Future of U.S-China Bilateral Relations

This briefing paper explores the potential future of the relations between the U.S and China, focusing on the impact of the trade war, balance of hard power, and Chinese political liberalization. It discusses the scenarios of supreme bipolarity and status quo, and provides early warning indicators for each scenario.

International Policy
Making

TABLE OF CONTENTS
INTRODUCTION.....................................................................................................................................3
DRIVERS...................................................................................................................................................4
SCENARIO................................................................................................................................................6
POLICY RECOMMENDATION..........................................................................................................10
EARLY WARNING INDICATORS......................................................................................................11
REFERENCES........................................................................................................................................13

INTRODUCTION
What is the future of the U.S-China bilateral relation?
The relationship between the U.S and China is one of the central topic for international
relations in the twenty-first century, and how this relationship will develop over the next 15 years
is highly uncertain. Therefore, this briefing addresses the potential future of the relations
between those dominant nations. The paper is purposed for the audience of the federal
government of the United States of America.
Security, economics, and cultural-educational ties of the US-China for the last four
decades have been broken recently by political trends and the leaders of both countries (Lampton
2019, p 43). China’s outstanding growth has unsurprisingly had a huge impact on the position of
global power from which the United States has since 1945 been leading the liberal world order
(De Gaaff et al 2018, p.123). Especially, the US started to engage in collaboration with China in
economic and cultural field since 1970s regardless of their difference in political ideology. The
current US government has decided to change its strategic tactic against China, possibly because
of the Chinese government is not opening up towards liberalism, and to protect the US economy
from over dependency. Recent worsened relation of those giant nations is clearly expressed by
the widely-discussed “Trade War”. In 2018, the Trump administration imposed import tariffs on
approximately $283 billion of Chinese exports, with rates ranging between 10% and 50%. In
response, China has imposed tariffs in an average of 16% on about $121 billion of US exports,
dropping the U.S into its first episode of large-scale competitive tariff protection since the Great
Depression of the 1930s, and raising questions about the future of international trade integration
(Amiti et al 2019). This year, the trade tension has intensified, and the expected China-US trade
negotiation broke down since May 2019. The US government was goaded into launching an all-
out war on private tech companies like Huawei (Yong 2019, p. 8). According to data of the
Office of the United States Trade representative, China is the USA’s largest goods trading
partner with $659.8 billion in total (two way) goods trade during 2018. The U.S. goods and
services trade with China totaled an estimated $737.1 billion in 2018. Exports were $179.3
billion; imports were $557.9 billion. The U.S top import categories from China in 2018 were:
electrical machinery, machinery, furniture and bedding, toys and sports equipment, and plastics.
The top export categories in 2018 were: aircraft, machinery, electrical machinery, optical and

medical instruments, and vehicles (USTR 2019). Moreover, the U.S has exerted growing
pressure on China on almost all of the issues that are vital to Chinese interests. These include the
South China Sea, Taiwan, Xinjiang, the exchange of education management, visas and
investment in the US (Yong 2019, p. 8). In terms of military build-up, China has seen an
estimated increase in defense spending from about US$10 billion in 1991 to US$215 billion in
2016 and now ranks second in the world (De Graaff et al 2018, p. 119).
DRIVERS
Driver 1: Balance of hard power (economy and military) between the US and China
The balance of hard power that is economic and military power can act as driver. This is
because both are having a supreme economic growth and military power. So, till 2035 the gap
between hard power may reduce. It is due to that Chinese economic growth can increase. Besides
it, the military base of US can also grow at high rate. Thus, both US and China growth may be
similar. Through it, gap may get narrow. There will be a high impact of hard power between US
and china. This is because both countries ae highly competing against each other to become
super power. Due to this there might be change in economic growth of both nations (Eckhard
and Ege, 2016). There can be high imbalance in hard power. So, this may enforce to reduce
gap.
But after 15 years, it might happen that gap in hard power may change rapidly. This is
because in future china economic growth rate may be more than US. It might be due to that US
technology is transferred, educated people, large number of companies, etc. So, these all can
boost economic speed at higher rate. So, it is possible that China economy can be more than US.
Therefore, the gap may increase to a great extent. Likewise, in military power as well China may
exceed than US. It can lead to breaking of alliance between them. Alongside, US may end trade
relation with China. Thus, it can give more power to China to dominate world economy. This
change will highly impact on US economy. The military power can be affected as compared to
china.

Driver 2: The magnitude of Chinese political liberalization
No change in China's political system:
The political liberalisation policies of China and the gap between political culture of both
the nations can act as significant driver in their relation. Since both have different political
culture there are higher possibilities of US- China conflict with the increasing growth of China.
China has autocratic political system while US has democratic which makes them to have
different perspectives in terms of expansion and growth propaganda (Fang and Lu, 2015). China'
political and control system lacks transparency and complex outlook for human rights
perspective which is also observed in its military functions. In Asia, US has huge series of
bilateral alliances with individual countries.
The alliance with US gives a strong financial and military support to Asian countries as
well as authority to US to intermediate in the matter. However, China does not have any such
Gap in hard power
narrow gradually
Gap in hard power
change rapidly
No change in
China's political
system
Liberalized
political system of
China
Peaceful
world order Status quo
Uncertainty Supreme
bipolarity

alliances and most of the Chinese policies are very restricted in terms of liberalisation. They are
primarily seems to be opposed of such alliances. Such type of liberalisation in political
commitments and alliances can bring conflicts with China. Since Chinese alliances does not
provide any such commitment of military or cultural protection the commitments from US to the
other Asian regions can be one of the prime reason to cause dispute between the two. China and
US both have significant international presence and thus their commitment towards such
institutes impose various constraints to eliminate the conflict or war possibilities between the
two.
Liberalisation political system of China:
Few years ago, China has been one of the countries which showed intensive compliance
with the regulations and norms of international standards. However, with the exiting Chinese
role and liberalisation policies it has been observed that China is increasingly and strongly
challenging various aspects of international standards which are led by US. In the next 15 years
there will be no change in the liberalisation policies of China. However, in the long history
current president of China Xi Jinping is considered as leader with global vision. The Chinese
development model of authoritarian political system may gain more traction against
liberalisation concepts which are long promoted by US. The China is emphasising and working
on global governance vision which differs from liberal democratic system. It recognises the
limitations of state authorities like international laws and rights of individuals. The existing
political system of China has revealing leadership statements which convey the intentions
throughout government hierarchy and Chinese communist party. For this purpose, China is also
adopting institutional strategy so that it can balance the dominant position and influence of US.
Through the approaches such as Asian infrastructure investment bank, belt road initiative it is
expected China is trying to create its own set of international and regional institute and may also
get gain success in it.
SCENARIO
Scenario 1- Supreme bipolarity
By 2035, US and China trade war may result in cold war. This is because the conflict
might become worse. Also, both countries may not deal with each other from long time.
However, political tension may rise that can highly impact on growth and development. Beside
this, war can be in terms of political, economic and other (Härter and et.al., 2017). There will be

a great impact on GDP of nation. In long term for gaining competitive advantage the countries
will have to depend on other nations. Moreover, cold war will put pressure on nation to resolve
it. Basically, war may have adverse affect on society as well. It might be possible that cold war
can lead to use of military and weapons. In the end there will be high burden on US and china
companies. They may have to look out for alternative options or change strategies for import and
export. Furthermore, US firms operating in china may face huge loss. This is because Chinese
government may form new tariff and trade policies. Similarly, foreign businesses may have to
look up for other options.
Furthermore, to gain supreme bipolarity US and China can attack. By 2035, by getting
influence from both nations, other countries may also support either US or China. In this way, a
group can be formed due to which communism is evolved. It may change political involvement
of nations. If cold war remains for long time, it may never end.
Similarly, with cold war between US and china many other countries political relations
may also be impacted. China can force other nations to be included in cold war. However, for
obtaining greater power status they can harm each other through military war. So, it might lead
to rise in critical consequences. Cold war might bring drastic changes in entire world. In order to
end this, one nation might have to do peaceful agreement. Also, china may have to pay more tax
to deal with other countries. Hence, dominance of china will remain in Asian countries only such
as Hong Kong, Malaysia, etc. this can bring drastic changes on china economy (Lundgren,
Squatrito and Tallberg, 2018). Apart from it, till 2035 cold war may impact on developing
countries economy like India in positive way. The nation GDP may grow at high rate as compare
to china.
Early warning indicators-
There are many indicators that above situation may happen. This is because of Donald
trump is highly forcing china to pay more tax on exports. He wants to reduce Chinese market and
products in US. So, in coming US election 2020, if Donald trump wins then more taxes will be
imposed. Another indicator is dealing with other developing nation by US. Hence, it has boosted
US economy. In addition, there is downfall in GDP of china (Richardson and Mazey, 2015). So,
it has reduced total value of import and export. Thus, with 45% tariff rate there is high impact on
both nations.

Scenario 2: Status quo
With increasing trade and military power and dominance in Asia US may no longer retain
the capability to fulfil its traditional role of “off shore balancer” and to provide regional order.
China's border related issues with its neighbouring countries are well known and China stands
firmly on them without seeking any interference from US. Thus their stronger relation withdraw
US from being acting as mediator in cross boundaries issues related to China. However China
lacks the ability of global leadership and its existing soft power deficit can help US to retain its
dominance unchallenged. In next 10-15 years US china relation may affect negatively in the
rivalry of establishing supremacy among other Asian countries particularly in the matter of cross
boundary issues.
Assertive behaviour of China in East and South China sea may become more visible and
concerning issue can involve US in territorial disputes related to regional maritime. By 2025 the
increasing competition between US and China for capturing western Pacific region may become
more fierce and can result in extreme inclusion of military dimensions to achieve the goals of
geopolitical expansion (Fang and Lu, 2015). Another indicator or flash point for rivalry in
dominance is India. The strategic rapprochement of India with US, Indo-China issues related to
China's road and belt initiative, increasing dominance of India in G20, United Nations and other
forums of developing nations is creating tension between China and India. The rivalry between
two nations can affect the intermediator role played by US.
The consequence shift in power and continuous expansion and rise of power can act as
major and critical challenge in international order. The Chinese economy has been developing at
sustainable rate and thus by 2030 it may become capable to challenge the international systems
for power distribution which is currently controlled by US. The international institutions may
also observe situations in which power and decisions of US may conflict with each other (Patel
and et.al., 2017).
Another important issue which may create tension in next 15 years is economic
liberalism. US has bilateral relations with most of the Asian countries which allow it to play an
active role in international institutes and regional conflicts of Asia. However Chinese leaders
does not have any such significant bilateral relations in terms of economic support. Contrary to
this with globalisation interdependency of countries is increasing in terms of economy. The
Chinese economy is flourished and have potential to maintain good trade relations with other

nations of world (Yu and et.al., 2016). The increasing economy dependency of China with
remaining parts of the world can challenge centralised power hold by US. The assertive rhetoric
approach, increasing military and nuclear power force used by China for resolving its territorial
disputes indicates its strong opinion for changing the international system of US intervene. In
future it may take more serious form and China can also seek support from other rival countries
which are against US.
Early warning indicator
Taiwan act as the key flash point which may witness and demonstrate the political rivalry
in US China relations. The existing and expected policies of US towards Taiwan and other
conflicting Asian countries depends greatly upon strategic aspects emphasising the broad Asian
region. Thus, in future the liberal attitude of US towards Asian countries who have border issues
with China can lead to open rivalry between the two nations. The leadership style of Chinese
president is constrained by various domestic issues and increased interdependence of US china
relations. These constraints limit the possibility of Chinese confrontation with US.
Along with the developed countries most of the developing countries are also heading
towards their nuclear resources. For encouraging peace, US can make efforts to make China
modernise its nuclear forces. From long time China has been demonstrating a medium level of
dissatisfaction with the power distribution and its position in international institutes. It is
gradually trending towards high level of dissatisfaction. It indicates that there may rise a strong
and non-suppressing demand from China to establish a more cooperative and partnership based
international authorities. It will indirectly challenge the existing supremacy of the US power.
EARLY WARNING INDICATORS
The analysis suggests that US – China relations have higher possibility of peaceful
relations. The first indicator which indicates the very low possibility of war between the two
nations is economic ties. Another critical indicator which can be taken into account is US
defence alliances to allies in Asian region (Zhang and et.al., 2019). The increasing extent and US
alliance with the conflicting regions and interest area of China can be potential indicator of rising
conflict between the two. However domestic political system and their implications in term of
power dissatisfaction can be reason for deteriorating the relations between two.
However contrary to this it is also observed that these factors are often balanced by other
elements such as nuclear weapons, sustainable domestic growth and institutional constraints can

are also important factors in demonstrating the future of US China relationship. China holds
strong position in terms of its technology, nuclear resources and sustained growth which does not
interfere with the economic or political growth of US. Thus, it can balance the war or conflict
possibilities and can shift this relationship towards peace. The major powers of the world are
having a slow pace geopolitical competition and in the coming decades some other developing
countries or rising powers may also join the competition. Though great powers may not seek or
opt for a direct or weapon based war but they are competing against each other using various
tools (Chen, Gao and Wang, 2019). There has been increase in this competition via economic
war, cyber war and attacks which is most advanced and threatening challenge, proxy war are
becoming quite common. The technology war between US and China indicates that in future
both of these nations can also use variety of tools for challenging each other. Though both the
nations may not have direct issues with each other but they may involve in deteriorating relations
on the basis of power distribution and increasing superiority on international level and Asian
region.
POLICY RECOMMENDATION
A policy should be formed to resolve trade war. This will be useful for both US and
china. The recommendations are :-
Policy recommendation- WTO trade practices
US and china should follow WTO trade practices which will enable in trading easily. The
practices adhere countries to trade in fair way. It will enable in balancing economic power
between both nations. Moreover, by signing an agreement it will be easy to deal in import and
export. The involvement of WTO in policy forming can be beneficial. Also, restrictions should
be set along with pricing policy. Trade deficit must be decided which will be useful in balancing
economic power. For example- if specific trade deficit of particular nation is achieved then
certain measures must be taken. However, partnership agreement should be signed by US and
china. The WTO should help out resolving trade war (Smith, Hadfield, A. and Dunne, 2016).
Likewise, in policy related to investment and transfer of technology should be formed. This will
help in reforming trade relations of between them. Here, a different stance can be adopted by
WTO to cooperate with US and china. This can be done by integrating resources and taking
certain initiatives.

Policy recommendation -Trade policy
This should also be done by US and china. They should form trade policy that contain set
of rules and regulations. The US and Chinese government should work towards signing an
agreement. Through this, trade relations can be improved. This will benefit both nation and
remove barriers of trade war. Furthermore, this will bring shift in economic power of US and
china. Apart from it, in policy terms and conditions should be formed, tax and tariff rate must be
decided. The policy will stimulate trade and foreign investment in them. It should be based on
economic and political reforms. Thus, by having a full trade free agreement it will benefit in
growth in GDP. A strong economic relation will boost global economy (Wallace, Pollack and
Young, 2015). Moreover, it will also benefit European and other countries GDP. They will also
focus on trading with China and US. Here, military power is not major concern, thus it provides
security to trade freely. The policy will limit entry of products and companies in their economy.
EARLY WARNING INDICATORS
The analysis suggests that US – China relations have higher possibility of peaceful
relations. The first indicator which indicates the very low possibility of war between the two
nations is economic ties. Another critical indicator which can be taken into account is US
defence alliances to allies in Asian region (Zhang and et.al., 2019). The increasing extent and US
alliance with the conflicting regions and interest area of China can be potential indicator of rising
conflict between the two. However domestic political system and their implications in term of
power dissatisfaction can be reason for deteriorating the relations between two.
However contrary to this it is also observed that these factors are often balanced by other
elements such as nuclear weapons, sustainable domestic growth and institutional constraints can
are also important factors in demonstrating the future of US China relationship. China holds
strong position in terms of its technology, nuclear resources and sustained growth which does not
interfere with the economic or political growth of US.
Thus, it can balance the war or conflict possibilities and can shift this relationship
towards peace. The major powers of the world are having a slow pace geopolitical competition
and in the coming decades some other developing countries or rising powers may also join the
competition. Though great powers may not seek or opt for a direct or weapon based war but they
are competing against each other using various tools (Chen, Gao and Wang, 2019). There has
been increase in this competition via economic war, cyber war and attacks which is most

advanced and threatening challenge, proxy war is becoming quite common. The technology war
between US and China indicates that in future both of these nations can also use variety of tools
for challenging each other. Though both the nations may not have direct issues with each other
but they may involve in deteriorating relations on the basis of power distribution and increasing
superiority on international level and Asian region.

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