China and the United states

Overview of Contentious Areas and Policies Adopted Problem Solution Economic

i) ii) Massive trade/ current account deficits Chinese protectionist policies (as such violating the spirit of its freetrade pledges by limiting market access, inhibiting competition and preventing the recovery of the global economy) a. Chinas indigenous innovation policies, building up of national champions- Famous Chinese brand program which provides for unfair export subsidies. Fast growing market segments are reserved for domestic industries b. Foreign companies treated unfairly in government procurement (market worth US$1 trillion a year) c. Foreign enterprises cannot obtain the same licenses as domestic companies, being extremely limited by the regulatory environment. Chinese currency practices/ policies a. Undervaluation of Chinese yuan US dependence upon Chinese financing of its budget deficits (China is the single largest holder of US treasuries) Inadequate enforcement of intellectual property rights (and its implications for the trade imbalances) U.S.-China Strategic and Economic Dialogue (since 2009) Cabinet-level gathering aimed at defusing trade tensions and promoting cooperation in health, the environment and other areas Lodging formal complaints to the World Trade Organization Not an effective solution, ought to be negotiated, and negotiated in a spirit of contributing to Chinas development of a sustainable innovation within the economy WTO Dispute Settlement Understanding Chinas actions President Hu has affirmed that China was committed to allowing the yuan to rise BUT no timetable or scale of the reform was offered

iii)

iv)

Ending of export subsidies for Chinese branded goods (December 2009) - Chinas agreement to end dozens of export subsidies for Chinese branded goods Development of a legislative and regulatory IPR framework - China acceded to the World Intellectual Property Organization (WIPO) Copyright Treaty (March 07)

v)

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Security
i) Built up of Chinese military forces and the lack of transparency a. Implications for the USA: USs interests in Taiwan and the broader Asia-Pacific region In March 2009, China announced an increase in its military budget during the year by 14.9% over 2008 to $70.2billion, making it the 21st year of double-digit increases in Chinese military spending There is no official military or defence dialogue at a comparable level of intensity or public scrutiny (as the SED)- the main mechanism in place, the Defense Consultative Talks (DCT), had been intermittent and plagued with setbacks. ii) Core problems: Taiwan and strategic nuclear forces a. Military-to-military talks suspended for five months in 2008 over US arms sales to Taiwan Confidence building measures High level dialogue on military matters/ high-level military exchanges In 2006, the USA and Chinese Navy conducted two joint exercises Resumption of deputy-ministerial defense consultations in June 2009 Chinas actions Defense white paper, Chinas National Defense in 2008, released in 2009, enhancing transparency as it promotes an understanding of the others doctrines and capabilities Outcomes of DCT (while limited): - Signing of a Military Maritime Consultative Agreement (1998) - Establishment of a military hotline in 2007 Nevertheless there remains significant mistrust of each others motives, remaining the area most marked by a lack of communication.

Political 1) Controversial record on human rights, democracy, religious and family planning practices a. Chinas repressive policies towards Tibet and Xinjiang in 2009. Beijing rebuked the USA for making unwarranted criticism, warns of such interference in domestic affairs damaging bilateral ties. Human rights talks were suspended by China between 2002 and 2008 over American criticism of its human rights record; while Human Rights dialogue between the USA and China resumed in Washington in May 2010, after a break of 2 years - Criticized by Amnesty International for having no benchmarks or goals Chinas Actions 1997: Signed the International Covenant on Economic, Social and Cultural Rights 1998: Covenant on Civil and Political Rights Began to work with the USA on legal and judicial cooperation

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talks in 2010 were delayed over issues such as US arms sales to Taiwan and Obamas meeting with the Dalai Lama.

Potential Solution: Need to cooperate with China in developing legal and judivial organizations to address individual rights concerns, group rights issues and problems related to specific geographical areas.

2)

Internet in China a. Cyber-threat: computer attacks on Google as part of a larger political and corporate espionage effortattack on at least 34 companies, especially in the strategic industries that China is lagging in.

Global Online Freedom Act (GOFA) - USA lawmakers are pushing for the enactment of this bill to bar US firms from storing users personal information in countries that restrict the peaceful expression of political and religious views online

Sovereignty questions i) Taiwan a. Remains the most complex and sensitive issue in bilateral relations, could lead to a conflict between China and the USA b. USA arms sales to Taiwan has always been an issue of contention South China Sea a. The Pentagons 2005 report to Congress found that China is emphasizing its preparations to fight and win short duration, highintensity conflicts along its periphery, particularly in the East and South China Seas. Growing potential dangers of Chinas military operations in areas where US military forces routinely operate iii) Tibet and Xinjiang (crosses over to human rights) Page | 3 LIM ZI AI | CHINA STUDIES IN ENGLISH 2011 U.S.-China Strategic and Economic Dialogue (since April 2009) - Two diplomatic tracks: strategic and economic

Confidence-building measures (refer to military/ security measures above)

ii)

Foreign policy disputes i) Chinas support for rogue states such as Sudan, Burma, Iran, Cuba, Zimbabwe etc. Chinese trade, investment and aid to resource-rich and poorly governed states in Africa that undermine Western sanctions designed to pressurize governments to reform

ii)

Sample questions 1) Assess the view that Chinas high economic growth rate is more of an opportunity than a threat to the US economy. 2) Relationships with the USA are more important than those with other countries in maintaining Chinas current global influence. How far is this statement true? 3) How important is economic interdependency at binding the relationship between China and the United States? 4) China and America will go to war with each other. Discuss.
Need to understand 1) What Chinas rise means for the USA a. Economic: advantages and threats it poses for the USA b. Military: what it means for the USAs influence 2) Importance of the USA relative to other nations (How important is the USA to China?) 3) What binds China and America together 4) Prospects of the relationship between China and the USA

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OVERVIEW OF BILATERAL RELATIONS

Key Points:
Since 2001, US-China relations improved. Relations between the two governments evolved towards a positive equilibrium that appeared likely to continue into the near future. Both the USA and Chinese administrations were preoccupied with other issues and appeared reluctant to exacerbate tensions with one another. Growing economic interdependence and cooperation over key issues in Asian and world affairs reinforced each governments tendency to emphasize the positive and pursue constructive relations with one another. The positive stasis provided a basis for greater cooperation over economic and security interests and issues. Nevertheless, differences in strategic, economic, political and other interests remained strong throughout the period and represented major obstacles to further cooperation between the two countries as policymakers in both countries continued to harbor suspicions about each others intentions. While Chinas growth in economic, military and political power was a reality, it is unclear whether the Chinese administration intends to use this power in ways that benefits or undermines US goals of international stability and cooperation.

STRATEGIES ADOPTED
A pattern of dualism in the US-China relations emerged as part of the ostensibly positive equilibrium in the post-cold War period. The pattern involved constructive and cooperative engagement on the one hand, and contingency planning and hedging on the other. Dualism showed as each government used engagement to build positive and cooperative ties while at the same time seeking to use these ties to build interdependencies and webs of relationships that constrained the other power from taking actions that opposed its interests. This is designed to tie down aggressive, assertive, or other negative policy tendencies of the other power through webs of interdependence in bilateral and multilateral relationships, and reflects the underlying suspicions and conflicting interests that feature prominently in the calculations of both the US and Chinese administrations.

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China
Strives for a post-Cold War world order of greater multi-polarity; China would be one of the poles and would have greater opportunity for advantageous maneuvering than in a superpower dominated order. CCP leaders determined to maintain the primacy of their rule in the face of economic, social, and political challenges at home and abroad, including challenges supported by the USA. In general, the Chinese approach focused on trying to work constructively with US power, concentrating on areas of common ground, building interdependent economic relations, and minimizing differences wherever possible. This was difficult to achieve, especially when US policy concentrated on the stark differences between the USA and China over human rights, Taiwan, weapons proliferation and trade issues. For the most part, Chinese leaders bided their time, endeavoring to avoid complications that would ensue from protracted confrontation with the USA. At bottom, they believed that Chinas growing economy and overall international importance would steadily win over foreign powers to a cooperative stance with China and encourage politically important groups in the USA, especially businesses groups, to press for an accommodating U.S. approach to China.

OVERVIEW
Clinton Administration (1993-2001) By 1998, the Clinton administration appeared sincerely committed to pursuing a policy of generally accommodating engagement with China. Nevertheless, political forces in the USA, many interest groups, and the media still lined up against Chinese interests on a range of human rights concerns, strategic issues, Taiwan, and economic questions. I. Conditioning of MFN status for China on Chinas progress in human rights issues: 1993 26 May 1994 (President Clinton delinked MFN treatment to China from US consideration of Chinese human rights practices) MFN status widely seen as an essential element in the rapidly-growing US-China economic relationship. As such, there also existed business groups in the USA who were concerned towards the potential of MFN treatment jeopardizing US access to the burgeoning Chinese market, also allowing for economic competitors to take advantage of the situation. Support for this policy was thus isolated to the administration, and there was huge support for maintaining MFN treatment for China. Page | 6 LIM ZI AI | CHINA STUDIES IN ENGLISH 2011

Upon the delinking of MFN treatment from the Chinese human rights practices, Chinese officials grew anxious for the USA and China to take advantage of the improved atmosphere in bilateral relationships to push for more far-reaching and comprehensive progress in the US-China relationship.

II. June 1995: Lee Teng Huis visit to Cornell University Beijing responded with strongly worded protests, cancelling a number of important dialogues with both the USA and Taiwan, also carrying out widely publicized military exercises, including ballistic missile tests, near Taiwan. Chinas invective was accompanied by dark warnings of what China would do (that is, invade Taiwan) if Taiwan were to move toward de jure independence. III. 3rd Taiwan Straits Crisis (March 1996) China had conducting intimidating military exercises near Taiwan in the run-up to Taiwans first presidential elections in March 1996. This was followed by a large show of force by two US aircraft carrier battle groups. Implications: This incident had demonstrated to China that it was not productive to maintain a hardline approach to the USA, while it also resulted in heightened sensitivity by the Clinton administration regarding China, leading to official reassurances to the PRC that US policy towards Taiwan would not deviate from past practice. Results: As such, while China appeared to have judged that endeavoring to work constructively with the current US government was in Chinas best interests, Washington has also on its part continued strong efforts to avoid difficulties with China, to emphasise a policy of engagement with the PRc, and to seek high-level contacts, summit meetings, and tangible agreement with China on sensitive issues. In July 1999, Lee Teng Hui added to the Taiwan strait tension when he asserted that Taiwan was a separate state from China, stating that China and Taiwan had special state-to-state relations. China reacted with strong rhetoric, cutting off cross-strait communication links. IV. May 1999: US Bombing of the Chinese embassy in Belgrade Nationalistic uproar as mobs stoned the US embassy in Beijing and US diplomatic property was burned in Chengdu. Chinese official commentary was replete with harsh rhetoric against the USA, challenging the constructive Chinese approach to the USA, also arguing for stronger opposition towards US hegomonism. V. Chinas entry into the WTO in 2001 After the USA agreed to Chinas joining the WTO, it passed legislation granting China permanent normal trade relations in 2000, ending the need for annual presidential requests and congressional reviews regarding Chinas normal trade relations tariff status. Page | 7 LIM ZI AI | CHINA STUDIES IN ENGLISH 2011

Economic Issues
REMEMBER [SOME] OR ELSE:
General Statistics:
- China: GDP of 4.4 trillion and total foreign trade of 2.6trillion in 2008- firmly established as a premier world economic powerhouse - China is the USAs second-largest trading partner - Total trade in 2008 reached an estimated $409billion

China is the second largest holder of US securities and the largest holder of US Treasuries (used to finance the federal budget deficit) In 2009, China had a per-capita income of less than US$4000 as opposed to the USAs US$48000 The USA has had a bilateral trade deficit with China since the 1980s, annual deficits increased throughout the 1990s, and skyrocketed in the first half of the 21st century.

Implications of Chinas unfair protectionist policies:

- US trade officials identified more than 90 separate government measures providing support for domestic industries, including the i) Famous Export Brand ii) China World Trade Brand iii) China Name Brands Products This amounts to unfair export subsidies to promote domestic industries over foreign ones, contributing to the already massive trade imbalances between China and the USA. Americas more assertive positive in challenging Chinese trade policies is evident from its willingness to impose tariffs on Chinese products. For instance, in September 2009, the White House imposed increased tariffs on Chinese tyres for three years effective from 26th September 2009, at rates of 35% in the first year, 30% in the second and 25% in the third. In March 2007, the Department of Commerce also announced a preliminary decision to apply countervailing duties to two companies exporting glossy-paper to the USA, marking a 23 year break of not applying countervailing duty laws on non-market economies. As a result of the pressure, in December 2009, China agreed to end dozens of export subsidies for Chinese branded goods, rather than fight a battle with the USA at the WTO. Because of a lack of enforcement of Intellectual Property Rights: According to the Motion Picture Association, nine out of every 10 DVDs sold in China is an illegal copy The US music industry estimates the market for sound recordings in China is almost 90% pirated Page | 8 LIM ZI AI | CHINA STUDIES IN ENGLISH 2011

The Business Software Alliance estimates that in 2005, 86% of all software used in China was pirated

Violation of Intellectual Property Rights Since becoming a member of the World Trade Organization (WTO) the Chinese government has taken steps to strengthen its legal framework to amend its IPR, and regulations to comply with the WTO Agreement on Traded-Related Aspect of Intellectual Property Rights (TRIPs). Nonetheless, Beijing has still failed to fully carry out its commitments as a WTO member, particularly in regards to protection of intellectual property rights, patents, and information security regulations. American industries are thus hesitant to move intellectual property intensive products and manufacturing processes to China if IPR protection is inadequate. This insecurity constitutes one more constraining consideration in export control decisions in the USA. With the growth of bilateral trade, Americans have become concerned with the competitiveness of the US industry and frustrated with Chinese barriers to market penetration. ** The CCP plans to increase Chinas R&D expenditures from the current level, 1.7% of GDP, to 2.5% of GDP by 2020; the U.S. figure today is 2.7%. Like Western governments, it is funding megaprojects in sunrise areas such as new-generation nuclear reactors, nanotechnology, quantum physics, clean energy, and water purification. At the same time, the government is forcing multinational companies in several sectors to share their technologies with Chinese state-owned enterprises as a condition of operating in the country. This is fueling tensions between Beijing and foreign governments and companies, and it raises the critical issue of whether the Chinese brand of socialism can coexist with Western capitalism. Since 2006 the Chinese government has been implementing new policies that seek to appropriate technology from foreign multinationals in several technology-based industries, such as air transportation, power generation, high-speed rail, information technology, and now possibly electric automobiles. These rules limit investment by foreign companies as well as their access to Chinas markets, stipulate a high degree of local content in equipment produced in the country, and force the transfer of proprietary technologies from foreign companies to their joint ventures with Chinas state-owned enterprises. The new regulations are complex and ever changing.

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Potential Solutions 1) World Trade Organization should pressure China to comply with international trade standards and to adhere to the standards set for the protection of intellectual property rights, patents, regulations and inspections. a. In recent years the WTO has ruled several times against China in crucial cases against illicit taxes on imported auto parts and its lax enforcement of counterfeiting laws. 2) Both multilateral and bilateral approaches can be applied to address the aforementioned concerns. Since these concerns are experienced by various foreign companies and countries, they can be better addressed through a multilateral approach and in coordination with other governments.

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Essay Question: Assess the view that Chinas high economic growth rate is more of an opportunity than a threat to the US economy.
Chinas high economic growth rates present both opportunities and threats to the US economy. While China reportedly causes high unemployment rates in the USA due to the outsourcing of American firms, jobs are also created in the USA thanks to the opportunities offered by the large export market that is China, with its high domestic consumption and investment expenditure. While the USAs massive trade deficits have remained as a contentious issue to be reckoned with, Chinas trade surpluses have also helped to fund American spending. Nevertheless, with the exception of regulatory lapses, as Chinas economic growth continues to soar, the opportunities presented to the US economy are unprecedented, outweighing the threats apparently posed to the USAs economy. More of an opportunity The high economic growth rates of China today means that the USA can now reap benefits from a substantial export market, while the increase in demand for raw materials and capital goods also presents unprecedented opportunities for US firms. China presents the USA with a large consumer base of 1.3billion, allowing for expanded production to garner increased profits for US firms. As domestic investment increased, the demand for raw materials and capital goods has also experienced a concurrent increase. For instance, it is estimated that U.S. exports to China rose 300% between 2000 and 2007. According to a Morgan Stanley report, trade with China in 2004 also helped to create 4 million new American jobs, boosting employment especially in the export-oriented industries. A strong China with increasing domestic consumption and investment, together with a growing middle class with higher incomes thus bodes well for US exporters. Moreover, the cheap exports from China have also helped to control inflation in the USA, helping it achieve its macroeconomic goals while also benefitting the average American consumer with the huge volume and wider variety of lower-cost goods from China. For instance, it is estimated that trade with China has saved American consumers $100 billion in 2004. As such, both consumers and producers in the USA have enjoyed increased welfare following the economic boom of China, presenting increased opportunities. It should also be acknowledged that Chinas foreign exchange surpluses have been recycled into US Treasury securities- providing the American government with funding for its initiatives and activities. As the second larger holder of US securities and the largest holder of US treasuries used to finance the federal budget deficit, China has been the main source of funding for the USA government. Thus, while the focus of the bilateral economic relationship have largely been placed on the massive trade deficits on part of the USA, it has Page | 11 LIM ZI AI | CHINA STUDIES IN ENGLISH 2011

to be recognized that Chinas trade surpluses have been recycled into a purchase of US treasuries. This means that as Chinas high economic growth rates allow for a further capacity to purchase finance US debts, the USA is also ensured of sustained capital to address its domestic needs, affirming the view that Chinas economic growth presents more opportunities than threats for the US economy. More of a threat Nevertheless, despite the above prospects, it appears that Chinas economic growth has also resulted in several negative prospects for the USA. For instance, it is argued that the outsourcing of jobs to China have resulted in a rise in unemployment in the USA. It is estimated by the AFL-CIO that since 1998, the USA lost 3.4million manufacturing jobs, of which 1.3million were tied to China. This has undeniably contributed to the unemployment rate of 9.2% in the USA today, feeding the view that Chinas low wages and low labour standards have damaged the US economy. However, it has to be acknowledged that the cost advantages presented by the availability of cheap labour in China have also generated an increased amount of profits for the US producers, meaning economic growth for the USA as firms reap economies of scale. In 2007, US firms have reaped over $4billion in profits from businesses in China, 50% more than in 2006. As such, Chinas economic growth rates translate directly into increased profits for American firms with substantial FDI in China; and while the outsourcing to China has indeed contributed to an increase in unemployment for some sectors of the American economy- such as that of labour-intensive manufacturing- in reality Chinas high economic growth rates have allowed for various capital-intensive sectors in the USA to grow, balancing out the loss of jobs in the manufacturing sector and suggesting that what America needs is a structural reform. Apart from these, there are, however, some valid claims towards the threats posed by China. For instance, despite Chinas explosive growth rates over the past two decades, there remains an extremely weak judicial regulatory environment in China. The lax enforcement of laws has thus posed threats to the USA economy, in particular impeding on its economic growth. For instance, the lax enforcement of intellectual property rights (IPR) in China have impeded the USAs economic growth. Exports are limited as a result of the consumption of pirated goods- as illustration, according to the Motion Picture Association, nine out of every 10 DVDs sold in China is a pirated copy. The Business Software Alliance also estimates that 86% of the software used in China is pirated. This presents a threat to the US economy on two levels. Firstly, exports are capped at a significantly lower level than it would have been with a proper enforcement of laws. Secondly, the theft of advanced technologies also robs the USA of its edge in producing high-tech goods, presenting a threat even in the long-term Page | 12 LIM ZI AI | CHINA STUDIES IN ENGLISH 2011

perspective. Despite efforts and commitments by the CCP to adhere to international agreements, such as the WTOs TRIP agreement, the violation of IPR have continued, constituting one of the main threats to the USAs economy and presenting itself as an effective barrier towards bettered trading relations. Chinas protectionist policies in trade also maintain disadvantages for the USA, presenting threats to its economy as it suffers from a net decrease in exports, leading to diminished economic growth. Trade disputes have often erupted between China and the USA. For instance, in September 2009, the White House imposed increased tariffs on Chinese tyres for three years, at rates of 35% for the first year, 30% in the second year, and 25% for the third year. Due to the undervalued yuan- which allows for Chinese exports to be priced relatively cheaper in terms of foreign currencies- trade deficits have also ballooned between the USA and China. For instance, in 2007, the USA sent $65.2billion worth of exports to China and imported $321.5billion worth of goods, running up a trade deficit of 256.3billion, the USAs largest trade deficit ever with a single country. Owing to these and other protectionist measures such as unfair subsidies, threats to the USAs economy have constantly accumulated, as an increase in export earnings for China means, by implication, a decrease in the GDP of the USA. Nevertheless, as protectionist policies are mediated by the WTO and as the Chinese leadership assuages the USAs concerns, there is evidence of a positive trend towards improved bilateral economic ties. For instance, from 2005-2009, the yuans value to the dollar increased by 22% as it was allowed to appreciate from 8.3yuan to 6.8yuan. In response to the USAs imposition of tariffs, China had also requested consultations with the USA under the WTO Dispute Settlement Understanding. This demonstrates the willingness and desire of both parties to keep the economic relationship favorable. Conclusion The opportunities presented by the high economic growth rates of China largely outweigh the threats posed. In particular, the threats currently posed towards the American economy are regulatory lapses that, if addressed by the CCP government, can be alleviated to ensure benefits for both parties. As Chinese producers climb the value ladder, the most important challenge facing the Obama administration is how to channel investment toward education and expand production capacity for capital-intensive spending, allowing the US economy to maintain its comparative advantage in knowledge-intensive sectors.

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MILITARY/ SECURITY ISSUES

U.S. Security concerns include: o Ultimate focus of Chinese military build-up Threat it poses to Taiwan o The lack of Chinese military transparency o Recurring instances of apparent attempts to gain US military secrets o Evidence of improving Chinese military and technological power Growing threat to American maritime supremacy in the Western Pacific o Chinese military and technological assistance to rouge states. Although there is some degree of high level dialogue between the USA and China on military matters, and in fact resumed deputy-ministerial defense consultations resumed in June 2009, this is still the aspect of the relationship most marked by a lack of communication and mistrust of each others motives. Compared to the growing and robust economic links between the two, military-to-military relations remain relatively underdeveloped. Evidence of Chinese military Modernization China announced in March 2009 that it would increase its military budget during the year by 14.9% over 2008 to 70.2billion, marking the 21st year of double digit increases in Chinese military spending. China has the most active land-based ballistic and cruise-missile programme in the world. The Second Artillery has about 1100 short-range ballistic missiles facing Taiwan, while medium-range ballistic missiles capable of carrying nuclear or conventional warheads have also increased. China has 66 submarines against the USAs 71.

Chinese firepower and extensive development in warfare capabilities threatens the USAs Asian bases, which until now have been free from all but nuclear attacks. The USAs ability to project power and help allies in the Pacific is also threatened. Japan is already within range of Chinese missiles, and it is evident that Chinese abilities to strike have since soared far beyond seeking to deter American intervention in any future mainland dispute with Taiwan- China seems to want to stop the American fleet from being able secure its interests in the Western Pacific. This lack of knowledge towards the ultimate focus of Chinese military build-up and the threats it poses for the strategic interests of the USA thus forms a nagging mistrust between both parties.

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Nevertheless, the USA still enjoys a military spending much higher than that of China, as its defense spending was estimated at $663b in 2009 as opposed to Chinas $70.2b. As a share of GDP, China spends less than half the American figure. Regardless however, China has already forced American ships to think about how and when they approach the Chinese coast. Confidence-Building Measures Cooperation over security matters intensified especially after 9/11, including highlevel exchanges, working-level talks, reciprocal ship visit and functional exchanges. In 2006, the USA and China conducted two joint exercises, one of which was conducted near Hawaii- marking the first visit by China naval vessels to a US port since 2000. President Hu and Bush agreed in April 2006 to several confidence-building measures, including opening a dialogue on Chinas strategic forces modernization and US national missile defenses. o But little has been accomplished till date, while talks also broke down for 5 months in 2008 over US arms sales to Taiwan. Bilateral military relations appear to be improving under the Obama administration, as both Hu and Obama announced a shared commitment to better military-tomilitary relations. In June 2009, both sides resumed deputy-ministeral defense consultations and reportedly discussed US arms sales to Taiwan, anti-terrorism efforts, Norht Korea nuclear issues etc. Both sides also announced a resumption of routine military contacts and high-level military exchanges. Recent Examples of Chinese outrage at America US Secretary of State Hillary Clintons declaration on July 23 at the ASEAN Regional Forum (ARF) in Hanoi that The United States supports a collaborative diplomatic process by all claimants for resolving the various territorial disputes without coercion, and announcement that the United States oppose[s] the use or threat of force by any claimant, sent China into a rage, with officials accusing the Americans of attempting to internationalize the South China Sea disputes. So in Beijings eyes, Washington has now taken sides. China believes that, despite the long-simmering territorial disputes in the South China Sea, that it has taken serious steps to address its neighbors concerns. In 2002, for example, China and ASEAN signed a historic Declaration on the Conduct of Parties in the South China Sea that pledges to seek a peaceful resolution to the territorial disputes.

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Human Rights
Since the 1989 Tiananmen Incident when the U.S. imposed economic sanctions on China for its violation of human rights, American presidents have often put pressure on China by supporting the occasional U.N. resolution condemning Chinas human rights abuses, and by pressing for the release of individual dissidents. Human rights advocates charge, however, that ever since September 11, 2001, the Bush administration has all but stopped pressuring China on human rights as the U.S. has sought Chinas help in the war on terror. Human rights advocates charge, however, that ever since human rights will continue to be a sensitive and volatile issue for China. The medias treatment of this issue usually reflects the split approach of civil and political rights versus economic and social rights. Yet, the two sets of rights are inextricably linked as they are both included in the UDHR. Perhaps the public would be better served if the media could avoid the simplistic frames through which such complex issues are usually viewed, and begin a discussion instead on how the full set of rights can be achieved for all nations, East and West. Civil and Political Rights Western, more developed states tend to focus on civil and political rights, believing that economic and social rights are more goals than "rights." Viewed through this lens, issues like the lack of a free press, the arrest and incarceration of dissidents and journalists, and the inability of the Chinese to vote for their leaders, for example, have been used by critics of China (including the U.S. State Department, and groups like Human Rights Watch and Amnesty International) as examples of how China has not kept its promise to improve its human rights record, which it made in 2001 when bidding for the 2008 Olympic Games. The protests and riots in Tibet in March 2008 have only further ignited the human rights debate. Economic and Social Rights On the other side, Asian countries, developing countries, and ex-communist countries, have tended to prioritize economic, social, and cultural rights. Hence the Chinese government rejects criticism of its human rights record, claiming that survival and economic development, as manifested in a higher standard of living, and health and personal security, are just as valid human rights. In Chinas view, before a person can cast a ballot, he or she must be able to feed himself first. The idea that "freedom" is first and foremost a freedom from want is shared by many in Asia and in poor developing societies. Hence, China cites World Bank figures of having lifted 400 million people out of poverty in the last few decades as a human rights achievement. China, which adopted a constitutional amendment in 2004 to recognize and protect human rights, also believes that progress should be judged relative to its own past, and not according to other countries standards. Supporters also point to the Chinese governments recent rapid response and mobilization to rescue and shelter the millions of Chinese affected by the Sichuan earthquake, as a fundamental protection of Chinese human rights.

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Sino-US Cooperation
Positive convergence of Chinese and US policies

North Korea
Chinese leaders are acutely concerned about a crumbling North Korea that might precipitate massive instability in north-eastern China, exacerbating tensions in an ability volatile part of the country. As such, China takes seriously the destabilizing effects of North Koreas nuclear programme, seeking for its total abolition since a failure to do so might incur the intervention of the USA in toppling the regime, or Japan might choose to develop nuclear weapons as well, threatening Chinas strategic interests directly. On the other hand, the USA views North Koreas possession of nuclear weapons as a direct threat to the USA and its allies, South Korea and Japan. Moreover, Washington has a commitment to global non-proliferation efforts, explaining its concern for North Koreas export of nuclear materials.

China, the USA and North Korea

Positive Chinese backing for UN sanctions on North Korea suggests a newfound willingness to contemplate coercive measures against the North to complement traditional Chinese offers of reassurance to Pyongyang. The USAs willingness to engage in bilateral talks with North Korea to complement the SixParty Talks also suggests a new spirit of flexibility and a rejection of regime change as a realistic option of US policy. Negative (Implications) A key cause of Chinas troubles with the United States, Japan and South Korea last year was Beijings relative tolerance of Pyongyangs misbehavior. More importantly, North Korean escalation in expanding its nuclear arsenal will elicit a firm US response that will certainly cause fresh Sino-American friction.

Better neighbourly ties allow China to enjoy stable relations with the US because, when faced with Chinese pressure, Chinas neighbours naturally turn to Washington for help. As a strategic balancer, the US has no choice but to come to the aid of Chinas neighbours, thus directly confronting China. Page | 17 LIM ZI AI | CHINA STUDIES IN ENGLISH 2011

Abiding by international norms is subordinate to national interest. How accurately does this quote portray Chinese behavior in conducting its foreign policy?
Chinas national interests rest largely on the preservation of territorial integrity and national unity, as the CCP maintains a stronghold on governance and power. While there may be contradictions at times, more often than not Chinas abiding by international norms is essential in achieving its national interests as well, considering the need to maintain cooperative relations with major powers to enhance Chinas global standing. Hence, it is the interplay of both abiding by international norms The perceived subordination of international norms to national interests arises from concerns towards Chinas assertive stature towards territorial disputes and issues it claims as part of its core national interests. For instance, with regard to the sovereignty of Taiwan, China has consistently maintained a hardline stance. In response to the USAs arms sales to Taiwan in 2008, for example, the Chinese leadership had suspended military-tomilitary talks with the USA for five months as a sign of protest. Chinas military modernization plans, with a key intention in deterring Taiwan from declaring de jure independence also causes tension and suspicion amongst the international community, reflected in the concerns expressed towards the lack of transparency towards Chinas military capabilities. Chinas carrying on with its military build-ups thus reflect the subordination of international opinion to national interests, as China has consistently maintained an assertive stance in its foreign policy, apparently regardless of international opinion. However, Chinas efforts in enhancing transparency and promoting understanding should not be understated, as there is evidence of Chinese effort and determination in assuring the international community of its peaceful intentions and stature. For instance, in 2005, China published a white paper from its Information Office, titled Chinas Peaceful Developmental Road, providing an outline of the view of Chinas strategy in foreign affairs. In 2009, China also issued a defense white paper, Chinas National Defense in 2008, hence enhancing of transparency and promoting an understanding of its doctrines and capabilities. This reflects Chinas efforts in abiding by international norms while it remains committed to its core national interests; there need not be a trade-off despite sentiments otherwise.

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Moreover, as nationalist sentiments increasingly come to shape Chinese foreign policy, it is but crucial that the CCP addresses these sentiments, on which its legitimacy is based on. As such, should these sentiments come into conflict with what international norms dictate, it does appear that abiding by these norms are subordinated to national interests. For instance, when the US-led NATO force bombed the Chinese embassy in Belgrade in 1999, nationalist sentiments erupted, as numerous demonstrations saw tens of thousands of citizens attacking the US embassy in China by throwing eggs and bricks. These demonstrations lasted for four days, with then vice-president Hu Jintao delivering a national televised speech condemning the barbaric and criminal conduct of NATO, a gross violation of Chinese sovereignty. In 2005, Japans bid to be admitted to the UN Security Council also resulted in an online petition which garnered over 20 million signatures, together with physical protests through Shanghai, Beijing and other Chinese cities, resulting in a last minute cancellation of a meeting between Chinese vice-minister Wu Yi and Japanese PM Koizumi, plunging relations between Beijing and Japan to a perilous low. Hence, while international norms ought to mean Chinas addressing of these issues in a peaceful and harmonious manner, its national interests in preserving the CCPs legitimacy and ensuring the social cohesion of the nation did result in acts which reflects a subordination of international norms to national interests. Nevertheless, while the above holds true, Chinese foreign policy does in fact aim and a concurrent achieving of both aims, placating the sentiments of the masses while at the same time assuring the international community of Chinas determination in adhering to a peaceful rise. For instance, in April 2001, when the US EP-3 plane crashed with a Chinese jetfighter over the South China Sea, while the CCP leadership pressed for an apology from the USA to demonstrate its role as the guardian of the Chinese nation, it eventually settled for a subtle statement from the USA as an apology, playing down nationalist sentiments as it sought to seek a quick resolution. Hence, while pragmatic leaders have made use of nationalism for rallying support, they did at the same time, make sure that nationalist sentiments would not jeopardize the overarch objectives of political stability and economic modernization upon which their legitimacy is ultimately based. It is certainly not in their interest to let Chinese foreign policy be dictated by the emotional, nationalistic rhetoric on the street. Therefore, although pragmatic leaders have consciously cultivated nationalism against the perceived containment policy by Western countries, strong nationalist rhetoric has often been followed by prudential policy actions in foreign affairs, reflecting Chinas ultimate abiding by international norms. Page | 19 LIM ZI AI | CHINA STUDIES IN ENGLISH 2011

Chinas abiding by international norms is further witnessed in its increased participation in international and regional organizations, demonstrating its willingness to accept greater international obligations and commitments. For instance, since the Bush administration, China has worked closely with the international community in the six-party talks to deal with North Koreas nuclear weapons development. Chinese collaboration and consultation has also consistently been held with the USA over sensitive topics such as the war on terror, Afghanistan, Pakistan, Iran and even Taiwan as well as bilateral economic, security and other issues. Chinas abiding by international norms is hence witnessed in its utilizing of its rising influence in responsible ways in accord with broad American interests in Asian and world affairs. There are also frequently instances where national interests coincide with international norms; there is hence no need for a trade-off as implied. To ensure their political survival, the CCP leadership has emphasized the maintenance of a peaceful international environment, especially in nearby Asia, which would facilitate the continued trade, investment, and assistance flows so important to its economic well-being. The CCP had followed earlier steps to put aside self-reliance and to broaden international contacts by increasing efforts to meet the requirements of the USA and others regarding market access, intellectual property rights, and other economic issues, accepting more commitments and responsibilities from participation in international economic organizations such as the World Bank, Asian Developmental Bank, and the Asia Pacific Economic Cooperation forum.

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Why China is not a superpower

With the United States apparently in terminal decline as the worlds sole superpower, the fashionable question to ask is which country will be the new superpower? The nearunanimous answer, it seems, is China. Poised to overtake Japan as the worlds 2nd largest economy in 2010, the Middle Kingdom has all the requisite elements of power--an extensive industrial base, a strong state, a nuclear-armed military, a continental-sized territory, a permanent seat on the United Nations Security Council and a large population base--to be considered as Uncle Sams most eligible and logical equal. Indeed, the perception that China has already become the worlds second superpower has grown so strong that some in the West have proposed a G2--the United States and China--as a new partnership to address the worlds most pressing problems. To be sure, the perception of China as the next superpower is grounded, at least in part, in the countrys amazing rise over the last three decades. Powered by near-double digit economic growth since 1979, China has transformed itself from an isolated, impoverished and demoralized society into a confident, prospering global trading power. With a GDP of $4.4 trillion and total foreign trade of $2.6 trillion in 2008, China has firmly established itself as a premier world economic powerhouse. Yet, despite such undeniable achievements, it may be too soon to regard China as the worlds next superpower. Without doubt, China has already become a great power, a status given to countries that not only effectively defend their sovereignty, but also wield significant influence worldwide on economic and security issues. But a great power is not necessarily a superpower. In world history, only one country--the United States--has truly acquired all the capabilities of a superpower: a technologically advanced economy, a hi-tech military, a fully integrated nation, insuperable military and economic advantages vis-a-vis potential competitors, capacity to provide global public goods and an appealing ideology. Even in its heydays, the former Soviet Union was, at best, a one-dimensional superpower-capable of competing against the United States militarily, but lacking all the other crucial instruments of national power. Meanwhile, the challenges China faces in becoming the next superpower are truly daunting. Even as its economic output is expected to exceed $5 trillion in 2010, per capita income in China will remain under $4000, roughly one-tenth of the level of the United States and Japan. More than half of the Chinese population still live in villages, most without access to safe drinking water, basic healthcare, or decent education. With urbanization growing at about 1 percent a year, it will take another three decades for China to reduce the size of its peasantry to a quarter of the population. As long as China has an oversized peasantry, with hundreds of millions of low-income rural residents surviving on the margins of modernity, it is unlikely to become a real superpower.

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To believe that China is the next superpower, its also necessary to assume that Chinas super-charged economic growth will continue. Unfortunately, relying on any countrys past performance to predict its future prospects is a risky proposition. Chinas stunning economic growth performance since 1979 notwithstanding, its ability to sustain the same level of growth is by no means assured. In fact, the likelihood that Chinas growth will slow down significantly in the next two decades is real and even substantial. Several favourable structural factors, such as the demographic dividend (derived from a relatively younger population), virtually unlimited access to the global markets, high savings rates and discounted environmental costs, will gradually disappear. Like Japan, China is becoming an ageing society, due in no small part to the effectiveness of the governments stringent one-child policy (which limits urban families to a single child). The share of the population 60 years and above will be 17 percent by 2020, and this ageing will increase healthcare and pension costs while reducing savings and investments. Although the exact magnitude of the reduction in the savings and the increase in healthcare and pension spending is uncertain, their combined negative effects on economic growth could be substantial. Another obstacle to Chinas future growth lies in the countrys export-led growth model. As a middle-income country with limited domestic demand, China has relied on exports to increase its growth. While this strategy, which has been employed successfully in East Asia, has served China well for the past two decades, its future viability is now deeply in doubt. As the worlds second largest exporter (although China is expected to surpass Germany as the worlds largest exporter in 2010), China is encountering protectionist resistance in its major markets (the United States and Europe). In particular, Chinas policy of maintaining an under-valued currency to keep its exports competitive is now being blamed for worsening global imbalances and weakening the economies of its trading partners. Unlike its East Asian neighbours, which are relatively small trading powers, Chinas sheer size means it has the capacity to cause severe economic disruptions to its trading partners. Unless the Chinese government abandons its mercantilist strategy, a global backlash against Chinese exports cant be ruled out. Because net export growth has provided China at least an extra two percentage points growth over the past five years, a slowdown in Chinas exports in the future will mean an overall lower rate of growth. To be sure, China can compensate for the loss of its external demand by increasing domestic consumption. But this process requires a complete overhaul of Chinas growth strategy, a politically difficult and painful step the incumbent government has been unable to take. A third constraint on Chinas future growth is environmental degradation. Over the past three decades, China has neglected its environment for the sake of economic growth, with disastrous consequences. Today, air and water pollution kills about 750,000 people a year. The aggregate costs of pollution are roughly 8 percent of the GDP. Official estimates suggest that mitigating environmental degradation requires an investment of an additional 1.5 percent of GDP each year. Climate change will severely affect Chinas water supplies and exacerbate the drought in the north. Chinas business-as-usual approach to Page | 22 LIM ZI AI | CHINA STUDIES IN ENGLISH 2011

growth, which relies on cheap energy and no-cost pollution, will no longer be sustainable. Uncertain economic prospects aside, Chinas rise to superpower status will also be constrained by a host of political factors. First and foremost, Chinese leaders will find themselves in search of a global vision and a political mission. Countries dont become superpowers merely because they have acquired hard power. The exercise of power must be informed by ideas and visions that have universal appeal. The United States did not become a true superpower until it entered the Second World War, even though it had attained all the requisite elements of a superpower long before Pearl Harbor. The political challenge for China in the future is whether it will be able to find the political ideals and visions to guide the use of its power. At the moment, China is economically prosperous but ideologically bankrupt. It believes in neither communism nor liberal democracy. Besides depriving China of a source of soft power, the lack of appealing ideals and visions for the world is also responsible for the inward-looking mindset of the Chinese leadership, which has so far paid only lip service to calls for China to assume greater international responsibility. Unlike the United States, China will find its capacity to exercise power abroad greatly constrained by the lack of political integration at home. The Chinese Communist Party may have defied the doomsayers who repeatedly exaggerated its demise in the past. But the partys political monopoly is by no means secure. It holds on to its power by both delivering satisfactory economic performance and repressing challengers to its authority. As Chinese society grows more sophisticated and autonomous, the party will find it increasingly difficult to deny the rights of political participation to the urban middleclass. As a one-party regime, the Communist Party has also fallen victim to internal corruption. The combination of political challenge from the rising middle-class and progressive internal decay will increase the probability of a regime change in the future, a process thats likely to be disruptive, even cataclysmic. A possible democratic transition is not the only thing feared by the Chinese ruling elites-ethnic secessionism may be even more threatening. For all intents and purposes, China is not a nation-state, but a multi-national empire with huge chunks of its territory (Tibet and Xinjiang) inhabited by secessionist-minded minority groups. The risks of internal fragmentation, on top of the perennial Taiwan problem, will mean that China will have to devote enormous military and security resources to defending its territorial integrity. This structural weakness makes China less able to project power abroad and more vulnerable to the machinations of its competitors, who could exploit Chinas ethnic tensions to tie Beijings hands. Geopolitically, the limits on Chinese power will be equally severe. While the United States is blessed by weak neighbours, China has to contend with strong regional rivals--India, Japan, and Russia. Even Chinas middle-sized neighbours, South Korea, Indonesia, and Vietnam, are no pushovers. Chinas rise has already triggered a regional geopolitical realignment aimed at checking Beijings ambitions and reach. For example, the United States has Page | 23 LIM ZI AI | CHINA STUDIES IN ENGLISH 2011

greatly expanded its strategic cooperation with India so that New Delhi will be able to stand up to Beijing. Japan has also increased its economic aid to India for the same strategic purpose. Even Russia, Chinas partner of convenience for the moment, remains guarded about China. Moscow has refused to sell Beijing top-line weaponry and limited its energy supplies to China. For all its anti-American rhetoric, South Korea still counts on the United States for its economic prosperity and security. As for Vietnam and Indonesia, the two Southeast Asian countries most sceptical about Chinas future intentions, they are hedging their bets carefully. While trying not to offend China openly, they have significantly improved their ties with the United States and Japan, Chinas implicit regional rivals. As a result of such geopolitical counter-balancing, China will be unable to become a hegemon in Asia--a power with complete dominance over its regional rivals. By definition, a country cannot become a global superpower unless it is also a regional hegemon, such as the United States. As a great power hemmed in by powerful and vigilant neighbours, China must constantly watch its back while trying to project power and influence on the global stage. Such a status--a globally influential great power, but not a dominant superpower--is something nobody should dismiss lightly. Pax Americana is an accident of history that cannot be copied by another country. For the world, it should not be obsessed by the fear that China will become another superpower. Instead, it should learn to live with China as a great power. The question is: what kind of great power is China? Ironically, while the rest of the world has taken Chinas future as a superpower for granted, Chinese leaders themselves are more aware of the inherent limits of the countrys strength. As a result, Beijing exercises its newly acquired clout with extreme caution, eschewing external entanglements, frowning upon direct military presence abroad, avoiding costly international obligations and living with the international economic and security order established and dominated by the United States. Of course, China guards its national interests, particularly its sovereignty, jealously. On matters of its territorial integrity and economic well-being, Beijing seldom hesitates to flex its muscles. But it draws the line on empire-building overseas via the extension of its military power. So for the foreseeable future, China will be, at best, only an economic superpower by virtue of its role as one of the worlds greatest trading powers (in this sense, both Germany and Japan should be considered economic superpowers as well). Its geopolitical and military influence, meanwhile, will remain constrained by internal fragilities and external rivalry. While China will always have a seat at the table on the global stage, its willingness and capacity to exercise leadership will most likely disappoint those who expect Beijing to behave like a superpower. Its not that China doesnt want to be a superpower. The simple truth is that it is not, and will not be one.

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