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IS CONFLICT BETWEEN THE US AND CHINA INEVITABLE?

Angus Duncan examines the question of China-US tension.

Over the past few decades we have seen the resurgence of a great and powerful China. However, at the same time we have seen the rise of criticism towards China, particularly from America who remains concerned over China’s ongoing economic growth and military modernisation and what it means for American international power. A question that has arisen in this context is whether conflict is inevitable between the America (US) and China? The first thing to note when answering a hypothetical question like this is that we can’t attempt to look into a crystal ball and reach a definitive answer. What we can do, however, is examine China and America today and reach a likely conclusion. In doing so there is first an examination of those factors that deter conflict whilst the second section identifies areas that increase the likelihood of conflict. The point is argued that some degree of conflict is highly possible, but not inevitable.

Essentially there are two key aspects that deter the likelihood of conflict occurring. The first is the high degree of economic interdependence between China and America. Although it is difficult to fully assess the impact of economic links in deterring a potential conflict, American and China are so economically tied to the point that neither side can afford to radically alter their economy without drastically affecting the other or adversely impacting their own economy. To understand why this interdependence has arisen we must consider the 2008 Global Financial Crisis (GFC).

As America began to accumulate national debt at a rapidly increasing rate during the GFC it began selling its debt overseas in order to keep the American economy running and prevent it defaulting on its debt repayments. China started to buy American debt in the form of Treasury bonds. The buying of bonds has continued and China is now the single largest foreign holder of American debt, holding an estimated $US 1,154.1 billion. The reason for this accumulation of bonds by China has been to keep the value of its currency, the Yuan, low. A low valued Yuan means that Chinese goods are cheaper to buy and export which makes them more competitive and easier to sell on the international market. The easier Chinese goods are to sell the more demand there is for them, the more demand the greater the level of economic productivity in the Chinese market. The more productivity the more money there is with which to buy American bonds. The more America bonds China accumulates the lower the value of the Yuan.  If one of these factors is lost, the feedback loop fails.

Although China appears to be the main beneficiary of the economic relationship, much to the annoyance of America’s manufacturing industry, there are three things that must be considered. Firstly, America is the largest consumer of Chinese exports. This trade link has been beneficial for American consumers and companies who enjoy cheap products and increased profitability. Secondly, 27% of China’s exports are actually generated by American owned corporations, which pass on their savings to consumers at home. Finally, America cannot afford to stop selling China its bonds in order to sustain the value of the American dollar and to prevent an increase in its borrowing costs. Thus, America does receive some economic benefit from its relationship with China. However, recently this economic relationship has become problematic with the American Senate passing the Currency Manipulation Legislation in order to sanction states, China in particular, who manipulate their currency. Since this legislation has not yet come into full force and sanctions have not yet been passed it is hard to establish what effect it will have on the current degree of interconnectedness between China and America, but some type of impact is likely. For now it remains a positive factor that deters conflict as neither want to hurt their economic benefits

The second factor that decreases the inevitability of war is China’s satisfaction with the status quo. The status quo describes ‘rules of the game’ which determine institutions, rules and acceptable forms of behaviour in the international system. The US has been the main creator of the current status quo and thus the status quo remains something that one would assume that America would want to uphold and protect status quo. So is China a threat to the status quo then? The point when writing on whether China is satisfied, is that China is just beginning to become a constructive participant in the global community. It was only during the GFC that China displayed an unprecedented confidence in engaging with international institutions and making proposals to reform financial regimes.  China now believes that the GFC signalled the beginning of a new global era, one in which China should play a more active role. From what we have seen so far China is willing to engage within the status quo in a positive manner.

It should also be recognised that China does not simply face an American or Western led order, but an order that is the product of centuries of struggle and innovation, a system that is highly developed, expansive, integrated and institutionalized in the societies and economies of both advanced capitalist states and developing states. It is fair to say that any attempt made by China to alter the status quo would receive serious international backlash and only give rise to further suspicion towards China. With this understanding China is well aware that the best means through which to continue its peaceful rise is not through provocation and secrecy, but instead through greater involvement in the international system, clearly evident from its involvement in the United Nations, peacekeeping operations, APEC, ASEAN, BRICs Forum or G20. China has too much to lose should it work against the status quo. Therefore, China’s satisfaction serves to weaken tensions between it and America and thus reduces the likelihood of conflict as America will being to view China as less of a threat to the international institutions it has established.

Despite these two factors decreasing the likely potential of a direct head to head conflict, what more likely remains the case is that American will become involved in some Asian regional dispute in which China has been provoked into using force.  The most perilous of these situations is the ongoing Taiwan dispute and China’s territorial claims in the South China Sea.

To quote two academics writing on the topic of Taiwan, “Perhaps nowhere else on the globe is the situation so seemingly intractable and the prospect of a major war involving the America so real.” The Taiwan dispute developed after the defeated Nationalists Government fled mainland China to Taiwan in 1949 to escape persecution from the victorious Chinese Communists at the end of the Chinese Civil War.  The Taiwan issue is now so well entrenched amongst China and Taiwan, and America to a lesser extent, that neither side can afford to back away from their position on the issue, even if it results in war. On one hand, China believes that Taiwan is part of mainland China and refuses to accept that Taiwan is a sovereign independent nation as a matter of precedence and nationalistic sentiment. Taiwan disagrees, arguing that it is an independent nation, but has struggled to achieve this status as China continues to be ready and willing to use force to bring it back under mainland control should Taiwan declare its independence. America is involved as a de-facto ally of Taiwan with relations being governed by the Taiwan Relations Act 1979. However, America’s role is predominantly as a mediator that tries to uphold the current status quo which is to prevent Taiwan declaring its independence, whilst at the same time trying to stop China using force against Taiwan. To do this America has adopted a policy of ‘strategic ambiguity’, making it clear that should Taiwan come under any unprovoked attack from China, America is willing to use force. What remains unclear, however, it whether America would protect Taiwan should it come under attack after declaring its independence from China.

Why is Taiwan an area of high contention? The strong diplomatic stance taken by each party has reduced the room for diplomatic manoeuvring to such an extent that a small diplomatic miscalculation in a statement or military move could erupt into a war. What may begin as a regional conflict could soon develop into a conflict encompassing China and America who would be unwilling to back down. Although not necessarily a conflict as predicted by some, it is a situation that all sides continue to prepare for and could result in a global power shift. What needs to be stressed is that the character of China’s revisionism on the Taiwan issue does not appear to be reflective of its broader diplomacy elsewhere in the region or the globe. For now Taiwan remains a highly dangerous and volatile situation where conflict is potentially likely.

The second regional hot spot where conflict is likely to occur is the South China Sea. The importance of the sea is its strategic importance, as it boasts some of the busiest shipping lanes in the world, and is rich in oil and natural resources. The focal point of the South China Sea is ongoing sovereignty disputes between various South East Asian nations of which China is one. Flare-ups between China, Philippines, Taiwan and Vietnam have become more frequent particularly after American Secretary of State Hillary Clinton declared that America has a ‘national interest’ in the Sea. This interest arises because 90% of oil destined for America’s allies in the northeast pass through the area, secondly trade between America and Asia is of key importance and finally to uphold free navigation through the waters. This new stance from America marks not only the ‘internationalisation’ of the South China Sea dispute, but also the opening of another front in Sino-America rivalry.

The concerning feature of the South China Sea dispute for America and other Asian countries is that China feels it can claim undisputable sovereignty over almost the entire body of water which remains highly contested amongst all nations involved. If such a precedent were to be allowed favouring China then an extremely disturbing and worrying trend may begin to emerge. The reason why China is unwilling to back down is because the area remains rich in oil and other natural resources, commodities that the Chinese mainland is beginning to lack and the prices of which are beginning to increase. For this reason alone the sea remains a ‘core national interest’, something which China is prepared to use force to retain and, as previously noted, has increased its military budget in order to do so. Although not an issue as old or as deeply entrenched as the Taiwan dispute, the South China Sea presents itself as a potential conflict through which America and China can measure their potential dominance or lack of it. Again, the South China Sea does not reflect China’s broader international foreign policy, but an area instability and future unpredictability.

Although there are a number of factors, including the possession of nuclear weapons, population size, military spending, political differences and the newly emerging trend of computer warfare which could all contribute to or prevent a war, the four factors I have mentioned are what I see as the leading influences that will either result in or deter conflict being an inevitability between American and China. Despite the question being extremely difficult to answer definability, a prediction of a full-scale Cold War-style rivalry or war between America and China is highly unlikely.  Unprecedented economic and strategic interdependence between the two mitigate against such a trend. However, ongoing East Asian regional disputes present themselves as flash points where conflict is highly likely to involve both China and America. Therefore, some degree of conflict between these two nations is a very real possibility. However, to say that conflict is inevitable is to ignore the ever changing conditions of international politics and how these changes can affect future predictions.

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