Monday, April 4, 2011

The China Conundrum

What policy should the United States adopt towards the People’s Republic of China? This is one of the most complicated, most riveting, and most momentous foreign policy questions of the 21st Century, and a great deal rides on the answer.

First, let us state the obvious. The government of China is brutal and authoritarian, willing to use deadly force to repress its own people and suffocate their aspirations. It is a police state, which uses the latest technology (much of it shamefully provided by American corporations) to monitor virtually every aspect of the lives of its people. It was scarcely two decades ago that we witnessed the Tiananmen Square Massacre, which saw Chinese government soldiers slaughter thousands of their own people, whose only crime had been peacefully protesting for democratic reforms.

However distasteful we may find its government, we cannot ignore the growing power of China. Its economy has grown with unprecedented speed over the last two decades, and it has recently surpassed Japan to become the second largest economy in the world. Indeed, some projections have it overtaking the United States to become the world’s biggest economy by 2035. Coupled with its growing economy is its expanding military strength, as the Chinese army, air force, and navy continue to deploy increasingly sophisticated weapons systems, many of them clearly intended for potential use against the United States Navy and against American satellites in orbit.

It also seems clear that China is intent on developing a web of alliances throughout Africa and Latin America, to protect Chinese access to oil and other critical raw materials. Immense amounts of Chinese investment is flowing into poor African countries, not in the form of foreign aid so much as big infrastructure projects. Some of the partnerships China is forming are with distinctly unpleasant regimes, such as the Sudanese government of President Omar al-Bashir (currently under indictment by the International Criminal Court for genocide, war crimes, and crimes against humanity). China has also formed a close economic and political relationship with oil-rich Venezuela, ruled by the socialist and fiercely anti-American strongman Hugo Chavez.

China is authoritarian and powerful, and we ignore it at our peril. In thinking about this, we should remember the wise words of Thomas Jefferson: “We confide in our strength, without boasting of it. We respect that of others, without fearing it.”

Ironically, considering the vast ideological gulf which separates China and America, we cannot escape the fact that the Chinese and American economies are inescapably bound up with one another. Americans enjoy comparatively cheap consumer products largely thanks to Chinese imports, which have also helped keep inflation in check. Moreover, it is largely because of Chinese lending that the federal government of the United States is able to do business. In the process of lending us so much money, China has accumulated a reserve of around $1 trillion in U.S. Treasury bonds and allowed the U.S. Treasury to keep interest rates on its bonds low. If Sino-American relations were to worsen, the economic impact on the United States would be severe.

If China reduced its willingness to lend us money, interest rates on Treasury bonds would quickly go up. This would place substantially greater pressure on the federal budget by forcing the government to pay more on the interest we owe on currently existing debt. More to the point, if China ever decided to simply sell off their holdings of U.S. Treasury bonds, the ability of the federal government to borrow money at all would be effectively shattered, thus presenting the country with an unprecedented crisis.

Here is the amusing but quite correct take on the situation from that great American political philosopher, Jay Leno:

Although China is currently dependent upon the United States as a market for its exports, the rapidly expanding middle class within China itself will gradually become a more important force in the global economy, and the Chinese economy will certainly begin shifting towards its own domestic market. When that happens, Americans can expect the prices they pay for basic consumer goods to increase sharply.

Even worse, from the American point of view, is the fact that China has emerged as a unrivalled manufacturing powerhouse. As Britain was in the 19th Century and America was in the 20th Century, China is today "the workshop of the world". With an endless pool of poor labor and the virtual absence of any environmental regulations or labor laws, China can easily outproduce any Western nation. Every year, the shelves of our discount stores are crammed with more Chinese goods, and our own manufacturing sector is gradually disappearing.

Another economic issue is the Chinese policy of keeping their currency, the yuan, at an artificially low value vis-à-vis the U.S. dollar. This makes Chinese exports cheaper for purchase in both the United States and foreign markets, undercutting the purchase of American products within the American domestic market and making American exports to foreign markets less competitive. It is estimated that Chinese currency manipulation costs the United States hundreds of thousands of jobs.

Basic economic reality makes it inevitable that there will be tension between America and China. But beyond economics, there exists strains between them due more to old fashioned geopolitical rivalry. The most important of these centers on Taiwan. While it terminated its official diplomatic recognition of Taiwan as the legitimate government of China decades ago, the United States remains an unofficial ally of Taiwan, which China regards as a renegade province and have claimed a right to subjugate Taiwan by force if they so wish. It is expected by many that the United States would intervene militarily against China if such an invasion took place, and the United States sells large amounts of military hardware to Taiwan to beef up its defenses. The Chinese, needless to say, do not like this.

Although less important in a geostrategic sense, the status of Tibet is also a bone of contention between the two sides. Tibet has been under Chinese controls for half a century, but the exiled Dali Lama remains a popular figure in America and support for Tibetan independence is strong among many elements of the American left. For that matter, the dismal Chinese human rights record understandably angers many in the United States, creating political pressures on the government to press China to improve itself in this regard.

For their part, the Chinese deeply distrust the massive American military presence in East Asia. There are 28,000 American troops in South Korea, 33,000 American troops in Japan, a large force of land-based warplanes and an aircraft carrier battle group. These deployments are essentially a leftover from the Cold War and are ostensibly there to protect South Korea and Japan against North Korea (although both nations are perfectly capable of protecting themselves without our help). China considers these deployments to be directed at China rather than North Korea, and consequently eyes them warily.

To get an idea of how China feels about American military deployments in East Asia, try putting the shoe on the other foot for a moment. How would we feel if China deployed an army of 60,000 men and a large air force in Venezuela, ostensibly to protect that country from aggression by Columbia? How would we feel if a Chinese aircraft carrier battle group was cruising around the Caribbean? We would obviously see such a large Chinese military presence so close to our own territory as a terrible threat to American national security.

China is increasingly flexing its muscles in East Asia. Maritime border disputes with Japan have recently made headlines, with the captain of a Chinese trawler even being arrested by Japanese patrol boats, sparking a major diplomatic incident. Chinese military activity has also increased in the South China Sea, which is thought to harbor significant oil and gas reserves. There are serious geopolitical tensions in East Asia, but we should rationally examine whether or not it makes sense for the United States to be directly involved in them.

As in all things, our policy towards China should be based on carefully-considered common sense and rational cost-benefit analysis, not xenophobic or nationalistic chest-thumping. Our main priorities with regard to China must be getting our own deficit under control so as to reduce our dependence on Chinese lending, while also finding ways to narrow our trade deficit with China. We certainly should not tolerate Chinese currency manipulation any longer. At the same time, we must be willing to engage in intense diplomacy with China to minimize the possibility of any kind of Sino-American confrontation, and consider whether our questionable military deployments in East Asia might inadvertently and unnecessarily raise tensions between our two countries.

Whenever possible, we should seek to build bridges between ourselves and the Chinese. We should welcome opportunities to work with then at the United Nations on issues in which our interests do not conflict, such as tackling the problem of Somali piracy. We should be willing to cooperate with them in such fields as space exploration and on scientific projects such as ITER. Although we must watch the rise of China with some concern, there is no particular need for America and China to be rivals. Exaggerating the threat China poses, and attempting to relaunch the Cold War with China playing the part of the Soviet Union, would be a grave mistake.

The rise of China will be one of the big stories of the 21st Century, and it will happen no matter what the wishes of the United States might be. We have reigned unchallenged as the stronger nation in the world for the past two decades, but our supremacy was always going to be transitory. The one thing that is certain is that the United States is going to have to get used to having another big kid on the block, and sooner rather than later.

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