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For an investment bank in the industry of currency trading, it is crucial to be able to identify risks connected to foreign investments as they have a direct impact on the outcomes of operations. In recent years, the relationship between the U.S. and China has raised many questions regarding the probability of a conflict. The idea of power transitions can help distinguish the effects of geopolitical tensions on the relationship between the two countries. The conflict between the two states would probably occur within the next few years. This paper aims to examine power transitions between the U.S. and China and to determine risk factors that can be further utilized for pricing purchases of the company.
To understand the factors that can contribute to a conflict one must synthesize the existing evidence and compare it to theoretical assumptions. According to Bremer, most academic evidence suggests that “war is more likely to occur between states that are geographically proximate, approximately equal in power, major powers, allied, undemocratic, economically advanced, and highly militarized” (309). Based on these factors, the war between the U.S. and China is unlikely. However, the analysis of conflicts, occurring between the years 1816-1965 have proven that those components may differ. The primary reasons for the insufficiency of the theory are the actual occurrences of wars as each case differs considerably from the others. In addition, various researchers may utilize multiple definitions of war and participation in it, thus leaving out some of the significant conflicts from their study. Therefore, it is essential to understand that no framework can predict an international disagreement to the full extent. In addition, the modern world brings many new challenges connected to technological advancement, which can amplify a conflict. Thus, in the environment of rising tensions between the two states, an international company should be prepared for a possible dispute between counties.
Nevertheless, it is possible to analyze the proposed factors and distinguish others that can contribute to an evolving international conflict, which would help find primary indicators for an arising issue. Thus, a more advanced outlook on the probability of war between two countries would include factors such as “presence of contiguity, absence of alliance, absence of more advanced economy, absence of democratic polity, the absence of overwhelming preponderance, and presence of major power” (Bremer 309). Identifying the relationship and power that the states hold is the crucial step for the examination. According to the factors, determined by Bremer, the nations that are nearby (or that have a mutual border) and that do not have any agreements regarding their cooperation with regards to safety are at high risk of conflicting (337). However, the author suggests that equally powerful states are unlikely to engage in war with each other. It is more probable that those nations would cooperate to ensure that no conflict occurs. In addition, promoting economic growth and democracy while reducing the number of military weapons could contribute to peace.
Some of the factors suggest a possibility of future international conflict. China and the U.S. do not share borders; thus, this component would not cause tension. The U.S. is well developed in the economic sense, while China is continually increasing its potential. However, the two do not have an alliance that would guarantee the safety of both parties involved. China cannot be described as a democratic nation; thus, it may lead to complications in the relationship. No overwhelming preponderance or significant influence is currently present, which can contribute to tension; however, the two states are powerful, and it is possible that they would cooperate to ensure no wars occur between them. The peace can be guaranteed in case none of the countries changes its economic or political state drastically.
List of Indicators (Increasing the Chances of a Serious Conflict)
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Raising military strength of one of the nations (such as acquiring more weapons, and training more soldiers)
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Declining democratic tendencies in China
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Rapid economic growth of either China or the U.S. (economically equal nations are less likely to engage in severe conflicts)
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A decrease in the economic growth of one of the countries (as it would create an imbalance between the wealth of the states)
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Lack of cooperation that would contribute to a formation of an alliance between the two states
Works Cited
Bremer, Stuart. “Dangerous Dyads: Conditions Affecting the Likelihood of Interstate War, 1816-1965.” The Journal of Conflict Resolution, vol. 36, no. 2, 1992, pp. 309-342.
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