A new Cold War started last week. China and the U.S. exercised their militaries while trading threats like the old Cold War days with the Soviets. But unlike the Soviets, Beijing’s motivation is mostly economic, not spreading communism. The U.S. needs a plan to win this war.

The U.S. and its allies conducted an anti-submarine exercise in the Sea of Japan to signal North Korea, China’s proxy, that its recent provocative behavior that included the sinking of a South Korean warship is unacceptable and the U.S. remains ready to defend its ally.

Chinese General Ma Xiaotian, the deputy chief of staff of the People’s Liberation Army, protested that exercise, claiming it threatened Beijing, China’s capital. The Chinese responded to the perceived threat with naval exercises in the South China Sea, hundreds of miles to the south.

The Chinese used those exercises to reiterate its territorial claims to the South China Sea as “indisputable sovereignty” and warned the issue should not be “internationalized.” Then for the first time Beijing elevated its sovereignty claim to the level of a “core” national interest—a category previously reserved for Tibet and Taiwan.

China’s “internationalized” comment was a reaction to a statement made by Secretary of State Hillary Clinton. She told the Association of South East Asian Nations (ASEAN) that “the United States has a national interest in freedom of navigation, open access to Asia’s maritime commons and respect for international law in the South China Sea.”

Control of that sea was supposedly settled by an ASEAN declaration in 1992 which Beijing signed. But that agreement was quickly violated by the Chinese and now that Beijing is a superpower it is demanding sovereign control of the sea through which passes half of the world’s merchant fleet tonnage and hosts rich fishing and oil reserves.

The problem for the U.S. and its Asian allies is Beijing won’t stop demanding more territory. It will extend its territorial waters from the usual 12 miles to include its entire exclusive economic zone which extends 200 miles from its coastline. That impacts Japan, South Korea, Taiwan, and South China Sea rim countries like Vietnam.

Apparently the intent to expand its sovereign sphere of influence was prompted by China’s new heady superpower status which influenced ordinary Chinese who anticipated the new Cold War. Earlier this year China’s state-run newspaper the Global Times announced more than half of Chinese people agree that “a Cold War will break out between the U.S. and China.”

A Cold War, according to the Pentagon, is the state of tension wherein political, economic, military, and other measures short of overt armed conflict are employed to achieve national objectives.

China’s national objectives—regime survival, a robust economy, and political control of its sphere of influence—have created tension with the U.S.

Consider some of those Cold War-producing tensions:

• America’s decision to sell weapons to democratic Taiwan raised political tensions. The U.S. earlier this year announced its decision to sell $6.4 billion worth of weapons to the island nation, a territory China claims as part of the mainland. “This time China must punish the U.S.,” said Major-General Yang Yi, a Chinese naval officer, in response to the weapons sale.

• China’s support for rogue regimes raised tensions. Robert Einhorn, the U.S. State Department’s adviser on nuclear non-proliferation, testified that China is a major obstacle to the success of U.S. sanctions against Iran by taking up the slack left by countries that have dropped business and trade ties with Iran in adherence to the sanctions.

• China is creating tensions by helping North Korea. Not only is China giving North Korea political cover regarding the recent military exercises, but last week a Chinese delegation was in Pyongyang to sign an economic and technological agreement. That agreement indicates Beijing will continue its defiance of U.S. attempts to reproach the wayward North Koreans.

• There are significant economic tensions. China holds $2.5 trillion in foreign-exchange reserves—mostly U.S. debt. Some Chinese like Luo Yuan with China’s Academy of Military Sciences recommends using that debt to leverage American cooperation on fractious issues like arms sales to Taiwan.

Recently China became the world’s second-largest economy and could surpass America by 2025. That success is attributable to Beijing’s guiding principle for all policies—do whatever grows its gross domestic product (GDP). The 17-year estimates for GDP per capita annualized growth is 12.13% for China, according to the United Nations.
• China’s economic guiding principle explains growing tension over competition for limited raw materials and the regime’s decision to keep its currency under- valued. Beijing keeps its currency, the Yuan, cheap to give its exporters a competitive edge which undercuts American exporters.
Beijing aggressively pursues raw materials using every state means available. That explains why it has monopolized material markets like rare earth metals, which are used for high-tech devices such as lasers and iPhones. The Wall Street Journal reported last week that China “already consumes one-third of the world’s copper and 40% of its base metals, and produces half of the world’s steel.”

• China’s rapidly growing military is creating superpower tensions. The Pentagon’s annual report on China’s military indicates the regime has been on a top-to-bottom transformation campaign for more than 20 years, fueled by annual double-digit budget increases. Today Beijing fields a 3.35 million man force that is armed with sophisticated anti-access capabilities for targeting American aircraft carriers; a submarine fleet that rivals America’s in number and stealth; and an increased ability to project forces abroad.

Chinese Rear Admiral Zhang Huachen earlier this year said, “With our naval strategy changing now, we are going from coastal defense to far sea defense.” That view explains China’s use of the military to enforce its territorial claims and conduct high-seas bullying such as harassing merchant ships and U.S. warships much as the Soviets did in the first Cold War.

China’s militarization surge threatens U.S. long-term interests in Asia especially given that Beijing, according to that country’s 2006 Defense White Paper, intentionally plans to use military force to advance its economic interests.

Washington and Beijing should mitigate these tensions but until that happens America needs a plan to win the Cold War which must include three elements.

First, the U.S. must increase its military presence in Asia by establishing numerous bases that assure our allies and contain Beijing’s expanding military. China is poised to expand its military presence throughout the region and will likely employ an asymmetric capability to advance its hegemonic ambitions.

Second, the U.S. must form a robust Asian alliance. That NATO-like organization must include military, diplomatic, and economic arms. The Asian “NATO” must stand-up a credible, united effort against China’s intimidation and hegemonic actions much as NATO formed the backbone of our defense against the former Soviet Union.

Finally, the U.S. and its Asian allies must employ effective “soft power.” China cultivates influence across the globe vis-à-vis business ventures—“soft power,” irrespective of the client’s radical ideology such as Sudan. The U.S. and its Asian partners must engage peace-seeking nations in the region using an all-of-government approach working with global business partners to provide governing and business alternatives to China’s aggressive, no-holds-barred “soft power” intimidation.

The business side is especially critical. Europe’s NATO was successful during the first Cold War because the partners were economically developed with U.S. aid over time. Countries like Vietnam, Thailand, and India are ripe for diverting U.S. manufacturing investment from China. This approach surrounds China with westernized countries at Beijing’s expense.

The U.S.-China Cold War may be driven by economics but it could easily become a shooting war. Both nations should cooperate to mitigate their differences. But until that happens the U.S. must implement a plan that defends American and Asian ally vital interests against the world’s newest and hegemonic superpower.