– What will be the main theme of the US-China relations in the next 20-30 years?

The main theme of U.S.-China relations over the next quarter century will be great power competition between the incumbent superpower and the emerging superpower in Asia and the world at a time of flux, certainly, and transition, probably, in the international system. Fundamentally, it will be about the contest for geo-political primacy in the Indo-Pacific region, as the hub-and-spokes-based security bilateralism of the U.S.-engineered San Francisco system transitions to a more China-centered regional order. But globally too, Washington and Beijing’s (and Brussels’) respective roles in furnishing global public goods, and ideas, that sustain and reform the Bretton Woods-based multilateral economic architecture – spanning aid and development, trade and investment, finance and currency, and macroeconomics – will also be a key secondary theme.

As the two (of three) foremost economic players in the global system, the peaks and troughs in the U.S.-China bilateral economic and technology cooperation/denial relationship will also have a key bearing, going forward.

– In which areas will we see the most conflicts?

The areas in the bilateral relationship that are mostly zero-sum (win/lose) in character are the ones that will be most amenable to conflict. Typically, these tend to relate to military competition and, given the particular geography of the Indo-Pacific region, maritime competition. Naval contestation between the U.S. and China within the first and second island chains in the Western Pacific is destined to worsen appreciably.

It is particularly at the intersection point at which a core Chinese territorial and/or sovereignty-based interest challenges U.S. navigational preeminence and freedoms or implicates Washington’s forward-deployed military’s alliance obligations, that is the ripest for conflict. Thankfully though, the disputed land features in the East China Sea (which implicate alliance interests) and the South China Sea (which implicate navigational interests) are too tiny to fight over. And thankfully, too, that while Taiwan remains unresolved business for Beijing since the 1950s and also a key psychological marker of Washington’s forward deployed deterrent and “values-based” posture, the U.S.’s formal obligations to defend the island are written in hazy language. But that said, misperceptions in the asymmetry of motivation between the two sides to unite (from Beijing’s perspective) or, alternatively, to defend (from Washington’s perspective) the island could touch off a dangerously violent conflict. Taiwan will remain a powder-keg for the foreseeable future.

By contrast, high-technology, both in its innovation and commercialization, will be an arena of competition and rivalry over the next quarter-century but not an arena of conflict. Much like Kissinger’s quip about the futility of one side winning the battle of the sexes, so also there is too much fraternizing within cross-border technology ecosystems for any one side to overwhelmingly win or invite major conflict with the other.

Finally, the more one moves along the continuum from zero-sum towards relative sum (economic interdependence) to win-win (tackling climate change), the less the incentive to clash and the greater the incentive for the U.S. and China to cooperate.

– Do you expect China to be more restrained in geopolitics?

No, absolutely not. China is a $13 trillion economy with global stakes and responsibilities. The moment to bide its time and keep a low profile is over.

In the Indo-Pacific, with its star on the rise, China retains an interest in deepening the geo-political cleavages that exist (although it won’t admit so) and impose soft litmus tests on the region’s middle and smaller countries to choose carefully. Better neighborly relations, with dollops of cash on tap, will be implicitly premised – and promised – on their adopting more constructive approaches in diplomatic ties with China. As Beijing gradually becomes the largest customer for their final goods exports – not just in intermediates, the hope, if not expectation, is that these countries will better grasp where ultimate interests reside. The consolidation of powerful, centralized authority in Beijing, after all, has been the surest guarantor of peace, prosperity and stability in Asia across millennia, and Asian countries are intimately aware of this historical inheritance. This also means that China will be in no hurry to invite a hot conflict. Why fight a war/armed contingency in 2020 when Beijing will enjoy immensely greater capabilities in 2035? And why fight a war/armed contingency in 2035 when its opponent will concede or stand down from a fight altogether in 2049? A firmness of attitude, not restraint, will continue in regional geopolitics.

In the multilateral arena, on the other hand, China’s primary interest is to advertise that it is the staunchest defender of U.N-centered global governance and globalization. The postwar order that America created and underwrote has been the surest guarantor of prosperity (although not necessarily peace) for countries big and small. Developing and middle-income countries understand and appreciate this, given their often-times single-minded focus on exiting poverty and getting richer. And China understands these aspirations of developing and middle-income countries because they resonate with its own. And so now when it is finally capable of contributing effectively towards underwriting this successful economic order (on its own terms though), it will do so enthusiastically. It certainly cannot hurt to be seen as the engine, and an underwriter, of global prosperity. And it doesn’t hurt doubly to show-up the U.S. as a weary titan in the process, unable to shoulder its burdens. So bottom line: less wedge-building (compared to the Indo-Pacific) and more coalition-building and forthright assumption of “responsible stakeholder” duties in the multilateral arena. And all this, well-advertised to a global audience.

– How will the external pressure affect China’s trade and investment decisions and technology policies?

On the surface, it might seem that techno-nationalism and ‘indigenous innovation’ is the logical path forward, given the external pressures. That would be the wrong approach – and one that China’s leaders will not adopt (unless backed into a corner by the U.S.). Here’s the reason why:
China seeks to perpetuate a symbiotic high-technology trade and investment relationship with the U.S. – both, for technological development sake as its economic growth model evolves to a more productivity-led one as well as to lock the U.S. in an intertwined economic relationship that serves as ballast to overall political ties. Crucially, the dynamism of China’s dynamic domestic innovation system is based in large part on US-owned core technologies. That Washington’s foreign acquisitions and export control rules do not exclude Chinese innovators from acquiring these technologies abroad or working them at home is – and will remain – a key driver of China’s readiness to ‘reform and open up’ and level the trade and investment playing field.

Indeed, the more liberal and reciprocal its foreign investment and mergers and acquisitions regime becomes, the more likely – Beijing bets – that U.S. administrations under pressure from business lobbies will continue to draw their definition of the ‘national security’ perimeter narrowly and facilitate the two-way intercourse in civilian cutting-edge and foundational technologies.

It helps too that the (dis)incentive structure of technology ecosystems is such that “going it alone” also means having to inevitably adopt somebody’s else’s technical and governance standards if one is to be competitive internationally. In this day and age of inter-connected R&D, open-source platforms and global value chains, trade and investment decisions must facilitate – not work against – technology incubation and development. Despite frequent intonations that carry a techno-nationalist hue, reformist elements within the Chinese leadership get this and will do the needful on the trade, investment and IPR front to ensure that China is not detrimentally locked out from global technology flows.