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Is The U.S. Ceding Global Leadership To China?

February 27, 2017
Bill Overholt
AsiaStrat
  • The U.S. has been ceding global leadership since the end of the Cold War.
  • But, China — often cited as the likely successor to the U.S. — is not yet ready to assume leadership.
  • Instead, we are headed for is a ‘G-Zero’ world, with no single global leader. Not the U.S. and not China.

Hard on President Trump's 'American First' inaugural address, Xi Jinping gave a rousing paean to globalism at the World Economic Forum. And, immediately the hot question became: 'Is the U.S. ceding global leadership to China?'

Yes and no, says Bill Overholt of the Harvard Asia Center. Yes, the U.S. is ceding global leadership. No, China won’t replace the U.S.

What will replace the U.S. is ‘G-Zero’, a world with no single global leader. Not China, not the U.S.

So, can his critics lay this outcome at President Trump’s feet? Again, yes and no.

Yes, President Trump's ‘America First’ policies and his disdain for international regimes in trade, climate change, and defense, as well as his treatment of some of the U.S.’s greatest allies, has certainly accelerated America’s global retreat.

But, no, too. Because the U.S. retreat began well before President Trump took office. As Bill points out…

Why is the U.S. ceding global leadership?

The headlines are all about President Trump, and a lot of that is appropriate, but there are much deeper trends that are more important in the long run.
When Americans are not concerned about a great war or a Cold War, they get less interested in foreign policy when they elect a president.

Thus, since the end of the Cold War, we have elected presidents - from Bill Clinton and George W. Bush to Barack Obama and now Donald Trump - who came to office with no foreign policy experience.

And, we can see a parallel trend in Congress...

What's happened since the Cold War is that Congress has generously funded the military.
But, the State Department and economic aid budgets have been cut and cut and cut. That's a continuous process that has been going on since the 1990s.
Again, Trump is the ultimate caricature of that, trying to take an already minuscule State Department budget and cut it by another 30%, but he's on trend.

The result: 'The principal tools of successful strategy are being eroded at the same time when the top leaders are less experienced, less knowledgeable, and less interested in national strategy and foreign policy.' No wonder American has been losing influence globally.

But, regardless of the causes, the U.S. retreat could still benefit China.

Take Australia, as an example. Headlines there say that Canberra is 'now thinking it needs to tilt more toward China because the U.S. is such an unreliable ally.'

And that, it's 'starting to take more Chinese priorities into consideration’ on issues ranging from South China Sea to free trade.'

If our foreign policy can push even Australia - perhaps our most faithful ally - toward China, how much more will it drive our less stalwart Asian allies toward Beijing?

So, if China isn't destined for global leadership, can it nonetheless supplant the U.S. as the regional leader in Asia? Bill has his doubts about that too. 

2. In A G-Zero World, Will China Dominate Asia?

  • A G-Zero World is coming, where the U.S. will be first among several other powers - but no longer global leader
  • China will become the second most important power and the leader of Asia, propped up by countries alienated by President Trump
  • Still, the extent of Beijing’s regional hegemony hinges on whether it can overcome an array of domestic and international challenges.

Last week, Bill Overholt of Harvard’s Asia Center, presented an intriguing case for why China will not replace the U.S. as global leader (in case you missed it, you can watch our conversation here.)

Instead of a world led by China or the U.S., for that matter, Bill posited a G-Zero world, without any dominant hegemon. In contrast to...

A G-1 one world with one leader like the U.S.
A G -2 world would be a world where the U.S. and China were collaborating to create a world order, as to some extent they have been for a quarter century.
In the G-Zero world, the U.S. and China will be one and two, respectively globally. But...
China will be the regional leader in Asia.
We're not talking about everybody joining an alliance with China. That's not going to happen.
But, on trade issues, on local strategic issues, the Chinese voice is going to get stronger and stronger.
And, even a powerful country like South Korea will be more and more influenced by Chinese views.

And as China consolidates its dominance in what it considers its backyard, there is no guarantee that long-time friendly Pacific powers like Thailand, Philippines, or even Australia will support the U.S. as they used to.

Still, China’s regional hegemony is not a given. According to Bill, the extent of  Beijing’s leadership will depend on Zhongnanhai’s...

  • Successfully implementing its ‘One Belt, One Road’ initiative
  • Tamping down the quibbling over minor territorial issues with its neighbors, and
  • Completing economic – and, especially SOE - reform.

How will Beijing carve out a place for itself in this more anarchic reality? How will neighboring nations, who long have prioritized economic growth over military spending, respond to a new Chinese push for Asian domination? And, the crucial question: is war between China and the U.S. inevitable?

3. What 'Thucydides Trap'? Why China & the U.S. Won't Go to War

'It was the rise of Athens [China] and the fear that this instilled in Sparta [the U.S] that made war inevitable.' - Thucydides -(with apologies) 

Like Zeus, the Thucydides Trap has lost its power

Thucydides, 2,400 years ago, summed up the cause of the Peloponnesian War this way: 'It was the rise of Athens and the fear that this instilled in Sparta that made war inevitable.'

In more recent times, political scientists have used the simple equation rise of new power + fear of reigning power = war to explain the cause of about a dozen major armed conflicts. The latest to apply the formula is Graham Allison in his Destined for War: Can America and China Escape the Thucydides's Trap?.

So can we escape? According to Bill Overholt, the question itself is wrong: The Thucydides Trap died in World War II.He argues that since World War II. 

the geopolitical landscape has experienced 'one of the greatest transformations in world history'...   

‘The people who use the Thucydides Trap for analysis - John Mearsheimer and a dozen of other political scientists, including now Graham Allison - focus on the period before World War II.'What they miss is the strategic divide between the pre-World War II era when traditional military and territorial approaches were the way to build a powerful and successful country, and the post-World War II modern world where those approaches are more likely to be self-defeating.' 

Because the proponents of Thucydides Trap analysis focus on the previous world order, they miss entirely that...   

'The game is now going to be decided more by economics. I'm not talking about economic interdependence. I'm talking about the fact that economics is the key to success if you're a realist in the modern world - and this is something that political science realists have never focused on. 'What you do today to achieve power is pour your money into your country's economic success, not make territorial conquests or have overwhelming military superiority. 'This post-World War II change from using military force to using economic development to gain power is one of the greatest transformations in world history.'   

In this new world order, where economics trumps force, the U.S. and China have little reason to go to war...   

'Never have two countries gotten so much economic advantage from dealing with each other than the U.S. and China have. 'There's going to be constant pressure on both sides for leaders to realize that and not to mess it up.'   

And, of course, not go to war.

Bill Overholt

Bill Overholt

Senior Fellow at Harvard Asia Center
AsiaStrat
  • 21 years' experience running Asia research teams for Nomura, Bank Boston, and Bankers Trust
  • Former Asia Policy Distinguished Research Chair and Director of the Asia Policy Center at RAND

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5. Has Xi gone too far?

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Bill Overholt believes—'Xi Jinping may have gone well beyond what the consensus originally intended, and the politicization of the reform may not be exactly what some of the designers of the reform intended.

4. Enter Xi Jinping. The reformer?

Bill Overholt
Bill Overholt
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That these reforms are painful, and so there's going to be a lot of pushback from all the important power groups of Chinese society. So, they used the Anti-Corruption Campaign as a hammer to push aside these groups who were resisting reform.

3. The slower the reforms, the bigger the debt

Bill Overholt
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'What the Chinese have effectively chosen is much slower reform in order to keep the economic growth rate up around 6.7%.'

2. China 2030: 'It's hard to find a more impressive economic plan anywhere else in economic history.'

Bill Overholt
Bill Overholt
2/16/18
'Simple economies and politics have been replaced with immensely complex ones. And you gradually get to a point of complexity, where there is an economic and political crisis of some kind.'

1. 'A sense of terrible crisis was a prerequisite for an Asian economic take off'

Bill Overholt
Bill Overholt
2/16/18
China's Crisis of Success—1. 'Why is this sense of terrible crisis a prerequisite for an Asian economic take off? Because it creates a certain political environment.'...'The counterpart, on the economic side, is an economic simplicity.' says Bill Overholt.

China's Crisis of Success

Bill Overholt
Bill Overholt
2/16/18
Bill Overholt and I recently had a discussion about the points he makes in his new book, "China's Crisis of Success". Here are five key points, each corresponding to a section below. "The Rise of China: How Economic Reform Is Creating a New Superpower" by Bill Overholt, published in 1993, was called 'nonsense' and 'too optimistic.' How did that work out for the reviewers? Now, almost three decades after "The Rise of China", Bill believes that China's future has become 'much more uncertain.' And, he addresses his concerns in a new book, China's Crisis of Success. Bill outlined some the key points from his book recently in an interview with me. And, I have conveyed these below. As you will see, I have let Bill speak for himself. Bill was right in 1993. 

Is The U.S. Ceding Global Leadership To China?

Bill Overholt
Bill Overholt
2/27/17
[Malcolm Riddell's conversation with Bill Overholt] 'China isn't positioned to replace the U.S. as a global leader anytime soon.'—Hard on President Trump's 'American First' inaugural address, Xi Jinping gave a rousing paean to globalism at the World Economic Forum. And, immediately the hot question became: 'Is the U.S. ceding global leadership to China?' Yes and no, says Bill Overholt of the Harvard Asia Center. Yes, the U.S. is ceding global leadership. No, China won’t replace the U.S. What will replace the U.S. is ‘G-Zero’, a world with no single global leader. Not China, not the U.S. So, can his critics lay this outcome at President Trump’s feet?

Why A Trump–Kim Jeong Eun Summit Could Work

Bill Overholt
Bill Overholt
5/29/17
[Malcolm Riddell's conversation with Bill Overholt] 'If it would be appropriate for me to meet with him [Kim Jong-un], I would absolutely. I would be honored to do it.' — President Trump — May 2017:'What President Trump has done is to signal we are willing to move away from this formula that the North Koreans have to give up everything in their nuclear program before negotiations - only then we'll talk with them. I admire our U.S. negotiators, but that formula is simply absurd.'
Bill Overholt

Bill Overholt

Senior Fellow at Harvard Asia Center
AsiaStrat
  • 21 years' experience running Asia research teams for Nomura, Bank Boston, and Bankers Trust
  • Former Asia Policy Distinguished Research Chair and Director of the Asia Policy Center at RAND
AsiaStrat

AsiaStrat

Channels

AsiaStrat
Granite Peak Advisory
Track Research
Trivium China
Gao Feng
Real Estate Foresight
China Beige Book
coming soon