Economic, Military, and Diplomatic Developments
The Full Competition Report For Practitioners
By Monte Erfourth – Aug 2024
ABSTRACT
In 2024, the geopolitical chessboard saw heightened competition between the United States and China, with Beijing's strategic maneuvers aiming to reshape the global order and challenge U.S. dominance. Despite their profound ideological rifts, both nations engaged in cautious dialogue, striving to manage their rivalry responsibly. Despite the outreach, the first half of the year was marked by escalating economic, military, and diplomatic tensions, with neither side willing to seek cooperation over competition.
China's military capabilities have been steadily improving, narrowing the gap with the U.S. and outpacing regional neighbors. However, its economic slowdown and demographic challenges present significant hurdles. Meanwhile, China's diplomatic efforts in the Middle East and Europe faced setbacks, diminishing its leverage.
In response, the U.S. has strengthened its global diplomatic efforts, strengthening alliances and addressing geopolitical tensions. While symbolically significant, the formation of an "Axis of Authoritarians" between China, Russia, and Iran lacks the cohesion to effectively challenge the current international order. However, the BRICS coalition represents a notable shift in the global landscape, with China playing a pivotal role.
The U.S. retains an edge in national power but must continue to leverage its technological, academic, and corporate strengths. A united American front, reinvigorated patriotism, and respect for democratic values are essential to countering China's challenge. The next U.S. administration must align partners and allies against the growing authoritarian threat, focusing on innovation and strategic cooperation rather than mere containment. The stakes are high, and the path forward requires a blend of strategic foresight and national unity.
INTRODUCTION
The Strategy Central Great Power Competition report details the United States and China competition in the first half of 2024. It offers an analysis to help strategists grasp the current state of rivalry between these two superpowers in terms of power, economics, military power, and diplomacy. The conclusion is more than a summary; it will contain additional points and recommendations. The report will first examine the power dynamics in the Indo-Pacific as a way to explore the region of greatest tension between the U.S. and China. This does not mean that the rest of the world is not at play. It very much is. The world will also be discussed, just in less detail.
The report is broken into distinct sections:
· Power Politics. Explores the interplay of nations employing their powers to create advantage through influence and leverage to protect and advance their interests.
· Economic. Explores the ongoing trade disputes, technological restrictions, and collaborative efforts.
· Military. Delves into strategic deterrence, strategic approach, and the complex dynamics of military engagement in several regions.
· Diplomacy. Discusses high-level diplomatic initiatives, conflict resolution efforts, and the impact of strategic alliances.
· Conclusion. Synthesizes insights and offers strategic recommendations, aiming to inform strategy development or, at the very least, serve as an informative overview of the evolving U.S.-China relations.
The reader can skip to any one section to learn about a particular area of concern. Going directly to the conclusion may be best if the reader is looking for a synthesis of the primary facets of great power politics and where the competition currently stands.
POWER POLITICS
This report will use the Lowey Institute Total Power Index in the Asian Pacific for 2023 to show how developing power measures for nations can help understand the political strategies at play as each uses its power to protect and pursue its interests. Lowey’s Institute’s Asia Power Index 2023 edition (https://power.lowyinstitute.org/report/) is an excellent tool to aid the strategist in better understanding the regional power distribution of Asia. The following discussion will repeatedly refer to the Total Power Index to frame the current state of competition play.
Great power strategies in the Indo-Pacific orient around the axis of tension between an ascendant China and the post-World War II regional order backed by the United States. China strives for regional hegemony, seeking privilege commensurate with its power to protect its interests and impose its will in along its periphery. India and Japan balance the multipolar system; when aligned, they nearly match China in power. The Indo-Pacific members of the Quadrilateral Security Dialogue (“Quad)” formation—India, Japan, and Australia—surpass China’s Power score. Lesser regional powers—South Korea, Singapore, Indonesia, Thailand, and Malaysia—face pressure between China and the U.S.-led effort to balance. It should not be assumed that a greater collective score translates into an absolute power advantage. Types, abilities, coordination, and a host of other factors determine the actual power advantage. Yet, real power has been achieved if the perception of collective or individual power is achieved.
Less powerful Indo-Pacific states also factor into the geopolitical design of the region, albeit in context-specific situations. For example, countries in the South China Sea—Vietnam, the Philippines, and Brunei—have modest comprehensive power relative to global and regional powers but influence negotiations surrounding the nascent South China Sea Code of Conduct agreement between China and the Association of Southeast Asian Nations (ASEAN). North Korea, nuclear-armed and volatile, occasionally generates uniquely destabilizing effects in Northeast Asia. Mongolia, Nepal, and Bhutan are wedged between great powers with potential for both competition and cooperation. Sri Lanka and the Maldives spread across the Indian Ocean, offering access along seaways vital to global trade. Bangladesh, Cambodia, Myanmar, and Laos in Southeast Asia straddle the South China Sea and the Indian Ocean, providing land and maritime throughways around the Strait of Malacca. These nations straddle the single most important sea passage for China. New Zealand’s position at the region’s southern edge limits its strategic impact, yet its Commonwealth ties and economic linkages provide it with limited relevance. Depending on context, these less powerful states can have an outsized impact on regional outcomes.
Finally, the Indo-Pacific is home to many geographically small island states with varying degrees of economic development, independence, and strategic relevance. Many states experience relations with great powers based on colonial associations or imperial reach, such as the United States with the Marshall Islands. Yet the resurgence of other regional powers—most notably, China—has provided alternatives for investment and support. Perhaps better than any other country, China has capitalized on the fact that every United Nations (UN) member state—no matter its power in the geopolitical system—has a vote in the UN General Assembly (UNGA) and a voice on the international stage. In this context, even states with low power take on additional importance.
Great power competition in the Indo-Pacific is characterized by China’s growth not minimizing its insecurities. Historical threats of invasion from without and instability from within, demographic and environmental pressures, challenging economic transformation, and the shadow of the Century of Humiliation provide a greater purpose for acting on those insecurities. China strives for regional hegemony, which manifests in a perceived need to project security across borders, dominate its near maritime environment within the first island chain, and secure its aortic sea lanes linking to the Middle East and Europe and those connecting the Americas. China’s approach generates friction with India and Japan, with which it shares land and maritime boundaries. Russia has limited reach in the Indo-Pacific but remains engaged in Northeast Asia and often supports Chinese initiatives, including the expansive Belt and Road Initiative. Germany and France also have limited leverage within the region but advance multilateral agendas to address shared challenges like climate change and reinforce architecture, such as ASEAN, to shape China’s rise. The U.S. seeks to contain China within the first island chain, which will prevent China from pushing its newly formed blue water navy into the Pacific, which would significantly pressure the U.S. domination of critical sea lanes of communication in the Pacific and possibly beyond. The United States seeks to balance Indo-Pacific power through its allies and partners and multilateral processes alongside its European peers.
ECONOMIC REVIEW
Ongoing and escalating tensions have marked the economic relationship between China and the United States. One significant issue in the first half of 2024 was the continuation of trade disputes, with both countries imposing tariffs and trade restrictions. China retaliated against U.S. trade measures by threatening to sell U.S. Treasuries and controlling exports of critical minerals, which could impact global supply chains. This period also heightened scrutiny of China's economic policies, such as its ambitious and distortionary industrial strategies, particularly in sectors like electric vehicles and high technology. These strategies have prompted the U.S. and its allies to implement measures to reduce dependency on Chinese goods and technology, contributing to further friction.
Between January and July 2024, the United States implemented several measures to prevent China from accessing critical technology, particularly in sectors deemed vital for national security and technological leadership.
· Export Controls and Investment Restrictions
The U.S. has continued to expand its export controls on critical technologies. These controls, first significantly revised in October 2022, have been further tightened to restrict the export of advanced semiconductors, semiconductor manufacturing equipment, and AI-related technologies to China. The Biden administration has built on these measures by restricting outbound investments in key technological sectors, including semiconductors, quantum computing, and AI. This comprehensive approach aims to prevent the transfer of technology that could enhance China's military capabilities and its high-tech industry.
· Sanctions and Cybersecurity Measures
In response to persistent cyber threats, the U.S. Department of the Treasury, in coordination with other agencies, sanctioned Chinese entities and individuals linked to state-sponsored cyber activities targeting U.S. critical infrastructure. For example, in March 2024, the Treasury sanctioned Wuhan Xiaoruizhi Science and Technology Company, Limited, and associated individuals for their roles in cyber operations against U.S. infrastructure. These sanctions are part of broader efforts to disrupt malicious cyber activities and protect U.S. national security.
· Collaboration with Allies
The U.S. has actively sought to harmonize its technology control measures with those of key allies. Agreements with countries like Japan and the Netherlands have been crucial, particularly in limiting China's access to advanced lithography equipment essential for semiconductor manufacturing. This coordinated approach helps close loopholes that could allow China to bypass U.S. restrictions by sourcing technology from other advanced economies.
· Policy and Legislative Actions
The U.S. has also leveraged legislative tools to bolster its technology control framework. The Export Control Reform Act of 2018 and subsequent updates under the Biden administration have provided a robust legal basis for restricting technology exports. Additionally, the Department of Commerce has added numerous Chinese entities to its Entity List, requiring U.S. companies to obtain licenses for exporting specified technologies to these entities. This strategy aims to limit the transfer of technologies that could contribute to China's military modernization and strategic ambitions.
Cooperation
During the first half of 2024, the United States and China made several notable strides in economic collaboration despite ongoing tensions. Their commitment to renew the U.S.-China Science and Technology Cooperation Agreement was a significant achievement, which fosters joint research and development in various scientific fields. Additionally, both nations agreed to expand renewable energy efforts and reduce carbon emissions, reflecting a shared interest in addressing climate change. These agreements underscore the mutual benefits of economic collaboration and the necessity of cooperation in global sustainability efforts.
ECONOMIC REVIEW
Ongoing and escalating tensions have marked the economic relationship between China and the United States. One significant issue in the first half of 2024 was the continuation of trade disputes, with both countries imposing tariffs and trade restrictions. China retaliated against U.S. trade measures by threatening to sell U.S. Treasuries and controlling exports of critical minerals, which could impact global supply chains. This period also saw heightened scrutiny of China's economic policies, such as its ambitious and distortionary industrial strategies, particularly in sectors like electric vehicles and high technology. These strategies have prompted the U.S. and its allies to implement measures to reduce dependency on Chinese goods and technology, contributing to further friction.
Between January and July 2024, the United States implemented several measures to prevent China from accessing critical technology, particularly in sectors deemed vital for national security and technological leadership.
· Export Controls and Investment Restrictions
The U.S. has continued to expand its export controls on critical technologies. These controls, first significantly revised in October 2022, have been further tightened to restrict the export of advanced semiconductors, semiconductor manufacturing equipment, and AI-related technologies to China. The Biden administration has built on these measures by restricting outbound investments in key technological sectors, including semiconductors, quantum computing, and AI. This comprehensive approach aims to prevent the transfer of technology that could enhance China's military capabilities and its high-tech industry.
· Sanctions and Cybersecurity Measures
In response to persistent cyber threats, the U.S. Department of the Treasury, in coordination with other agencies, sanctioned Chinese entities and individuals linked to state-sponsored cyber activities targeting U.S. critical infrastructure. For example, in March 2024, the Treasury sanctioned Wuhan Xiaoruizhi Science and Technology Company, Limited, and associated individuals for their roles in cyber operations against U.S. infrastructure. These sanctions are part of broader efforts to disrupt malicious cyber activities and protect U.S. national security.
· Collaboration with Allies
The U.S. has actively sought to harmonize its technology control measures with those of key allies. Agreements with countries like Japan and the Netherlands have been crucial in limiting China's access to advanced lithography equipment essential for semiconductor manufacturing. This coordinated approach helps close loopholes that could allow China to bypass U.S. restrictions by sourcing technology from other advanced economies.
· Policy and Legislative Actions
The U.S. has also leveraged legislative tools to bolster its technology control framework. The Export Control Reform Act of 2018 and subsequent updates under the Biden administration have provided a robust legal basis for restricting technology exports. Additionally, the Department of Commerce has added numerous Chinese entities to its Entity List, requiring U.S. companies to obtain licenses for exporting specified technologies to these entities. This strategy aims to limit the transfer of technologies that could contribute to China's military modernization and strategic ambitions.
Cooperation
During the first half of 2024, the United States and China made several notable strides in economic collaboration despite ongoing tensions. Their commitment to renewing the U.S.-China Science and Technology Cooperation Agreement was a significant achievement that fostered joint research and development in various scientific fields. Additionally, both nations agreed to expand renewable energy efforts and reduce carbon emissions, reflecting a shared interest in addressing climate change. These agreements underscore the mutual benefits of economic collaboration and the necessity of cooperation in global sustainability efforts.
2024 China Economic Performance
China’s GDP growth in Q1 2024 reached 5.3%, surpassing both consensus expectations and the 5.2% reading from 2023, suggesting that the country's 4.6% growth forecast for 2024 is attainable, with potential for upward revision. Despite this, the economic structure remains unbalanced, with a stronger supply side overshadowing weaker demand. The recovery's foundation is still shaky, mainly due to the ongoing real estate adjustments and economic imbalance. Key risks include real estate, local government debt, deflation, supply chain shifts, and geopolitical tensions, though systemic financial risks appear manageable. In response, China continues implementing expansionary monetary and fiscal policies, emphasizing fiscal stimulus to bolster recovery amid weak economic sentiment and ineffective monetary easing.
2024 USA Economic Performance
In 2024, the United States displayed a robust economic performance, marked by steady GDP growth and strong labor market indicators. 2024 GDP for Q1 increased at an annual rate of 1.6%, and 2.7% in Q2, according to the World Bank. Consumer spending remained a key driver, buoyed by rising wages and low unemployment rates. Inflation pressures eased compared to previous years, allowing the Federal Reserve to maintain a balanced monetary policy stance. The tech and healthcare sectors led gains in corporate earnings, while manufacturing showed signs of resilience despite global supply chain challenges. However, concerns about fiscal sustainability persisted amid elevated government debt levels and geopolitical uncertainties posed potential risks to economic stability. The U.S. economy demonstrated resilience and adaptability in a complex global landscape.
2023 Lowey Asia Economic Capability Rating
Unsurprisingly, China and the United States are economically equivalent. Even with the divisions of allies and partners, China and its network have about the same economic power compared to the U.S. and its allies and partners.
Economic Summary
The United States has employed a multi-faceted strategy to prevent China from accessing critical technology. This includes stringent export controls, sanctions on cyber actors, collaboration with international allies, and robust legislative measures. These efforts reflect a broader U.S. strategy to maintain technological leadership and safeguard national security in the face of growing competition from China. A significant achievement was made in the commitment to renew the U.S.-China Science and Technology Cooperation Agreement, which fosters joint research and development in various scientific fields.
In 2024, China's economic growth is projected to slow to around 4.1%, influenced by structural challenges and external pressures. Despite robust export growth to ASEAN countries and Latin America, trade with Western economies has declined. Domestically, the Chinese government is prioritizing wage increases and consumer spending to boost economic growth, transitioning from an investment-driven model. However, the effectiveness of these measures remains uncertain, and the country faces significant risks, including a downturn in the property sector and weakened global demand.
China's decades-old, debt-fueled model of relying on real estate and infrastructure investments to drive its domestic economy is still facing its most severe challenge. The real estate sector, which accounts for 25–30 percent of the country’s GDP, is in crisis, with property developers losing the capacity to buy land, purchase construction materials, pay contractors, and deliver housing units. This has led to defaults on dollar-denominated bonds by 34 of 50 developers and pushed the two largest companies towards bankruptcy. Similarly, infrastructure construction, comprising another 15 percent of GDP, is under pressure. The property crisis has drastically reduced local government revenue from land sales, which traditionally accounted for one-third of their revenue, impacting essential public services.
With approximately 70 percent of household wealth tied up in real estate, falling property sales and prices have shifted consumer focus to reducing household debt, raising deflation risks. Despite two decades of official statements on boosting consumption, household consumption as a share of GDP dropped to its lowest level in nearly a decade in 2022, with only a slight rebound in 2023. This forces China to rely on exports to sustain growth, distorting global markets. The failing real estate model has caused systemic financial stress, with rising property loan defaults and declining asset sales and prices creating broader financial instability. Banks face shrinking profit margins and consumer deposit rates while carrying increasing nonperforming loans. The Chinese Communist Party (CCP) faces the dual challenge of addressing local debt accumulation while managing financial risks and maintaining foreign investor confidence amidst an overall debt-to-GDP ratio that exceeded 300 percent in 2023.
In 2024, the U.S. economy showed a mixed performance with moderate growth amid persistent challenges. The real GDP growth rate is projected to average around 2.4% annually, supported by robust consumer spending and a strong job market. However, this represents a slowdown from the previous year's growth due to elevated interest rates and geopolitical tensions impacting trade and investment. Consumer spending continued to be a significant driver, growing at 2.3%, buoyed by households leveraging savings and new debt. However, this growth is expected to decelerate as savings deplete and borrowing reaches its limits.
Inflation remained a key concern, with the Federal Reserve maintaining higher interest rates to combat price increases, impacting borrowing and investment activities. The labor market remained resilient, with a low unemployment rate of around 3.9%, contributing to sustained economic activity despite external pressures. Defense spending saw an uptick due to geopolitical conflicts, providing an economic stimulus that partially offset some of the downturns from international tensions and higher oil prices. While the U.S. economy demonstrated strength and resilience, it faced significant headwinds that moderated its growth trajectory.
The short-term projection for the U.S. economy for the remainder of 2024 and early 2025 suggests moderate growth amidst persistent challenges. GDP growth is expected to average around 2.4% for the year, driven by robust consumer spending and a strong job market. However, this represents a slowdown compared to previous years due to elevated interest rates and ongoing geopolitical tensions impacting trade and investment. Inflation pressures will likely ease somewhat, allowing the Federal Reserve to maintain a balanced monetary policy stance.
Despite these positive indicators, several risks persist. The U.S. faces challenges from trade deficits, higher inflation rates, and vulnerabilities in global supply chains, particularly for critical minerals and high-tech components. Defense spending is anticipated to rise due to geopolitical conflicts, providing some economic stimulus but also straining the budget. While the U.S. economy is expected to demonstrate resilience, it must navigate significant headwinds that could moderate its growth trajectory in the short term.
MILITARY REVIEW
Military tensions have been pronounced between China and the United States, particularly in the South China Sea and Taiwan Strait. The U.S. continued its freedom of navigation operations, which China views as provocations. In response, China increased its military activities, including building infrastructure on man-made islands and expanding its naval presence. The strained military relationship was further complicated by disagreements over the AUKUS pact, which involves the U.S., U.K., and Australia cooperating on nuclear-propelled submarines—a move Beijing sees as a containment strategy. Despite some high-level talks aimed at maintaining open lines of communication and managing the competition, deep mistrust persists, with both sides accusing each other of aggressive posturing.
U.S. Military Deterrence Efforts Against China in the Indo-Pacific
From January to July 2024, the U.S. military undertook several strategic initiatives to deter China's assertive actions in the Indo-Pacific region. These efforts were concentrated around Taiwan, the Philippines, the Spratly Islands, the Senkaku Islands, and the East China Sea. The U.S. aimed to reinforce its commitment to regional allies, uphold international laws, and maintain a balance of power to prevent any unilateral changes to the status quo by China.
· Taiwan
In response to increasing Chinese military pressure around Taiwan, the U.S. escalated its military presence and engagement with Taiwan. The U.S. conducted several freedom of navigation operations (FONOPs) through the Taiwan Strait, underscoring the international waters' status and the U.S. commitment to free passage. Additionally, there were joint military exercises between U.S. and Taiwanese forces, focusing on enhancing Taiwan's defensive capabilities against potential amphibious assaults and missile attacks from China. These exercises included simulated air defense, anti-submarine warfare, and cyber defense operations, demonstrating a comprehensive approach to deterrence.
· The Philippines
The U.S. fortified its alliance with the Philippines through increased military aid, joint exercises, and the rotational presence of U.S. troops under the Enhanced Defense Cooperation Agreement (EDCA). Notably, the annual Balikatan exercises were expanded in 2024, involving more complex scenarios and advanced weaponry. These drills included amphibious assaults, live-fire exercises, and air-to-ground operations aimed at improving interoperability and readiness against any regional threats, including Chinese maritime assertiveness in the South China Sea. The U.S. also worked on upgrading military facilities in the Philippines to ensure rapid deployment capabilities if necessary.
· The Spratly Islands
In the contested Spratly Islands, the U.S. conducted multiple FONOPs to challenge China's extensive territorial claims and militarization of artificial islands. These operations were complemented by aerial reconnaissance missions to monitor Chinese activities and assert the right to freedom of overflight. The U.S. Navy's presence in the region was bolstered by carrier strike groups and amphibious ready groups conducting patrols and exercises, demonstrating the capability to respond to any provocations swiftly. The U.S. also engaged with regional partners such as Vietnam and Malaysia, providing maritime security assistance and enhancing collaborative surveillance efforts.
· The Senkaku Islands and the East China Sea
To support Japan in its territorial dispute with China over the Senkaku Islands, the U.S. reaffirmed its defense commitments under the U.S.-Japan Security Treaty. This included increased joint patrols and surveillance missions in the East China Sea, where Chinese incursions into Japanese-claimed waters had escalated. The U.S. and Japan conducted joint air and naval exercises to deter Chinese aggression and demonstrate their alliance's robustness. These drills involved anti-submarine warfare, mine countermeasures, and missile defense operations, showcasing a comprehensive deterrence strategy.
China Undeterred
Beijing's expansion of its global influence posture is a strategic maneuver aimed at bolstering the Chinese Communist Party's (CCP) objectives. This strategy seeks to undermine U.S. leadership, destabilize democratic institutions, and extend Beijing's influence globally. Key elements of this approach include:
Promoting Pro-China Narratives: Beijing focuses on disseminating favorable narratives about China while countering U.S.-promoted narratives threatening its interests. This includes leveraging generative AI to enhance the sophistication of its influence operations.
Exploiting U.S. Societal Divisions: Beijing mirrors Moscow's influence tactics by exploiting perceived divisions within U.S. society. This was evident during the 2022 U.S. midterm elections when PRC propaganda arms targeted candidates from both political parties via platforms like TikTok.
Molding Public Discourse: Beijing intensifies efforts to shape U.S. public opinion on sensitive sovereignty issues such as Hong Kong, Taiwan, Tibet, and Xinjiang. This includes monitoring Chinese students abroad for dissident views and mobilizing student associations to act on Beijing's behalf.
Influencing Research and Academia: The PRC influences research by U.S. academics and think tank experts, aiming to control the narrative and policy choices regarding China.
Maritime Power Projection. From intimidating Taiwan with live fire exercises all around the island to the militia fishing fleets violating other nations’ territorial waters and harassing their coast guard and naval forces with their own, China conducts maritime operations just under U.S. redlines with great regularity.
UN Power Moves. In 1971, the PRC replaced the ROC as the recognized government of the Chinese people in the UN. Under PRC pressure, the number of nations that recognize Taiwan today has dwindled to twelve.
Given these activities, it is plausible that Beijing may attempt to influence the U.S. elections in 2024. The PRC's enhanced capabilities in covert operations and disinformation dissemination, coupled with the actions of individuals not directly supervised by Beijing but aligned with its goals, pose a significant risk to the integrity of the electoral process.
If the list does not look like traditional military activities, then you may not be aware of China’s competitive military organization. In late 2015, the People's Liberation Army (PLA) launched significant reforms that reshaped its structure, warfighting model, and organizational culture, notably by creating the Strategic Support Force (SSF). The SSF centralizes the PLA's space, cyber, electronic, and psychological warfare capabilities, shifting from land-based territorial defense to extended power projection in strategic frontiers like space, cyberspace, and the far seas. This reorganization aims to enhance efficiency and synergy among disparate capabilities, enabling decisive strategic information operations (IO). The SSF's two main branches, the Space Systems Department and the Network Systems Department, oversee space and cyber operations, consolidating previous departmental responsibilities to streamline command and control. Despite the ongoing transition, the SSF is poised to play a critical role in the PLA's strategy for fighting and winning informationized wars.
The SSF's formation is part of broader PLA reforms, including the dissolution of four general departments and the Central Military Commission (CMC) expansion. This new structure supports the dual command system where services focus on force construction, and theater commands handle joint operations. The SSF, alongside the Rocket Force, remains outside this bifurcated arrangement, responsible for both force construction and strategic operations. The SSF centralizes technical reconnaissance and information support, essential for joint operations and strategic defense. Modeled partly on the U.S. Strategic Command (USSTRATCOM), the SSF integrates various operations, including cyber espionage, cyber-attacks, and psychological warfare, addressing historical coordination challenges within the PLA. However, the SSF's effectiveness will depend on overcoming organizational culture issues and ensuring seamless integration across its various missions and with other military entities.
The Axis
China is central in fostering cooperation, coordination, and mutual support among China, Russia, Iran, and North Korea. This alliance significantly impacts global dynamics, notably by supporting Russia's military operations in Ukraine. China has contributed critical technology and economic backing, while Iran has provided advanced drone technology. North Korea, though not a formal member of this axis, has reinforced these efforts by supplying ammunition and missile systems to Russia. These contributions enhance Russia's military capabilities and undermine Western efforts to diplomatically and economically isolate Moscow. This supports President Xi Jinping vision of China as the preeminent power in East Asia and as a leading power on the world stage. The Chinese Communist Party (CCP) will attempt to preempt its reputation and legitimacy challenges, undercutting U.S. influence, driving wedges between Washington and its partners, and fostering global norms favoring its authoritarian system with the support of Russia and Iran.
Military Collaboration
Military collaboration between the U.S. and China saw a cautious but positive development with the resumption of high-level military-to-military communications. This includes reinstating the U.S.-China Defense Policy Coordination Talks and the U.S.-China Military Maritime Consultative Agreement meetings. These dialogues are crucial for managing potential crises and ensuring open lines of communication, especially in hotspots like the South China Sea and the Taiwan Strait. Both sides also agreed to resume telephone conversations between theater commanders, marking a significant step in mitigating risks of unintended military escalations.
Military Summary
The U.S. military's efforts from January to July 2024 to deter China in the Indo-Pacific region were multifaceted. They involved a combination of increased military presence, joint exercises, and reaffirmation of defense commitments to allies. These measures were designed to maintain stability, uphold international norms, and prevent any unilateral changes to the regional status quo by China. They have also been largely ineffective at deterring Chinese cyber-attacks, influence operations, lawfare, East China Sea aggression, expanding military capabilities, supporting Russia and Iran, or harassing partners and allies internationally. The Joint Force has no equivalent to the PLA’s Strategic Support Force and only a desperate and uncoordinated interagency response to defeat the threat it poses. This must be rectified, or China’s advantage in psychological, informational, and cyber capabilities will continue to outclass those of the United States. Despite the Lowey Institutes’ dominant military capability score for the U.S. (see below), it does not reflect China's dominance in key strategic capabilities. The U.S. military cannot be overconfident despite legitimate power projection. It urgently needs to set the theater for conflict to deter war while shoring up the manifold areas it is either not competing, not deterring, or deterring with little effect.
DIPLOMACY REPORT
Diplomatically, U.S.-China relations have been fraught with tension over issues such as human rights, Taiwan, and strategic alliances. The Biden administration maintained a tough stance on China's human rights record, especially concerning Xinjiang and Hong Kong, leading to diplomatic protests from Beijing. Additionally, U.S. support for Taiwan, including arms sales and political backing, has been a significant point of contention, with China repeatedly warning against any form of Taiwanese independence. Diplomatic engagements have been cautious, aiming primarily at risk management rather than substantive resolution of disputes. This cautious engagement was highlighted during the November 2023 summit in San Francisco, which, while easing immediate tensions, did not address the underlying issues that continue to drive U.S.-China competition.
Major Diplomatic Efforts by China
During the first half of 2024, China engaged in several significant diplomatic initiatives aimed at strengthening its global influence and fostering international cooperation. These efforts were diverse, covering various regions and issues and highlighting China's strategic priorities in its foreign policy.
· High-Level Diplomatic Events
China hosted several key international events to bolster its diplomatic presence and showcase its leadership. These included the Forum on China-Africa Cooperation, the Boao Forum for Asia, the China International Import Expo, and the Forum on Global Action for Shared Development. These events focused on themes such as fostering prosperity with developing countries, enhancing regional cooperation, promoting trade and globalization, and implementing the Global Development Initiative.
· Strengthening Bilateral and Multilateral Relations
China emphasized the importance of high-level exchanges and strategic communication with major powers and regional partners. This included efforts to deepen strategic mutual trust and cooperation with Russia, enhance relations with the European Union, and improve ties with neighboring countries and BRICS nations. These initiatives aimed at building a new type of international relations based on mutual respect and shared interests.
· Engagement in Conflict Resolution
China actively participated in efforts to resolve global and regional conflicts. It played a constructive role in promoting peace talks and providing public goods conducive to world peace and development. Specific areas of focus included the Palestinian-Israeli conflict and the Ukraine crisis. China’s diplomatic activities in these areas were part of its broader Global Security Initiative, which advocates for fairness, justice, and the promotion of peace through dialogue.
· Strategic Initiatives in Southeast Asia
China's diplomatic activities in Southeast Asia, particularly in Myanmar, were notable. Chinese Foreign Minister Qin Gang visited Myanmar and engaged with military leader Min Aung Hlaing, signaling China's support for the Myanmar military junta while pushing for the advancement of the China-Myanmar Economic Corridor. This move highlighted China's strategic interests in the region and its intent to consolidate its influence amidst ongoing conflicts.
· Enhancing Global Partnerships and Multilateralism
China continued to advocate for a multipolar world and genuine multilateralism. It called for upholding the principles of the United Nations Charter and participating in the reform of the global governance system. China's efforts included promoting the Global Civilization Initiative, which aims to foster exchanges and mutual understanding among different civilizations, and the Global Development Initiative, focusing on inclusive economic globalization and supporting the development capacity of other countries.
· Diplomatic Engagements with the United States
Following the November 2023 summit between President Xi Jinping and President Joe Biden, China worked to implement the consensus reached during the meeting. This included exploring ways to manage competition and fostering strategic stability. Despite ongoing challenges, this effort marked a significant attempt to stabilize and manage the complex relationship between the two major powers.
China's diplomatic efforts in the first half of 2024 were characterized by a mix of high-profile events, strategic bilateral engagements, and active participation in global conflict resolution. These initiatives reflect China's broader goals of enhancing its international standing, promoting cooperative development, and shaping a multipolar world order over which it can exert more control.
Cooperation
Diplomatic efforts have focused on stabilizing the bilateral relationship and preventing further deterioration. A key outcome was the establishment of a counternarcotics working group aimed at combating the production and trafficking of fentanyl and other narcotics. This initiative highlights a critical area of shared concern with direct implications for public health in both countries. Additionally, discussions were initiated to address the risks associated with artificial intelligence, particularly its military applications, and to explore global AI governance frameworks.
Diplomacy Summary
Despite deep-seated strategic and ideological differences, both nations have shown a willingness to engage in constructive dialogue and collaborate on issues of global significance. These efforts, while limited, represent a concerted attempt to manage competition responsibly and seek common ground where possible. Overall, the period from January to July 2024 has seen U.S.-China relations characterized by deepening economic, military, and diplomatic disputes, with both countries taking steps to manage but not resolve their strategic competition.
While China made inroads in the Middle East last year in the Middle East, brokering a truce of sorts between Iran and Saudi Arabia, the effort largely fell apart with the Hamas attack on Israel and subsequent fighting in Gaza since October 2023. China has been unable to encourage Iran to make safe passage for its ships through the Bab Al Mandeb without Houthi attacks. China’s leverage has been somewhat diminished in the region. In Europe, China had to work to repair relationships after attempting to dump EV cars on the Euro market but was blocked by members of the European Union. Talks with key European nations did not go well, with growing resentment towards China for backing Putin over Ukraine. China, Russia, Iran, and North Korea have significantly increased economic, security, and diplomatic collaboration over the past year.
The Lowey Comparative Advantage shows that the U.S. is gaining ground over China, with the noted exception of diplomatic influence and military power. Increases in economic relationships, defense networks, and cultural influence offset Chinese advantages.
In 2024, the U.S. State Department has been actively engaged in significant global diplomatic efforts, reflecting a multifaceted approach to addressing international challenges and strengthening alliances. One key area of focus has been enhancing security partnerships and addressing geopolitical tensions. For instance, the U.S. played a pivotal role in the NATO Summit held in Washington, D.C., which marked 75 years of the alliance. This summit advanced robust deterrence and defense strategies, showcasing NATO's unity and commitment to collective defense in the face of evolving threats. Furthermore, the State Department has been involved in extensive discussions and coordination with international partners to address the ongoing conflict in Ukraine and counter Russian aggression, highlighting a commitment to upholding international norms and supporting allies.
In 2024, the U.S. State Department has significantly engaged in diplomatic efforts across the Middle East, focusing on strengthening alliances, addressing regional conflicts, and promoting stability. Secretary of State Antony Blinken embarked on a comprehensive tour of the region in January, visiting key nations including Turkey, Greece, Jordan, Qatar, the UAE, Saudi Arabia, Israel, the West Bank, Bahrain, and Egypt. This tour aimed to address a range of issues such as regional security, economic cooperation, and ongoing conflicts. In Saudi Arabia, discussions centered on regional security and the Yemen conflict, while in Israel, talks focused on the Israeli-Palestinian conflict and steps toward a two-state solution. The visit to Iran aimed at exploring possibilities for diplomatic normalization and cooperation on regional stability and the nuclear deal.
Furthermore, the State Department facilitated a historic agreement between Israel and Lebanon to formally end their maritime boundary dispute. This agreement, achieved after months of U.S.-mediated negotiations, is expected to enhance regional stability and cooperation, particularly in energy resource development. The U.S. also emphasized the importance of diplomatic solutions and economic collaboration during Blinken's visits to UAE, Qatar, and Egypt, addressing issues from counterterrorism to economic partnerships. These efforts reflect a broader U.S. strategy to foster peace, stability, and prosperity in the Middle East through robust diplomatic engagement.
Additionally, the State Department has strongly emphasized public diplomacy and strategic communication. This includes countering misinformation and enhancing the U.S.'s global image through public diplomacy initiatives. The Global Engagement Center has been at the forefront of these efforts, working to expose and counter foreign propaganda and disinformation. The department has also focused on promoting global health security, as demonstrated by the 2024 U.S. Global Health Security Strategy release, which aims to strengthen international health systems and improve preparedness for future pandemics. These initiatives reflect a comprehensive approach to diplomacy, integrating security, public diplomacy, and international development to address complex global issues and foster international cooperation.
COMPETITION REPORT CONCLUSION
Throughout 2024, great power competition between the United States and China intensified. This competition is characterized by China's strategic initiatives to reshape the international order, expand its global influence, and challenge U.S. leadership across various domains. Despite deep-seated strategic and ideological differences, the United States and China are willing to engage in constructive dialogue and collaborate on global issues. These efforts, while limited, represent a concerted attempt to manage their competition responsibly and seek common ground where possible. From January to July 2024, U.S.-China relations have been characterized by deepening economic, military, and diplomatic disputes, with both countries taking steps to manage but not resolve their strategic competition.
China does not need to fully catch up to or overtake the United States to challenge U.S. power in Asia or impinge on the interests of smaller neighbors. China is steadily improving its Military Capability — closing the gap with the United States from 27 points in 2018 to 23 points in 2022. An important explanation for China’s often aggressive military posturing in the Asia-Pacific may be that while it remains less powerful than the United States, its relative lead over its neighbors — including India, Japan, South Korea, Taiwan, and the Philippines — continues to grow. China maintained a constant tempo of diplomatic activity throughout Southeast Asia, the Pacific, Europe, and the Middle East, where it pursues interactions with foreign ministers and relationships of influence with diverse political actors. Its Economy has slowed significantly as global demand for its products has waned, their local markets cannot absorb excess goods, and their real estate market continues its calamitous freefall.
Some in the United States advocate for appeasement or neutrality towards China, arguing that deterrence is futile and self-deceptive against such a formidable power. However, China’s meticulous military modernization, including the Belt and Road Initiative, Made in China 2025, and the Dual Circulation policy, indicates that Xi Jinping, like any leader, makes material calculations before using force. Despite advancements, China is not yet invincible, and it is both illogical and dangerous for the U.S. to relinquish agency or retreat defensively. Close inspection reveals that Chinese success is neither inevitable nor likely, and if Xi's material calculations change, deterrence remains possible. Integrated deterrence is failing as seen in the Congressional Committee on the NDS report makes clear. This makes revising and implementing a deterrence strategy for China that is specific, attainable, and relevant is the highest priority for OSD in 2024.
China's efforts to broker peace in the Middle East between Iran and Saudi Arabia fell apart following the Hamas attack on Israel and the subsequent fighting in Gaza. This has diminished China's leverage in the region. In Europe, China's relationships suffered after attempts to dump EV cars were blocked by the EU, coupled with growing resentment over China's support for Russia in Ukraine. Meanwhile, the U.S. State Department has engaged in significant global diplomatic efforts, enhancing security partnerships, addressing geopolitical tensions, and promoting stability. Notable achievements include a pivotal role in the NATO Summit, extensive discussions on the Ukraine conflict, and a historic agreement between Israel and Lebanon to end their maritime boundary dispute. These diplomatic efforts reflect a multifaceted approach to strengthening alliances and addressing international challenges.
An area the U.S. should expect China to invest more energy is its relationship with other autocratic nations. There is a growing consensus that Iran-Russia-China are forming an axis of Authoritarians. While symbolically significant, it lacks the substance and cohesion to effectively challenge the current international order. However, when considered in conjunction with BRICS (Brazil, Russia, India, China, and South Africa), it represents a significant shift in the global economic and political landscape, with China, Russia, and Iran playing crucial roles in shaping its direction. The organization facilitates economic cooperation among emerging markets across the global south. It serves as a strategic platform for these countries to assert their interests on the global stage, challenging the existing Western-centric order. BRICS is marked by opportunistic cooperation and limited by significant strategic and political divergences among its members. The trilateral Axis relationship underscores the complexities of international relations where states pursue alliances based on immediate strategic interests rather than enduring partnerships.
The U.S. and China have reached a proximate equilibrium of national power. However, the U.S. still holds an edge and a higher probability of continued growth and economic health. China faces a decline in manufacturing and a massive demographic shift as many of its skilled workers age out of the workforce, with a much smaller “one China policy” generation coming behind it that will be unable to fill the void of such a rapid decline in the general population. However, the U.S. must continue to press its technological, academic, corporate, and relationship advantage. Congress must act to shape the best conditions for all dimensions of U.S. power to be brought to bear on competition with China, Russia, and Iran. The next U.S. administration must also act diplomatically to align partners and allies against the growing Axis threat. Tariffs and trade wars will be of limited value. Outproducing and out-innovating in tech and entrepreneurial ability has always been the best approach in competition, not simply containing a rival.
Lastly, a heartfelt (perhaps corny) call for a united American front. Reinvigorating patriotism, respect for democratic values, and a sense of shared American identity must be pursued by the American political class and the people. It must be taught in our schools and practiced by family, neighbors, and friends. The naked pursuit of power using all manner of outright lies and manufactured crises will raise money and put a candidate in office. However, the tactic has so cheapened national politics as to warrant the contempt and enmity of the people and only undermined the patriotism necessary to support institutions of democracy that we have sought to defend. Lies and contempt will not sustain this democracy for long. Defending our democratic values is a core national security interest that must be respected. China may not have to out-compete America; we may perform political suicide that hands them the world.
To address the challenge presented by China, the U.S. military should pursue the following strategic actions:
Strengthen Alliances and Partnerships:
Enhance Security Cooperation: Deepen military and security ties with allies and partners in the Asia-Pacific region, such as Japan, South Korea, Australia, and India, to create a robust network of mutual defense.
Build Partner Capacity: Invest in the military capabilities of smaller neighbors to ensure they can effectively counterbalance China's growing influence.
Modernize Military Capabilities:
Technological Advancements: To maintain a qualitative edge over China, prioritize the development and deployment of cutting-edge technologies, including cyber capabilities, artificial intelligence, and advanced missile systems.
Force Readiness: Ensure that U.S. forces are well-prepared and capable of rapid deployment to respond to any potential regional conflicts and that the logistical support for conflict is well established in advance.
Forces for Cyber-PsyOps-Info Competition: The PLA’s SSF has no equal in the U.S. military, which seriously undermines defending the homeland and strengthening its influence abroad. A similar force and capability is required to outcompete China in this space.
Integrated Deterrence:
Comprehensive Deterrence Strategy: Develop a specific, attainable, and relevant deterrence strategy that addresses China's unique strategic initiatives and military modernization efforts.
Economic and Diplomatic Leverage: Use economic sanctions and diplomatic pressure to deter China's aggressive actions while also engaging in constructive dialogue to manage competition responsibly. More importantly, outperform China to retain the top economic position globally.
Global Diplomatic Efforts:
Multilateral Engagement: Actively participate in international forums and organizations to counterbalance China's influence and promote a rules-based international order.
Conflict Resolution: Continue to play a pivotal role in mediating and resolving conflicts globally, thereby enhancing the U.S.'s reputation as a reliable and stabilizing force.
Countering Authoritarian Alliances:
Monitor and Counter: Closely monitor the evolving relationships between China, Russia, and Iran, and develop strategies to counter their collective influence.
Promote Democratic Values: Strengthen alliances with democratic nations and promote democratic values to counter the ideological appeal of authoritarian regimes.
By focusing on these strategic actions, the U.S. can effectively address China's multifaceted challenge and maintain its leadership in the international order.
BIBLIOGRAPHY
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