The United States has little to gain and much to lose by treating its relationship with China as a zero-sum game, instead it should build "a strategic partnership" with China for mutual benefits, U.S. investment tycoon George Soros says in an article to be published soon.
"In other words, it (the U.S.) has little bargaining power. It could, of course, obstruct China's progress, but that would be very dangerous," Soros writes in the article to be published on the July 9 issue of the New York Review of Books.
Soros notes that there is a "global disorder" in today's world, where local conflicts fester and multiply and the U.S.-led Bretton Woods institutions -- the International Monetary Fund (IMF) and the World Bank -- have lost their monopoly. Under Chinese leadership, a parallel set of institutions is emerging.
The future course of history will greatly depend on how China tackles its economic transition from investment and export-led growth and how the U.S. reacts to it. But "a strategic partnership between the U.S. and China could prevent the evolution of two power blocks that may be drawn into military conflict," Soros says.
He criticizes the U.S.-led Western bloc for being "shortsighted " in refusing to abandon an outdated control on IMF voting rights, and being unwilling to speed up reform of the Special Drawing Rights (SDR) basket to include China's currency renminbi.
Soros warns that the U.S. policy could lead to the failure of China's market-oriented reforms, and could force China to align itself with Russia financially, politically and militarily. If a conflict escalates into a military confrontation with an ally of the U.S. such as Japan, then "it is not an exaggeration to say that we would be on the threshold of a third world war."
But he says this could be avoided if the U.S. seeks to reach an understanding with China on building a strategic partnership, and expand mutual cooperation from the spheres of energy to those of finance and economy, citing the Sino-U.S. deal on tackling the climate change reached last November as a successful example.
"Both the U.S. and China have a vital interest in reaching an understanding because the alternative is so unpalatable," Soros writes, adding that the benefits of an eventual agreement between China and the U.S. could be equally far-reaching.
The investment tycoon says while rivalry between China and the U.S. is "inevitable", it needs to be kept within bounds that would preclude the use of military force.
Though building a strategic partnership between China and the U. S. will not be easy due to their fundamentally different political system and world views, Washington nevertheless should "make a bona fide attempt at forging" such a partnership with China, Soros argues.
The U.S. needs to develop a two-pronged strategy that offers incentives for cooperation and deterrents that render tit-for-tat bargaining less attractive, he says.
Finally Soros notes that the Obama administration is wrong in pushing U.S. Congress to grant it the fast-track authorization on trade negotiations in order to pass the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership ( TTIP).
As these trade deals exclude China, he said, they could be conceived as anti-China alliances and present an "apparent threat" to China, which in turn will ruin the prospect for the U.S. to build a strategic partnership with China.