In 1972, Richard Nixon and Mao Zedong signed the Shanghai communique that resulted in a simple but brilliant bargain between the US and China. The US agreed to recognise China and give up propping up the regime in Taipei as the legitimate government of China and Beijing agreed not to pursue hegemony in the Asia-Pacific region. The agreement, as Australian scholar Hugh White has argued, led to forty years of regional peace and prosperity with China eventually benefitting enough to become the second-largest economy in the world.  The foundation of the Shanghai communique, however, has started to crack and led in part to the incumbent US President Barack Obama’s government decision to pivot to Asia. But it may well be a case of too little too late as Asia seeks to move to a new regional economic and political structure. 

 

The Unravelling of the Cold War Order

For a number reasons the old Cold War order has begun to unravel in the Asia-Pacific region and, therefore, allowed China to challenge the status quo that was in the US’ favour. First, China’s military capabilities have improved to the extent that the US can no longer contain from a chain of nation states that extend from Japan to the Philippines. China’s development of robust missile and anti-satellite capabilities have substantially raised Washington’s costs to employ power in the region. That said, China is a long way from being in the position to launch a global military challenge the US.  Therefore, it has instead sought to use the forces of globalisation to improve Beijing’s global position while seeking to lessen that of Washington’s.  Thus, China has developed a set of regional economic interdependencies that have made the future prosperity of Asian countries dependent on the continued growth and prosperity of the Chinese economy.

Japan, South Korea, Australia, and Malaysia, among others, now have China as their largest trading partner despite, in some cases, having free trade agreements or strategic alliances with the US. This has led to the emergence of contradictory strategic objectives for some of these countries.  Australia remains a major strategic ally of the US and was one of the countries that welcomed the pivot to Asia and the rotation of the US Marines via Darwin. But, simultaneously, Canberra is acutely aware that good economic relations with an economically robust China is vital to the Australian national interest. Australia escaped the great recession of 2008 because China ramped up its purchase of Australian natural resources, and, more recently, the Australian economy is in the doldrums because China has reduced its imports from Australia.

Additionally, China is now trying to create alternatives to the US dollar as the international reserve currency by engaging in currency swaps with some Southeast Asian countries and Australia.  

Finally, Beijing has now become the largest provider of economic projects and investments across Asia and the fact that Chinese entrepreneurs are now engaging in serious innovation will only increase Beijing’s ability to use its economic capabilities to gain regional clout. New Delhi, despite all the problems with China, actually expected a much larger foreign direct investment package to be offered by Xi Jinping during his visit earlier this year.  

The problem for Beijing lies in the fact that while regional nations welcome its economic dynamism they worry about its political and military muscle flexing and that is why the US decision to pivot to Asia was tacitly welcomed by so many countries for it was seen as counter-balancing Beijing.  

China’s long-term objective is to create a post-American order in the region and for that aspiration to succeed it will have to tone down its bellicosity and strive for rapid economic development in Asia. The role model for Beijing in this case has to be Germany which gave up its imperial claims and military prowess after World War II to become the most influential economic actor in Europe - and some would argue that continent’s banker. Beijing can bring about a similar economic structure in Asia if it starts to look forward economically while downplaying and eventually settling border disputes that do little to enhance China’s security but do much to aggravate it.  

The views expressed in this article are the author’s own and do not necessarily reflect those of the US Air Force or the Department of Defense.