China and the United States: Destined to cooperate over ‘core interests’


    The 21st century will be defined by the relationship between the American superpower and rising China. A new Cold War would threaten the world order while a mutually beneficial association could bring all prosperity. The latter scenario is more likely. The geography, economies, and energy resources of the US and China align their “core interests.”

    First, geography. The US is located on the most resource and capital-rich continent, North America. The American Midwest consists of valuable arable land and is bisected by the world’s largest navigable rivers, allowing the export of food and products at bargain prices. Nearby nations have either historically been on friendly terms (Canada) or lack the ability to present a threat (Central America and the Caribbean) without an external sponsor. This benign environment has allowed America to focus on projecting power and dominating global merchant marine traffic. Since China lies across an ocean dominated by the American Navy, neither directly threatens the other.

    China, meanwhile, is a populous and vast land power with a long coastline. Yet China’s focus has historically turned inward, with only sporadic efforts to build a naval presence. China’s heartland is exposed to Russia from the north, Japan to the east, various fractious states to the west, and the rising powers of Thailand, India, and Vietnam to the south. In other words, China is surrounded, and its biggest threats are from other land-based powers, particularly Russia and India.

    China therefore cannot afford to antagonize America, since it would require American support or tacit neutrality in any conflict with Russia or India. Geography ensures that China does not see American naval dominance on its shores as a comparable threat. A Chinese move against American interests would open it to aggression from its neighbors while simultaneously cutting off a needed ally. No Chinese go–vernment is foolish enough to risk multiple high-intensity wars.

    The geography of China and the US dictate their “core interests” as mutually non-threatening states, and make cooperation more likely since both have an interest in opposing Russia.

    Secondly, the American and Chinese economies are destined to become more interdependent, and integrated economies usually lead to geostrategic alliances. The US follows a laissez-faire economic model, entailing a boom-and-bust cycle that is harsher than in more planned systems. When the free market dictates economic ap–portionment, at the height of the cycle resources are often applied to unwise projects. During recessions, companies either downsize or go out of business, resulting in short spurts of high unemployment. America tolerates these fluctuations because she long ago decided to trade economic stability for higher long-term growth. This has succeeded over the past century. This growth, combined with other advantages, ensures the US will endure as a superpower. America utilizes its advantages to maintain a global maritime “trade order” in the form of organizations like the World Bank, International Mone–tary Fund, and World Trade Organization, resulting in economic growth for the world and a successful consumption-based economy at home.

    Contrastingly, China’s economy is a sort of “state capitalism” distinct from the European “state champion” model. The economy is based around exporting finished manufactured goods to America, further integrating both economies. China’s two-de–cade-plus surge in economic growth will soon end, yet given the lack of progress in transitioning to a more con–sumption-based economy, China has not achieved what its large population considers an equitable distribution of resources and benefits. Such imbalances foster domestic tensions. The growth constraints facing China’s economy will only create additional problems with fewer new resources at Beijing’s disposal. The Chinese slowdown has already led to political in–fighting, and this is likely to continue in the future. Addressing this problem while transitioning to a consumption-based economy may reduce the ability of the ruling Communist Party to project power abroad while retaining it at home.

    Economically, America is strong in areas like food production, edu–cation, technology, and precision industrial manufacturing. China, by contrast, is strong in areas like heavy industry, light manufacturing, and cheap labor. This presents a recipe for complementary econo-mic interdependence.

    Finally, both countries will move closer geopolitically because of their complementary energy interests. Most of China’s foreign policy centers on attempts to acquire new energy resources, particularly oil. Over the following decades, China will seek to become more self-sufficient by expanding its hydropower capacity and coal plants. America shares this goal, and with the shale revolution will likely end up exporting energy to China, including oil and liquid natural gas. This gives America a geopolitical “lever” over China by increasing economic interdependence.

    The American situation on energy resources, particularly oil and natural gas, outclasses China’s. Oil is non-renewable, and members of the Organization or Petroleum Exporting Countries will likely be unable to meet China’s growing demand. However, America now controls the world’s largest untapped oil reserve, the Green River Formation. This formation alone contains up to 3 trillion barrels of untapped oil-shale, roughly half of which may be recoverable. This single geologic formation could contain more oil than the rest of the world’s proven reserves combined.

    As Chinese demand rises, Beijing will likely become the top importer of this oil. No other oil source can supply China’s needs as efficiently. Eastern European and Russian oil shale reserves are smaller and less politically and economically extractable than America’s emerging sources. If America invests a comparatively small portion of its new energy-based wealth into a larger Navy to secure a Pacific trade route to China, the economic integration of the two nations will be virtually irreversible. Already, foreign investments are pouring into the “new Middle East” of America and Canada, despite strong opposition from the current administration. American control over future markets for natural gas is almost as certain as for oil. The US produces natural gas abundantly and is building the facilities to export it to foreign markets, including China.

    China imports roughly 56 percent of its oil and this number grows each year. Beijing plans to increase reserves by acquiring new offshore resources and “secure” reserves abroad. Since between 60 percent to 70 percent of its imported oil originates in Africa or the Middle East, the only way to inexpensively transport it is by sea. This makes China vulnerable to economic warfare from India, which can severe much of its supply at will. This is a strategic concern and makes war with India more likely. China doesn’t have many other domestic energy options with the exception of coal, which carries high health and environmental risks. Renewable energy is too expensive, hydraulic power creates instability in rural areas, and social biases prohibit nuclear power.

    For technical reasons, China’s untapped oil shale reserves, though large, would be prohi–bitively expensive to process. They are estimated to be economically recoverable at $345 a barrel, more than triple the price of American oil shale. An American boom in natural gas cannot fully “bail out” China; nonetheless it will certainly be part of the solution.

    Domestic political pressures, environmental concerns and rising demand for portable fuels mean the crux of Chinese foreign policy for the foreseeable future will be aimed at acquiring new oil supplies and protecting existing supply lines across the Indian Ocean. The South China Sea is critical to China’s goals because most imported oil from Africa must cross it, and the sea contains its own marginal reserves close to China. Inadequate naval forces guarantee China will continue to depend upon the American Navy to protect its oil trade. The dispute surrounding the Senkaku/Diaoyu Islands does not change that. In any case, heightened regional competition for energy assets will diminish as American reserves come online over the next five to ten years.

    In the energy sector, America will ultimately transition to an energy and fuel exporter and China will ultimately import American resources. This will further connect their economies and build strong economic ties.

    Both China and America hope for a mutually beneficial arrangement to meet their security and de–velopment goals. Geographic, economic, and energy consi–derations ensure these two nations will become more interdependent throughout this century.



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    1 Comment

    1. This analysis gives the world the bird’s eye view of the future of America and China. Energy is the driving force of any country to succeed economically, which in a few years, 5-10 years, America will be a major exporter of oil and natural gas to the whole world, most probably some will go to China. China needs America’s staying power for peace and order in the world, so its oil tankers passing through the risky sea are unmolested, in exchange America will demand China to have a democratic form of government where freedom prevails, just like America. God bless America and its people.