Twin peaks in Sino-US relations 2015-2020
- By Dan Steinbock
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E-mail China.org.cn, January 19, 2015
Two pivots, one region
In the 2010s, both China and the U.S. have engaged in regional rebalancing. America's security alignments in Asia Pacific stem from President Obama's pivot to "maintain our strong military presence in this region."
In June 2012, the then-Defense Secretary Leon Panetta said that America's combat ships in Asia would be doubled to 60 percent by 2020. In turn, U.S. recalibration of trade in the region has been fueled by the proposed Trans-Pacific Partnership (TPP) deal.
In a recent APEC forum, China presented its own new regional initiatives, which reflect the proposed "Asian-Pacific Dream," including a $40 billion Silk Road fund, and the $50 billion Asian Infrastructure Investment Bank, which will augment the already-launched New Development Bank (NDB) by the BRICS nations. Furthermore, Beijing is paving way for the Silk Road Economic Belt to serve a combined market of 3 billion people, as well as the 21st century Maritime Silk Road along with $1 trillion in bilateral trade with Southeast Asia by 2020.
These initiatives are evolving hand in hand with the proposed Asia Pacific Free Trade (FTAAP) plan, which would include both China and the United States. While Washington has lobbied against both the AIIB initiative and the FTAAP plan, the regional development bank has broad support in east, southeast and south Asia, while inclusive free trade in Asia Pacific requires the presence of both Beijing and Washington.
While there has been friction over China's 'core interests' in Asia, particularly with Japan, the Philippines and Vietnam, major conflicts have been contained in bilateral talks rather than multilateral or international venues.
Changing economic realities
As the Obama era is winding down, the Dow Jones topped 18,000 for the first time, while the third-quarter U.S. growth intensified to 5.0 percent, the strongest in 11 years. U.S. real GDP growth is likely to accelerate to 2.3 percent in 2014 and 3.1 percent in 2015, respectively. While inflation will remain less than 2 percent, the Fed will hike rates to 0.6 percent in 2015. At the same time, the value of the euro will decline from $1.38 to $1.15 in 2013-2015.
As President Obama will leave the White House, U.S. growth will steadily decelerate to 2.3 percent by 2020, even as inflation will rise to more than 2 percent. At the same time, general government fiscal balance of GDP will increase to more than -3 percent, whereas trade balance will remain 3.4 percent of GDP. Concurrently, the euro will increase to $1.30 by 2020.
This economic deterioration will be compounded by the challenge of leverage. Despite all the rhetoric about "austerity" and "rebalancing America's debt burden has grown by almost two-thirds since the global crisis. Today, it is close to $18 trillion – almost $1 trillion higher than the U.S. GDP, despite the Fed's lifeline of $4.5 trillion in the past half a decade.
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