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Relations between Washington and Beijing are said to be worse than at any point since their normalization in 1979, and they are on the verge of plunging further through a “trade war” over the horizon, military tensions over the South China Sea and Taiwan where past management is being challenged, exposure of the illusion of a comprehensive agreement on North Korea now that diplomacy is being pursued, and even an ideological competition reminiscent of the Cold War. This Special Forum explores four approaches to the troubled relationship in search of greater clarity on what is transpiring and whether it can be reversed. Certain challenges have deep roots. Others are seen as resulting from the leadership of Donald Trump and Xi Jinping. In some cases, limited compromises might be found, but they are unlikely to be long-lasting. With an overview of four approaches, we can strive for a broad understanding of the recent tensions.

The first dimension covered is international law, taking examples from trade wars and maritime rights. Jacques deLisle observes that in both China and the United States doubts are growing that the existing law-governed international economic order serves their economic interests, while ambiguities in the law of the sea and the stature of dispute resolution institutions have combined to give China greater options in dealing with the South China Sea, which do not bode well for stabilizing Sino-US relations.

Second, we offer coverage by Lowell Dittmer of how the two pillars—strategic and economic—on which Sino-US relations were built from the 1970s-80s are collapsing. Scores of bilateral exchanges have failed to bring the two closer to agreement on either China’s reconfigured East Asian strategic role or its mercantilist economic policies. He adds that given the increasingly distinctive conception of Chinese identity and its gap with others, there is also a distinction between in-group and out-group normative rules and a corresponding diminution of transnational trust. Ahead, he sees a trade war leading to the formation of two rival self-sufficient economic blocs, as global repolarization presses other nations to choose sides, as in the Cold War.

Third, Kim Sung-han discusses how this rivalry is playing out on the Korean Peninsula, viewing the ongoing trade dispute as another form of a strategic competition between the existing hegemon and a potential hegemon in international relations. Kim warns that plans for the United States and China to focus on building a trustful relationship are unrealistic at this juncture, given mutual skepticism of strategic intentions and unwillingness, on either side, to display strategic vulnerability. He adds, when there is an intensive Sino-US rivalry, it would be very hard for South Korea and the United States to persuade North Korea to seriously implement the process of denuclearization, to expect China to emerge as a constructive player supporting the continued ROK-US alliance, and also to prevent China from spoiling the unification process. Yet, he proposes a narrowing of focus on the peninsula that would, somehow, make finding common ground easier.

Finally, Vasily Kashin presents a Russian perspective on the nature of the Sino-US competition and the prospects for it to become aggravated before long. Given Russian assumptions of a revived cold war, it should come as no surprise that Kashin has concluded that Sino-US relations will soon plummet to the very low level of Russo-US relations.

Comparing the four approaches, we find no basis for optimism. They anticipate no fundamental change on the Chinese side, and they attribute the sources of the downturn less to Trump than to a broad awakening in the United States to either a relentless challenge or serious provocations. A plea for narrowing the scope of the clash to one possibly manageable issue—North Korea—is the closest thing to optimism we present. Whether one approaches the future from the loss of the pillars that have buttressed the relationship—in economics and security—or from the perspective that one or the other side is fixated on a way of thinking irreconcilable with the other—hostility to what are seen as critical elements of international law or to competition from a country that is required to proceed differently due to the middle-income economic trap—polarization into two blocs led by these great powers looms as the most likely outcome. Relations have plunged fast in 2018 and, even if there is some respite, the image here is that they will be even more troubled.

Jacques DeLisle, “International Law in US-China Relations: Trade Wars and Maritime Rights in the Era of Xi and Trump”

The WTO and UNCLOS are two legal instruments that have guided US administrations even if US exceptionalism has not been far below the surface. Championing the rule of law has been a hallmark of official rhetoric, especially in dealing with China. However, deLisle explains, the
shifting rationales and mix of credible and implausible legal claims in the Trump administration have encouraged assessments that international law does unusually little to drive, frame, or constrain the US agenda. Whether in launching trade wars or in backing away from international security agreements, Trump takes a cavalier attitude toward law as a force in US foreign policy. The Trump administration and the Xi regime have adopted significantly conflicting positions on the content of legal rules, and the United States has not played its customary role as principal patron of a law-based, multilateral order. DeLisle argues, given the limitations of existing rules and institutions as means to address US concerns—including clearly legitimate ones—about Chinese behavior, a downward spiral is easily imaginable, with an innately skeptical (or hostile) Trump administration growing increasingly frustrated with a system that does not produce, at least expeditiously, satisfying outcomes.

In both China and the United States, albeit for different reasons, there are growing doubts that the status quo serves national economic interests, adds deLisle. The waning of expectations that China would continue to converge with global economic norms and rules and that the United States would continue to support and underwrite the postwar international economic regime, did not begin with Xi or Trump, but it has surged under both. In asserting that trade-restricting measures targeting China were warranted and lawful, the Trump administration relied on several grounds in addition to national security. These entailed primarily arguments that China was violating international legal rules and obligations: China has a large surplus in bilateral trade, which is indicative of unfair trade practices, or, at least, justifies measures to address the imbalance; China maintains an overvalued currency, boosting exports and depressing imports; China provides inadequate protection for US intellectual property; its government impermissibly subsidizes Chinese firms (especially state-owned ones) through a variety of means (including access to cheap capital); Chinese firms engage in dumping in foreign markets; and China’s industrial policy—including the “Made in China 2025” program—gives unfair, impermissible advantages to Chinese firms. Yet, it is difficult to square with WTO law and international norms Trump’s central, mercantilist-style notion that a large bilateral deficit is per se problematic, and that it is therefore appropriate to demand that China make concessions (or for the United States to take its own measures) to close the gap. Any meritorious WTO-based or WTO-linked legal claims about China’s behavior risk being overwhelmed by, or lost amid, Trump administration rhetoric that has been hostile to the WTO and skeptical about multilateral institutions, concludes deLisle.

The law of the WTO and other trade and economic treaties are not entirely clear or liberal. This creates room for effective lawyering to escape accountability for what may plausibly, and even persuasively, look like legal obligation-violating (and, even more obviously, illiberal and self-serving) national laws, policies, and actions. Much to US chagrin, China has quickly moved along the legal learning curve to bring and defend cases against the United States and others effectively. Many of the foci of US complaints about China, including ones that predate and are likely to outlast the Trump administration, are not effectively reached by existing legal rules or readily achievable alternatives. Existing international economic law is ill-equipped to police phenomena such as: industrial policy to promote the development of emerging sectors (including some forms of state financial support that are not straightforward subsidies); the influence of the party-state (or even party-state-spurred nationalist sentiments) on companies’ (including formally private companies’) business decisions, including where and on what terms to invest abroad and from whom (or when and at what price) to purchase imported goods and material; selective enforcement, or relatively lax or strict enforcement, of regulations such as customs and safety inspections or licensing review that can have a disparate impact harmful to particular foreign firms or sectors; the adoption of strict and probing national security or antitrust review of foreign bids to acquire domestic companies; the pursuit of zealous enforcement of TRIPS-compliant intellectual property laws; and the persistence in practice of something akin to the socialist planning era’s “soft budget constraint” such that large, especially state-linked, companies face less pressure than their foreign competitors to focus only on maximizing profit or share value.

According to deLisle, the US posture and practice, increasingly under Trump, are granting Beijing a low-cost option. Because Beijing can pursue its agenda in these economic fields without the scrutiny, criticism, and rivalry that previously would have been expected, and likely forthcoming, from Washington, China has more latitude to develop the means to pursue a revisionist agenda, should it intend or choose to do so, without having its agenda revealed or its choices forced in the near term. The Trump administration’s sharp and possibly deepening turn against support for the WTO and other multilateral international economic legal institutions and rules, combined with other significant and possibly worsening troubles besetting the established regime, are helping to give China valuable and relatively low-cost options in this crucial issue area. With the United States departing from its tradition of supporting the status quo and a liberal legal order, China has been relatively free even to declare itself recently the principal exponent of economic globalization.

Much as the WTO is at the center of a troubled US-China economic relationship and its legal aspects, the UNCLOS regime is a focus of discord in regional security relations and their legal dimensions. Here, too, the United States and China have long pressed conflicting views on the content of relevant law. The long-ambivalent US engagement with UNCLOS, along with ambiguities in the law of the sea and the stature of dispute resolution processes and institutions, have combined with additional developments under Trump to give China greater options than it otherwise might have had, especially in the aftermath of the Philippines-China arbitration decision. China is likely to face weaker, sparser, and less formal challenges from the United States and regional states to the legality of its behavior in the South China Sea, To the extent that traditional US commitments were newly in question, regional states that shared US views about China’s legal claims and concrete actions in the South China Sea had new reasons to be less assertive in resisting and challenging China on intertwined issues of international law and regional security, observes deLisle. And the general Trump era decline in rhetorical and practical support for international law and multilateral and UN-linked legal regimes has not explicitly spared UNCLOS and thus has cast a pall over US engagement with the law of the sea regime.

The United States has countered a “Chinese lake” portrayal of the South China Sea (and China’s more general “closed seas” position) with an “open seas” conception of relevant law: the nine-dash line can signify nothing more than a claim that China has territorial sovereignty over any landforms within it; the marine formations within the line are much less than China assumes or asserts, being too insubstantial to be sovereign territory at all or to generate more than a territorial sea, or being the object of conflicting and unsettled claims of sovereignty by two or more states and thus not available to China (or others) as baselines from which to draw maritime zones; much of the South China Sea therefore remains part of the high seas, open to free navigation and peaceful use by all; and China’s rights to regulate or restrict foreign navies’ and other vessels’ activities in its territorial sea, EEZ, or other areas in the South China Sea cannot extend beyond the limited rights of coastal states that are generally, even universally, accepted as part of the international law of the sea. This case is more difficult to make, given Trump’s abuse of international law as seen by observers, opening the door to China reducing pressure on it.

Lowell Dittmer, “A Prognosis of the Critical Sino-American Condition”

A seemingly robust Sino-US friendship has been built over the years on two pillar–strategic and economic—but, by 2018 both had severely attenuated, argues Dittmer. In the decade following the ice-breaking Nixon visit in 1972, ties were based solely on strategic grounds. Afterwards,
China’s economic opening provided a new basis for cooperation.  The economic relationship was complementary This mutually profitable interaction accelerated (albeit asymmetrically) upon China’s admission to the WTO in 2001 The objections of human rights advocates and ideological anti-communists were defrayed by the theory of political-economic convergence: just as advanced capitalism had adopted socialist attributes in the contemporary welfare state, so would China’s assimilation of capital and labor markets, corporate business organization, and Western consumerism eventually culminate in some form of electoral democracy, as it had in China’s East Asian neighbors. These pillars are largely gone, insists Dittmer, who warns of
a progression from the current “cool war” to truly “cold war.” Trade war leads to the formation of two rival self-sufficient economic blocs, global repolarization pressing nations to choose sides. On the power-political front the two are engaged in an undeclared arms race as China expands economically and territorially where it can do so with calculated risk, even if this is a more limited arms race than the strategic competition between the United States and the Soviet Union.

Scores of bilateral negotiating forums have not yet brought Washington and Beijing closer to agreement on either China’s reconfigured East Asian strategic role or its mercantilist economic policies, concludes Dittmer. He sees two factors, neither of which alone is necessary and sufficient, driving the growing bilateral rift: strategic or power transition theory and diverging developmental trajectories, widening the identity gap that plays a large part in mutual trust. Chinese economic reform continues under Xi Jinping, but the trajectory has shifted from market liberalization in the 1980s and 90s to “socialism with Chinese characteristics”—the hybrid ambiguity of the Hu Jintao era gave way to a reemphasis on socialist identity. The 13th FYP (2016-2020) most notably is but the opening stage of an ambitious “Made in China 2025” plan to transform the country into a production hub for high-tech products like robotics, artificial intelligence, quantum computing, hypersonic cruise missiles, and new energy vehicles within the next few decades. As the “workshop of the world” and an industrial powerhouse, China produces more steel, aluminum, glass, and cement than the rest of the world combined, but it relies too much on imported key parts, components, and production equipment, reducing its profit margins. Beijing has noticed that although it is the world’s largest exporter, its role in the supply chain division of labor has tended to be limited to relatively low value-added jobs such as assembly.

The substantive content of “Xi Jinping Thought” is spelled out in a “14-point Basic Policy. Its essence is that the CPC should directly command and control all other hierarchies. As a great power, it becomes more willing to wear its distinctive socialist identity, even once again to recommend it to other developing countries, and to point out flaws in the rival Washington consensus. This underlying identity reprise has shaped the Chinese developmental model in a more socialist direction, giving rise to a more mercantilist trade policy because economic interests are identified with the Chinese party-state rather than with the firm. This has an alienating effect on economic interactions, as foreign economic actors see Chinese actors as representatives of a collective rather than individual or firm interests, and Chinese actors are expected to view themselves likewise. Given the increasingly distinctive conception of Chinese identity and its gap with others, there is also a distinction between in-group and out-group normative rules and a corresponding diminution of trans-national trust.

What has been more concerning to American strategic thinkers is the political economic dimension of China’s strategy. The BRI not only holds the potential for further Chinese base development beyond Djibouti but the creation of debt traps. China’s currently “assertive” ideological revitalization is in no small part a reflection of awakened awareness, since around the time of the Beijing Olympics, China’s surpassing of Japan, and the accession of Xi Jinping, of the power-political implications of its own momentous “rise.” The current Sino-American “trade war” is to some extent an expression of American anxiety about that rise and China’s ownership of it. Dittmer does not foresee a way to overcome this distrust in the current environment.

Kim Sung-han, “US-China Rivalry and the Future of the Korean Peninsula”

Kim Sung-han explores the impact of Sino-US relations on resolving challenges on the Korean Peninsula. He views the ongoing “trade war” between the United States and China as not just a trade dispute in light of the two sides’ intensifying rivalry in the area of strategic technologies. China has stepped up efforts to overtake western countries in advanced technologies, for semiconductors (the silicon brains required to run smartphones), connected cars, cloud computing, and artificial intelligence. “Made in China 2025” is based on the subsidization of Chinese firms in those areas and the requirement of foreign companies to provide the key information for their technologies to Chinese partners, which has provoked the United States, whose long-time superior status is based on superb strategic technologies. The ongoing trade dispute is thus another form of a strategic competition between the existing hegemon and a potential hegemon after the Chinese perceived Obama’s Asia pivot as a form of expansionism, encroaching on their sphere of influence and seeking to expand and deepen US hegemony. Thus, plans for the United States and China to focus on building a trustful relationship are unrealistic now, given mutual skepticism of strategic intentions and unwillingness, on either side, to display strategic vulnerability, Kim adds. Yet, he explores an arrangement that could lead to cooperation.

US-China rivalry gives South Korea strategic concerns that China might drive a wedge between Seoul and Washington, particularly when they deal with the North Korean nuclear problem; China might intervene when South Korea and the United Sates consult with each other about the future of US military presence on the peninsula; and China might play a spoiler role when South Korea comes across historic opportunities for Korean unification. When there is an intensive Sino-US rivalry, it would be very hard for South Korea and the United States to expect North Korea to seriously implement the process of denuclearization, to expect China to emerge as a constructive player supporting the continued ROK-US alliance, and to prevent China from spoiling the unification process. US-China cooperation is supposed to be the essential part of the strategy of inducing North Korea toward the path of denuclearization. North Korea would be highly tempted to try to balance one against the other as long as the two continue their strategic competition and link the North Korean issue to it. In particular, China has been looking at North Korea through this lens, which means the North Korean nuclear issue is not to be isolated from other regional strategic issues such as Taiwan and the East China and South China seas. Kim argues that Chinese concerns must be assuaged through multilateralism in Northeast Asia.

There are two schools of thought in South Korea’s security community: the concert of Asia and the US-led Asian order. The concert of Asia one believes that great power relations surrounding the peninsula are reminiscent of great power politics in 19th century Europe. Now a concert of Asia should be established, supporting multilateral cooperation among major powers. In contrast, the school of US-led Asian order believes that a multipolar system is inherently unstable, and the United States has been playing a stabilizer role through its military presence. The “progressive” Moon Jae-in government tries to strike a balance between the two schools, emphasizing close coordination between Seoul and Washington while supporting the establishment of a multilateral peace and security cooperation regime in Northeast Asia. China has been recognized as the champion of multilateral cooperation mechanisms in East Asia since the late 1990s. Although it refused to participate in NAPCI, the assumption here is that it will support multilateralism now.

South Korea-China cooperation is necessary for denuclearization of North Korea, Kim argues,
and a new kind of comprehensive approach is needed. North Korea should declare all its nuclear programs, negotiate over conditions for their dismantlement, and quickly move to verification. North Korea is likely to rely on the salami slicing tactics—separating the bilateral agenda into smaller pieces and maximizing its benefits for each concession—unless the United States can draw genuine support from South Korea and China. The four parties—the two Koreas, the United States, and China—should start talking about the establishment of a peace regime on the peninsula by signing the declaration for the end of the war, done only when North Korea agrees to a specific timeline. This could lead China to accept multilateralism while the United States would have its alliances, albeit with a narrower scope and set of functions that it had earlier envisioned.

The ROK-US strategic alliance for the 21st century meant the alliance would go beyond the peninsula and expand its scope of cooperation to the Asia Pacific region and the global stage. With the military alliance at the center (particularly on the Korean Peninsula), the countries would closely cooperate on the basis of common values and create exchanges in politics, diplomacy, economies, and culture. These elements were reflected in the 2008 joint vision, but
China interpreted it as a “value alliance” that was aimed at imposing liberal democratic values on other countries including China. Another concern China might have is that the alliance would survive the denuclearization of North Korea. Even if the military component targeting North Korea could be reduced after denuclearization, the strategic alliance would continue, it feared. To achieve a breakthrough, however, it is important for the United States to show concern for its allies even though an “alliance transition,” which usually precedes a power transition—but this is not happening. China might try to drive a wedge between the United States and its allies in East Asia by taking advantage of Trump’s bad management of allies. The ROK-US alliance and the US military presence on the Korean Peninsula should be understood in this context. The United States should well maintain its allies and potential allies if it wants to maintain the US-led order in the Asia Pacific region for a long time. Thus, it should accept multilateralism as well. For the United States to refurbish its leadership it needs to treat China as a strategic partner rather than branding China as a revisionist state. This shift would presumably be reciprocated by China.

The United States and China are likely to see more costs than benefits when they intensify their competition on the Korean Peninsula and in East Asia, which will work against unification. From the South Korean viewpoint, the ROK-US military alliance is a vital strategic tool for its security, defense, and even Korean unification, but it is not a sufficient condition for South Korea’s security, defense, and unification. China and South Korea should discuss how to establish a multilateral security cooperation mechanism in Northeast Asia while South Korea and the United States will be discussing how to transform the ROK-US alliance if North Korea accomplishes denuclearization. In addition, South Korea and China should talk about how to integrate Northeast Asian economies after denuclearization. China needs to be discouraged to look at North Korea through the angle of China-US strategic competition. As long as it continues to do so, the issue is inevitably linked with Taiwan, the East China Sea, and South China Sea issues, which makes the North Korean issue a permanent conundrum. A way out is foreseen.

Vasily Kashin, “The Current Crisis in Sino-US relations: How Deep Can It Be?

Kashin portrays a crisis in the making since the 1990s, delayed by erroneous US assumptions about the relationship between economic development and democracy and “strategic respites” due to intervening events with little potential to alter the long-term trajectory. Tensions have been building for a long time, and a showdown was expected by Chinese strategic thinkers since at least the late 1990s, he argues, finding 2018 the point of no return with a trade war in the forefront but escalation by no means limited to economics. The United States now regards China as a threat on a par with Russia, and it is taking a more assertive approach to the sensitive issue of Taiwan, while speeding up its military build-up in the Pacific, increasingly criticizing China’s human rights record, and, as in the case of Russia, warning about espionage or covert political influence.

What changed is US perceptions of Chinese internal politics and economic and industrial strategies, which led to greater pessimism. The Made in China 2025 plan and the national plan for development of artificial intelligence were watched with growing suspicion. Major Chinese companies, usually state run, identified by the Chinese leadership as national champions and having special access to cheap loans from the state-run banks, have been buying technological companies and strong international brands for years. At a point the Americans as well as some other developed countries started to see potential danger, notes Kashin. The United States also reevaluated Chinese military capabilities and the potential for the development of advanced military technology. After facing considerable weakening in US influence in East Asia, especially due to the failure to react adequately to Chinese activities in the South China Sea, there was growing support within the US military establishment for more decisive measures to contain the Chinese.

Modern technology did not bring freedom and democracy to China but rather allowed the Chinese government to establish more effective control over the population. China has become one of the world leaders in surveillance technologies, face recognition, and cyber warfare, and created a powerful intelligence apparatus capable of operating in cyberspace. Awakening to this, the United States lost its longstanding naïve faith in convergence. A major turning point was the grand parade for the 60th anniversary of the CPC, which clearly demonstrated that the PLA has indeed made a leap forward over 1-2 generations of defense technology in most areas. The United States started taking military countermeasures when the Iraq War seemed to be winding down and then tried a “reset” with Russia to focus more on China, Kashin suggests, but with another respite in 2012-17 with turmoil in the Middle East, the Ukraine crisis, and a priority for Chinese cooperation over North Korea, it was only in 2018 that Sino-US relations really deteriorated. The US military moves were too little, too late, it lost intelligence assets in China, and allies were hedging away from it. Compounding the problems, changes in US internal politics and the rise of anti-trade sentiments led to abandonment of the most successful element of Obama’s strategy TPP.

In this trade war the United States is not really trying to address the imbalance, but rather is trying to dismantle some vital elements of Chinese economic policy, which are supposed to deliver China from the middle-income trap. The Chinese policy is currently centered around a number of huge technological initiatives, which are managed at a very high political level. The government is concentrating on the infusion of vast resources into a limited number of very high-profile projects such as the development of artificial intelligence or 5G technology.

The companies involved in such projects with state support are at the same time enjoying the benefits of globalization. These include access to foreign technology, foreign personnel, and high-tech components for domestic production. The best examples of such an approach are the two Chinese leading telecom equipment producers, ZTE and Huawei, which managed to create highly innovative businesses competing globally with the established leaders. These were the very companies which came under US pressure for supposed violation of the anti-Iranian sanctions and involvement in espionage activities. As result, the normal business of ZTE outside of China was destroyed and Huawei was facing increased limitations on the US market. While China could potentially compromise on trade, it cannot abandon these industrial policies which Western countries accuse of violating trade rules and intellectual property rights. China is currently lacking a business climate which could make it possible for the country to compete relying on market-driven, private sector innovation as the main source of progress. And moving up the production chain becomes vital with an aging population and significant wage inflation.

The American moves to levy high tariffs on Chinese indigenous high tech and limit access to Western technology are making massive retaliation from the Chinese side inevitable. China is strengthening relations with BRICS countries especially Russia. In August 2018 Chinese troops for the first time took part in the Russian strategic exercise Vostok-2018. With Russia already largely isolated from the West and suffering from financial sanctions, the relations of the two could lead to a trade bloc with development of parallel financial infrastructure to service their trade. The two sides are already trying to increase the share of national currencies in their trade.

The current crisis in Sino-US relations is not limited to economics and is not caused by some specific imbalances in bilateral trade. The key issue is rather that the current Chinese political-economical model is not compatible with the US-led liberal capitalist system. Current Chinese industrial policies and innovation initiatives, if successful, would create major disruption. China cannot give up these initiatives, key to avoiding the middle-income trap and economic stagnation. Not just Chinese economic practices are seen as unacceptable. The Chinese political system is seen in the United States as moving towards greater Communist Party control over social life and further away from the liberal model. At the same time, the United States takes Chinese military power much more seriously.

Kashin concludes that the United States is trying to bring the policy of containment to a new level, increasing the pressure on China on several fronts simultaneously. The relationship has entered a period of irreversible and relatively fast deterioration. Descending to the level of the current Russian-American relations may take time, because of the magnitude of economic and cultural ties between the countries, but the relationship could get there within several years, especially if there is a security crisis around Taiwan or in the South China Sea.