solutions in economic transparency, currency reform, exchanges of energy data and other areas. As for cyber security, the September 2015 agreement was, in one observer’s estimation, “a potentially important first step” toward addressing cyber espionage. The two sides still spy on each other, and there is much disagreement on internet governance and information flows, but Chinese hacking may have decreased since the agreement.
There has even been some low-level naval cooperation. China has participated in the U.S.-sponsored, twenty-six-nation Rim of the Pacific multinational maritime exercise since 2014. Although the invitation to China has not been without controversy, the exercise does promote regional cooperation in noncombat areas such as search and rescue, disaster relief and counterpiracy.
Counterterrorism is another area of some common interest, though not one of much direct cooperation. Since both nations seek a stable, secure international order, they oppose transnational threats to that order. Washington and Beijing exchanged some intelligence in the wake of the September 11 attacks, and in more recent years they have commenced an annual counterterrorism dialogue. China faces Islamist and separatist threats in its western provinces and in neighboring states, as evidenced by the August 2016 suicide attack on the Chinese embassy in Kyrgyzstan. Moreover, China’s expanded relations with Pakistan and Afghanistan increase its security interest in those strife-torn nations. The prospect of Xinjiang (Uighur) militants fleeing across the border gives added impetus to this interest. China’s counterterrorist goals will only increase with the expansion of the “One Belt, One Road” initiative, which is already tying China more closely to other Eurasian nations.
Finally, Sino-American relations are also strengthened by “soft ties” in the form of educational and cultural exchanges, tourism and family connections. The more than three hundred thousand Chinese nationals studying in America add $10 billion to the U.S. economy annually, and the graduates who stay contribute in countless ways. America is also pulling in more than 10 percent of the more than $200 billion Chinese tourist market. A few million Chinese tourists visit the United States every year, and a few million Americans visit China. There is a flight between the two countries every seventeen minutes. Family connections are also considerable. There are now more than two million Chinese-born immigrants in America, making them the largest group of newly arrived immigrants and the third-largest overall.
Sources of Conflict
These connections and areas of cooperation are heartening, but they are generally overshadowed by the many sources of Sino-American disagreement. For starters, there are substantial regional security differences over the Korean Peninsula, Taiwan, the East China Sea and the South China Sea. America’s five security treaties in the western Pacific commit Washington to defend Japan, South Korea, the Philippines, Australia, New Zealand and Thailand. Since these treaties all date from the early Cold War era, there are questions about their raison d’être today. (NATO is under similar scrutiny.) There is no U.S.-Taiwan treaty, but Washington maintains an informal partnership with Taipei via the terms of the 1979 Taiwan Relations Act. China still upholds its 1961 treaty and quasi-alliance with North Korea, though this does not guarantee Chinese support if Pyongyang starts a conflict.
The broad regional differences in Asia are worth noting. Northeast Asia (Japan, Taiwan, the Koreas and eastern China) is relatively prosperous and is characterized by a comparatively high degree of economic interdependence, though the region is also heavily militarized and its interstate relationships are tense. Southeast Asia is relatively less developed on average, though it has a low level of militarization and no unresolved interstate conflicts. The ten members of the Association of Southeast Asian Nations run a wide gamut, from the wealthy microstates of Singapore and Brunei to the struggling economies of Cambodia and Myanmar.
America has more direct interests in the northeast/East China Sea region, where the United States and China are on opposite sides in disputes over the Taiwan Strait, the Korean Peninsula and the Senkaku Islands. North Korea’s nuclear program is perhaps the most acute flashpoint between Washington and Beijing. China and the United States are signatories to the Non-Proliferation Treaty, and neither wants North Korea to possess nuclear weapons. But Beijing only lightly admonishes Pyongyang because it fears a regime collapse that would threaten regional stability and send thousands of desperate North Koreans into China. Beijing has backed UN sanctions against Pyongyang three times under Xi Jinping, but Chinese merchants still send plenty of goods into North Korea.
China’s claims of sovereignty over the Paracel Islands, the Spratly Islands, Scarborough Shoal, the Senkaku Islands and a portion of the East China Sea seafloor are another source of disagreement. These assertions bring it into conflict with the region’s other claimants: Japan, the Philippines, Vietnam, Taiwan, Malaysia and Brunei. Beijing became more assertive in 2009, due in part to a recession-weakened America, and it has gained attention for island building in the Spratlys and for recently placing weapons at its new airbase there. Chinese leaders insist that the weapons are defensive, but their actions raise the question of whether China will be a “responsible power” in the years to come. Beijing’s archipelagic disagreements with Southeast Asian nations are offset somewhat by its expanding business and infrastructure projects in those nations.
Much is at stake in the South China Sea, including military preeminence in contested waters, hegemonic influence over the world’s busiest shipping lanes, the rights to seabed fossil fuels and fishing grounds, and national pride. Beijing bases its claims on perceived historical dominion over these seas, and it expresses a strong interest in overcoming past humiliation and becoming a major maritime power. China’s more nationalistic opinion shapers maintain that the country’s actions have been consistent with those of rising powers in the past, e.g., America’s extension of hegemonic influence in the Caribbean a century ago.
The territorial and resource claims do not directly involve the United States, but from Washington’s perspective, China has been flouting international law and the principle of freedom of the seas, especially in the South China Sea. Since 2015, the United States has responded by conducting “freedom of navigation operations” near the contested areas, though the Obama administration’s most vocal critics argued that these operations were “too little, too late” in light of China’s bold maneuvers.
The other regional actors generally support a strong U.S. presence as a counterbalance to China and North Korea. The United States, Japan and South Korea strengthened their security relationship in 2016, as evidenced by Washington’s agreement to deploy a Terminal High-Altitude Area Defense missile defense system in South Korea. Japan–South Korea cooperation has been difficult for complex historical reasons, but China’s inability to rein in Kim Jong-un is contributing to a minor entente. America and Vietnam have gone even further in putting their past animosities behind them. They have enhanced cooperation in recent years, and last year Washington lifted the longstanding ban on arms sales. U.S.-Vietnam trade has also grown apace, topping $50 billion in 2016. Hanoi is wary of getting too close to any power, but the more amicable relationship with Washington is unmistakable.
Many Filipinos would also like to see a stronger American presence in the South China Sea because China’s maritime claims conflict with Manila’s. Yet here, as elsewhere in the region, Beijing has followed a divide et impera tack of combining economic incentives with an uncompromising defense of its territorial claims. Beijing has rejected the Permanent Court of Arbitration’s July 2016 ruling in favor of the Philippines, but Chinese leaders have also wooed Manila with multibillion-dollar pledges of loans and investment. Philippine president Rodrigo Duterte has publicly “tilted” toward China, but so far he has not fundamentally altered the U.S.-Philippine relationship because the two nations are intertwined on so many levels.
As for Sino-American economic relations, these, too, have been a source of conflict. One could argue that China gets much more from the trading relationship than does America—or to put it another way, that the American consumer benefits while the American worker does not. In 2015, China accounted for nearly 22 percent of U.S. imports and 7.7 percent of U.S. exports, reflecting a record $367 billion merchandise trade deficit. Furthermore, as formidable as this relationship is, it is far from vital in some key areas. China is responsible for a very small share of the total foreign direct investment into the United States, while the nearly $75 billion dollars of U.S. Foreign Direct Investment into China last year comprised a tiny fraction of the $5 trillion in total U.S. investments abroad. Only about one-eighth of China’s outward investment goes into the United States.
China’s slowing growth rate is another cause of concern. After a decade of 9–14 percent GDP growth up to 2011 and more than three decades of remarkable growth overall, official figures in the last few years have hovered between 6.5 percent and 7.5 percent. (It reached 6.7 percent in 2016). Some economists believe that the true figure is lower. Beijing has recently been selling its foreign exchange reserves in order to head off a drop in the yuan’s value. Japan is now the largest foreign holder of U.S. Treasuries, not China.
From all of this, one can surmise that the United States is no longer so important to the Chinese economy. China’s firms and investors are behind countless infrastructure, extraction and manufacturing projects in Africa, Asia and Latin America, while the Chinese government has promoted some major regional trade and investment initiatives. Such projects include the Asian Infrastructure Investment Bank, which now boasts more than fifty member nations; the “One Belt, One Road” development initiative, which is linking China with several Eurasian nations; the China-Pakistan Economic Corridor; and multiple massive infrastructure projects.
On the American side, there are now populist demands to address the negative outcomes of globalization and free trade agreements. These critics argue that China has benefited greatly from its permanent normal trade relations status and World Trade Organization membership, while workers in America and Europe have suffered. Back in the late 1990s, supporters of China’s World Trade Organization entry and permanent normal trade relations argued that these developments would benefit both countries. American businesses would enjoy favorable conditions and would gain access to China’s large labor market and growing consumer market, while American consumers would get more affordable goods. Beijing would attract more foreign investment and gain greater access to the huge American consumer market, thus increasing exports and enhancing employment. The Clinton administration also hoped to influence China’s political development by further integrating it into the U.S.-led liberal order. There was little to lose and very much to gain. As President Clinton stated in 2000, the agreement on China’s World Trade Organization accession “creates a ‘win-win’ result for both countries.”
In reality, permanent normal trade relations status and World Trade Organization membership helped China achieve stratospheric levels of growth in the decade after 2000, while America’s manufacturing sector shed five million jobs. This was not all China’s doing, of course; nor was it all a product of trade agreements. But it is difficult to avoid the conclusion that more benefits accrued to China than to America.
Beijing supports free trade up to a point, but its priorities are understandably domestic. Maintaining economic growth, ensuring social stability and overseeing a rising living standard, all while employing, housing, educating and feeding the world’s largest population, is a massive undertaking. These domestic priorities will always take precedent for Beijing. Consequently, China is accused of protectionism and of “dumping” steel and other subsidized commodities onto the world market. Charges of currency manipulation similarly dogged Beijing for years. China devalued its currency to maintain its high export figures, though market forces have induced a readjustment.
Foreign investors and businesses also lament the maze of restrictions on foreign enterprises, as well as Beijing’s lukewarm enforcement of intellectual property agreements and cyber espionage. Beijing has taken some steps to remedy restrictions on foreign businesses, and its goal of making China a legitimate player in technological innovation gives it a stake in stepping up enforcement of intellectual property laws. But these are still problem areas.
The bilateral relationship has also long featured a fundamental disagreement on values and norms. This is most evident in their differing views on human rights. While the United States insists that human rights are a legitimate aspect of the relationship, Beijing’s leaders maintain that Washington’s attention in this area is strategic, not humanitarian. They see it as interference in their domestic affairs and as a politicized effort to isolate and weaken China. They have reluctantly acquiesced to consultation, but they have also shaped the parameters of this consultation to fit their interests. Consequently, there is a lot of talk but few results. The two governments have held regular private human-rights dialogues for more than two decades; the U.S. State Department has produced annual human-rights reports since the 1970s; and China has responded with human-rights “reports” on America. Little comes of this exercise.
Finally, there has been surprisingly little bilateral cooperation in combating terrorism. “The U.S. defines and approaches terrorism from a vantage point of global security, national interest and liberal values,” writes security specialist Jeffrey Payne, while “China largely defines terrorism from the viewpoint of threats to the Chinese homeland and to the government itself.” Moreover, Beijing’s attention is on its western provinces and the neighboring republics, while America’s attention is more on the Middle East. The values question also comes into play here. There have been concerns in Washington that Beijing has used the threat of “extremism” and “separatism” as an excuse to crackdown on its minorities’ social and economic aspirations. Washington’s combined interest in human rights and counterterrorism has put it into a quandary. In one scholar’s words, current U.S. policy is one of “minimal cooperation and maximum criticism.”
While the negatives seem to outnumber the positives in the bilateral relationship, there is nothing inevitable about a Sino-American military conflict or even a major deterioration in relations. The sources of competition will remain, but there is plenty of room for maneuver in trade, finance, regional security, counterterrorism and other areas of mutual interest. If these matters are managed wisely, America and China can avoid a major confrontation.
Joe Renouard is resident professor at the Johns Hopkins University School of Advanced International Studies in Nanjing, China. His most recent book is Human Rights in American Foreign Policy: From the 1960s to the Soviet Collapse.
Image: People greet sailors from the People’s Liberation Army (Navy) in San Diego. DVIDSHUB/Public domain