http://www.idsa.in/idsacomments/USStrategicDefenceReviewTheDilemmaforAsianStates_RSKalha_160112 January 16, 2012 When President Barrack Obama unveiled the new US Strategic Defense Review at the Pentagon recently he did not in his remarks name the one country that everyone was expecting â€“ China. While emphasising that the US will continue to contribute to security â€˜globallyâ€™, he remarked that â€˜of necessityâ€™ the US would â€˜re-balance towards the Asia-Pacific regionâ€™. Emphasising what was expected, that there would be progressive â€˜cutsâ€™ in the defence budget, Obama nevertheless confirmed that the US would continue to maintain â€˜military superiorityâ€™ and that its military profile in the Asia-Pacific region would not be affected. The new US strategic defense review would guide US defence and diplomatic policies in the post Iraq/Afghanistan phase and is intended for the future well into the 21st century. What Obama left unsaid was made clear in the body of the review. The review underlines the fact that the emergence of China as a military and economic power has indeed become a contentious issue. Unfortunately for the Chinese, they were bracketed in the same paragraph as the â€˜threatâ€™ from Iran. There is no doubt in the minds of US policy planners that in the long term Chinaâ€™s emergence as a regional power will have the â€˜potentialâ€™ to affect US economy and security in a â€˜variety of waysâ€™. While recognising that the two countries have a stake in the maintenance of peace and stability in East Asia and in building a â€˜co-operativeâ€™ relationship, the review demanded that China must â€˜clarify its strategic intentionsâ€™ in order to avoid friction in the region. What was left unsaid was whether China would â€˜co-operateâ€™ with the US as it pursues its policies in the region or adopts a strategic profile hostile to US interests. Perhaps that was the meaning of the phrase, â€˜clarifying its strategic intentionsâ€™. Thus it was clear that a dual track US policy has emerged from the review. The US will continue to work with China and at the same time keep a wary eye on its â€˜intentionsâ€™. The Chinese have not reacted officially to the latest review, but their media, through a series of articles, have articulated Chinaâ€™s views. Most of these articles have been published in the official media such as the ,i>Peopleâ€™s Daily and its offshoot â€“ The Global Times. The dominant theme is that China must remain calm and continue with its development. At the same time, China must remain alert to Washingtonâ€™s â€˜intentionsâ€™, but work out a way for â€˜co-operationâ€™ under the framework of bilateral relations. China has indicated that it is least interested in starting another cold war, but would not give up its â€˜peripheralâ€™ security. What China means by â€˜peripheralâ€™ security has not been made clear and, as is the Chinese practice, deliberately left delightfully vague. The visit this week of the US Assistant Secretary of State for Far Eastern Affairs, Kurt Campbell, to Beijing would perhaps help to clarify the issues. Thus as China and the US size up and confront each other, the dilemma for other Asian States is indeed acute. Are the US and China headed for a collision course or are they just manoeuvring for tactical advantage? Despite official bluster and media speculation from both sides, the two countries remain committed to a dialogue. The US engagement with China is indeed vast. Apart from a high level â€˜strategic and economicâ€™ dialogue, there is also a joint commission on commerce and trade where meetings take place on an annual basis. Institutionally there are 54 bilateral mechanisms where talks are held between the two countries. Some of these dialogues are headed by cabinet level officials and meet on an annual basis. There is a US-China dialogue on South Asia also. No two countries have such a varied interaction. The US is one of Chinaâ€™s major markets with bilateral trade nearing US $400 billion, although it is heavily weighted in Chinaâ€™s favour. The huge current account deficit that the US runs up each year enables China to invest its foreign exchange surplus in US government treasury bonds. China needs export growth in order to maintain job growth and preserve social stability. With some crucial industrial sectors in China such as steel, aluminium, etc. showing excess capacity, China needs the US market more than ever. Therefore it has little alternative to buying US treasury bonds with the reserves it has accumulated while managing the exchange rate. 70 per cent of Chinaâ€™s foreign reserves are in US dollars. With the Euro zone witnessing a further economic decline, the other alternatives for China are even bleaker. On the other hand, the US will continue to need buyers of its debt issued to finance its huge budget deficits, especially if the domestic savings rate continues to show a sluggish rate of growth. It is obvious to any observer that the two countries are in a tight embrace and will find it exceedingly difficult to disengage even if the circumstances so demanded. Both countries would have to pay a heavy price. The question that therefore emerges for countries situated in the Asia-Pacific rim is how to handle relations with the two giants. Relying totally on one or the other could have fatal consequences. While the US attempts to re-position itself in the Asia-Pacific region and its offer of providing security in the face of a Chinese offensive bluster appears to be attractive as an alternative, most smaller Asian-Pacific countries are not sure whether if it comes to a crunch the US would actually stand by with them. Would the US be willing to sacrifice its vast interests in China for their sake? Or is the present US stance just posturing for a better strategic position? In India too we should be more discerning if the past is any guide. During the 1962 conflict with China, the US was indeed quite helpful but in the aftermath of the conflict heavy pressure was put both by the US and UK to â€˜settleâ€™ the Kashmir issue. A blue print for a settlement was reportedly forwarded by the two powers which was much to the favour of Pakistan. Similarly, in 1971, few in India can forget the shenanigans of Nixon and Kissinger when they schemed with China against Indian interests. The joint communiquÃ© issued by President Clinton with the Chinese after the Pokhran tests in 1998 had shades of establishing a â€˜co-partnershipâ€™ in the case of issues relating to South Asia. Thus while we in India should welcome a change in the strategic profile of the US and perhaps in its thinking, we should at the same time not get carried away by euphoria but examine the matter very closely, lest we unnecessarily get embroiled yet again with the Chinese to our strategic detriment and disadvantage. RS Kalha is a former Secretary, Ministry of External Affairs and can be contacted at [email protected].