China and US: Mercy Kuo on "The Rules"

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Brian recently visited China on a trip for journalists sponsored by the Committee Of 100. He and his fellow travelers will be posting reflections on the blog over the next week. Here Mercy Kuo, Managing Director at Managing Director at C-100, responds to Brian's first post.

Brian wrote: The U.S. and China are two major powers with tremendous need for energy resources who tend to throw our weight around in pursuit of our economic interests. The U.S. complains that China doesn't just compete, but breaks the rules, like condoning intellectual property theft or manipulating its currency. I wonder how much this conflict over the rules will come to define the two countries' relationship and how serious it might become. I hope we can both defy history and be a rising and a declining power who can work together for mutual benefit.

Mercy Responds 

Brian, this question really gets to the essence of US-China relations – as China’s influence grows, will it be a “rule-maker” or “rule-breaker,” and in either scenario, what are implications for the United States, other regional players, and international relations? As a back-of-the-envelope informal exercise in scenario analysis, I’d offer two rudimentary contrasting sketches depicting how this relationship might evolve over, let’s say, the next decade or two. 

Scenario 1: Strategic Engagement

 As the main drivers of global economic growth, the United States and China recognize the mutual benefits of preserving economic stability and effectively managing security. Having reached a parity of soft power—the ability to influence international norms and outcomes through international economic diplomacy and institutions—Washington and Beijing agree to exercise mutual power-sharing in Asia and facilitate healthy regional competitiveness. This scenario assumes that India, Japan, Russia, South Korea and ASEAN acknowledge that the region’s economic vitality and security are predicated on strong US-China cooperation, but they concurrently prepare hedging strategies against possible US-China friction.

On the domestic front, a western-educated generation of technocratic elites in Beijing, Shanghai and other emerging regional power centers, understands the reputational and commercial benefits of supporting a domestic market that espouses international standards of intellectual property rights and pursues effective enforcement policies. Beijing takes incremental steps to open up investment opportunities to foreign investors and revamps regulatory mechanisms conducive to foreign direct investment. Although corruption still exists, national, provincial and local leaders are compelled to curtail kick-back and nepotistic practices under the public-shaming mechanism of national and local netizen corruption monitor boards. China’s middle class, civil society and social media play an integral role in transforming Chinese society through inculcating universal values and ethical conduct. 

This “Strategic Engagement” scenario is derived from China’s position as a formidable counterweight to the United States in setting international rules.  Beijing understands that as China’s power grows, geopolitical stakes commensurately rise. The need to preserve global stability drives Chinese leaders to seek win-win solutions with the United States and other major powers.


Scenario 2: Polarizing Rivals  

Deep-seated fault-lines in US-China relations become increasingly manifest in the face of unwieldy global security challenges.  A belligerent North Korea, a nuclearized Iran, and conflict in the South China Seas induce heightened regional and global tensions. As a major test of China’s regional and international crisis management skills, Beijing’s recalcitrance and miscalculations collide with Washington’s decisions to take forceful action in containing North Korea, neutralizing Iran, and defusing military escalation in the South China Seas. This scenario magnifies the intense polarization between Beijing and Washington that drives a deeper wedge in regional rivalry and contending worldviews.

With trade sanctions heightening protectionist tendencies between the United States and China, Washington actively engages other East and Southeast Asian capitals to ramp up regional tariff-free trade partnerships, such as the Trans-Pacific Strategic Economic Partnership. Moreover, suspicions toward China’s frequent saber-rattling over of the Spratly Islands motivates Southeast Asian countries to reaffirm US presence in China’s littoral region, thereby balancing China and the United States off one another.

Beijing’s perception that China’s role as a stabilizing force in the region’s prosperity and growth belies its ability to mitigate widespread workers protests and infighting in the upper echelons of China’s leadership. With the United States as its main power rival and ideological opponent, Beijing marshals its cyber-warfare capabilities to damage US IT-based cyber-defense infrastructure and periodically elevates tensions in cross-strait relations as a signal to Taipei and Washington that the People’s Liberation Army is still a key stakeholder in China’s security policy. This scenario magnifies a China riddled with domestic disarray as a result of social reforms gone awry and the Chinese public’s vociferous outcries against government corruption. Internal turmoil drives China to target American values and consumerism as the source of China’s social ills.

Read more about the trip, see pictures, and listen to segments on the Brian Lehrer Show blog.