Article in The Cipher Brief by Dr. Thomas Cynkin, Vice President of Development and Implementation at the Daniel Morgan Graduate School of National Security (DMGS):

Chinese rivalry with the U.S. for regional dominance will be central to U.S. East Asia policy for the incoming administration.  China’s aggressive use of economic leverage, its mercantilism and revanchism will continue to complicate U.S. relations with its main rival – and potential partner – in East Asia.  This is the prism through which all other aspects of U.S. interests in East Asia, and policies concerning the region, must be viewed throughout the 2017-2021 term and beyond.

China

The Chinese will likely test U.S. resolve early in the new administration, probably in the East China Sea.  During the transition, the incoming team should familiarize itself with contingency plans and publically signal readiness to contend with China if pressed.  During the new Administration, the U.S. should double down on the pivot to Asia by strengthening strategic relations with its regional allies and friends to balance China.  It should encourage ASEAN countries to work in concert vis-à-vis China, rather than being overwhelmed by the Middle Kingdom in bilateral negotiations.

A Chinese economic crash during the 2017-2021 term is unlikely but possible.  In the longer term, the key to China’s economic future is meaningful reform of its State Owned Enterprises (SOEs) to make them more competitive.  This is difficult given that the political elite has vested interests in SOEs that it does not want to subject to risk.  Without reform, the Chinese Government will need to continue papering things over by subsidizing SOEs.  This will have an impact on China’s growth rate, eventually reducing it to around 3% by some estimates, and China will end up importing more.  In the longer term (circa 2025 timeframe), China’s economic situation could have a negative impact on its political stability. . . .

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