Asian Affairs, Vol. 28, No.

2, 24-45, April - June 2006

CDRB publication

THE POST-COLD WAR U.S.- CHINA

THE POST-COLD WAR U.S.-CHINA RELATIONS: WIN-WIN OR ZERO-SUM GAME

AKM KHAIRUL ISLAM Abstract: Since the end of the Cold War, there have been enormous changes in the configuration of international relations. The strategic focus of the U.S. has shifted from Europe to Asia and especially in East Asia because of its growing economic importance. Since the collapse of the former Soviet Union, more attention has been paid to China and its relations with the United States. The fall of the former Soviet Union also took away the geo-strategic reasons to sustain cooperation between the United States and China. U.S. security perception has also changed due to the ideological victory of liberal democracy over communism, the decline of Russian economic and military strength, and the possibility of Chinas emergence as a global economic and military power. In the coming decades, the relationship between these two countries will be most critical and complex. It will profoundly shape the life of billions of people, stability and prosperity in the world and especially in East Asia. Whether U.S.-China relations will be zero-sum or win-win game will depend on U.S. policy toward China, and Chinas involvement in international institutions, norms, and regimes in the near future. The primary objectives of the paper are to analyze different views and major conditions that have shaped the U.S.-China relations after the end of the cold war. Key Words: U.S-China relations, trade, security, relative gain, absolute gain,

the Cold War, the strategic focus of the U.S. has shifted from Europe to Asia and especially in East Asia because of its growing economic importance. The fall of the former Soviet Union also took away the geo-strategic reasons to sustain cooperation between the United States and China (Suettinger, 2003; Wang, 2000). U.S. security perception has also changed due to the ideological victory of liberal democracy over communism, the decline of Russian economic and military strength, and the possibility of Chinas emergence as a global economic and military power. Since the collapse of the former Soviet Union, more attention has been paid to China and its relations with the United States (Shambaugh, 1996). The United States is suspicious and worried about China due to its authoritarian political system, lack of transparency on military affairs, and uncertainty about future intentions and capabilities. The emergence of China has changed Asian security perceptions, trade, and the global balance of power (Shambaugh, 1996). A robust debate is underway in the U.S. about how to tackle the growing China (Shambaugh, 1996). Both liberals and conservative groups consider China as a potential threat to US interests in Asia. But liberals want peaceful evolution and cooperative engagement by trade, investment, and interdependence, while neo-conservatives want to prevent China by pre-emptive confrontation through diplomatic means, alliance formation, and military conflicts (Henry and Liu, 2002). Three major views have emerged in response to Chinas economic growth in the last two and half decades: first, The China threat perspective argues that Chinas growing economic power and military modernization efforts will eventually weaken the preponderant power of the United States relatively and absolutely in Asia and especially North Asia (Shambaugh, 1996). The scholars of this group (Huntington, 1996; Bernstein and Munro, 1997; Bernstein and Munro, 1998; Meirshimer, 2001) argue that a growing China will upset the world status quo and destabilize Asia as well as the whole world. Policy prescription of this group of scholars is to contain China as quickly as possible and by any means.
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Introduction Since the end of the Cold War, there have been enormous changes in the configuration of international relations. During the Cold War, the Soviet Union was the main concern for U.S. security and political interests in global politics. Superpower rivalry was mainly concentrated in Europe. But, after the end of
CopyrightCDRB, ISSN 0254-4199

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Second, scholars of Incorporating China into the world system or liberal perspective are more optimistic about China. They argue that a rising China will not be a challenge to the international system and destabilize the world. Instead, a growing China will be a huge market for the rest of the worlds economies and help global economic growth. Liberal scholars argue that China will not be a threat for other states for various reasons; first, it has a unique non-expansionist culture. Second, growing interdependence will enhance Chinas wealth and it will be satisfied with the status quo of the existing global economic and military order; and third, Chinas participation in international organizations has increased tremendously in the last two decades and that will prevent China from upsetting global order and stability (Lampton, 2003; Wang, 1998). They also argue that if China becomes part of the international structure, it will follow international norms and regimes for its own benefit. Third, scholars from the pro-conditioning perspective are more optimistic than realists but more cautious than the liberals. They argue that despite Chinas impressive growth in the last three decades, China is still economically and militarily weak compared to the United States. China is also facing some difficult internal and external problems that will hinder Chinas rise as a global power. Many internal and external problems forced China to adopt conservative rather than aggressive policies to upset global order and emerge as regional superpower (Roy, 2003; Chang, 2000; Rose, 1997; Godwin, 1997). The primary objectives of the paper are to analyze these three views and major conditions that have shaped the U.S.China relations after the end of the cold war. The article will focus primarily on two aspects of the U.S.-China relationship, trade, and security. The China-U.S. Trade Relationship Before the establishment of the Peoples Republic of China in 1949, U.S. and China were trade partners for many years. In 1936, China exported 22% of its product to the U.S. market and imported 20% of its products and services from the United States
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(Cheng, 2002). But after the communist revolution in China, the Korean War and the subsequent U.S. embargo against the PRC (Peoples Republic of China) caused a sharp reduction of U.S.China trade (Cheng, 2002). In 1972, total trade volume between the two countries was only 1.6% of their total trade (Cheng, 2002). Since Deng Xiaoping initiated economic reforms and market liberalization in 1978, trade relations between the two countries have expanded tremendously. In the early 1970s, the trade between U.S. and China was at a very low level. But in 2004, the U.S. was the second largest trading partner of China, and China was the fourth largest trading partner and rapidly growing export market for the United States. The large trade and investment flows, however, have not secured a smooth trading relationship between the two countries. Despite the massive growth of U.S.-China trade relations, there are some misperceptions, fears, frictions, and disputes on U.S.-China trade relations. The United States always criticizes Chinas trade practice as mercantile and unfair (Suettinger, 2003). One of the major reasons for trade disputes between the two countries is the huge trade deficit of the United States (Table-1).
Table 1: Chinas Trade with the United States ($ billion)
1995 US Export % of change US Import % of change Total % of change 11.8 26.9 48.5 17.1 60.3 18.9 1996 1997 12.0 1.7 54.4 12.2 66.4 10.1 -44.4 12.8 6.7 68.5 21.0 78.6 18.4 -53.0 1998 14.3 10.9 75.1 14.1 89.4 13.7 -60.8 1999 13.1 -8.0 87.8 16.9 100.9 12.9 -74.7 2000 16.3 24.4 107.6 22.6 123.9 22.8 -91.3 2001 19.2 18.3 109.4 1.6 128.6 3.8 -90.2 2002 22.1 14.6 133.5 22.0 155.6 21.0 -111.4 2003 28.4 28.5 163.3 22.3 191.7 23.2 2004 34.7 22.2 2005 41.8 20.5

210.5 243.5 29.0 23.8

245.2 285.3 27.9 23.3

US balance -36.7

-134.8 -175.8 -201.7

SOURCES: US International Trade Commission, US Department of Commerce, (In) The US-China Business Council (http://www.uschina.org/statistics/tradetable.html) 27

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The huge US trade deficit is not only influencing the bilateral trade relations, but it is also influencing the security and internal politics of these two countries. The centerpiece of debate between realism and liberalism is about the importance of relative gains in international trade (Matthews II, 1996). Most realist, neo-realist and structural realist theories (Gowa, 1994; Pollins and Mansfield, 2003; and Mearsheimer, 2001) argue that trade between two countries not only influence economic relations but also security relations. According to them, wealth is the main source of military capability and other means of influence. Current unequal gain from trade may have serious security implications in the future. Sensitivity to relative gain is much higher when gain from trade is easily convertible to military might (Matthews III, 1996).When a state engages in trade with its allies or a relatively weak state, it does not seriously consider about relative gains. But when a state engages trade with a country with relatively equal power or has the potentiality to become an equal power, or a country with different political and economic system and does not consider it an ally, relative gains matter (Russett and Onnal, 2001, 136). Realist scholars argue that China is gaining more than the United States in bilateral trade because of its huge trade surplus. Instead of declining, Chinas trade surplus is increasing every year for a long time. They argue that over the long run, such an imbalanced trade relationship and unequal gains from trade might create a real threat to Americas economic welfare and military security. According to them, China is not a democratic country and an ally of the United States. Many authors argue that without war, China and the United States will engage in major competition and conflict from the first decades of the twenty-first century (Bernstein and Munro, 1997). The U.S. Trade Deficit Review Commission chairman Roger Robinson makes similar views by arguing that, A number of current trends in U.S.-China relations have negative implications for our long term economic and national security interests, and therefore that U.S. policies in these areas are in need of urgent attention and course corrections (in Williams, 2004). The 1998 Defense Reports issued by the Pentagon also predicts the same: China will become a
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peer competitor for the U.S. after 2015 (Yebai, 1999). If Chinas economic growth continues, many realist scholars predict that within a few decades, China will be the biggest economy in the world and a formidable military power as well (Bernstein and Munro, 1997; Mearsheimer, 2001). Therefore, they want to contain China at any cost and by any means. On the other hand, most liberal and neo-liberal institutional scholars focus on absolute gain in trade and economic relations. According to them, pursuit of relative gain is misleading and destructive to the global economy and a hindrance to cooperation among states. They argue that if the U.S. and China both gain in absolute terms in economic relations, the economic welfare of both countries will improve and each country will be satisfied. Many scholars and even many government officials argue that there are far more reasons to cooperate than collide. The U.S. and Chinese economies are complementary rather than competitive due to different cost structure and comparative advantages. U.S. is rich in capital, technology and highly trained manpower. On the other hand, the comparative advantages of China are disciplined and unlimited low cost labor and natural resources. Different natural endowments, technology, and skill, are the essential sources of mutually beneficial business and trade between the U.S. and China. According to a 1999 Institute of International Economic Study (in Lampton, 2003), 90% of US imports from China are mostly made of low-tech electrical machinery, toys, footwear, and apparel. Only 10% of imports from China compete directly with U.S. made products. Chinas goods are substitutes for U.S. imports from other low-wages economies, largely from East and Southeast Asian countries. China has a huge trade surplus with the United States, but most of the exports are low value-added labor intensive products and produced by Multinational Corporations and especially U.S. multinational firms. Since economic liberalization, foreign firms have been the main engine of both export and import in China. During the 1980s and 1990s, huge number of Multinational Corporations re-located their production facilities in China and they were the main engine of Chinas export growth. In 2004, 60% of Chinas
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THE POST-COLD WAR U.S.- CHINA Table-2 Chinas Trade with the World ($ Billion) 1996 Export 151.1 % Change Import % Change Total % Change 1997 182.7 1998 183.8 1999 194.9 2000 249.2 2001 266.2 2002 325.6 2003 438.4 2004 593.4 2005 762.0

export and import were conducted by foreign firms. Many studies show that foreign farms are getting most of the profits from that exports (Ciuriak, 2004). Trade benefits are also not one-sided; the United States is also getting benefits from U.S.-China trade relations. China is the most efficient producer of wide range of many low tech consumers products. Cheap Chinese products are reducing the U.S. inflations, wage hike pressure, and improving living standards. The U.S. consumers and especially low and middle income consumers are getting varieties of products at lower prices. China is also providing cheap intermediate goods to the United States that is helping high-tech and high value added U.S. industries to be more competitive in the global market (Haiying, 1999). Due to outsourcing of labor intensive products, U.S. companies are also specializing on high-value, capitalintensive products, and investing more on research and development for new products, which gives the U.S. corporations more comparative advantages against its competitors (Ciuriak, 2004). The main U.S. complaint against China is its undervalued currency that provides Chinese producers a tremendous comparative advantage over US producers. The United States is not only blaming China but also other fifteen countries including Canada for unfair trade with the United States. In 2005, China exported $762.0 billion worth of good and services and imported $660.1 billion worth of goods and services. In the last few years, Chinas trade surplus is not so high with other countries (Table-2), but it is increasing with the United States. As a whole, China has a very small trade surplus with the rest of the world in the last few years except 2005. But it has a huge trade surplus with the United States (Table -3). This indicates that the problem lies with the U.S. economy, not with Chinas unfair trade.

1.5 138.8

20.9 142.4

0.5 140.2

6.1 165.7

27.8 225.1

6.8 243.6

22.3 295.2

34.6 412.8

35.4 561.4

28.4 660.1

5.1 289.9

2.6 325.1

-1.5 324.0

18.2 360.6

35.8 474.3

8.2 509.8

21.2 620.8

39.9

36.0

17.6

851.2 1,154.8 1,422.1

3.2

12.1 40.3

-0.4 43.5

11.3 29.2

31.5 24.1

7.5 22.5

21.8 30.4

37.1 25.5

35.7 31.9

23.2 101.8

Balance 12.3

SOURCES: US International Trade Commission, US Department of Commerce, (In) The US-China Business Council (http://www.uschina.org/statistics/tradetable.html)

Table-3 Chinas Top Export and Import Destinations ($ million)

Country United States Japan South Korea Taiwan Germany Russia Export (2005) 162,899.6 83,992.1 35,109.3 16,549.6 32,527.6 13,212.2 Import (2005) 48,726.3 100,451.6 76,822.0 74,684.4 30,724.4 15,890.9

SOURCES: US International Trade Commission, US Department of Commerce, (In) The US-China Business Council (http://www.uschina.org/statistics/tradetable.html) 30 31

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U.S. is losing its manufacturing competitiveness in the global trade. Most scholars argue that not trade barriers, but competitiveness of U.S. products and services are the crucial factors for reduction of trade deficit between the two countries. Fifty years ago, the U.S. was the manufacturing powerhouse in the world, its manufacturing sector employed 29% of the workforce, now it employs only little more than 10% of the workforce (Nash, 2003). Chinas enormous cheap labor, technology-oriented education system, technological up-gradation and export-oriented state policies played key roles in Chinas manufacturing development (Nash, 2003). If China appreciates its currency, the U.S. may reduce trade deficit a little bit with China, but it will not able reduce the trade deficit significantly with the rest of the world. China is now a big high-tech importer. The United States has the real comparative advantages of high-tech products. In 2003, China imported aircraft, nuclear reactors, machineries and equipments from the U.S. worth 10.6 billion, which was 40% of the US export. But that was only 10% of Chinas total high-tech imports. But due to different types of government restrictions, U.S. firms are unable to sell its products to the Chinese market, which is another reason for huge trade deficit (Asia Times Online, May 4, 2005). Due to U.S. government restrictions, European and Asian firms are taking advantages of growing Chinese market. Many scholars argue that U.S. trade deficit will not reduce substantially very soon for various reasons (Lardy, 2001): first, Chinas market is far more open than many others countries. Chinas import duty has decreased from 55% in 1985 to 9.3% in 2005, which is much lower than Argentinas 31%, Brazils 27%, Indias 32 %, and Indonesias 37%. (Peoples Daily Online, April 14, 2005). In the last decades, China has also significantly reduced its import quotas and licensing requirements. Second, China benefits from the phase-out and elimination of a quota system at the end of 2004 that restricted Chinas apparel export in the last two decades. Third, China will continue to benefit from the relocation of manufacturing industries from different parts of the globe. In the 1980s and early 1990s, low tech industries such as toys,
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footwear, and apparel were relocated to China. But from the mid 1990s, high-tech industries, such as semiconductors, electronics, computers, automobiles, and other household goods also started to relocate to China from Taiwan, Japan, Hong Kong, U.S., Europe, and other countries in the world. Due to these factors, it is unlikely that the U.S. trade deficit will decline very soon (Lardy, 2001). Despite the present huge trade deficit, in the long run, there is no doubt that trade relations between the U.S. and China will benefit both the countries. Chinas huge market will take growing U.S. exports, especially agricultural exports, and pave the way for long term economic growth in the United States. Chinas economic development has also opened up new frontiers for U.S. Multinational Corporations investment in China. In the last few years, U.S. multinationals direct foreign investment has been rising in China (Table-3). China has already opened its economy to fulfill the conditions of the World Trade Organization, to enter into this organization. It has also agreed to reduce its tariffs on agricultural product from 22.5 to 17.5%, and Americas priority products from 31% to 13% (Sinha, 2003). By curbing Chinese exports, the U.S. may reduce the trade gap with China a little bit, but the United States needs to import same labor intensive products from other developing countries instead of China by paying more price (Haiying, 1999). Import from other countries will not reduce the United States overall trade gap with the rest of the world. Not only the U.S. domestic economy, but Chinas domestic economy is also facing some serious difficulty due to reduction of tariffs and other types of trade barriers. Due to economic openness, Chinas capital intensive enterprises and especially state-owned enterprises came under serious competitive pressure and suffered relative decline in last two decades, in which most of the Chinese worked (Ciuriak, 2004). Chinas agricultural products such as corn, wheat, and soybean oil, seeds, sugarcane, and cotton are also facing increased competition from American products. According to a recent report by the Chinese Academy of Social Science, due to economic openness, Chinese agriculture
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will be exposed to market risks, unemployment risks and security risks (in Sinha, 2003: 113). U.S.-China Security Relations The end of the cold war had deepened the security differences and existing cleavages between the United States and China (Celico, 2001). Lampton (2001: 69-70) points out five factors that have contributed to Sino-American security relations: first, the change of Chinas defense strategy. China is trying to modernize its armed forces and especially the naval and air forces. Second, The United States and China have different views about the desired character of emerging international order. The United States wants uni-polar world and China wants multi-polar world in which China has the ability to manipulate one country against another. Third, the United States is fearful about Chinas rapid economic growth that may convert rapidly into military might. Fourth, Chinas authoritarian political system and lack of transparency about its military affairs have created suspicion for the United States. Fifth, divergent security interests of these two countries have also contributed to mutual suspicion. The relationship between the two countries also aggravated due to Chinas dismal human-rights records, undervalued exchange rate, Taiwan issue and competition over energy resources. Both U.S. and China are desperate to control the key strategic areas of energy resources. Chinas growing presence in the Middle East, Central Asia, Africa, Russia, Latin America and other places could ultimately lead to confrontation with the U.S., the largest oil consumer in the world. (Bajpaee, 2005). There are two divergent views about Chinas emergence as a global super power. Many scholars, especially the realist scholars, believe that Chinas rapid economic growth over the next two or three decades will enable the country to catch up with the United States and possibly overtake it economically and militarily (Table4). They argue that China is an unsatisfied and ambitious power, not a status quo power. Current international order was shaped by western powers when China was weak. Therefore, China will try to redress historical grievances and seek new positions in
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global political and economic order. It will try to dominate Asia and especially East Asia, the future economic centre of the world, not by occupying or invading neighboring countries, but by political and military influences (Bernstein and Munro, 1997, Mearsheimer, 2001). They further argue that there are some similarities between the rise of China and the rise of Nazi Germany, post-Meiji Japan and former Soviet Union. All the countries had authoritarian political systems, and rapid industrial growth and military modernization process (Shambaugh, 1996). They argue that it is unreasonable to think that China will not use military force in the near future. China has fought more border wars with its neighbors than any other country in the world since its independence in 1949 (Shambaugh, 1996). Therefore, it is better to contain authoritarian China as early as possible. Mearsheimer asserts that It is clear that the most dangerous scenario the United States might face in the early twenty-first century is one in which China becomes a potential hegemon in Northeast Asia. (Mearsheimer, 2001: 401). He further argues that China might be far more powerful and dangerous than any of the potential hegemons that the United States confronted in the twentieth century. Neither Wilhelmine Germany, nor imperial Japan, nor Nazi Germany, nor the Soviet Union had merely as much latent power as the United States had during their confrontations (Mearsheimer, 2001:401).
Table 4: Chinas Economy in Perspective U.S. GNP (1998) Japans GNP (1998) Chinas GNP (1998) Chinas GNP if it had South Koreas per capita GNP Chinas GNP if it had half of Japans per capita GNP Chinas GNP if it had Japans per capita GNP Source: Mearsheimer John J., 2001: 398.
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$ 7.90 trillion $ 4.09 trillion $ 1.18 trillion $ 10.66 trillion $ 20.04 trillion $ 40.08 trillion

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In the last one hundred years, U.S. policy in Asia has been consistent and that is preventing any single country dominating the region (Bernstein and Munro,1997). If China emerges as a single dominant country in Asia, the U.S. interest will definitely collide with Chinese interest because of Asian economic and strategic importance (Bernstein and Munro, 1997). Most of the realist scholars also believe that engagement is a modern form of appeasement that will give China more leverage to become a potential aggressor (Shambaugh, 1996). They also argue that interdependence and institutional means are inefficient and insufficient methods to change the behavior of China. Power and pressure are required to contain and constrain China (Shambaugh, 1996). Instead of engagement, they want to prevent China by traditional realist means; that are arms build-up, unilateral diplomacy, balance of power, and alliance formation. On the other hand, many and especially liberal scholars argue that China is not in a position to pose any real security challenge to the United States. According to them, despite rapid economic growth and modernization of the armed forces in the last two decades, Chinas military strength is too weak to compete with that of the United States. A country can balance its potential enemy or enemies in two ways: internal balancing and external balancing. For internal balancing, a country may increase its defense expenditure, and modernize its armed forces to counterbalance its enemy states. China has been trying to modernize its armed forces and increasing its defense expenditures and trying to modernize its armed forces, especially navy and air forces in the last two decades. But Chinas military power is still weak compared to the United States. The United States defense budget is now the highest of any country in the world. In 1999, the U.S. defense budget was more than double the combined budgets of China, Russia, France, Germany and the United Kingdom (Table-5). In 1999, (except Bureau of Arms Control data) the U.S. defense expenditure was almost ten times more than Chinas defense expenditure (Table-5). Even if we consider Bureau of Arms Control data, U.S. defense budget was more than four times than that of Chinas defense budget.
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Definitely China will increases its defense budget rapidly in the near future, but it is still not possible for China to catch up or reduce the gap significantly within a very short period of time. The U.S. still has effective control on global sea, air, and space. No country can match with the U.S. power in this regard.
Table 5 Military Expenditures in Selected Countries, 1998, 1999 ($billion)
Country Total military expenditure (CIA) Total military expenditure (IISS) Total military expenditure (SIPRI) Total military expenditure (U.S. Bureau of Arms Control) 74.9 (2.2) (PPP) 276.0 (3.3) 40.8 (1.0) 41.5 (3.0) 32.9 (1.6) 35.3 (2.7) 41.7 (5.8) (PPP) 13.1 (4.6)

China USA Japan France Germany UK Russia Taiwan

12.6 (1.2) 276.7 (3.2) 42.9 (1.0) 39.8 (2.5) 32.8 (1.5) 36.9 (2.7) N/A (N/A) 8.0 (2.8)

36.7 (5.3) 265.9 (3.2) 36.9 (1.2) 39.8 (2.8) 32.4 (1.5) 36.6 (2.8) 53.9 (5.2) 13.9 (4.6)

18.4 (1.9) 259.9 (3.2) 51.2 (1.0) 45.8 (2.8) 39.5 (1.5) 31.8 (2.7) 22.4 (3.2) 9.3 (3.5)

Source: Sinha, Radha, 2003:161

Chinas Defense Report 2000, points out that its defense industrial complex is far behind of any other great powers like United States, Russia, or even Japan (in Sinha, 2003). Chinas Defense Report 2002 also points out that Chinas Air force and Navy is far behind that of any other great power and even Taiwan in some respects (in Sinha, 2003). In addition to defense expenditures, U.S. holds a huge lead on the military research and development spending. It spends three times more money on research and development than the next six highest-spending countries combined (Roy, 2003). The U.S. is also far ahead in
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term of arms sales. From 1995-99, the U.S. exported 48%, and China exported only 2% of the total global arms (Table-6). China also does not have a massive arms industry like the United States. China still purchases most of its sophisticated arms from other countries and especially from Russia.
Table 6: Arms Export by Selected Countries, 1995-99 ($ billion)
Countries USA UK France Russia China Netherlands Germany Italy Ukraine Total Arms Export (1995-99) 53.4 7.3 11.7 14.6 2.2 2.2 6.1 2.0 2.0 Arms Export as % of Total Arms Export (!995-99) 48.0 6.6 10.5 13.1 2.0 2.0 5.5 1.8 1.8

enormous economic and military power. It is also difficult because Chinas close allies such as Pakistan, North Korea, and Myanmar are too weak and falling states. They are economically and militarily too weak to counter-balance the mighty United States (in Roy, 2003). In the economic sphere, China has developed bilateral and multilateral relationship with East Asian countries. But its security relationship is still uncertain with neighboring East Asian countries. The United States has a long standing security relationship with Japan, South Korea, and Australia. In recent times, the U.S. has further strengthened its security relationship with Japan and Australia. It has also developed new security relationship with other Southeast Asian countries such as the Philippines and Singapore. The U.S. is also trying to build its security cooperation with India, the most powerful neighbor of China. (Lim, 2004). Balancing against the United States is not possible for China, and at the same time it is not a driving principle of Chinas security policy (Roy, 2003). One scholar mentions that Chinese strategies have consensus on: first, the stronger China become, the more accommodating the United States will be toward China. Second, it is unwise for China to challenge the United States directly during its unipolar moment of unparallel power except where absolutely necessary (Roy, 2003). Chinas first broadbased national defense white paper, published in 1998, mentions that it will seek a peaceful, stable, prosperous world into the new century (in Celico, 2001:23). Chinas military strategists periodically have cautioned Chinas leadership not to indulge in any types of lopsided arms race with the United States that will hamper its economic development and modernization process (Sinha, 2003). Chinas policies towards its neighbors clearly indicate that China is willing to avoid conflicts and has focused more on economic development and peace and stability of the region (Montaperto, 2005).
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Source: SIPRI, SIPRI Yearbook 2000, in Sinha, 2003:177.

For external balancing, China has improved its relations with Russia. In 1996, China signed The Strategic Cooperative Partnership with Russia to counterbalance the U.S. global hegemony. The United States hegemonic position in global politics, NATO expansion in the East Europe and former Soviet Republics, and National Missile Defense policy (NMD) helped to build up Sino-Russian relations (Wishnick, 2001). But many scholars argue that due to many bilateral problems, it is not possible for these two countries to establish viable security cooperation against the United States (Roy, 2003). External balancing is not possible for China because few states are willing to join balancing coalition against the United States due to its
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Many authors argue that China is not even a superpower and its military capacity is declining compare to the U.S., despite its massive economic development (Nolt, 1998). He further mentions that Chinas pattern of economic growth undermined its possibility to become an autonomous military power. Nolt mentions that the U.S. should deal with China with confidence, not with fear (Nolt,1998). The U.S. still enjoys many advantages and leverages in its relationship with China. Strong economic relation with the U.S. is vital for Chinas economic growth and development. China desperately needs to preserve and expand its export market in the U.S. for its continuing economic growth and modernization. Due to recession in Japan, slow economic growth in Europe, and slow recovery in East and Southeast Asia after 1999 financial and economic crisis, U.S. is still Chinas most important export market. Bad economic relations with the U.S. will definitely hamper Chinas export growth and also overall economic growth, which aggravate unemployment in urban areas and mass discontent in rural areas. Bad economic performance will seriously erode the legitimacy of the communist regime. Conclusions The United States was worried about the Soviet Unions economic growth in the 1950s and 60s and Japans economic growth in the 1980s. But neither Japan nor Soviet Union were able to create any real threat to the United States economic and military supremacy in last three decades. Chinas economic growth in the last two decades will also not at all change the U.S. hegemonic position in the world. The United States is now the only superpower in the world. Many scholars disagree with the notion that U.S. power is declining compared to other great powers. There is no evidence that China will be able to create any serious economic or military threat to the United States in the foreseeable future (Sinha, 2003). The gap between American and Chinese military power is so enormous in terms of organizational and technical competence that the very idea of China being a military threat for the United States is unthinkable (Sinha 2003).
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There is no doubt that China will increase its military budget in the near future, but there is no indication that it will extend itself beyond its deterrence (Sinha 2003). China is not only dependent on the United States for its market, but also for foreign direct investment, technology transfer and financial resources. Chinas dependent development definitely prevents China from engaging in any kinds of serious confrontation with the United States. If China wants huge military build-up, it will face many difficulties: first, a weak technical and technological base and especially military technology. Second, huge military expenditure will seriously hamper its economic development. Third, huge military build-up will hamper its economic relations with its neighbors, especially with Japan and India (Isenberg, 2002). During the first two decades of Cold War, both China and the United States suffered enormously due to mistrust, suspicion, and bad relations. Billions of dollars were wasted and hundreds of thousands of people died in Korean and Vietnam Wars (Lampton, 2001). China will also definitely take lessons from the Soviet Unions bitter experience of indulging in any type of lopsided arms race with the United States. During the 1950s, the Soviet Union was not in a position to engage in an arms race with the United States. It was economically and militarily too weak to compete with the United States. Four decades of arms race seriously hampered its economic development and also the welfare of the people. The fall of the Soviet Union and demise of the communist party in the Soviet Union and Eastern Europe have convinced the Chinese leadership that improvement of living conditions are the only viable strategy for legitimization of the communist party and its rule. Arms race with the United States will hinder Chinas economic development, modernization process, and wellbeing of its people (Sinha 2003). Due to these reasons, economic development was given higher priority than security considerations in China during the last two decades. China is desperate to improve and normalize its relationship with the United States (Sinha, 2003).
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China is also not a rogue state like Iraq, Iran, and North Korea. In the last two decades, China has gradually liberalized its economy, improved relations with its neighbors, and enhanced its participation in the international organizations. China has already signed Non-proliferation Treaty (NPT), and the Comprehensive Test Ban Treaty (CTBT), also agreed to follow the guideline and parameters of the Missile Technology Control Regime (MTCR) and also agreed to cooperate with other international organizations (Xinghao, 1999). China has already integrated its economy into the global economic system and also part of global political and security regimes. China, with 1.2 billion people and rapidly growing economy, is very important for the rest of the global economy as well as U.S. big business and future economic growth. George Bush mentions that if we make China an enemy, they will end up being an enemy (in Sinha 2003: 92). After World War II, the Soviet Union wanted financial aid from the United States like the Martial Plan in Europe. The U.S. financial aid and involvement with the Soviet Union might have produced a different global order after the Second World War. But hostile attitudes towards the Soviet Union originated the Cold War between the two super powers and that lasted many years. It is also true for China, if the U.S. considers China as an enemy then it will end up being an enemy like the Soviet Union. Many authors (Nau, 2002; Nye, 2002) argue that by following a liberal internationalism, the United States may able to prevent any types of counter-balancing coalitions. The future Sino-American relations will profoundly shape the life of billions of people, stability and prosperity in the world, especially in Asia (Lampton, 2001). Whether the U.S.-China relations will be a zero-sum or win-win game depends on the U.S. policy toward China, and Chinas involvement in international institutions, norms, and regimes in the near future.

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