EXECUTIVE SUMMARY

1. • US-China relations have deteriorated from about 2010. From the US perspective, a pattern of Chinese assertiveness in the South China Sea and its stance on North Korea's military provocations against South Korea in 2010 created dangerous tensions and challenged important US interests, including its treaty obligations to allies.

2. • The US response has been two-track: its “pivot” to Asia and intensified efforts to engage China in high level dialogues to improve relations and reduce the chances of miscalculation by either party.

3. • The changing power equation in parts of the Western Pacific will make it difficult in the future for the US to prevail in the “direct defence” (that is without extending the conflict to mainland China) of territories of its allies and friends. The US response to this prospect has been to develop long-range strike capabilities which will enable it to escalate the conflict to mainland China; strengthen alliances and help build the military capabilities of friends and allies; and, again, high-level engagement with China to reduce the dangers of miscalculation.

4. • Intensive on-going Sino-US dialogues are a good development and could help manage the relationship. However any breakthrough is unlikely because each side's perceived vital interests collide against those of the other.

5. • Over the longer-term, the Western Pacific is heading towards multi- polarity, even though the US is expected to remain the strongest military power in the next few decades.

6. • How the South China Sea issue develops and how it will affect US-China relations will have vital implications for Southeast Asian security.

INTRODUCTION

US-China relations have had their ups and downs since the end of the Cold War, with periodic attempts to develop better understanding and cooperation. However, relations deteriorated around 2010 with Washington, and possibly also Beijing, feeling let down by the behavior of other side.

What caused this downturn in relations? From the US perspective, China was engaged in a new and dangerous level of Chinese assertiveness at a time when it was also becoming militarily and financially stronger. Beijing's actions in the South China Sea, suggestions that it might regard the Sea as a core interest, and resulting concerns among US allies and friends led the US to intervene in the issue at the July 2010 ASEAN Regional Forum (ARF) in Hanoi and thereafter.