Reform, Cyber, and Bilateral Tension

From 10-11 July, the fifth meeting of the U.S.-China Strategic & Economic Dialogue (S&ED) will take place in Washington, DC.  The meeting serves as the highest bilateral meeting between the leadership of the United States and the People’s Republic.  For more background, read this overview.

Since its inception, the S&ED has been criticized for not achieving much within the bilateral relationship, but that may soon be changing.  Internal pressures in China and a changing international arena affecting the United States may finally lead to some frank, essential discussions between these two major powers.  What sort of issues will likely be a subject of discussion…?

Cyber

Cyber assaults and espionage have long increased tensions between these two countries.  For years, the United States has been the victim of attacks originating in China.  These incursions have predominately focused on private industries in the United States, searching for proprietary information that could give Chinese firms a leg up by gaining access to cutting edge technology without going through the investment of research and development.  US industry has partnered with the US government in order to increase effective countermeasures for cyber incidents and pushed for a stronger stance on cyber topics within the bilateral relationship.  With the US firm Mandiant publicly revealing earlier in 2013 the scope of Chinese hacking on US government offices, the issue of cyber has become a primary topic of concern.

The cyber issue is not solely a topic of concern for the Americans, as the Chinese government has also traced cyber incursions into their systems back to American shores.  However, whereas Chinese cyber forces focus on extracting information by disrupting systems, especially from US corporate entities, American cyber forces focus on gleaming information without causing disruption.  Given the potential cyber capabilities of the United States and superior global position of US information technology firms, the Chinese government understands that US cyber policy could readily become much more invasive and overtly confrontational.  As of right now, there is likely no more contentious topic of conversation between these two countries.

The Asia-Pacific

China’s rise has been accompanied by not only an over interest in becoming the hegemon of the Asia-Pacific, but also with a policy of extending China’s territorial claims in the South and East China Sea.  Viewed by many of its neighbors as aggressive, China’ expansion claims have increased hostilities with Vietnam, Korea, Singapore, Malaysia, Indonesia, the Philippines, and Japan.  Given US strategic alliances with Korea, the Philippines, and Japan, the United States has been dragged into regional tensions.

It is unlikely that discussions over the Asia-Pacific will lead to any new understandings.  China will never be able to exert control over everything it claims, which means that eventually there will have to be conciliation by some party to the disputes.  Yet, that time has not yet arrived.  Additionally, China remains wary of the US rebalance to the Asia-Pacific.  It is likely that both countries will strongly reiterate their positions and move on.

China’s Economic Transformation

Over the past several years, there has been mounting evidence that China needs to initiate wide-ranging economic reform.  The almost magical growth rates of the 1990s are no longer possible, its banking sector is saddled with billions in bad debt, its real estate sector is in many ways toxic, and the country’s overall economic health remains dependent on exports.  Greater financial transparency, industrial and commercial regulation, and stronger domestic consumption are essential for maturing the economy.

The United States has long called on China to initiate this change.  The Americans believe that by doing so, China will become a stronger partner in the global economy and abandon many globally unpopular actions.  Yet, a change of this magnitude is dangerous for the global economy and for China’s political elite.  Economic conversations will likely center on how the United States can help China if it seriously desires to reform.

Opportunities

During the two days of engagement, there will be conversations on topics where the United States and China largely share common interests.  Maritime security is one such example, especially in the Indian Ocean Region, global energy market stability and energy pricing will be another opportunity.  Furthermore, stability in the Middle East, which is all the more important with recent instability in Egypt, is of greater importance to both countries.  With any luck, the United States and China will discuss not only topics where they disagree, but also engage on those issues where they walk in parallel.  Investing in such topics will improve the bilateral relationship while also enhancing stability on a whole host of global issues.

Please note that the views expressed in this piece do not represent the official policy or position of the National Defense University, the Department of Defense, or the U.S. government.

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