The relationship between China and America has been characterized by many as complex. Even with the bitter partisanship in Washington, most democrats and republicans seem to have no problem looking at China as a threat and using China as a scapegoat for economic problems in America. I think it’s also quite clear that the US military views China as its most likely foe in the future regardless of how many confidence building measures are proposed. Of course, the Chinese government officially try to avoid overly confrontational language, even though PLA generals and Global Time often voice strong opposition to America.

Recently, I read this article where it talks about how people in the Chinese ruling elite really feel about America. Here are a few really interesting snippet.

The senior leadership of the Chinese government increasingly views the competition between the United States and China as a zero-sum game, with China the likely long-range winner if the American economy and domestic political system continue to stumble

China views the United States as a declining power, but at the same time believes that Washington is trying to fight back to undermine, and even disrupt, the economic and military growth that point to China’s becoming the world’s most powerful country

the authors say the level of strategic distrust between the two countries has become so corrosive that if not corrected the countries risk becoming open antagonists.

In contrast, China has mounting self-confidence in its own economic and military strides, particularly the closing power gap since the start of the Iraq war. In 2003, he argues, America’s gross domestic product was eight times as large as China’s, but today it is less than three times larger.

the Chinese leadership, backed by the domestic news media and the education system, believes that China’s turn in the world has arrived, and that it is the United States that is “on the wrong side of history.”

China’s financial successes, starting with weathering the 1998 Asian financial crisis and the 2008 global financial crisis, the execution of events like the Beijing Olympics in 2008 and the Shanghai Expo in 2010, contrast with America’s “alarming” deficit, sluggish economic recovery and polarized domestic politics

None of these above views are surprising, since I’ve read all of these view points from different sources and at least partially agree with most of the above points. It’s particularly hard to address all of them, so I hope I don’t go completely off track with my thoughts here. I think this is an extremely important topic. I know this can be a sensitive topic and most of my views are probably not popular, but I can only state how I see things. I do apologize in advance if I offend anyone.

The first question is whether or not US is a declining power. I think if we compare where US is right now to where it was at the collapse of Soviet Union, there is no question that it has declined. More than anything else, I think the two prolonged wars in Middle East that are operated completely on debts have really accelerated the American decline. In the coming years, I think it will decline further when compared against the rising economies of China, India and Brazil. In several areas like financial prowess and manufacturing power, China has already caught up or surpassed America. In other areas like military, higher education/research and cultural influence, it’s hard to see when China will ever catch up to America. The areas that China will likely to gain ground on America in the coming years is the overall economy and political influence around the world. Another thing to consider is that American allies in the Western world are also on the decline due to debts issues, decreasing productivity and population decline. So if we just look at the current economic and finance situation in America and the rest of the Western world, it would seem like China (and other rising powers like India and Brazil) are poised to take over.

The second question is whether or not the China is actually ready to take over from America. I think the answer to this is no. A lot of times, we are blinded by the 30+ years of economic growth in China and fail to see the problems in the country. The problems that China and America face are quite different. America is facing huge debts problems from years of excessive public and private sector spending. American Federal, state and municipal governments faces much financial problem in the coming years related to the runaway health care, social security and public sector pension costs. China’s government is not burdened by these excessive public sector spending problems, but it faces a lot more social problems. I have always that pollution and corruption are China’s biggest problems. Now, I have to add two more to the list: the extreme male/female population imbalance and the increasingly unsustainable wealth gap between the rich and the poor. The first problem results in a lot of frustrated single men, large prostitution industry and escalating home prices (from women demanding owning home before marriage), Having a lot of frustrated single men have historically been a really bad social situation (more conflict and wars). The second problem is exaggerated by the absolute wastefulness of many rich Chinese people and how these people made their money in the first place. These people make Wall Street bankers look like Mother Theresa’s. So even though China has gotten a lot wealthier, there are serious social tension within the country toward the wealthy and the corrupted officials that are further exaggerated by frustration over male/female imbalance, lack of free speech, inflation and very polluted environment. The Chinese government really has more things to worry about at home. On top of all of this, China’s banks and local governments are also grappling with debt problems from all of the recent economically unfeasible public sector projects. I think the Western bank and public sector debt problems are larger, but China’s debt problems are ready to explode too. The Chinese leadership would be making a huge mistake if it overestimates itself and underestimates America.

The third question is whether or not America is really trying to hold back China. I think the answer to this is yes. China’s goal is to create a multi-polar world where it assumes regional hegemony. American goal is to remain as the sole superpower in a unipolar world where no other country establishes local hegemony. Clearly, the two countries have different political goals and will clash against each other. Currently, this is playing out in South East Asia where China is trying to achieve regional hegemony, but America has managed to inject itself back into the region and prevent that. I think this will continue to play out in the future as long as the two nations have such polar opposite political vision. I think that once India grows powerful enough, it will also clash with America on the very same issues. Just think about what would happen if India becomes confident enough to assert its own view points on countries like Iran, Afghanistan and demand greater say in energy coming out of the Middle East.

The fourth question is whether or not this is a zero sum game. I think the answer is yes and no. The two countries can obviously work together to address a lot of the security threats that we face today. At the same time, China cannot achieve regional hegemony with America around nor can it be part of a multi-polar world without America loosing influence. There is also the scenario where both country looses influence if the social problems in China blows up and the debts problems in America blows up. We are already seeing EU declining significantly in the recent years due to its financial and debts problems. The other part of the zero sum game is economy. In the near term, the two countries need each other to have continued economic growth. If one country suffers a large slow down, it will have large affect on the other country. As I’ve said in the past, a trade war would have crippling effects on both countries. In the long term, I think it is somewhat of a zero sum game. The world has finite natural resources and energy sources. As we approach peak oil, the cost of energy will simply grow higher and higher. If all of the countries are battling for the same finite resources to keep economy going, then they will clearly be in competition with each other. We already see some of that with China signing deals around the world for oil reserves and mining rights to different natural resources. This is another area where India will also really be competing with China and America on. Just imagine the energy and natural resource demand of China and India if they all seek to live the same quality of life as Americans. As the world population expands, we will also be battling over basic necessities like water and food.

In the end of the day, I think both countries face a lot of challenges ahead. In their current path, China and America clearly has confrontation world view, but that may change in the future. If China goes through a period of social instability or economic meltdown, who knows how its foreign policy will change. Looking at its 5000 years of history, China has always been a country that concentrated on itself. If America goes through anything close to Greece style debts crisis, I think that would have to cutback on its role in the world affairs. I think India will be a very large player in the future as its population and economy continues to grow. I think Brazil will also have a very strong voice in the future, whereas countries like Japan, UK and the rest of EU will continue to be in decline. In 15 years, we won’t just be talking about a G2 kind of world. With energy and natural resources become increasingly scarce, we could see conflicts over them in the future. More than anything, I think that’s where I see the highest possibility of a major future conflict.