Risk Insights
April 30, 2020

COVID-19 and the U.S.-China Strategic Balance: The Stratfor/RANE Approach to Analysis

Rodger Baker
Senior VP of Strategic Analysis
Chinese and American flags
LUDOVIC MARIN/AFP via Getty Images

In early April, we raised several issues to consider beyond the immediate impact of the COVID Pandemic and national responses. One was the impact of the pandemic on the U.S.-China balance of power, a question raised regularly by several of our customers. For some clients, the concern is the impact on third countries amid the U.S.-China strategic competition. For others, it is about the future of economic relations with China, or the impact on supply chain stability and resilience. Still others approach the question from a broader concern over global decoupling and economic fragmentation, or even the erosion of the value of the U.S. dollar as a global reserve currency. Despite the diversity, the core remains - how does the current coronavirus crisis impact the U.S.-China strategic relationship.

We are not alone in addressing this issue - there is no shortage of commentaries, articles or reports highlighting either China’s likely strong gains in international influence; or the contrary view that Beijing will lose strategic clout and the trust of the developing world. Each argument can show evidence to back its point; such as China’s selective assistance with COVID-19 responses and PPE supplies coupled with the U.S. threat to cut funding for the World Health Organization; fears of rising African and Central Asian debt; reports of faulty Chinese COVID-19 tests, and blunt threats of economic boycotts against countries that raise questions of Beijing’s own coronavirus response.

To draw on a literary reference, there is nothing “out of the common course of things” in these contrary views, or the vehement strengthening of preferred assessments by those debating the future. As James Fenimore Cooper noted in The Pathfinder, (in reference to a debate over the loyalty of a member of the party) “There is no more certain way of arriving at any particular notion than by undertaking to defend it; and among the most obstinate of our opinions may be classed those which are derived from discussions in which we affect to search for truth, while in reality are only fortifying prejudice.” In short, the COVID-19 outbreak and implications haven’t necessarily created a space for a new assessment of the U.S.-China balance.

Rather it has reinforced preconceived notions (prejudice) and desires for the future.

Let me share three of the ways we at Stratfor and RANE manage these tendencies while we assess complex and multi-variable issues like the future of U.S.-China relations.

1. Draw on expertise and implications from multiple disciplines and sectors. Combining RANE’s network of experts across multiple disciplines and business sectors, and Stratfor’s inherently multidisciplinary approach, we can discern where impacts and implications from one perspective may impact those from another. Looking solely from a military balance point of view, for example, would not only fail to appreciate economic, social and political dynamics, it overemphasizes a single aspect in a complex relationship.

How do economic trends shape defense spending? Would differing economic recovery rates post COVID-19 alter the way countries respond to Chinese and U.S. military overtures? Is green diplomacy and soft power sufficient to shape regional dynamics, or does hard power still matter. Being able to look at the interactions of differing geopolitical domains, and even of various business sectors, can help shape a more comprehensive view, and expose hidden risks and opportunities.

2. Build a Net Assessment to reframe the current relationship. Geopolitical assessments of single countries, regions or issues serve to reshape a baseline understanding and help to mitigate over-emphasis on “hot” topics (and under-emphasis on less visible areas). A strong net assessment comparing two or more baselines can reframe the way we look at how they interact.

How are national-level drivers and constraints shaping behavior? These may not all be tied to the other power. Not everything China does is about the United States, and vice versa. Stepping back to assess each independent of the other - and then looking at how these interact - can reveal unexpected implications, and better explain why certain behaviors appear “counterproductive” when viewed solely through a bilateral lens.

3. Develop a set of plausible scenarios to assess implications and devise mitigation strategies. Building on the former methods, we can develop both a baseline scenario over a defined period of time, and develop additional plausible alternative scenarios by challenging and altering core assumptions and drivers.

How would the length and depth of an economic recession impact the capacity and interest of the two powers to cooperate or expand their conflict? Are there third-party dynamics that may not fit our core assessment due to social or political forces? If so, how would these affect the behavior and efficacy of the United States and China in regional dynamics?

If the variables in the post-COVID-19 scenarios remain highly volatile and quantifiable data changes regularly, developing a small number of distinct scenarios, based on plausible analytical frameworks, can provide tools to assess implications for businesses, organizations, and even governments, and to begin thinking through ways to mitigate or take advantage of these differing futures. It also encourages the identification of signposts that can provide early warning of a move toward one of the likely outcomes. Even if the future cannot be known in detail, the active exercise to work through and identify risk and opportunity based on the scenarios can allow more rapid and intentional responses.

These are just some of the ways Stratfor and RANE work to assess complex future dynamics, both for our direct clients and for our broader publications. While no method provides a crystal ball for revealing the future, taking a disciplined approach, drawing on multiple fields, resetting baseline understandings and building a limited number of future scenarios provides a more robust and structured way to consider the future, and to identify ways to manage change.

And yes, Stratfor and RANE are assessing the China-US strategic balance, and will have more out soon.