The 2017 is going to be a testing year for China-U.S. relations. American president Donald Trump seems eager to renegotiate the bilateral relationship (namely trade) and contain China’s military rise in the South China Sea. In the next months, China's president Xi Jinping will focus his attention on the domestic political struggle and on the XIX National Congress of the Chinese Communist Party (CCP). Sino-U.S. geopolitical collision will continue as well as their economic interdependence. Xi is exploiting Trump’s asserted protectionism to promote China’s global initiatives such as the Belt and Road Initiative (BRI) and several free trade agreements in the Asia-Pacific. In the medium term, Beijing doesn’t want to replace Washington as the world's superpower or go to war with the United States. Nonetheless, Xi has proved more assertive than his predecessors' and might not cave in to Trump’s offensive on issues regarding China’s core interests, such as Taiwan's sovereignty.
Trade, Taiwan and globalization
In his congratulatory message to Trump, Xi pointed out that China and the U.S. must cooperate according to the principle of non-conflict, non-confrontation, mutual respect and win-win cooperation. In a nutshell, Xi asked “The Donald” to adhere to the “new model of great power relations” presented to Barack Obama right after the 2013 Sino-U.S. summit in Sunnylands, California.
Like his predecessor, Trump is not interested in welcoming Xi’s offer; quite the contrary, he wants to upend Sino-U.S. relations, starting from trade. The Donald promised to slap tariffs on Chinese goods up to 45% and to coax American manufacturers to shift production back to the U.S. As of today, it is unlikely for Sino-U.S. tensions to escalate into a full-blown trade war. According to Chinese media, however, the appointment of Peter Navarro (economist and author of a book entitled “Death by China”) as head of the National Trade Council could dramatically increase the chances of an economic or military war.
If it were to start a trade war with Beijing, Washington would certainly have the upper hand. The People’s Republic is America's second-largest creditor (behind Japan) and its largest goods trading partner with over $600 billion ($480 billion imported by the U.S.). The People’s Republic's economy is still export based and badly needs to access the U.S. consumer market. Anyways, a trade war could be detrimental to America as well. China could buy less from Boeing (possibly switching orders to Airbus), Ford or General Motors and from many U.S. producers of soybean and corn. Chinese investments in the United States could also decrease, while trade barriers would hurt those American companies depending on China in terms of their supply chain. Such a development would damage both countries and have serious repercussions on U.S. allies in the Asia-Pacific whose economy is bound to Beijing's.
The phone call between Trump and Taiwan's president Tsai Ing-wen was the first attempt by the American president at understanding which buttons he can push when negotiating with China. But Taiwan's sovereignty wouldn't be the best of choices. The One-China Policy has been the bedrock of U.S.-China relations since 1979. The island is one of China's “core interests”; Taiwan's a geostrategic “region” located at about 80-miles from the Mainland's coastline and, according to Beijing, it simply belongs to the People’s Republic. CCP and Chinese scholars describe the island as a shield guarding China’s rich coastal underbelly and a danger to its regional security at the same time. According to the 2015 white paper on China’s military strategy, Taiwan’s reunification with Beijing “is an inevitable trend in the course of national rejuvenation”. From Xi's perspective, giving up the One-China Policy would mean looking weaker in the eyes of the Chinese population and could undermine Beijing's claim on the South China Sea.
A week after the Trump-Tsai phone call, Beijing seized an underwater drone deployed by a US oceanographic vessel at about 50 nautical miles northwest of the Philippines’ Subic Bay port. The message was clear; Beijing won't back down in the South China Sea. In August, the People's Republic rejected the unfavorable ruling by the United Nations Arbitral Tribunal on the China-Philippines dispute in the South China Sea and recently installed a defense weapon system on its artificial outposts on the Spratly islands. If China didn't control them, those islands would most likely be used by the U.S. and its allies in a military conflict. A scenario which could endanger two of China’s main geopolitical imperatives; to defend the coastline from potential foreign attacks and secure maritime trade routes linking China to the rest of the world.
In a rare TV interview with NBC News, Lu Kang, a senior official with the Chinese foreign ministry, warned the U.S. not to interfere in South China Sea disputes. A clear reply to Rex Tillerson, the U.S. Secretary of State, who recently said: "We're going to have to send China a clear signal that, first, the island-building stops and, second, your access to those islands also is not going to be allowed”.
It is clear that Trump wants to apply a “stick and carrot” strategy to China. On February 10th, right after having sent a letter to Xi, The Donald held his first cordial telephone conversation with the Chinese president. The two leaders focused on U.S.-China cooperation. Most importantly, Trump recognized the significance of the One-China Policy while promising to honor it. A move confirming his unpredictability and which could well portend a rethinking in future.
From China's perspective, Trump’s protectionist policies and the U.S. withdrawing from the TPP could spawn positive consequences. Those moves allow Xi to tout himself as the new champion of globalization, even if China is far from embracing it. In January, Xi became the first Chinese president to attend the World Economic Forum in Davos (Switzerland), by many considered to be the most sacred summit of capitalism. In November, at the APEC Summit in Lima, Xi promoted the development of the Regional Comprehensive Economic Partnership (RCEP), the Free Trade Area of Asia-Pacific (FTAAP) and the Belt and Road Initiative (BRI), the huge infrastructural project aiming to link China to Europe. Beijing is using BRI to achieve three targets; uphold economic growth in China's inner regions, find alternative trade routes while reducing the vulnerability of the maritime ones; consolidate China’s image in the Asia-Pacific and around the world. In Davos, Xi announced that next May Beijing will host a Belt and Road Forum for International Cooperation to discuss cooperation within the BRI.
China is not - and doesn’t perceive itself to be - a global power yet. Chinese newspaper Huanqiu Shibao recently wrote that in the short run the People’s Republic cannot replace the U.S. to “lead the world” as Beijing doesn’t have “America's comprehensive strength” and is not “psychologically ready for it”. For a long time to come, the leadership of the U.S. will be irreplaceable, even though “China's further rise is inevitable”.
The United States still shapes the global economy and China is struggling to adopt those structural reforms needed to reach “the new normal”; meaning, a slowdown in the trend rate of growth (6.7% in the first three quarters of 2016), higher life quality and domestic consumptions, less reliance on export, a narrower income gap between urban and rural households and between coastal and inner provinces.
The XIX CCP National Congress, scheduled to take place next autumn, is going to be a decisive step for three reasons; it will mark the beginning of Xi’s second mandate as president; Xi will probably succeed in promoting his allies to the Politburo Standing Committee and to the Central Committee to boost the reform process; the National Congress should offer some hint on whom will be Xi’s successor after 2022. This last point is the most uncertain. Allegedly Xi hasn’t chosen his heir yet and Western media (namely The New York Times) have been speculating that he’s thinking about staying in power beyond the end of his second mandate.
Wealthy China, strong Army
Xi Jinping’s foreign policy is very different from his predecessors'. In 1978, Deng Xiaoping (who once said that China and the U.S. will eventually have to get along) introduced the “reform and opening-up” policies to speed up Chinese economy. At that time, China’s economy, politics and armed forces were in shambles. The People’s Republic couldn’t simply be a global power. Thus, Deng proposed the famous approach “observe calmly, secure our position, cope with affairs calmly, hide our capacities and bide our time, be good at maintaining a low profile, and never claim leadership”. Deng suggested that China had to develop its economy silently, without reacting to foreign provocations, while taking action according to its possibilities in those sectors relevant for its national interests. Under Jiang Zemin and Hu Jintao, China kept “a low profile” and didn’t react forcefully to even serious incidents such as the 1999 bombing by a U.S. jet of the Chinese embassy in Belgrade or the 2001 collision of an American spy plane with a Chinese jet, at about 50 miles southeast of China's Hainan Island. In the latter case, the American plane made an emergency landing in Hainan while the Chinese jet crashed into the water.
Since becoming president, Xi has discarded Deng’s approach and changed China’s attitude towards the international relations. Xi has recently become the “core" of the Chinese leadership while centralizing the decision-making process and promoting an active role in China's economy. Beijing is working on island reclamation faster and tougher than the other countries involved in the South China Sea disputes. Xi is also reforming the People’s Liberation Army (PLA) as to abandon the army-centric structure, allow the military branches to conduct joint operations and adjust China’s military capabilities to its economic growth. In 2015, Xu Qiliang, vice chairman of Central Military Commission said that "security is a precondition for development, and development is the material base for security". Xu also quoted the principle “wealthy state, strong army” (fuguo qiangbing), by the Legalist philosopher Shang Yang. During the Warring States Period (475 B.C – 221 B.C.), Shang policies paved the way for the unification of the Chinese empire by the Qin State.
Xi (who knows well the Legalist School and quoted its philosophers several times in the past) aims at achieving the same result which Deng and Shang sought to obtain: a wealthy China with a strong military. Even if the U.S. Armed Forces are superior to the PLA in almost every aspect, Trump’s administration should not underestimate Beijing’s new assertive approach when crafting his China's policy.
The future of Sino-U.S. relations
In the next years, both economic interdependence between the two countries and their geopolitical collision will continue. Beijing wants to protect its coastline from potential military attacks, secure its trade routes and seize natural sources in the South China Sea. While Washington wants to dominate the world’s oceans and prevent the rise of a potential challenger in the Eurasian continent.
The Trump administration believes China to be in decline. The White House will try to renegotiate Sino-U.S. relations and possibly thrust Beijing against the wall, but there are issues the Chinese won't compromise on, namely the One-China policy or South China Sea sovereignty. That is why China’s new assertive approach and Trump’s hard style negotiation could determine a deterioration of Sino-US relations. Especially in the months leading to the next CCP National Congress, when the Party's inner struggle could increase Beijing's vulnerability. This situation could increase the chances of a possible retaliation in response to Trump’s provocations. Moreover, any move by the U.S. against China on trade, Taiwan or South China Sea disputes could feed China nationalism and be used to promote a faster modernization of the PLA.
In the long run, the most important strategic change in China-U.S. relations could come from a U.S.-Russia rapprochement, a top priority of Trump's foreign policy. In the last few years, tensions between the White House and the Kremlin due to crises in Ukraine and Syria pushed Moscow toward Beijing. Despite China and Russia having both imperial aspirations and sharing a 4200 km long border, Putin and Xi Jinping sealed their partnership with infrastructure and energy agreements. Now a U.S.-Russia thaw could hypothetically contain China’s rise and be a game-changer in the Asia-Pacific. That is why Xi Jinping will work hard as to further consolidate relations with Moscow.
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