Over much of the past decade, the economic relationship between China and the United States has been that of mutually beneficial exchange. However, as China’s pervasive economic influence in the Asian region grows, major rifts have risen over issues of economic, political and security matters. With the pressure of the great recession, both countries resentful of the growing debt, demand policy changes of each other to avoid contentious behavior and bring about a balance of power, however, the proverbial demands from China are unsustainable and with America being the current vulnerable power, the economic stability of the international economy is once again at stake as both economies remain dependent on each other in their struggle to develop their domestic economic growth as well as gain dominance in the power struggle of the status quo world order.
The bilateral economic relationship between the U.S and China makes them dependent on each other because both countries import, export and exchange goods leading to a trade surplus. China exports almost $337.8 billion dollars worth of goods to the United States out of the $2.19 trillion dollars which are exported to it yearly making Chinese imports almost 15% of the U.S market. Goods like apparel, footwear, computers and parts, toys, televisions and furniture are some of the many things with the “made in China” stamp found in our markets. However, the United States is not heavily dependent on cheap goods from China because it is very well able to manufacture the same goods on its own. As explained by Steven Dunaway of CFR, “The prices for goods that could substitute for products from China would be higher, but the difference in costs would be relatively small” meaning it would not be impossible to overcome imports from China if they were to ever decrease or stop (Dunaway). China on the other hand imports $1.6 trillion dollars worth of goods, $71.4 billion of which are from the United States, the top five imports being soybeans, semiconductors, civilian aircrafts, plastic materials and copper. In relation to the United States’ imports from China, not even 7% of Chinese imports are from the U.S (mint.com visual). However, China is highly dependent on U.S demand for its products as well as the supplies it imports from them.
China has accumulated billions of U.S dollars but instead of cashing its earnings, it lent much of it back to the U.S to help finance Americas banks and federal deficits. America, still trying to climb out of its recession has been unable to pay back the Chinese and has instead invested more into its own economy through the federal health care bill and by bailing out wall street. China has threatened to cut back on the massive buying of treasury bonds that Washington depends on to finance its deficit and if the U.S “doesn’t curb its widening deficit and stop badgering China to make concessions on currency and export policies, Beijing may begin dumping dollars” (Lee and Pierson). Some economists believe that such a response could damage the recovery of the recession while others argue that this would lead to China incurring a substantial capital loss on its reserve assets making them highly unlikely to dump U.S assets.
China’s practice of protectionism to protect the free market limits free trade and so other businesses suffer. Its efforts to promote local industries has undercut competition from other countries hampering the worlds efforts to fully open the international economy and let free trade persist and dominate by allowing outside companies less room to compete. Due to this, major rifts between the US and China have risen “about the depth of China’s leadership to reform, of completing the transition” and to further open more markets (Schneider). Also, Chinas insistence on defending its own domestic economy by encouraging the purchase of Chinese goods within its borders protects its own “national companies at the detriment of American companies” (Cooper and Landler). American multinational corporations are hurt by these regulations as Chinese companies are openly favored over foreign ones leading to foreign companies being cut out of contracts from the worlds fastest growing economy.
Another problem between China and the U.S is the current currency dispute which is one of the biggest issues surrounding relations between the two countries. China is accused of undervaluing its currency to avoid bringing a change to the trade balance between the two countries as it would lessen the U.S’s deficit to China greatly. Also, by keeping the value of Chinese currency artificially low, it is acting as an illegal subsidy to China’s exporting manufacturers bringing in more revenue. By intervening in currency markets, China is unfairly competing with enterprises from other countries taking all the revenue by dramatically lowering the cost of their own production. The U.S is threatening to impose tariffs on Chinese imports until China properly values its currency which is currently between 25 and 40% undervalued against the dollar (Duncan). These tariffs in turn would make China’s products more expensive and limit their demand, leading to damaging China’s economy in the long run. If China does not properly value its currency, other countries may too, out of desperation to increase exports, subsidize their currency, leading to a rise in protectionism which would hinder free trade and the international economy as a whole. For “a nation like China that has staked its entire economic future on the existence of robust global trade”, this could backfire for the worst and leave the country in turmoil (Prasad). This external pressure aimed at China to properly value its currency is crucial as it is this very pressure which stresses a country to reform its public policies.
The second major political rift between China and the United States is that of the issues of the recognition of Taiwan, and China standing fast against America’s demand for tougher Security Council sanctions against Iran. The United States of America, though not publicly acknowledging Taiwan as a separate country, gives it military aid to defend itself against the possibility of the use of force against it by China due to it being a pluralistic, liberal democracy and its lack of sympathy against communism during the Cold War. The U.S has stated a commitment to a One China Policy where it acknowledges Taiwan as a part of China but the strength of this commitment varies between administrations as they change. When the Obama administration announced its decision to sell an arms sales package to Taiwan worth $6 billion on January 30th 2010, it was considered a “direct strike at the heart of the most sensitive diplomatic issue between the two countries since America affirmed the One China Policy in 1972” and its commitment of the One China Policy was questioned (Cooper). The Obama Administration, choosing to act in favor of protecting their own national security interests first, sent a stern message to the Chinese administration demonstrating the firmness of their position in regards to China and democracy in response to China’s position on Iran and its nuclear weapons program.
Other issues that the United States has to deal with China on politically are climate change, Iran and North Korea. Americas demand that China agree to an international monitoring system for emissions targets was a power struggle as both countries were trying to undermine each others authorities to show the world who asserted more power in this struggle to gain economic and political dominance in the status quo world order. We are now in a time of super power politics and the two biggest contenders are the United States and China. In order for one to win, the other must be snubbed and so the power struggle will continue until one reaches dominance (Dellios).
The US and China came to terms and decided it was best to pose sanctions on Iran to keep nuclear materials out of terrorist hands and improve nuclear security (Guardian). As for the case of North Korea, China, forced to be an ally to protect its borders from an influx of refugees as well as an economic supplier, keeps pressure on the country low. However, “Obama warned his Chinese counterpart, President Hu Jintao, that if Beijing did not step up pressure on North Korea, Washington would redeploy its forces in Asia to protect itself from a potential North Korean stroke on U.S soil” (Laurence and Mason). A resolve of the third political issue of climate change between the two countries was paved as they agreed to “enhanced cooperation on climate change, clean energy and the environment” this past January 2011 (White House).
As for the issue of security and military, fundamental questions of war and peace have been raised. Currently, the military budget of the United States far surpasses the military budget of all the countries in the world combined. According to the Peoples Republic of China’s government, China spend $45 billion on defense in 2007. In contrast, the United States had a $623 billion budget for the military in 2008. In terms of developing a military, China poses little threat to the United States, the strongest military in the world. However, the development of China’s Air Force capabilities which have modernized significantly in the past ten years poses a threat of war against Taiwan which would present a significant obstacle to U.S’ success in such a conflict. China has also developed and modernized its defense industries by developing a range of air-transportable and air-droppable vehicles, “suggesting a desire to increase the ground combat capabilities of the airborne forces. The potential utility of increased airborne capabilities in an invasion of Taiwan is clear, as the greatest challenge in such an operation would be transporting ground forces across the water that separates Taiwan from China” (RAND). This suggests that if China’s military continues to develop and modernize at the rate that it is now, it would pose a threat to U.S military dominance in the east and weakening the dominance of the U.S military on a global scale.
Due to China’s race for economic dominance by increasing and strengthening its domestic market, American multinational corporations are weakened leading to a disruption of the free market and eventually a trade deficit for the United States leading to a weaker currency. The undergoing power struggle between the two nations depends on economic victory and so the bilateral relationship between the two countries which is keeping their respective economies afloat is in reality, what makes them most vulnerable to each other and is what is hindering them from gaining total political dominance. China’s rapidly developing military threatens Americas dominance over the eastern hemisphere thus directly challenging their place as the worlds super power in the status quo of the world order. This delicate balance between give and take is what is keeping the U.S and China in a very critically challenging position, fighting for their place on the top. What sets China apart from the United States and may very well make it a victorious world power is its focus on its own people. It is hindering international economic growth for the sake of domestic economic growth. Although it does have a human rights violations track record, the country is providing enriching opportunities to its people in the form of bank loans and other subsidies leading to a stunning improvement in the country’s standard of living for many of its urban occupying people. It works to further and benefit China’s cultural and political forms (Kakutani). In comparison to the United States, who has yet to make jobs for its people and while a new health care law was passed promising health care to more Americans, I was denied my own due to having too much money in my bank account; if $4000 is really too much. Where the United States went wrong was that as a super power of the world enthusiastically trying to take care of weaker nations who it with personal incentives and gain, it forgot to take care of its own people. I see China, a leading innovator yet expansionists, inventing a whole new standard for success in the world and though undoubtedly unjust and possibly brutal, will lead to a substantial change in the world for the better but with the Chinese at the forefront, the rest will be diluted in to the background and made to become the rest of China.
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