The Relationship Between China and the United States, Research Paper Example

Presently China and the United States of America represent the two biggest economies in human history. This positions the two of them as the most powerful countries on Earth, whose combined dominance shows no signs of stopping. For this reason, the two of them have both influence and interest in many of the same global issues. Yet, they are not always allies and not always enemies. Their economic interactions ensures some level of cooperation, but their goals are divergent in many cases. Economically, the two are largely dependent on each other; while seeing each other as political rivals. The rise of China is changing this and bringing instability to their relationship.
The beginning of the modern relations between the two superpowers began in 1949, when China officially became the People’s Republic of China, a communist nation. As this was early in the Cold War era, the United States was against the rise of a new communist nation and continued to recognize the former Chinese government, now exiled in Taiwan as the legitimate rulers of China. This lasted until China and the Soviet Union had a falling out and the United States and China began diplomatic relations due to their shared enemy (Begleiter). Since then, their economic integration has made their relationship into the most significant in the world.

The two countries today are hugely reliant on each other for their individual economic success. China has undergone historic levels of growth over the past decades, largely being fueled by manufacturing goods for export. The United States is the largest export market for them, making their consumer demand one of the catalysts for China’s growth. China not only produces goods the American economy is dependent on, but they are also the third largest export market for the Americans. This relationship has grown significantly since the countries began diplomatic relations in the 1970s. In 1970, total trade between the two was worth two billion American dollars, while in 2010 it was four hundred and fifty seven billion (Morrison).

Many Americans are wary of the level of economic integration between the two nations. For one, China has an abundance of low cost labor, which has been essential in their growth as an economic power. This means that that it is often cheaper for western countries to manufacture in China even including the additional transportation costs associated with the process. This is often cited as a reason for the decline of the American manufacturing sector, as higher paid manufacturing workers are being replaced by counterparts across the globe. This effect can be seen in the trade deficit between the two, which shows that Americans import from China over two hundred billion dollars of goods more than they export to the country (Morrison). To some, this is a sign of Americans sending money to China that does not return to the country.

While the current government of China is descended from the same group that introduced Communism to the country, they have taken many market reforms recently. These have been essential to their explosive economic growth. However, there remains levels of state involvement that are not seen in most market economies. Many industries are dominated by companies that are still publicly owned and tasked with growing the Chinese economy over their own profits. The hybrid system existing in China is known as state capitalism, and often times the government involvement in the economy is the source of contention between China and the United States.

One example of the Chinese government’s intervention in their economy that causes friction between the two countries is their devaluation of their currency, the yuan. The Chinese currency is pegged to a certain value against the dollar at all times, and the government uses yuan to buy bonds and other financial assets to maintain a low value for the yuan against other currencies. This means those currencies can buy more Chinese goods, supporting the export driven economy of the Chinese, while making it more difficult for imports into China, as the yuan buys fewer goods from other countries. Although the Chinese insisted this policy was essential to ensure stability by removing any threat of overly fluctuating currency values, they have allowed the yuan value to become more flexible recently, perhaps because of pressure from the United States and other western countries (McLaughlin).

Another area where the contention between the two countries often plays out is in World Trade Organization negotiations. The WTO is the inter-governmental organization tasked with helping to promote free trade between countries. China was in negotiations to become a member between 1986 and 2001. Membership ensures that no other WTO member can apply a higher tariff to Chinese goods than they apply to goods from other trading partners. This meant that the Chinese would have faced substantially lower tariffs as members of the WTO than they did without membership. Due to their extreme need for low tariffs to support their export driven economy, this was seen as a possible significant boom to their economy. However, the negotiations were used as a platform in which WTO members were able to voice their concerns with Chinese economic policies.

In the extended negotiations regarding Chinese membership, the main source of contention was over what kind of country China should be considered. China wanted to be considered a developing nation, as the country did have poverty rates matching those of the developing world at the time. This desire was fueled by the fact that developing nations are given more favorable terms in the WTO. However, the United States was one country to insist on much more stringent terms for their membership. This debate was the main source of contention that lead to the China negotiations stretching out for fifteen years (Ianchovichina).

The final result of the negotiations was a compromise in which China was forced to open up their economy more to foreign interests. By the end of 2006, China was required to have a finance system that foreign interests could operate in. Tariffs were lowered, as were agricultural subsidies. On top of that, they had to agree to enforce global intellectual property laws and allow foreign firms better treatment within China (Morrison). These commitments to market reforms in China furthered the integration between the two countries, as they became a better trading partner for market economies, such as the United States.

Another economic area in which the two countries interact is in regards to American debt levels. The United States Treasury sells bonds to cover the American federal government’s debt, which stands at about fourteen trillion dollars. The Chinese own over one trillion dollars worth of that debt, which is one of the mechanisms they use to try and maintain a certain yuan to dollar value ratio (Treasury Department). The Americans benefit from this arrangement as well, because ultimately the Chinese drive up demand for the treasury bonds, meaning they can be sold at lower interest rates. Some have theorized that these debt holdings give the Chinese extreme amounts of leverage over the United States government, who are dependent on the Chinese buying their debt in this theory. However, based on the American ability to influence the Chinese WTO organizations and secure some terms from China, it seems clear that they are still able to act in their own interests without fear of China no longer buying their bonds.

In terms of economics, the two countries are closely aligned with one another. Both benefit from global growth, aligning their views there. On top of that, their large amounts of trade benefit each side. The Chinese are dependent on the Americans to provide them with a large export market for their economy, although their growing middle class has made a domestic economy more possible. The United States in turn receives lower prices when goods are manufactured in China, giving their citizens more purchasing power. There are certainly times when the two are at odds, as seen in the WTO organizations and the yuan dollar exchange controversy, but largely their interests align. This promotes economic cooperation between the two and will continue to influence their policies for time to come.

However, the foreign policies of the two countries can and does often collide, especially in Asia. China sees this region as within their sphere of influence, but the United States also sees their interests in the balance in the region and acts there as well. Conflicts between the two in this region began almost immediately after the People’s Republic of China came into existence in 1949. Just a year later the Korean War broke out, with the Chinese, along with the Soviets supporting the communists in North Korea. The United States supported the South Koreans in the conflict, which ended with a ceasefire in 1953. Today, the Korean peninsula is still divided, and still drives a wedge between China and Americans on occasion.

The history of North Korea since it was established has been one in which they continue to become more isolated within the international community. Constantly, the nation is being put under sanctions by inter-governmental organizations, especially due to its nuclear program under former leader Kim Jong Il. Increasingly, China has become the only ally the North Koreans have, which does not sit well with the Americans, who have accused the Chinese of supporting the nuclear ambitions of North Korea. On top of this, occasional signs of aggression or instability from North Korea add to the tension between China and the United States in Asia.

One potential situation that could have untold effects on Chinese and United States relations is the end of North Korea as an independent country. The country’s economy is exceedingly poor and its relation with the rest of the world is always deteriorating, exacerbating the already present issues with their economy. At some point, it seems likely that North Korea will no longer be sustainable and something will occur to end it. This would likely throw the region into disarray, as millions of North Koreans would look to escape one of the poorest countries on Earth to one of its considerably richer neighbors. Currently, the United States and China have no coordinated plan on how to deal with this potential issue and both would certainly like to get as much influence into the future of North Korea as possible. It is undoubtable that if this event occurs before any plan is coordinated, that the two countries will come into conflict over the best way to deal with it, as both will have a different vision of what North Korea’s future will be.

Another country where the two are constantly at odds with one another is in regards to Taiwan, or Chinese Taipei. When the People’s Republic of China was formed, the leaders of the Republic of China fled to the island of Taiwan, which they still rule. The United States originally did not recognize the new government of China, insisting that the Taiwanese government still had domain over China and blocking the Chinese from getting a place in the United Nations for twenty years. Since the China and Soviet split, the United States warmed to China and allowed them to join the international community. Despite this, the Americans are still strong allies to Taiwan, which the Chinese government denounces strongly. China has threatened sanctions against the Americans, who very delicately state their support for Taiwan for this reason (Glaser).

The Chinese issue with the Taiwan-United States alliance goes beyond their refusal to acknowledge the Taiwanese government, but also their view on United States encroachment into their region of Asia. The United States maintains strong alliances with many countries in the continent and in the Pacific Ocean region. Japan, Philippines, South Korea, Taiwan, and Australia are all main allies of the United States that maintain some level of proximity to China. The Chinese often feel threatened by this, and have accused the United States of an encirclement conspiracy. According to that theory, the United States wants to make as many countries around China into their allies as possible, to make themselves the dominant force in the region. This would cut off China’s power in what should be their main sphere of influence, and permanently limit their global influence if successful. Americans deny this theory, seeing their actions in Asia as standard foreign policy maneuvers (Buckley).

Another issue between the two countries comes from their disputes about each other’s records on human rights. The Chinese government is often accused by many others, including the United States, of human rights violations. Specifically, they work to limit free speech in their country, especially dissenters against the government. On top of that, their presence in Tibet is often criticized by the international community. China is often listed as a human rights violator in the State Department’s annual report on such violations. In response, China began publishing their own report on human rights violations committed by the United States.

The sizes of both nations’ militaries are very telling about how they truly feel about the other’s intentions. They easily rank number one and two in terms of expenditures on military, yet both continue to expand on that (Sipri). China announced earlier this year, an eleven percent increase in their own military expenditures (Perlez). With no other countries on Earth capable of matching either of their military capabilities, there is reason to believe that their expansions are undertaken with the other nation in mind. Simply, if there is no one else in the world can threaten either country, what is the rationale for their increased spending? They must be in some way worried about the military presence of the other. This may not necessarily be in preparation for armed conflict, but just for leverage in other interactions between China and America. This arms race is reminiscent of the same kind that was undertaken during the Cold War, although with less obvious hostility between the two.

The relationship between the two superpowers in terms of foreign policy can be described as uneasy. Both see themselves as powerful enough to have great deals of influence on global affairs, and both manage to exert that influence. However, this means the two are usually coming into conflict with one another as they both end up in the same spheres, trying to change certain policies at odds with one another. There is however certainly an effort by both countries to not upset the other. The United States certainly feels a different way about the situation in Taiwan than they will publicly admit, which is obviously a case of them trying not to anger the Chinese. This is likely because they both see the benefit of avoiding a larger conflict.
The current state of the Chinese and American relations is unlikely to remain for much longer. The two countries often go out of their way to avoid upsetting the other, but China continues to grow economically at an extremely rapid pace. Economic growth should lead to an expansion of their military power and their standing in the international community. While we currently have a slightly uneasy peace between the two, China’s growth is going to continuously change and destabilize that relationship between the two. It is impossible to predict with any certainty what will become of the relationship in the future, but it is safe to say that China’s continued growth will change it and perhaps in a way that will increase tensions between the two.

There are almost two different relations between these two countries. On the economic side, there are certainly disagreements, but the two are in a mutually beneficial relationship and both recognize it. For this reason, they may come into conflict on issues on occasions, but both are aware that they need each other and are hesitant to truly upset the other. The foreign policies of the two are much more uneasy in relation to one another. Both seem to distrust the other and seek to limit the others influence, but neither is willing to seriously condemn the other publicly. However, the two relations really are not separate. The economic side clearly influences the foreign policy side, and is perhaps the reason that both countries seek to appear friendly towards one another, even when they may otherwise have reason for aggression. As of now, the relationship between the two is working relatively peacefully, but the growth of China can change all of that and leaves the future between the two as completely unpredictable.

References

Begleiter, Ralph. “U.S. and China Share Long History of Distrust.” CNN. 24 May 1999. Web. 03 June 2012. <http://articles.cnn.com/1999-05-24/us/9905_24_china.trust_1_sinoamericanrelationship-china-winston-lord?_s=PM:US>.

Buckley, Chris. “PLA Researcher Says US Aims to Encircle China.” Reuters. Web. 3 June 2012. <http://www.reuters.com/article/2011/11/28/us-china-usa-plaidUSTRE7AR07Q20111128>.

Glaser, Bonnie S. “U.S.-China-Taiwan Relations in the Run-up to 2012 Elections in Taiwan and the U.S. and Leadership Transition in China *.” Web. 3 June 2012. <http://csis.org/files/publication/Glaser%20US-Taiwan-China%20Carnegie%207-7 11.pdf>.

Ianchovichina, Elene, and Will Martin. “Trade Liberalization in China’s Accession to the World Trade Organization.” World Bank (June 2001). Print.

“Major Foreign Holders of Treasury Securities.” Treasury Department. Web. 03 June 2012. <http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt>.

McLaughlin, Kathleen E. “China Yuan Devaluation: A Delicate Dance.” GlobalPost. 21 June 2010. Web. 03 June 2012. <http://www.globalpost.com/dispatch/china-and-itsneighbors/100621/yuan-devaluation>.

Morrison, Wayne M. “China-U.S. Trade Issues.” Congressional Research Service. Web. 3 June 2012. <http://www.fas.org/sgp/crs/row/RL33536.pdf>.

Perlez, Jane. “Continuing Buildup, China Increases Military Spending More Than 11 Percent.” The New York Times. 05 Mar. 2012. Web. 03 June 2012. <http://www.nytimes.com/2012/03/05/world/asia/china-boosts-military-spending-more than-11-percent.html>.

“The 15 Major Spender Countries in 2011 (table).” â?? Www.sipri.org. Stockholm International Peace Research Institute. Web. 03 June 2012. <http://www.sipri.org/research/armaments/milex/resultoutput/milex_15>.