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American Diplomacy
Commentary and Analysis

July 1998

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In an especially timely analysis, Joe Borich, one of the new breed of “old China hands” among U.S. Foreign Service officers, assesses China’s economic and political future. Even more to the point of this journal’s purpose, he sets forth in brief his prescription for U.S. policy toward China over the coming years.~ Ed.

U.S. Relations with a

CHANGING CHINA

by Joseph J. Borich


In late June, President Clinton became the first U.S. president to visit China since early 1989. This watershed event reciprocated the visit to the United States last October by China’s president Jiang Zemin.

The exchange of state visits within one year marks a very sharp departure from the antagonism and deep distrust that characterized Sino-U.S. relations between 1989 and mid-1996, particularly after Taiwan president Lee Teng-hul’s visit to the United States in mid-1995.

In the wake of that visit and during the run-up to Taiwan’s presidential elections in March, 1996, the high-level dialogue between Washington and Beijing was suspended and was replaced with unrelenting and frequently shrill criticism by each side.

When China resumed large-scale military exercises in the Taiwan Strait in early 1996, which included test missile firings targeted at points off the northern and southern tips of Taiwan, the United States dispatched two carrier groups to within 200 miles of Taiwan’s eastern coast.

While the odds of an armed conflict erupting between America and China at that time were remote, the two sides were nevertheless on the closest thing to a war footing since the Seventh Fleet ceased patrolling the Taiwan Strait around 1960.

Since then, relations have gradually improved. While China’s harshest critics in the United States continue to call for “containment” and their Chinese counterparts demand that China resist “U.S. hegemony,” cooler-headed and more farsighted policy leaders are beginning to prevail in both countries.


China has maintained for some time that good relations with the United States are its top foreign policy priority. On the U.S. side, there has been a gradually growing recognition through the 1990s that, whether we like China or not, and for better or worse, China will dominate the U.S. foreign policy agenda throughout most if not all of the twenty-first century.

At the heart of the U.S. debate over China has been the question of whether our relationship will be one of cooperation or confrontation. Since late 1996, engagement has been gathering steam and has been producing results that clearly serve the interests of both the United States and China.
At last October’s summit, for example, the two leaders agreed to work together to halt the spread of nuclear weapons and weapons of mass destruction, to cooperate on the peaceful uses of nuclear energy, to develop cooperative programs on the rule of law, to define “rules of the road” (procedures for naval encounters on the high seas that lessen the chance of accidental conflict), and to advance new energy and environmental projects.
Since the October summit, there has been a steady flow of high level exchanges, including the U.S. secretary of defense, the secretary of state and China’s minister of justice. With high-level dialogue thus fully restored, we are witnessing an evolution in U.S. foreign policy goals. The Clinton administration’s stated policy for the past five years has been to engage China. Well, we now appear to be fully engaged.

What next?

The new goal — and it is a real one — is to construct a strategic partnership with China through the twenty-first century. The detailed objectives of this policy goal are still being worked out, but it clearly foreshadows greater bilateral interaction than in the past and closer efforts to work together as responsible members of a rules-based international community.


CHANGING CHINA

This shift in America’s approach toward China reflects in part a maturing among U.S. policy leaders, both in the administration and in Congress. In the early years of the post-Cold War era domestic issues dominated the political landscape and foreign policy became the stepchild (if not the bastard) of national policy. However, this view has gradually changed and in China’s case, the change was propelled by the events of 1995-96 that I described above. It suddenly became apparent that we were losing our policy leverage with China by default, and that this could have serious — even dangerous — consequences for America.

In addition, there was also growing recognition that China itself was changing — that the 1989 windmill against which we were tilting was no longer there, or had been substantially transformed. One reflection of this change was Clinton’s announcement at the summit that he would lift Tiananmen-era sanctions against China.

In the past two decades, as China has restructured its economic policies increasingly along market economy lines, its GDP has nearly quadrupled, while foreign investment has exceeded total foreign investment to Japan since the end of World War II (and only the United States has attracted more foreign investment than China has in the past several years). Foreign trade burgeoned to the point where China is now the United States’ fourth largest trading partner. There had also been an explosion of infrastructure development, with new construction or improvements on expressways, rail lines, ports and airports, telecommunications, and buildings. According to the mayor of Shanghai, seventeen percent of all the world’s operating construction cranes are located in that one city alone.

China’s swing in the direction of market economics also has also been accompanied by social and political change The grip of the old work-unit system has been loosened. Today Chinese have much more personal freedom than ever before to decide where they will live, when and where they will travel, what they will buy, and which jobs they will compete for.

They also have unprecedented access to the world of ideas inside and outside China’s borders. Today, 200,000 students are pursuing their education outside of China, most in the United States. Countless more travel internationally or view the outside world through satellite television and the Internet.

Political pluralism and the right to express political dissent have not kept pace with China’s economic progress, the growth in personal freedom, and the control over one’s own life. We should not be shy about espousing our values in this regard.

Yet, even in this still-sensitive area, change is underway. The monolithic, centralized political authority that characterized China in the past has already evolved considerably. Localities have far greater decision-making authority and control over their budgets than in the past. Nearly ninety percent of China’s one million rural villages are now electing their village leaders. This grass-roots democracy is holding local leadership accountable in a way never before imagined in China. At provincial and national levels, open debate and criticism are increasingly evident.

These are healthy trends for China, and the interplay between economic growth and political transformation will, I believe, continue to move the country toward a more open and civil society, one with rising standards of living and a growing commitment to being a stabilizing force in the world order.

But, China, like other great, emerging nations, will move ahead in response to its own rhythms. I believe that by example, we can influence the course of China’s development — on the margins, at least — through the next century. I do not believe there is any possibility we will speed up or change the course of China’s development through coercion. Containment will not work, even if it were possible to effect.


BEYOND THE 1990s: WHITHER CHINA?

Let me begin with what I believe is a near certitude:
China is becoming a global economic superpower and will be one of the principal players on the world stage throughout the coming century.
China is already the world’s third-largest economy. As noted, the nation draws more foreign investment than any other country except the United States, and is among the top ten trading economies.

Amid the radical restructuring of its economy now underway, China will see its GDP growth this year shrink to its lowest level in nearly fifteen years — to around seven percent. Even at that, China’s economy may still be the world’s fastest growing by the end of the year, and the surgery being done on its state-owned enterprise and banking systems will likely make its economy even more robust and competitive by the turn of the century. There are no straight lines in economics, of course, but it is quite possible that China will overtake Japan in aggregate GDP in the next fifteen to twenty years, and the United States a decade after that .

As China’s economic power grows, so will its influence on the world stage. China is already indicating clearly it wants a stronger hand in writing the rules that govern international relations, be it in the UN, multilateral development banks, the World Trade Organization (WTO), or security regimes.

However, China’s rise as a world economic power and its growing influence do not necessarily foreshadow its commensurate rise as a global military power and a threat to U.S. interests. China’s preoccupation for millennia has been — and remains today — consolidating and securing its borders, not expanding them. With its remote, lengthy frontiers, that will be challenge enough for this still-developing country. While China holds a huge advantage in military manpower, it has virtually no force projection capability. China’s military doctrine must continue to focus on defending China’s land mass. It lacks the resources and, I believe, the desire to do otherwise. China’s military technology and its capacity to generate new technology are decades behind that of the United States

In theory, China could commit to building a world-class military as the Soviet Union did after World War II with the goal of challenging the military supremacy of the West. In fact, it has not, and I doubt very much that it will. The Soviet Union sacrificed its civilian economy to pursue a course of military might. The best it could achieve was a nuclear standoff with the West; it never came close to domination. The ultimate cost was economic collapse and political dissolution. This example has not been lost on China.

For the past twenty years, China has been embarked on a program of transforming its economy, and with remarkable success. Yet, it remains in many respects a fragile economy with great disparities between various regions and sectors. Even if we assume for the moment that China’s economy continues to grow at current world-beating rates for the next thirty years and it surpasses the United States and Japan in terms of aggregate GDP, that would still leave China with only a small fraction of the per capita GDP of developed countries. China’s economy will strain to meet the rising demands of a population already more than 1.2 billion and projected to grow to about 1.6 billion by the middle of the next century.

China’s principal concern over most of the next century thus will not be how to challenge the West militarily; rather it will be how to achieve balanced steady growth and development throughout the country. There is much to be concerned about: China’s coastal areas are prospering, but the vast reaches of its interior are an Appalachia by comparison and are falling further behind.

My final comment about China’s intent and capabilities is to note that Beijing’s core objective for the past twenty years has been integration into, not confrontation with, emerging global systems. There is no discernible end-game for this objective: China’s need for access to global trade and capital markets will be as great 100 years from now as it is today.

Some analysts dismiss China’s opening up as a tactical expedient masking a much darker strategy. Yet, it is difficult to imagine how a country could follow a tactical course with utter consistency for two decades and give no hint that its strategic objectives in fact lay in the opposite direction. If China were truly a wolf in sheep’s clothing, one could reasonably expect that the fleece should have become threadbare and transparent by now.


FUTURE POLITICAL AND SOCIAL CHANGE

Will economic reform lead to political liberalization in China as it has elsewhere in the region? The answer to this question will certainly be a factor in the architecture of Sino-U.S. relations. Americans will continue to view the treatment of citizens by their governments and the degree to which citizens can participate in political processes as litmus tests for good relations, be it with China, or other countries. However, for most people in China today, the gradual transformation of the country’s political institutions has already led to an unprecedented opening up of new choices and freedoms in the conduct of their daily lives. Add to that the emergence of a small but growing middle class and you have the primordial soup that has spawned participatory democracies elsewhere in the region.

This is a positive trend for China, and our dialogue with China and among ourselves should not fail to take account of that fact.




This broad assessment of China and its prospects in the coming century, although not unrealistic given the evidence at hand, is certainly optimistic. To the extent that it proves to be correct, it suggests that our interests and China’s will merge more closely, and our differences be reduced, if gradually. It also suggests that the Clinton administration’s engagement policy should eventually lead to a full, cooperative partnership with China, marked by friendlier relations than we have known in the past.

However, this is not the only possible scenario for China’s future. The principal assumption upon which the optimistic assessment rests is the continuing rapid growth of China's economy. China’s leaders have shown impressive sophistication in managing macroeconomic levers,with examples being the soft landing that brought inflation from twenty-two percent to about zero in three years, the resiliency shown thus far in dodging the financial bullet that has shattered other economies in the region, and its determination to carry out far-reaching enterprise reorganization while sustaining impressive growth levels.

But China also faces a seemingly unavoidable paradox: the more dependent it becomes on world trade and capital markets, the more its own economy becomes subject to the vicissitudes of those markets. No one knows what an extended worldwide bear market would do to China’s ambitious plans. As I have noted, China’s economy is fragile; and so, too, is stability in the social and political realms. The main source of legitimacy for the current regime is an almost unblemished record of rising prosperity, spread widely although not evenly.

Could political legitimacy and the social fabric remain intact if China suffered a prolonged economic downturn? And, if the current system failed, what would it be replaced by? Would there be a prolonged period of chaos in China, perhaps bringing on conditions that would shatter regional stability and sink the global economy?

These are not cheerful questions to ponder. I would posit that the threat from China — if there ever is one — will not result from the success of China’s modernization effort, but rather from the failure of that effort.


WHAT SHOULD THE U.S. AGENDA BE?

I see a genuine commitment at last by the Clinton Administration — and the president in particular — to engage China. It has been a long time in coming, but Clinton’s visit to China in June closed the last summit loop and helped consolidate the critically important relationship between the two presidents. Having achieved that benchmark, the two sides can begin tackling more earnestly the rather extensive agenda of substantive issues.

  • From China, the United States should continue to seek firm commitments to observe international accords on the sales of weapons and weapons technology; cooperation on further development and expansion of rule by law (ultimately the best means to ensure human rights); adoption of international standards concerning trade and investment; and the employment of peaceful means to resolve the Taiwan issue.

  • From the United States, China will continue to seek greater willingness to strike a bargain over its WTO accession, including the extension of permanent MFN; more recognition of the progress it has made in improving living standards and less interference in what it considers its internal affairs; more resources to tackle problems with its environment and sustainable development; and an unequivocal reaffirmation of the United States’ one-China policy.
Now that the bilateral agenda has been more firmly set by the June summit meeting, the focus shifts to the next encounter between the two presidents at the APEC leaders’ meeting in Kuala Lumpur this November. We can hope that enough progress will be made on our bilateral agenda that new agreements can be reached, laying a positive foundation for our relationship in the decades ahead. Such agreements could, among other things, inject new vitality into our economic relations with China, increase cooperation on environmental protection and cleanup, and reduce the possibility of future tensions over security-related issues

This assessment of our resolve and ability to move the relationship significantly forward in such a short timeframe may be too optimistic. The issues involved are complex and have troubled our relations with China for quite some time.

In any event, constructing a cooperative partnership with China should be America’s foremost foreign policy goal as we move into the next century. The time is clearly at hand for the world’s largest economy and the world’s largest country to pursue cooperation, not confrontation, with each other.

© Copyright 1998 by Joseph J. Borich. All rights reserved.

[Author Joe Borich]The author was closely associated with U.S. policy toward China throughout his long career in the U.S. Foreign Service. He held the position of American consul general at Shanghai from 1994 to last year. Now retired, he heads the Washington State China Relations Council located at Seattle.

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