When these two world juggernauts meet to discuss business the world takes time out to stop and listen. The recent round of Sino-US bilateral meetings in the form of the annual strategic and economic dialogues was no different. What can we expect as a result of these meetings? And how can we expect the Sino-US partnership to develop in the future?
Sun Tzu once said, “The supreme art of war is to subdue the enemy without fighting”. One could strongly make the claim that this is the very philosophy underpinning the Sino-US relationship.
One does not need to look far to find evidence of this philosophy in effect. From the regional disputes in the South China Sea to strategic economic check mating to bold moves in industrial over production, it is evident to see the delicate dance these two super-powers are engaged in.
The recent annual Sino-US Strategic and Economic Dialogue was a chance for both nations to take stock of and review the progress of each-others pledges and to address issues they both face in this fast-paced international environment.
Success or failure?
Often when meetings of this calibre take place the first question that is asked by commentators is: Was it a success?
On the issue of climate change, both the US and China paid generous lip service to continue with efforts to reduce carbon emissions and to present their climate change policy progress in time for the G20 summit in September. As the most developed country in the world and the largest developing country in the world, it is hard to see either one hitting targets, especially if that means risking their respective economic position.
The US also raised concerns over China’s steel production capacity. This economic strategy is nothing new. Overproduction of a necessary commodity such as steel or oil has been used and continues to be used today by key supplying nations like China and Saudi Arabia for different reasons, but usually as a way to destabilise economies and to meet demand for internal growth.
As of 2014 America’s annual crude steel production was 88.2m tonnes. This pales in comparison to China’s 822.7m tonnes of crude steel produced, with 100m of that being exported. This is hitting American jobs and the world economy hard, as it is now cheaper to just import cheap steel from China than to produce it yourself.
The US also continued in pressuring the Chinese to speed up its economic reforms, and in doing so allowing a new market to open up for foreign financial services. The growing middle classes in China are demanding financial security in order to protect against losses and to keep safe their earnings and capital they have acquire throughout their working life. This offers superb growth opportunities for insurance companies and pension funds and can be a tool used to increase trust among the two nations.
Otherwise on the agenda: foreign policy. A fog of war still lingers over China’s artificial islands in the South China sea with no agreement in sight. American diplomatic efforts can only go so far especially for issues with such geo-strategic importance. We are likely to see a continued stalemate, especially now that it is an election year in the US.
End of an era
Now might be a good time to stop and take stock of the evolving Sino-US relationship. There are several key milestones. The first was in 2007 when China increased its military budget by 18%, totalling more than $45 billion which raised some military eyebrows at the pentagon. The next year followed with China officially becoming the US’s largest foreign creditor, surpassing Japan with US debt holdings of $600 billion. This moved marked an unprecedented closening of financial ties between the two nations.
2010 saw China becoming officially the second largest economy, again surpassing Japan. Figures from Goldman Sachs project China actually overcoming the US as the world’s largest economy by 2027. This growth accumulation prompted the US’s ‘pivot’ to Asia in 2011, expressing a desire to increase its diplomatic, economic and geo-strategic clout in the region as a means to keep an eye on and have some influence over China’s policies. November 2012 saw a revitalisation of China’s leadership with roughly 70% of its leadership positions being replaced, including the instatement of Xi Jinping as president.
I think therefore I am
It is also imperative to realise one very important aspect that has a tremendous effect on the long-term geo-political and economic strategy of these nations, and that is their fundamental political structure.
As the US is a democracy, any long term strategy of any kind will have its sell by date when that particular administration leaves, thus causing a continually shifting and ‘pivoting’ of intentions and policies. China on the other hand, can afford to have a much longer term view and strategy which it can change, not due to democratic demands, but due to changing global political and economic landscapes. This perhaps gives the Chinese an advantage as they have built a stamina and philosophy for long-term objectives that can pay dividends. The Chinese thus can be seen as valuing winning the war more so then winning the battle, especially when it comes to Sino-US strategic negotiations.
This final major bilateral meeting between the two nations can also been seen as President Obama tying up loose ends and putting to bed his influence and direction regarding China. It was almost certainly expected that no major geo-strategic decision were to be made at this dialogue, which by no means can be interpreted as it being a failure.
With such an unpredictable political future for the US, any credible long term Sino-US strategy will have to wait. No doubt the Chinese administration is keeping its cards close to its chest and waiting to see who they will be dealing with, at least for the next four years. 2017 will to doubt mark a new era in Sino-US relations. For better or for worse, time will only tell. But if in doubt, Sun Tzu might be worth consulting.