The Unspoken Key in the Relationship Between the U.S. and China

Henry Kissinger has words of wisdom:

The 21st century requires an institutional structure appropriate for its time. The nations bordering the Pacific have a stronger sense of national identity than did the European countries emerging from the Second World War. They must not slide into a 21st-century version of classic balance-of-power politics. It would be especially pernicious if opposing blocs were to form on each side of the Pacific. While the center of gravity of international affairs shifts to Asia, and America finds a new role distinct from hegemony yet compatible with leadership, we need a vision of a Pacific structure based on close cooperation between America and China but also broad enough to enable other countries bordering the Pacific to fulfill their aspirations.

The subject of China, as readers of this blog know, and Henry Kissinger is of special interest because a) of my business dealings in China in the early 1980’s, and b) Paul Speltz, Kissinger Associates’ President, is one of the people who facilitated those dealings.

Kissinger also observes that “Historically, China and America have been hegemonic powers able to set their own agendas essentially unilaterally. They are not accustomed to close alliances or consultative procedures restricting their freedom of action on the basis of equality.”  Unlike the British, neither country has a long history of extraterritorial imperialism.  Both tend to be inwardly focused and self-contained.  That makes for an interesting pas de deux.

That leads me to the following:

  1. I don’t see the emergence of a cross-ocean rivallry, with “opposing blocs…on each side of the Pacific.”  The other players are arranged in too complicated of a fashion.  In Asia, the Sino-Japanese feud, which worked so much to my own business advantage, will always complicate things in East Asia, as will the latent fear of Chinese hegemony amongst the nations and people surrounding China.  On our side, Latin America has likewise had a similar complicated relationship with the U.S., and the Chinese are working that region very intensively.
  2. The key to the outcome of this relationship depends upon the economic course of the respective nations.  Will the U.S. debt, of which the Chinese hold a significant portion, sink the U.S.?  (Or, more accurately, when.)  What impact will that have on China?  Will China’s economic progress allow it to loosen its dependence on the U.S., as Kissinger implies?  Can China redeem its debt via equity in U.S. assets?

Unless someone really loses their composure here, I don’t see a major conflagration between the two.  But which one will move forward?  Personally I think the Chinese have the advantage right at the moment, but they, as always, are subject to sudden and unpredictable changes.

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