The US-China Competition in Constructing the Asia-Pacific Order

"In the midst of intensifying US-China competition, what is the path forward for South Korea?"

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Prepare for the Coming 'US-China Era'

The Cold War order, architected by the US and the Soviet Union after World War II, ended with the dissolution of the Soviet Union in 1991. Numerous policymakers and international relations scholars worldwide anticipated that a new post-Cold War order, centered on the United States, would be rebuilt without significant difficulty. However, these expectations proved mistaken. The US embarked on the War on Terror in the 21st century and, in 2008, experienced the most severe financial crisis since the Great Depression of 1929, dedicating its efforts to constructing a new 21st-century order.

While the Soviet Union dissolved, China, following its reform and opening-up policy initiated in 1978, sustained high growth rates exceeding 10% for three decades. In 2010, it surpassed Japan's Gross National Product for the first time, emerging as the world's second-largest economy. Since 2012, China has entered an era of 'new normal,' experiencing moderate growth around 7%. With projections indicating it will surpass the US GDP by the late 2020s, China has articulated its ambition to present a new civilizational standard by 2049, the centenary of the People's Republic of China.

As the landscape of the Asia-Pacific order rapidly transforms, the established power, the United States, and the rising power, China, are demonstrating momentum towards a new order. There is no easy consensus, domestically or internationally, on how the 21st-century Asia-Pacific order will be constructed through the convergence of these dynamics and momenta. Discussions continue regarding various models, including US-led, China-led, US-China-led, and multi-led orders. This discourse is not merely an academic debate but a crucial question that will determine the future of the Asia-Pacific and the Korean Peninsula. To seek answers to this question, the East Asia Institute, in collaboration with leading experts in Korea, has embarked on a two-year journey.

US-China competition unfolds in a multi-layered, not dichotomous, structure.

This journey began with the establishment of a new analytical framework. The core question in existing discussions on this issue was whether the established power, the US, and the rising power, China, would inevitably clash as power transitions occur in the Asia-Pacific order. However, this is not a simple matter. As long-cycle theories of world order have historically and theoretically revealed, great powers and rising powers do not face a dichotomous choice between conflict and cooperation or war and peace during power transitions. Instead, they navigate much more complex phases. In situations of power asymmetry, rising powers tend to engage in a competition for legitimacy through non-military means rather than direct military confrontation with established powers. Conflict relations only fully emerge when the legitimacy of the order is not improved during the ongoing power transition process.

The great power relationship between the US and China will also likely enter a period of 'hiding capabilities and biding time' (韜光養晦) until the mid-21st century, as evidenced by China's three principles of a new type of great power relationship: 'no conflict, no confrontation,' 'mutual respect,' and 'win-win cooperation.' This period will involve downplaying the 'power' politics of direct military confrontation and instead emphasizing the 'interest' of mutual cooperation and the 'righteousness' (義) of securing international politics and legitimacy. Therefore, the analysis has been broadly divided into military order, economic order, and emerging order.

Military Order

First, in Chapter 1, Professor Chun Jae-sung examines US security strategy through trends in defense budgets. While the actions of the Trump administration carry considerable uncertainty, he advises that given President Trump's emphasis on 'peace through strength' and his advocacy for strengthening defense capabilities during his campaign, it is reasonable to anticipate a general trend towards military buildup rather than reduction. He forecasts that the US will inevitably have to exert efforts to enhance its military presence in the Asia-Pacific region, particularly to counter China's sustained military expansion.

In Chapter 2, Professor Lee Dong-ryul scrutinizes the implications of China's increasing defense spending. Based on publicly available data, China's defense expenditures may not appear excessive. However, he points out the issues of transparency and reliability in the data and information. He specifically notes that the omission of costs for advanced weapons research, development, and procurement—key indicators of military buildup—in the disclosed defense budget figures has the potential to amplify concerns among neighboring countries. Although China is unlikely to significantly deviate from its current spending trajectory in the immediate future, he warns that failure to dispel these suspicions could trigger a vicious cycle of escalating security dilemmas within the Asia-Pacific region.

In Chapter 3, Professor Shin Sung-ho reviews the US-China nuclear arms race and nuclear strategy competition. This aspect is indispensable when discussing hard power competition since the mid-20th century. Analyzing the current capabilities of the US and China across intercontinental ballistic missiles (ICBMs), submarine-launched ballistic missiles (SLBMs), and strategic bombers—collectively known as the 'nuclear triad'—he concludes that China currently shows no signs of engaging in a full-scale nuclear arms race with the US, unlike the former Soviet Union. However, he assesses that if the security dilemma between the US and China intensifies, China could potentially make concentrated investments and efforts to bolster its nuclear capabilities.

In Chapter 4, Professor Park Young-joon examines the maritime competition between the US and China in the Asia-Pacific region, focusing on naval power trends, changes in US and Chinese maritime strategies in the region, and aspects of international law and institutional development related to territorial and maritime disputes. China is actively seeking to transform its coastal navy into a blue-water navy and is pursuing military expansion, while the US is strengthening its Pacific Fleet and pursuing new strategies that place greater emphasis on cooperation with regional allies. In this context, the possibility of maritime conflict between the US and China depends on how long both countries can maintain a status quo, defensive, and cooperative stance, he analyzes.

In Chapter 5, Professor Hwang Ji-hwan examines North Korea's behavior within the framework of US-China competition. He analyzes that in the Asia-Pacific region, the post-Cold War unipolar order of the US has been challenged by competition with China, creating an environment where North Korea could pursue an active and assertive strategy, including nuclear weapons development. However, he also notes that the North Korea-China relationship is not immune to the dilemma of entanglement versus abandonment inherent in traditional alliances. If North Korea continues its nuclear tests and hardline approach, and the US Trump administration maintains pressure on China, the North Korea-China relationship could face a fundamental turning point, he forecasts.

Economic Order

In Chapter 6, Professor Sohn Yeol addresses the US-China economic hegemony competition, focusing on whether the two countries can avoid the 'Thucydides Trap.' While acknowledging the possibility of various scenarios depending on the speed of uneven growth, the adaptability of both nations, and their sensitivities and vulnerabilities, he notes that the projected timeline for China's GDP to surpass that of the US has been pushed back due to China's economic slowdown. He also observes that both countries are moderating the intensity and pace of their competition by focusing on institutional competition rather than direct confrontation. Therefore, he predicts that for the time being, US-China competition will concentrate on soft power domains such as economics and institutions, rather than military affairs. He specifically anticipates that Japan will play a significant role as a third actor in this process.

In Chapter 7, Professor Lee Yong-wook discusses the internationalization of the Chinese Yuan, which poses the greatest challenge to the international financial and monetary order, and the policy direction for South Korea's financial diplomacy in response. Utilizing the theory of financial statecraft, he analyzes the policy options for South Korean financial diplomacy in response to the internationalization of the Yuan. Departing from previous studies that focused solely on 'leveraging the internationalization of the Yuan,' he considers various policy considerations such as securing monetary policy autonomy and engaging in global governance diplomacy. He examines the trade-offs among these options and presents possible combinations in response to Yuan internationalization through various scenarios.

Competition between the US and China is also evident in monetary policy. In Chapter 8, Professor Lee Wang-hwi examines the dynamics of the monetary and financial hegemony competition between the two countries and analyzes its potential impact on neighboring countries, including South Korea. While tensions between the two nations temporarily subsided due to the appreciation of the Chinese Yuan, the possibility of increased pressure on China has re-emerged following President Trump's inauguration and discussions of strong measures against currency manipulators. However, considering the US's substantial external debt, the need for cooperation with China on security issues, and China's agreement to the '100-day action plan' to address the trade deficit, the likelihood of Trump's aggressive rhetoric being fully realized appears low. Nevertheless, he assesses that the risk remains for neighboring countries, including South Korea, to be caught in the crossfire of the escalating 'currency war' through measures such as the US designating China as a currency manipulator or China retaliating financially.

In Chapter 9, Professor Lee Seung-joo examines the economic strategies of the US and China from the perspective of linking investment and aid. Based on trends in the scale of foreign aid and investment by the US and China, he closely analyzes the economic relationships that both countries are forming with Asian nations. He finds that economic relations among East Asian countries are becoming more comprehensive than in the past, with increased and strengthened linkages between trade and production, production and investment, and investment and aid. This signifies the growing importance of economic tools for East Asian countries in pursuing their strategic goal of redesigning the regional architecture, underscoring the need for a strategic approach to establish effective methods and appropriate levels for linking economic and security issues.

Emerging Order

The hegemonic competition between the US and China is also occurring in the realm of science, technology, and innovation. In Chapter 10, Professor Bae Young-ja seeks to understand the implications of the ongoing US-China technological innovation competition for the trajectory of global political hegemony in the 21st century by combining long-cycle theory of world political leadership with innovation studies to compare the characteristics and achievements of the innovation systems of both countries. While it is difficult to conclude that the center of global innovation has shifted from the US to China, it is clear that China is emerging as a new focal point for driving innovation. Ultimately, these efforts by China will be perceived as a significant challenge by the US, further accelerating the technological innovation competition between the two nations, he forecasts.

Meanwhile, in Chapter 11, Professor Kim Heon-jun examines the competition and conflict between the US and China through the lens of social science knowledge systems. According to his analysis, China is currently challenging the mainstream international relations theories, which are predominantly US-centric, by emphasizing 'its own characteristics.' He points out that this movement began as Chinese scholars, along with China's rise, recognized the limitations of existing Western mainstream theories in explaining general international relations phenomena or China's foreign policy. Although Chinese-characterized international relations theory has not yet reached the level of challenging mainstream political science, its importance is likely to grow in conjunction with China's rise, suggesting that competition and conflict in international political theory between the US and China will continue, he forecasts.

Finally, in Chapter 12, Professor Kim Sang-bae presents an analytical framework for understanding the US-China hegemonic competition in the information and cultural industries, particularly the film industry, as leading sectors of the 21st century. He argues that the competition in this domain transcends traditional competition over market share or technological innovation, and should be understood as an emerging power competition involving the control of standards, the projection of attractiveness, the variable of scale, and the nature of the system. Based on current trends, the outcome of this asymmetric inter-network politics is likely to manifest as a symbiotic competitive network structure. He forecasts a complex structure of competition and cooperation for projecting attractiveness both domestically and internationally, with the US leading in quality and standards competition, and China leading in quantity and scale competition, potentially resulting in a symbiotic competitive network structure. ■

Table of Contents

Foreword ■ Ha Young-sun

I. Military Order

Chapter 1: US Defense Budget Trends and Security Strategy ■ Chun Jae-sung

Chapter 2: The Status and Implications of China's Defense Budget Increase ■ Lee Dong-ryul

Chapter 3: US-China Nuclear Military Strategy Competition ■ Shin Sung-ho

Chapter 4: US-China Maritime Competition and Prospects for the Asia-Pacific Security Order ■ Park Young-joon

Chapter 5: US-China Competitive Relations and North Korea ■ Hwang Ji-hwan

II. Economic Order

Chapter 6: US-China Economic Relations: GDP Reversal, Interdependence, and Institutional Competition ■ Sohn Yeol

Chapter 7: Yuan Internationalization and South Korean Financial Diplomacy: Indivisibility and Strategic Choices ■ Lee Yong-wook

Chapter 8: US-China Monetary and Financial Hegemony Competition and Currency Wars Since the Global Financial Crisis: A Perspective on Monetary and Financial Statecraft ■ Lee Wang-hwi

Chapter 9: US-China Economic Strategies in Asia: Focusing on the Linkage of Investment and Aid ■ Lee Seung-joo

III. Emerging Order

Chapter 10: US-China Hegemonic Competition and Science-Technology Innovation ■ Bae Young-ja

Chapter 11: US-China in Social Science Knowledge Systems ■ Kim Heon-jun

Chapter 12: US-China Competition in Cyberspace: The Future of Information and Cultural Industries ■ Kim Sang-bae