American Vice President Joe Biden’s visit to China last week provided a glimpse of a critical juncture in Sino-American relations, which, if not properly handled, may unravel the international economic order put in place under U.S. stewardship that has worked well to benefit the world as a whole for the past half a century.
Biden told his Chinese counterpart Xi Jinping, who is expected to succeed President Hu Jintao next year, “Fifty years from now, 100 years from now, historians and scholars will judge us based upon whether or not we’re able to establish a strong, permanent and friendly working relationship.” He also said a close relationship and cooperation between U.S. and China “is the key … to global economic stability.”
In response, Xi emphasized that the two countries should “share even broader common interests and co-shoulder more common responsibilities” and an enhanced relationship “fits not only the interests of the two nations but that of the world.”
From the beginning, the Obama administration chose to reach out to, rather than contain, a rising China, which is projected to surpass the United States in GDP as early as 2027 to become a superpower. As Washington was witnessing the 2008 financial crisis and still bogged down in Iraq and Afghanistan, Secretary of State Hillary Clinton said that China and the U.S. were “in the same boat” and they would “rise and fall together.”
China’s rapid growth depended on its free access to U.S. markets and China needs a healthy U.S. economy to continue its growth. China is the largest foreign holder of U.S .Treasury securities in the amount of $1.16 trillion.
Beyond the Chinese interest to protect the value of its foreign reserves over $3 trillion, most of which are held in U.S. dollars, China has continuing need of economic growth for the political legitimacy of state capitalism. Beijing is very much in the “same boat” with Washington, at least for the next few decades.
Even after U.S. debt rose to $14 trillion, equal to the U.S. GDP and after Standard & Poor’s downgrade of U.S. credit rating to AA+ from AAA, Washington is still in a weakened but viable position to lead the world economy.
Without China’s cooperation, it would be much more difficult. Trade imbalances with China, for which Washington blames the undervalued Chinese currency, are not the sole source of increasing unemployment, budget deficits and economic recession in the U.S.
With Washington’s prodding, Beijing says it will turn to more imports for domestic consumption. If China appreciates the yuan and removes barriers to its market, it would help the U.S. bounce back from further economic deterioration.
The “rise of China and U.S. decline” and its potential impact on the international economic and security systems have been and still are some of the hottest topics of debate among scholars and pundits across the world.
The past 10 years of discussions of the rise of China or the decline of the U.S. has produced roughly two schools of thought. The first school represents the predominant view that even after China becomes the world’s number one economic power, it would not become a dominant power and not even a hegemon in Asia, and the current international order will remain because of the intrinsic interdependence in international relations.
This school, spearheaded by Joseph Nye and other neo-liberalists, points to the historical perspectives of economic transitions ― rise, decline and restoration ― of Asia and the West, and the American experience to prove its earlier doomsday predictions to be wrong in the 1970s after Vietnam and 1980-90s after Japan’s economic rise.
This school argues it will take a long time for China to address its internal needs, including underdeveloped infrastructure, environment, a low per-capita income, now only one-seventh of that of the U.S., widening gaps between the booming east coast and the backward inner China, corruption, demographic change to aging, etc.
The other school of thought on China, with a realistic approach to international relations, lists the examples of the rise and fall of world powers including the Soviet Union, Great Britain, France, and so on. Their theory is simple: if the dominant power’s economy declines, it will reach a point where it cannot support its overextended military, and when that dominant power withdraws, a new power comes in to fill the vacuum. They further argue that when a new dominant power is born, it is likely to change the existing international order.
China has been very sensitive to concerns of potential destabilization in Asia from its rise. To assuage such concerns, China spoke of “a peaceful rise” and later “a peaceful development,” undertaking a soft-power approach. Yet the realists argue China will be more assertive on world issues. They believe China aims at pushing out the U.S. from Asia.
China, culturally and historically, has been very patient in achieving its objectives. If China is seeking a multi-polar system, especially in Asia, as many analysts think it is, the current trend seems to be developing in favor of China. The U.S. would be unlikely to recapture its unchallenged position.
However, there should be little reason to worry that China’s rise will lead to war with, or push out, the U.S. from the region. But, America may decide to leave Asia on its own at some point, and more likely from Korea first.
Tong Kim is a visiting research professor at Korea University and at the University of North Korean Studies. He is also adjunct professor at the School of Advanced International Studies at Johns Hopkins University. He can be reached at email@example.com.
Source: The Korea Times