Not Since Nixon Has a U.S. President Faced Such a Tough China Challenge
China now has more tools of economic statecraft and military power than ever before.
FOR MOST of the past four decades, American presidents have presumed that a “successful” China would be good for the United States. But this is no longer the case. Today, that long-standing consensus is breaking down in the face of several dynamic changes. These include China’s rapid military buildup, its unprecedentedly quick industrial and economic development, an increasingly assertive Chinese foreign policy, and new competitive pressures on the United States’ economy and fiscal health.
Even the most sanguine voices now view the U.S.-China relationship as competitive, and urge the United States to respond decisively, if carefully, especially to Beijing’s security behavior in Asia. Among Washington foreign-policy elites and a growing number of U.S. companies, China is viewed as a strategic competitor, a military threat in Asia and, ultimately, a possible adversary. Indeed, during the election campaign, Donald Trump pledged to adopt a more confrontational approach toward China, not least by threatening to impose significant tariffs on its exports to the United States. But Trump is by no means alone in this regard. Across the American political spectrum, from right to left, a new and more skeptical consensus about the rise of Chinese power is eroding the aspirational and optimistic view that prevailed for more than forty years.
It would be difficult to understate just how important and dramatic this shift could turn out to be. Eight presidents, from Richard Nixon to Barack Obama, fostered closer relations with China. Washington opened American markets and welcomed Chinese products into the United States. It encouraged U.S. firms to invest in China, sharing business practices and U.S. technologies. Bill Clinton and George W. Bush’s administrations supported China’s admission into the World Trade Organization (WTO). Over three decades, Washington enabled China’s participation in nearly every major international forum.
In the process, the United States subsumed many of its concerns about China’s Communist-led political system to its long-term interest in trying to assure a more integrated, less isolated, less autarkic China—one that joined and participated in the international system. But that was not all: by helping to enable a stronger Chinese economy, Washington also shelved, at least temporarily, some of its concerns about China’s capacity to translate butter into guns.
But while the long-standing Washington consensus about China is breaking down, it would be too simplistic to argue that the United States is now heading for a more adversarial relationship. The reality is that the Trump administration’s approach to China will be formulated against the backdrop of four swiftly changing strategic and economic conditions in Asia: the growing economic and financial integration of the region, which has shifted the relative balance of power against the United States; China’s newly assertive strategic posture; the increasingly diverse economic and social ties that now characterize American interaction with China and will make coalition building difficult, whether for more cooperation or more conflict; and the combination of eroding U.S. military advantage and protectionist trade pressures.
A Trump administration has the opportunity to adapt to these conditions. If it does, it can define an agenda with China that sets American policy onto a more strategically and politically sustainable course.
IT IS already clear that Asia is fast becoming a more integrated region—more “Asia” than “Asia-Pacific.” This means that the U.S. role will, in relative terms, become diminished over time.
This trend is structural, and thus not easily reversible. It reflects the rapid rise of Asian economies, the growth of intra-Asian trade, the restoration of old linkages between continental and maritime Asia, and the emergence of Asian market participants, companies and government financing arms as capital exporters, including to one another, not just consumers of Western capital. Taken together, this first trend will mean a smaller role for the United States in relative terms, even though U.S. trade and direct investment in Asia are rising in absolute terms.
This is a notable change, one that will make it harder for the new administration to rely on the same playbook the United States has deployed since World War II. Throughout the postwar period, but especially since the 1960s, the United States has been the principal provider of both security and economic related public goods and other benefits in Asia.
In the security realm, alliances and partnerships, solidified by the U.S.-Japan security treaty of 1960, a forward-deployed military presence and willingness to assert American power with carrier battle groups (and, when necessary, military action) have tamped down major-power war. There have been localized conflicts, of course, from Indochina to the South China Sea. But this unique U.S. role has mostly kept the peace.
In the economic realm, the United States has beaten back protectionist pressure, kept its markets open to Asian exports, led the region and the world toward liberalization of trade and investment rules, and enabled Asia’s export-led economies to power their way to prosperity.
The past two administrations, Obama and Bush, have worked to modernize America’s Asian alliances and security partnerships. But the changing U.S. economic role, especially when combined with the death of the Trans-Pacific Partnership (TPP) and other tools of economic statecraft, such as American leadership of big regional trade deals and ambitious bilateral investment treaties, will reinforce the tension in U.S. policy between security and economics.
The American role as Asia’s security provider is being reinforced even as the region’s economy becomes increasingly pan-Asian. So this will deprive the Trump administration of tools that its predecessors mostly just took for granted. Asian governments will, in many ways, look to one another for trade, investment and, above all, a hedge against lingering market volatility from the 2008 financial crisis.
In short, the Trump administration will be trying to make the U.S. security posture in Asia more sustainable at precisely the moment when America’s economic profile in the region is beginning to recede.
A SECOND trend compounds this challenge: Beijing increasingly seeks to take advantage of these underlying changes in Asia. In many ways, China has begun to successfully leverage these trends to bolster its power, profile and interests.
For example, Beijing’s more assertive posture in the South and East China Seas, together with a raft of new economic initiatives, are challenging Washington’s footprint in Asia. The latter include the first true Chinese effort to build new institutions and set technical and legal standards. One illustration of this is the new multilateral Asian Infrastructure Investment Bank (AIIB), proposed by Beijing in 2013 and launched with fifty-seven founding members, including some of Washington’s closest allies. Another is China’s bilateral multitrillion-dollar “Belt and Road” infrastructure initiative, which aims to finance and build roads, ports, rails and power plants across Asia and beyond.
Beijing did not invent such pan-Asian initiatives. Nor did it begin to advocate them only when its self-assured president, Xi Jinping, rose to power in 2012. In fact, pan-Asianism has a decades-long pedigree, especially in Japan and Southeast Asia and also among major development banks. Nor does the construction of infrastructure by China in itself necessarily or automatically challenge U.S. interests.
But Beijing’s activism, especially against the backdrop of growing pan-Asian integration, will, in time, reinforce perceptions of U.S. retreat and Chinese advance. Thus it will challenge the Trump administration to formulate a strategically coherent and realistic response—one that gets more American skin into the game.
A THIRD trend that will affect any new administration approach is the emergence of more stakeholders in the U.S.-China relationship. This will vastly complicate the politics of building policy coalitions. Elite consensus around America’s China policy has eroded, yet it will be no easy thing to build a new one, whether for more confrontation or even more cooperation with Beijing.
That is because the number of Americans involved in the relationship with China has become more diverse and multifaceted than ever. In the 1970s, U.S. ties with Beijing were driven, in large part, by a desire to triangulate and neutralize the Soviet threat while also extricating the United States from Vietnam. Thus the core constituency for the relationship comprised strategic elites and touched geopolitical interests. From the 1980s, and especially since China’s 2001 entry into the WTO, U.S. policy has depended not just on foreign-policy elites but also Wall Street and big U.S. corporations, which have plowed some $65.8 billion in foreign direct investment stock into China while providing ballast for the relationship during periods of strategic tension. Today, however, as the economic relationship grows more diverse and decentralized, American governors and mayors, small- and medium-sized firms, farmers and ranchers, and technology developers and entrepreneurs have deep and growing stakes in the U.S.-China relationship.
The more diverse the stakeholders, the harder it will be for any U.S. administration to assemble a tightly knit political coalition around this or that overarching strategy. And in fact, this challenge will be compounded by economic change in China. As Beijing moves to deploy an even larger share of its $3 trillion in foreign-exchange reserves (and billions more on corporate balance sheets) into direct investments overseas, American states, cities and businesses have begun to clamor for a share. Vice President–elect Mike Pence’s Indiana offers just one example: the state has both lost jobs to and gained jobs from China. Some factories have closed and moved operations to China, yet the state has also attracted job-creating green field investment, such as Nanshan Group’s $160 million aluminum extrusion operation in West Lafayette, which employs hundreds. China is one of Indiana’s top overseas markets, with $2.1 billion in exports in 2015.