America is up – and China is down – in Asia

Time and momentum are on our side, ”Chinese President Xi Jinping said in January. But this year’s developments have not confirmed Xi’s confidence in China’s relentless rise. A number of structural weaknesses have weighed on China’s outlook: a rapidly aging population, vulnerability to climate change, heavy debt loads, and an increasingly withdrawn political system. The might of the United States, on the other hand, has grown by a larger margin over the past year than that of any other country in the Indo-Pacific.

In 2021, according to the Lowy Institute Power index in Asia—An annual data-driven assessment that measures national resources and international influence to rank the relative power of states in the Indo-Pacific –Beijing lost ground in half of the index’s power measures, including diplomatic influence, cultural influence, economic capacity and future resources. During the same period, Washington recorded its first annual aggregate power gain since the index launched in 2018.

The United States exercises more, more multidimensional power– military capabilities and defense networks with diplomatic and cultural influence – than any other country in the world. Equally important, the United States this year outperformed China in the future resource measure of the index, a combined assessment of the projected distribution of economic and military capabilities and demographic strength in the future. That the United States remain the leading power in the Indo-Pacific for decades to come depends on how he plays his cards. Yet it’s already clear that China will never be as dominant as the United States once was. A bipolar future is looming.

INDO-PACIFIC POWER STARTS AT HOME

Much of the improved performance of the United States in 2021 is the result of national renewal and a successful coalition. President Joe Biden emphasized that success in foreign policy begins at home. The new administration has made significant progress in the fight against COVID-19, investing in infrastructure and stimulating the U.S. economy – the only major global economy that is now expected to be larger in 2030 than predicted before. the pandemic.

The faster-than-expected US economic recovery coincided with growing headwinds in China. China’s economic growth is slowing from eight percent a year ten years ago to a “new normal” of just over four percent a year expected by the end of this decade. Even at this rate, China’s GDP at market exchange rates will still exceed that of the United States. But there are inherent limits to how quickly China can continue to grow beyond 2030. Its workforce is expected to contract nearly 20% from current levels by mid-century. and there are few policy levers to reverse China’s declining labor force. population. Productivity growth is slowing, and China’s heavy investment approach to stimulating the economy will produce diminishing returns over time. What is more, according to some estimates, Beijing spends more to project its power inward, on internal security, than outward, on military spending.

But inner strength is only half the story. Just as important as what a superpower has is what it does with what it has. Washington has redoubled its emphasis on allies and partners as a force multiplier for American power. the The Biden administration strengthened long-standing bilateral alliances, such as those with Japan and South Korea, and renewed defense ties with the Philippines. New multilateral partnerships such as the Quadrilateral Security Dialogue (with Australia, India and Japan) and AUKUS (with Australia and the United Kingdom) offer Washington its best hope of maintaining a military balance in its favor despite the declining margin of US military superiority in the region. China may be building the world’s largest navy at a frightening rate and investing in signature military capabilities, including expanded nuclear deterrence. It has intimidated Taiwan, shoved India, and aggressively asserted its claims in the East China and South China Seas. But rather than strengthening Beijing’s influence, such behavior undermines its ability to replace Washington as the guarantor of regional security.

Washington has also seized the diplomatic initiative on issues ranging from COVID-19 vaccines to development and infrastructure finance and climate action. By October 2021, the United States had donated and delivered more than 90 million doses of vaccine to the Indo-Pacific region, twice as many as China, the second largest donor in aggregate terms, and had been more generous on a per capita basis. than any other donor in the Indo-Pacific. The net result markedly improved the diplomatic position of the United States. Biden is judged by regional experts to be the most effective Indo-Pacific leader, up ten places from President Donald Trump’s ranking in 2020.

Biden’s reputation was not significantly diminished by the chaotic withdrawal of US troops from Afghanistan in August 2021 or by France’s anger over the AUKUS announcement. In reality, Washington’s efforts to end the Eternal War in Afghanistan and strengthen Australia’s sovereign capabilities have been seen as tangible signs in many Asian capitals that the United States is focusing on this region and betting on its allies.

ASIA DOESN’T WAIT

If there is one factor that threatens the position of strength of the United States, it is the decline of its regional economic influence. Here, American policymakers should be alarmed. The rate of deterioration indicates the risk of a growing mismatch of the United States in the political economy of Asia.

Beijing’s economic power in the region rests on a narrow but deep foundation. China is practically on par with the United States in terms of overall economic capacity, but is well ahead in terms of regional economic relations. China’s ability to connect and influence the choices of other Asian countries through economic interdependencies underpins this power, just as US defense partnerships are the backbone of US military might. Trade flows between China and the rest of Asia are now three times greater than that between the United States and the region. China has also emerged as the largest foreign investor in as many Indo-Pacific countries as the United States and Japan, the second-largest investor, combined.

The disparity in regional economic relations has been a chronic weakness for the United States for many years. The Trans-Pacific Partnership (TPP), signed between 12 Pacific countries in 2016, was a centerpiece of the Obama administration’s strategic pivot to Asia and aimed to address this weakness, by thwarting the growing influence of the model of capitalism. Chinese state in the region. But the United States withdrew in 2018, and without Washington anchoring the successor agreement, the Comprehensive and Progressive Agreement on Trans-Pacific Partnership, the consortium risks falling short of the original goal of strengthening and deepening the “rules of the road” of regional trade. system. Still, there appears to be little hope that a chairman of either party will join the CPTPP or a similar deal anytime soon. The anti-trade consensus in US politics prevents the formation of an effective multilateral cover against the economic power of China. It remains to be seen whether the Biden administration’s next “Indo-Pacific Economic Framework” can overcome domestic US opposition to free trade and deliver anything substantial to the region.

In the meantime, Asia is not waiting. Alternative models for a regional rules-based business environment are well underway. The Regional Comprehensive Economic Partnership, for example, led by the Association of Southeast Asian Nations, will come into effect next month. The RCEP, unlike the CPTPP, has few commitments on labor, the environment, intellectual property and public enterprises. But this will translate into greater trade, investment and supply chain integration for its 15 Asian partners, foremost China.

The limits of American economic leadership in the Indo-Pacific underscore the deeper problem: just as the resurgence of the United States over the past year has stemmed from events at home, so too are the greatest threats to the sustainability of this resurgence. The US position will be threatened without a new economic commitment to the region, which in turn depends on domestic US dynamics. The other great danger for the United States is the polarization of its domestic politics and the threat this poses to the stability of the democratic institutions of the United States and, ultimately, to its reliability as an ally and partner. Perhaps the greatest risk to American power in Asia does not lie in Beijing but in Washington.

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