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How America Can Avoid a War with China

How America Can Avoid a War with China

A blueprint for American policymakers to improve the U.S.-Chinese relationship.

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