A Competitive U.S.-China Engagement

By Stratfor

U.S. Chairman of the Joint Chiefs of Staff Adm. Mike Mullen continued his visit to China on Monday. He met with Chief of General Staff of the People's Liberation Army Chen Bingde, future Chinese President Xi Jinping and other officials at naval and air force bases in China.

Mullen's visit has attracted attention because the two sides have proved incapable of sustained military communication and exchange, with disruptions arising from intractable differences such as American military support for Taiwan. Mullen's trip is the first for an official of his rank since 2007. There is every reason to think that disruptions will continue to occur because of the disparity between the two sides' views on how international military exchanges should function. The United States seeks continual interaction separate from other aspects of the relationship, whereas China cannot afford to separate what Washington views as "political" issues from its military engagements and frequently cuts off exchange. Thus it is important that the two sides are talking at all.

However, the visit has also attracted attention because it is an exceedingly interesting time for the two sides to be talking. As wars and a financial crisis make the United States' strategic constraints more visible than at any other time in the post-Cold War era, China's fast-growing economy and military development make for a sharp contrast. The view among some regional players, whose national security depends on their accurate assessment of the situation, is that a kind of leveling is taking place.

The renewed engagement is also notable because it follows recent incidents and conflicts that show regional animosities - in the Koreas, the East and South China Seas and Southeast Asia - threaten to spill out of their former containers, especially where American power is not considered to be overwhelming. Despite the U.S. re-engagement throughout the region, some East Asian states suspect that weakness and a long-term lack of commitment lie at the base of its prolonged distance from regional affairs.

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Thus what the United States and China say regarding military matters - and any sign of the trajectory of their intentions and capabilities - are of great interest to both parties as well as the rest of the region and world. So far the two sides have shown they are capable proceeding with the calculated warming of relations formally launched when Chinese President Hu Jintao met with U.S. President Barack Obama in January. They have agreed to hold drills on humanitarian assistance and disaster relief, as well as counter-piracy, and to work toward holding more traditional military exercises in the future. These developments are not small, and they have at least temporarily eased some fears in the region that relations between the United States and China were on the verge of a downward spiral.

The recent warming in U.S.-China relations has drawn inevitable comparisons to the Kissinger-style detente. However, the contrast between these events is more striking. When Kissinger traveled to China, relations between the two countries could hardly have been worse and because the countries shared a common enemy, relations had ample opportunity to improve. At present, the prospects for improvement appear limited, whereas their many differences on economic, military and strategic interests present serious pitfalls. For instance, Chen's optimism regarding China's future naval capabilities and his criticisms of U.S. military exercises in the South China Sea with Australia, Japan, the Philippines and Vietnam reflect Beijing's bolder stance. Meanwhile, Mullen's insistence on the durability and depth of American power and presence in the region and emphasis on China's need to become a more responsible power seem to reflect a warning to Beijing not to become too bold. The clash over the South China Sea will intensify regardless of a warmer diplomatic atmosphere.

Nevertheless, for the time being the warming of relations continues apace because China is not yet the great power it aspires to be. What allows both countries to defer confrontation is not only American preoccupation elsewhere but also - as Chen all too readily admitted during Monday's meeting - China's persistent military weaknesses, despite its recent highlighting of a fifth-generation fighter-jet prototype, an aircraft carrier and anti-ship ballistic missiles. Chen's comment that the United States should spend less on its military and focus more on reviving its weak economy had a certain pointedness in the context of American budget-deficit debates, but on a deeper level reflected China's fear that it is becoming the United States' next target for direct competition before China is ready.

What Chen inadvertently pointed to is that, like the Soviets, Beijing's competition with the United States has an economic basis. Economics is at the heart of military power. However, in this regard the Chinese do not have as great an advantage as is widely thought. The American economy has shown itself to be resilient after many recessions, while the current Chinese model shows all the signs of unbalanced and unsustainable growth. Coincidentally, the military meeting came as an American financial delegation visited China to renew demands for inspections of auditing firms, after a wave of accounting scandals struck Chinese companies listed on American stock exchanges. The scandals have drawn attention because of their flagrancy, but China's domestic economy is rife with false accounting. Hidden risks have become more visible after recent revelations of gigantic debts held by local governments that push China's total public debt up to levels comparable to heavily-indebted, developed Western countries. The risks are located in the state-owned banks, which can only hold things together so long as rapid growth enables them to continue deferring debt payments. Thus China's great challenge is to face not only a rising international rivalry but also its eventual combination with deteriorating domestic economic conditions.

A Stratfor Intelligence Report.
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