Shyam Prasad Mainali

The relationship between China and the United States has entered a new phase. Both countries at present have been intensively engaged in trade competition. China has set its aim to become the top world economy by the year 2030 whilst USA is adamant about stopping this effort and keeping its hold at the top. It has the potential to lead to confrontation on bilateral issues of the two superpowers. More broadly, many of the fundamental ideas that once guided the relationship between these countries such as engagement, cooperation and convergence have been increasingly compromised. Institutional structures have also been tested frequently and well developed and worn channels of communications have gradually atrophied.

Both nations are straining to keep up with the diverse and complex set of issues relating to one another that is truly global in its scope and consequences. As a result, many questions are now being raised on the future relationship between these giants. What might be a major source of such tension? What are the possible trajectories for Sino-US relations? This article makes an effort to answer these questions.

Excessive competition
Asia is emerging as a fast-growing continent. Economy-wise, Asia hosts twenty fast economically growing countries, forty per cent of the world's GDP, two-thirds of global growth, as well as 65 per cent of the world's total middle-class population. Asia is also a military force as it contains seven of the ten largest standing militaries on top of six of the eight nuclear weapons countries. Finally, its demographic strength is well known as sixty per cent of the total world population lives in Asia.

The United States has five formal treaty alliances in Asia and currently deploys, including at Indo-Pacific Command in Hawaii, over 350,000 US troops in the region from across all armed services. China's behaviour has assumed even greater significance for many in the United States as the US perceives China to be a threat to US interests. US-China conflicts of interest have been apparent on a range of security issues, including Taiwan's status and security, as possible conflict over Taiwan remains a central feature of US-China security competition.
Whilst China has made great strides in challenging the US military hegemony of the Pacific, they have also used other means of hard power. They have imposed economic and diplomatic sanctions against the Japanese and the South Koreans as a result of their activities in the South China Sea as well as their close military alliance with the USA. Additionally, China has also started pressing some US allies to alter politics to complement their interests.

In the context of the economic decisions of China, a host of structural forces and related policy choices are intensifying bilateral economic competition. As China’s economy rebalances and focuses on innovation-led growth, bilateral economic interactions are becoming more competitive. The degree of complementarity in Chinese and US exports is declining. Thus, the natural complementarity of the two economies is engaged in a larger segment that is more competitive with each other, creating tensions. This intensifying economic competition comes at a time when many US firms believe that the field of competition is increasingly tilted to their disadvantage.

This bilateral competition is structural due to the massive spending on industrial policy, and the highly discriminatory policies used to implement the former. The Chinese policy move has a huge effect on worldwide supply and demand, global financial markets, the structure of global supply chains, and the situation of every incumbent player in the market, implying that the United States needs to care about even minor Chinese economic policy moves.

This economic competition has spilt over into the military realm. China's efforts to acquire technological superiority in civilian sectors of its economy, including artificial intelligence, robotics, quantum computing, and autonomous vehicles, may erode the US’s ability to maintain military superiority. Many of the technologies that give the US military its advantage have their roots in global commercial markets. Thus, the deep integration of the US and Chinese technology production supply chains could be a source of vulnerability for the US defence industrial base.

Policymakers and business leaders in both countries see themselves as locked in a long-term competition to dominate foundational technologies critical to future innovation. Both policymakers believe technologies are essential to innovation, productivity, and national security and, thus, will control the global economy in the twenty-first century. There is a unique and disturbing convergence between the longer-term structural drivers and the short-term cyclical ones at the heart of these relations. This is pushing the Sino-US relationship into a more competitive direction which has engulfed a range of issues and a diverse set of actors.

The conclusion raises several general considerations for policymakers. Firstly, it is not enough for policymakers to call for more competition with China — they need to debate how the United States competes: with what tools, on what issues, and at what costs? Second, there is a need to find a balance between competition and cooperation. However, this will be increasingly difficult to do due to the nature of Sino-US competition and cooperation remains narrow and of limited value. Policymakers are likely to find areas of cooperation, but whether these are strategic in value and can offset diverging interests is an open question.

Integration
Third, it will require a higher degree of integration at home and abroad. The United States needs to coordinate more dialogue with China through inter-governmental channels as well as non-official engagements in business and academia. Internationally, coalitions of like-minded countries will have the greatest chance of shaping China’s policy choices on economics, security, technology, and governance.
Lastly, policymakers should refresh the US thinking about the applicability of past concepts used to manage relations. These include the relative value of strategic dialogue, the effectiveness of reassurance, the payoff from cooperation, and the value of seeking stability in the overall relationship, otherwise, the relationship is likely to end in turmoil. BRI and IPS have been the latest strategies to worsen the cohesiveness and good relationship affecting the global context.

(Mainali is a former secretary of Nepal government.)