The reality of US-China competition

In the article The Myth Of US-China Economic Competition two weeks ago in these pages, Professor Linda Lim provided us with a trenchant and level-headed analysis of the economics underlying the Trans-Pacific Partnership (TPP), the advent of the Asian Infrastructure Investment Bank (AIIB), and the designation of the yuan as a reserve currency.

Prof Lim suggested it was a mistake to view these developments as instances of "intensifying political contention between a supposedly declining superpower and a 'rising' one" or in terms of a "US versus China battle for hegemony in the Asia-Pacific". The TPP, AIIB, and yuan as reserve currency all have economic logic of their own that do not necessarily translate to the kind of zero-sum competition between the US and China that has been hyped up by the media and some analysts.

I agree with much of Prof Lim's economic analysis but I feel her article underemphasises the politics behind these economic developments. Like all good social scientists, she anticipates this objection in the final paragraphs of her piece, as when she acknowledges that hegemonic aspirations are not absent and that the US and China do compete for global influence.

Sussing out the politics implied in these economic developments, I argue, reveal an ongoing struggle for power and influence between China and the US, not just in the Asia-Pacific, but across the globe. This struggle, which international relations scholars view as natural, is about rising powers wanting to challenge the reigning hegemon (the US), with the eventual goal of replacing the US as the hegemon.


ST ILLUSTRATION: MANNY FRANCISCO

One influential subscriber to this view was the late Mr Lee Kuan Yew. When asked by two Harvard scholar-practitioners whether China aspired to displace the United States "as the No. 1 power in Asia" or "the world", Mr Lee responded: "Of course. Why not? They have transformed a poor society by an economic miracle to become now the second-largest economy in the world… The Chinese will want to share this century as co-equals with the US... It is China's intention to be the greatest power in the world."

Mr Lee did not arrive at his conclusions via academic study, but they accord with what historians such as Dr Paul Kennedy have written about the rise and fall of great powers, and what political scientists term power transition politics.

The narrative is basically about cyclical change in world politics: Over time, other powers rise to challenge the existing hegemon for the top position, to reap the attendant psychological (status and prestige), political (power and influence) and material (economic) benefits that come with being top dog. Germany's attempt to challenge Britain was beaten back twice, though it occasioned two world wars; around the same time, the US overtook Britain peacefully to become today's hegemon.

We are now on the verge of another power transition.

TRANSITION TREMORS

Although the transition will be decades in the making, we are already experiencing the initial tremors. This explains why the contemporary backdrop of US-China relations is one of strategic distrust, to use the words of a recent Brookings report by authors Kenneth Lieberthal and Wang Jisi.

The US and China will continue to cooperate on issues where they have common interests, such as climate change and the fight against the Islamic State in Iraq and Syria, but they will most certainly compete when their interests conflict.

China's assertiveness in the South China Sea is a result of its improved capabilities to enforce its views, while the Obama administration's dispatch of the USS Lassen to the vicinity of the Subi and Mischief reefs on freedom of navigation (FON) grounds is a display of its disagreement with China on who has sovereignty over those reefs.

Portraying the FON as a "public good" and determining when it may be at risk, that is, making and enforcing the rules of the game, are the prerogatives of the hegemon, and it is this that riles China most: Why should the US continue to make and enforce the rules?

To be sure, China has gained substantially from many of the existing rules and therefore is unlikely to want to overturn things fundamentally, but it certainly wants to have a greater say in shaping the rules and, where possible, adjust them to suit its preferences.

This is where the TPP, AIIB, the yuan, and the One Belt, One Road (OBOR) initiative come in. It is true that President Barack Obama's quip about not wanting to let China make the rules was aimed in part at Congress and the American public, to obtain their support in negotiating and ratifying the TPP. But presidents must also anticipate the consequences of their rhetoric.

As the second-largest economy, China wants and expects to have a role in making those rules. The US, in suggesting that it wants to keep China out, is saying that it should be making all the rules. It implies that the US is not prepared to grant China the "co-equality" it desires this century. This sets the stage for competition. Hence China's push for the Regional Comprehensive Economic Partnership (RCEP), which excludes the US, which gives it the chance to make the rules, as well as the AIIB and OBOR.

We are witnessing the beginnings of an economic-political-strategic competition whose outcome is hard to predict. China's setting up of the AIIB, dreaming up of OBOR, and pushing for RCEP are all attempts at creating alternative institutions and platforms that will enable it to project economic power, influence friends, and corral allies in the coming competition with the US.

Getting Britain to defy the US and join the AIIB as a founding member was a political coup. The fact that the US' other European allies quickly followed Britain's path will not be lost on it. Britain is already hedging its bets on the future sources of its economic well-being.

OBOR, if successful (although that is a big if), will amount to the grandest of grand strategies, where China leverages on its comparative economic advantage (infrastructure and connectivity), history (land and maritime silk routes), and norms (non-intervention) to conjure an economic orbit connecting the underdeveloped western regions of China to Central Asia, the Middle East and Europe by land.

The maritime route seeks to connect coastal China with South-east Asia, South Asia, Africa, and Southern/Northern Europe. Notice that the US is not part of the scheme.

The obstacles to OBOR's success are formidable, but if it materialises, the political payoff for China will be significant political influence among the 65 countries participating in the project. The fact that China's OBOR strategy is driven by excess internal economic capacity and expertise do not detract from its strategic implications.

AMERICA'S BID TO RECLAIM ASIAN MANTLE

The US has not been sitting idle all this while. On the economic front, the precursor of the TPP may have been initiated by four smaller Pacific nations (including Singapore), but the US was able to hijack or build on the initiative to make it a mega trade pact involving 12 major trading nations. Until the TPP, the US had not been very pro-active on the Asia-Pacific economic front, so the timing of its reclaiming of the economic mantle in the Asia-Pacific region needs to be explained.

In my view, it has to do with the changing economic landscape of Asia - China has replaced the US as the No. 1 trading partner of most countries in the Asia-Pacific region, including most of America's allies. The US needs to stage an economic comeback and the TPP is it. It is the economic counterpart to the military rebalancing announced by the Obama administration in 2011.

Less noticed, but utterly crucial, is the fact that in the last decade or so, the US has also consolidated and upgraded all its military alliances in the Asia-Pacific region. All its military allies have non-Nato major ally status, and bilateral agreements have been strengthened, while strategic cooperation between US allies and partners, such as Japan-Australia and Japan-India, was strongly encouraged. US military predominance is likely to remain a constant feature of the region for decades to come.

Recent economic developments therefore cannot be viewed in isolation from the politics associated with them and, more specifically, the politics of power transition.

The good news is that China remains so far behind the US in most of the important dimensions of power that the talked-about transition is many decades away. Level-headed Chinese policymakers and strategists are also in no hurry for their country to replace the US as the hegemon, though there are nationalists who are less patient.

The trick is to keep the latter in check and not to allow events (say in the East or South China Sea) to spiral out of control. The bad news is that, historically speaking, peacefully negotiated power transitions are rare; the decision as to who deserves to be the top dog is usually settled by war.

But we can remain optimistic because the US-China situation is unique, making comparisons to previous (violent) power transitions dubious.

The distant time frame, the conditions of China's ascent (facilitated by the US), the nature of US-China economic interdependence, nuclear weapons, prevailing norms against war, and the seriousness both sides have shown in learning from history suggest that a negotiated settlement (say co-equality for the rest of the century) or a peaceful transition is a distinct possibility.

  • Khong Yuen Foong is Li Ka Shing Professor of Political Science at the Lee Kuan Yew School of Public Policy, National University of Singapore.
A version of this article appeared in the print edition of The Straits Times on December 30, 2015, with the headline 'The reality of US-China competition'. Print Edition | Subscribe