U.S., China Jockeying Over Asia to Be on Display at APEC Summit

  • TPP, AIIB big achievements for each country in past year
  • South China Sea remains possible source of tensions in Manila

It’s been a busy year for both the U.S. and China as one sought to preserve influence in Asia and the other to expand it.

U.S. President Barack Obama and Chinese President Xi Jinping will be maneuvering for position this week to sell their respective Asian strategies to the 21 nations of the Asia-Pacific Economic Cooperation forum in Manila.

Obama can tout the Trans-Pacific Partnership, a trade deal encompassing a dozen Pacific nations, among the successes of his “rebalance to Asia.” Xi is fresh from state visits to the U.K., Singapore, and Vietnam, plus the first meeting with a Taiwanese leader in seven decades. He’ll be pushing for a bigger role on the world stage and flagging achievements like the establishment of the Asian Infrastructure Investment Bank and the expectation it will soon achieve reserve currency status for the yuan.

“Clearly there is competition going on in a way that even two or three years ago both sides would taken steps to say: ‘there’s no competition here,”’ said Nick Bisley, a professor of international relations at La Trobe University in Melbourne. “The competition is out in the open now and we’re seeing lot of things, like TPP and AIIB, being viewed through this competitive prism.”

If there are fireworks, they’ll be over the South China Sea. The U.S. has been pushing back against China’s efforts to assert claims to a large part of one of the world’s busiest waterways. China has insisted it be kept off APEC’s agenda.

We assess where each of them has made or lost ground. Take a look:

U.S.-Led Trade Pact

Once described by Pentagon chief Ashton Carter as being “as important to me as another aircraft carrier,” the TPP deal struck in October between a dozen Pacific nations including the U.S. and Japan, but not China, will provide duty free trade on most goods in a bloc that represent about 40 percent of the global economy. “TPP is a strategic agreement,” said Assistant Secretary of State for East Asia and Pacific Affairs Daniel Russel. “It is the economic leg and the crown jewel of the Obama rebalance strategy.”

The TPP must be ratified by its members and may face hurdles, particularly in the U.S. Congress. Obama is even facing opposition within his own ranks, with Democratic Party presidential candidate Hillary Clinton saying she opposes the deal.

China-Led Investment Bank

China managed to convince key U.S. allies to join the AIIB, the first major multilateral development bank in a generation that was launched with $100 billion in initial capital. The U.K. signed on in March, quickly followed by Germany, France, Italy and Israel. Former Treasury Secretary Larry Summers wrote that the inability to keep U.S. allies out was a “failure of strategy and tactics” and marked the end of the U.S.’s role as the chief underwriter for the world. The U.S. cited concerns about transparency and governance in opting out.

China, Japan, South Korea Summit

China and South Korea agreed to completely restore cooperation with Japan after a three-year diplomatic freeze caused by tensions over territory and Japan’s wartime past. The three-way summit was followed by the first bilateral meeting between Korean President Park Geun Hye and Japan Prime Minister Shinzo Abe. With relations back on track, the three will seek to revive talks on a free-trade agreement that would cover about one fifth of the global economy.

The summits were positive for both the U.S. and China. Cooperation between the countries could help contain a nuclear-armed North Korea, while the renewal of talks between South Korea and Japan is a relief for Washington, which has been pushing for a rapprochement between its key allies in North Asia.

South China Sea

China has moved in the past year to strongly assert its claim to more than 80 percent of the waters that overlap with those of five other nations. APEC host country the Philippines is seeking international arbitration over its dispute with China. The waters are a key transit point for global trade and the U.S. has a vested interest in them remaining open.

China has now reclaimed 2,900 acres of land to build islands in the Spratly archipelago, according to the Pentagon. It is constructing as many as three airstrips there, and claims the facilities are primarily for civilian purposes. During his state visit to Washington, Xi said China “does not intend to pursue militarization.

The U.S., an ally of the Philippines, last month effectively challenged China’s claims by sending a warship into the 12-nautical mile zone around one of China’s new islands. The U.S. has vowed more patrols and to continue to “fly, sail, and operate wherever international law allows.”

Economic Divergence

China’s economy is growing at the slowest pace in 25 years as its leaders seek to transition from investment-driven, manufacturing-dominated growth to consumption and services. The transition isn’t translating into growth fast enough, putting policy makers under pressure to step up stimulus after six interest rate cuts in the past year.

In contrast, the U.S. is heading toward its fastest expansion since 2006, with Federal Reserve Chair Janet Yellen saying recently she anticipates growth will warrant a rise in interest rates. At about 7 percent, China’s annual growth rates still dwarf the 2.5 percent expected this year in the U.S.

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