11 July 2011

China SignPost™ (洞察中国) #40–12 in ’12: Strategic Challenges Facing the U.S. and China as the 2012 Political Season Approaches

Gabe Collins and Andrew Erickson, “12 in ’12: Strategic Challenges Facing the U.S. and China as the 2012 Political Season Approaches,” China SignPost™ (洞察中国), No. 40 (11 July 2011).

China SignPost 洞察中国–“Clear, high-impact China analysis.”©

Executive Summary:

Challenges Washington faces that will affect relations with China

1) Adapting to a sometimes contradictory “frenemies” type relationship with China.

2) Accepting that China’s idea of what constitutes “responsible behavior” on the world stage may be very different from what Washington wants.

3) Reassuring countries like Japan, South Korea, and Singapore, as well as other ASEAN members, that it intends to maintain—and possibly strengthen—its focus on the Asia-Pacific region while trying not to overly antagonize China.

4) Currency and trade policies, along with the hollowing out of the U.S. heavy industrial base, will almost certainly be major issues in the upcoming elections.

5) China faces more profound structural economic and human development problems such as chronic diseases that may prompt its new leadership to focus more closely on internal issues, while also adopting more muscular external policies designed to secure the resources and political support that it needs to confront internal challenges.

6) The most profound foreign policy challenges and opportunities that the U.S. faces in coming years lie in the Asia-Pacific region, not the Middle East.

Challenges Beijing faces that will affect relations with the U.S.

1) Grappling with inflation and higher labor costs that are driven as much by demographic pressures as they are by economic forces.

2) Monitoring how U.S. economic policies affect China’s massive U.S. bond holdings.

3) Deciding whether to improve market access for U.S. firms wishing to do business in China.

4) Managing the Taiwan question.

5) Deciding how to handle maritime disputes with its neighbors, particularly in the South China Sea.

6) Reign in cyber attacks on the U.S. by Chinese hackers. …