The China Challenge - The Consequences and Opportunities of an Emerging China

What I would like to address is the so-called rise of China. First, I will speak briefly about the current state of United States-China relations and then I will speak more specifically about developments associated with this so-called rise of China. Finally, I might give some thoughts on U.S. policy and the U.S.-Japan alliance.

First of all, there is a sort of hedging of terminology when senior U.S. officials describe the current state of U.S.-China relations. President George W. Bush said about a month and a half ago that the relationship is "very good and very complex." Others have said it is the best relationship in 30 years but that very profound disagreements remain. Secretary of State Colin Powell would say, yes, it is the best relationship we have had in decades but there is no bumper sticker or single slogan that is sufficient to describe what remains a very complex relationship. I think both can be true. U.S.-China relations may be in the best state we've had, while at the same time there may be profound disagreements and areas of tension.

On the positive aspects, the frequency and level of our communication in U.S.-China bilateral relations is unprecedented. Secondly, the scope of our agenda is broader than it has ever been. Even 10 to 15 years ago, bilateral issues dominated our interactions with China. Now, the conversations literally span the globe from the humanitarian situation in Darfur, to Chinese peacekeeping in Haiti, to the Middle East, to the nuclear challenge in Iran, and so on. Thirdly, and this is perhaps the more arguable point, I think in many ways the quality of our communications is probably unmatched in any period of U.S.-China relations. Unlike before, there is real cooperation and collaboration on a range of areas like counterterrorism, our work on the Korean Peninsula, international environmental issues, health care, and transnational crime. All of this combines to support the statement that it is the best relationship in 30 years.

Then you have the other side of the equation, Secretary Powell's "no single slogan or bumper sticker is sufficient to describe the relationship." And you have President Bush's odd formulation: a very good and very complex relationship. I think what needs to be kept in mind is that while all the good news is occurring, we still have very profound disagreements on human rights and religious freedom. As for Taiwan, China always lists this as the most sensitive and core issue of our relationship. Then, of course, trade issues occupy much of the agenda in Congress. Again, this is a complex relationship that colors the way we start to think about the future.

Secretary Powell used to talk about a spectrum of possible futures. On one side of the spectrum, China rises, becomes more influential, more powerful, and generally adopts policies and takes actions that are complimentary to our interests. China becomes a stakeholder in peace and stability and a supporter of policies that enhance mutual security and economic prosperity. On the other side of the spectrum, China rises but chooses a path that is more competitive or adversarial. So what these two scenarios suggest for the here and now is a period of shaping and hedging: shaping the environment and shaping our relationship with China, but also hedging against the possible bad outcomes.

Given that framework, what can we say about how we think things are turning? Secretary Powell said that in the military you think of threat as a combination of two elements: capability and intent. In the context of China, we are not talking specifically about a military threat but something broader in nature - diplomatic, political and security threats to our interests.

On the capability side, I think China's comprehensive national power is increasing across the board. Its military modernization program has been largely successful, very much oriented toward and driven by the Taiwan mission and scenario. Along the way, it is also developing a range of capabilities that are transportable to other missions besides Taiwan. China's sustained economic growth has given it increased leverage and clout with their neighbors and in the region. The quality of the Chinese diplomatic corps is also an element of its capabilities and comprehensive national power. All of this adds to what China already had: It is the most populous nation in the world, a permanent member of the Security Council, and a nuclear-weapons power. These more recent developments add to what were already features that positioned China as probably a great power if not a global power. The combination of these new elements certainly thrust China into a different category.

The capability side is the clearer side of this equation. The intent side is the one that is a bit more difficult to ascertain. But the following actions taken and policies adopted by China may be of concern.

Firstly, China's approach and initiatives in multilateral organizations of which it is a member, including the Asia-Pacific Economic Cooperation (APEC), the Association of Southeast Asian Nations (ASEAN) Regional Forum, and the Shanghai Cooperation Organization (SCO), are a bit confrontational with the U.S. At the last round of APEC, China was the single biggest obstacle to the security agenda that President Bush and other APEC leaders were trying to promote. At SCO, China sponsored an initiative that would set a date for the withdrawal of U.S. troops from countries in Central Asia that we think are key to the war on terror.

I would also cite China's response to its growing energy requirements. First of all, the Chinese role in addressing the nuclear challenge of Iran appears not to be helping the EU-3 and the U.S. The Chinese are, for instance, cutting oil deals with Iran and making assurances about how Iran will be treated in the United Nations. Likewise, as many countries were working to address the humanitarian crisis in Darfur, Sudan, the Chinese government was promoting its relationship with Khartoum, including selling arms and concluding oil deals. With Venezuela, China has courted President Hugo Chavez very aggressively and concluded a range of energy and oil deals. The pattern has been that whenever China sees a country that has two things, energy and a poor relationship with the U.S., they go there with great energy and enthusiasm.

Another area of concern is new Chinese initiatives. With regard to the East Asia Summit and the potential East Asian Community, there is a Chinese initiative to somehow replace or enhance the existing ASEAN+3, and the U.S. is not invited to participate. Moreover, there is still no agenda and no agreed-to participant list. All of this combines to suggest that if there is not a strategic direction to choose competition with the U.S. and its friends and allies, there at least appears to be an attempt to increase China's influence and power, perhaps at the expense of the U.S. and its friends and allies. There is a zero-sum view that in order for China to have power and influence, there has to be some associated, diminishing role for the U.S.

So what do we do about this and how do we think about it in the context of the U.S.-Japan alliance? First, I think the U.S. needs to continue its broad and comprehensive engagement with China. Our goal is to have an Asia-Pacific region characterized by peace, stability and mutual prosperity, not to constrain China or deny it a seat at the table.

Secondly, we have to have a U.S.-Japan alliance that is appropriately oriented to our current challenges. So all the elements associated with China's rise - having the appropriate force posture, the appropriate planning, the appropriate venues to share our vision and compare notes on the direction of China - all these things have to be part of our alliance. Nevertheless, the U.S.-Japan alliance is probably not sufficient in and of itself to shape the environment and hedge against the bad outcomes. The U.S. needs to have a real Southeast Asia policy; not a counterterrorism policy, not a policy that disregards the interests of our partners in Southeast Asia, but one that is more long-term and one that promotes a positive vision for our relationship with Southeast Asia. Some of this is being done, but more needs to be done.

We also need to think creatively about what is holding us back from having a better relationship with many countries in Southeast Asia. Here I would probably break from the current U.S. government policy. I think we have got a "Burma problem" that is constraining us in ways that are not helpful. Burma's is a repugnant regime, and there is absolutely no reason to believe that the current regime envisions a future with political freedoms and liberty. U.S. Secretary of State Condoleezza Rice made a decision not to go to the ASEAN Regional Forum this year to protest the decision that it might be held in Rangoon next year. Japan has an ASEAN summit, China has an ASEAN summit, but we cannot have an ASEAN summit because of Burma. I think, over time, we need to think a little more creatively about how we can engage in ASEAN and still promote the right kind of change in Burma and address the human rights problems there.

I think the U.S. also needs to be a little bit more creative about multilateral organizations. We have important objectives in Asia that could be accomplished through multilateral means if we had the vision, the energy, and the enthusiasm to promote them. For example, why not talk about energy security in Northeast Asia in a multilateral setting? There is no reason to think that energy will ultimately drive us toward confrontation if we are proactive and more creative. Why should it not be possible for the U.S. and China to work together to promote stability in key oil-producing regions like the Middle East and to recognize the shared interests that we both have in access to energy? It is not inevitable that this will be bad for our interests, but I think it is an inevitable fact of life that China will emerge as a stronger power. Therefore, it is important that we shape this the right way to the extent that we can.

The alternative scenario is that China does not fall anywhere on that spectrum I mentioned before: Perhaps China does not rise at all due to its many internal problems, which include income disparities, labor unrest, ethnic tensions and environmental challenges. This is equally challenging for us and equally challenging for our alliance. I do not think we want a weak China where there is a lot of unrest, tension and chaos. That is something else to keep in mind.

Q: We are concerned that Chinese military power will overwhelm Japanese military capability in the future, even in the field of conventional weapons. What is your view of this issue?

A: This is something that I have personally looked at for quite some time. Let me make a couple of observations. The first observation is that China has had a great advantage in orienting its modernization program to the single mission of Taiwan. It has given the People's Liberation Army a great ability to demand resources internally because the cause of Taiwan is such a powerful one. When you focus on a single mission, there is a great synergistic effect and your ability to get good very quickly is enhanced. I think this mission of Taiwan has served to focus the various elements of China's defense community. Secondly, what we discovered from national intelligence assessments in the last decade is that China was getting better faster than anyone had anticipated. Thirdly, the capabilities China is acquiring, while perhaps oriented toward Taiwan, are transportable to other missions.

I think our alliance needs to be oriented to this challenge. It does not mean we want an arms race with China. That would be costly and would not serve our interests, but we need to prepare for the bad outcomes that none of us want. Joseph Nye used to say do not treat China as an enemy because if you do, you will get an enemy. Academics write about the so-called security dilemma: You arm yourself for defense, but your inability to communicate your intentions to the other country leads them to think you are arming for offense. But all that said, I think we would be negligent if we did not prepare as an alliance for the future challenge of China. I have great confidence also that the U.S.-Japan alliance could be well suited and well prepared for this.

Q: Why is China developing its military at such a rapid rate? How does it view its role in Asia? And specifically, how far do you think China will push to assert its sovereignty over petroleum resources on the seabed of disputed territories?

A: Trying to ascribe great strategic clarity to what is going on is a mistake we often make in international relations. It could be true that China wants to improve its position, to increase its ability to impact the region, and to influence the region in the absence of a strategic notion of what it wants to do with that influence, or without knowing what it will do once it is better positioned. To the Chinese, greater power means an associated diminishment of American power and influence, and that of our allies and friends.

As for the question you asked about China's strategic vision for Asia, I think you get a range of views. We are at a critical point where we need to establish what is acceptable, what the rules of the road should be as China emerges, what we are prepared to live with, and what to confront China on.

On the anti-Japan demonstrations and rallies of last spring in China, and I perhaps am going to break from the views of the U.S. government here, but I think we were a little too wishy-washy. Issues of history, textbooks and visits to shrines are very complex and we are best to leave them to the two parties. But I think those demonstrations had less to do with the past than with the future. The demonstrations were animated by Japan's interest in joining the UN Security Council, and the Japan-U.S. statement on Taiwan at the two-plus-two meeting. I think on those matters we should not be neutral. Japan is a treaty ally of ours, a friend of ours, a democracy, and a like-minded country.

Q: It seems to me that the Bush administration has been preoccupied with international terrorism and Iraq and perhaps military transformation. Do you think it is time for the Bush administration to develop and publish an East Asia strategic initiative? Secondly, what will be the gist and scope of the "Armitage Report"?

A: Let me answer your second question first. The report will be a little different from the first report, which was more narrowly focused on the alliance and technical issues related to the alliance. The second report will contain more about the Asia-Pacific region, the trends we see, how this will impact the alliance, and how U.S. and Japan should respond individually and collectively. I cannot tell you much more than that because it is has not been drafted yet.

As for the first question about publishing an East Asia strategy or security report, I would be less concerned about whether a report is published or whether a report exists than whether or not there is a strategy. To be completely candid, I think we need to do a little better in the absence of a real consensus and coherence about what this all means for our interests and what we should do about it.

I would argue with your point that we are preoccupied with counterterrorism and Iraq. I think we need to better address those perceptions, if not enhance what we are doing in Asia. I do not want to be overly critical of my own administration. However, I do worry about Dr. Rice's decision not to go to the ASEAN Regional Forum. I think if she did have other priorities then obviously she has got to make those decisions, but I think we have taken a step back. I think we are not doing a good enough job communicating to our friends in the region that we have a strategy, that we are committed, and that we do care.

Q: You mentioned several times, and I think quite correctly, that many people in the U.S. view China's rise as taking place at the expense of the U.S. in many respects. Can you share some of your thoughts on China's rise as a high-tech power?

A: So much of our trade relationship generates debate that is not connected to facts and to reality. I think the notion that our manufacturing base is being decimated due to our trade deficit with China is factually incorrect. Even without China, there are plenty of other countries in the world that have similar comparative advantages in terms of large pools of labor and lower costs. What I would like to see is a more informed and better debate about the realities of having a robust trade relationship with China. That means technology transfer, with some limitations.

We need to have some confidence that the U.S., Japanese, and other modern economies still hold some advantages over the Chinese economy. Some argue that the primary advantage is the ability to innovate. It is argued that Chinese economic success is based on their excellence in low-end and final-stage manufacturing. They essentially are hyperdependant on the outside world on both ends of the trading relationship: on the front end because they need the raw materials, the foreign direct investment (FDI), the know-how to put it together, and then they need a market to sell it to because the Chinese domestic market is not yet sufficient. They do not have an economy or a political system that facilitates great innovation.

Q: Is your opinion on China the majority view of the future of China within the U.S. policy community? The U.S. Department of Defense (DoD) report on the Chinese military was supposed to be released and discussed next week but I think the release has been postponed. Are there any conflicts inside the DoD? Also, what are the different opinions on China in the U.S.?

A: I think what needs to be understood is that agencies naturally have different views. However, we cannot have a DoD foreign policy and a State Department foreign policy and a national security foreign policy. I think the good news is that the person in charge of our China policy all along has been George Bush. He has taken a personal interest in the relationship, and when he has seen one agency get out of line he has been clear to offer course correction. I do not see a problem with bureaucratic competition and bringing different equities to the table at inter-agency discussions, but we cannot have competing foreign policies. My own view as shaped by my own experience is that the person in charge of our China policy is George Bush. I do not see that changing, and he has done a pretty good job sustaining coherence.

Q: What do you think of the specific threats to Japan given the rising tensions in Japan-China relations? We all saw the demonstrations on TV. How do you think these kinds of tensions and bad feelings are going to impact Japan?

A: I think the nationalism card is a very tricky and dangerous card to play. What I would worry about in the immediate future is China trying to play this card and then losing some "rudder control" over the military. Every time there are popular demonstrations in China, or people are energized around an issue that is nationalistic, there is the risk that it will either be turned against the government in an unhelpful way, or that the debate will become so heated that the regime will start to lose control of its own direction. People used to talk about the three pillars of legitimacy and sustained power for the Chinese Communist Party: communist ideology, nationalism, and economic growth and success. Communist ideology is no longer a realistic pillar or an option for the government. And what happens if they fail to sustain 8% or 9% economic growth in a given year? The nationalism card would then be a very tempting one for them to play just in terms of trying to sustain support for the regime. Therefore, I can see scenarios where the government loses rudder control of what they tried to subtly unleash in more tactical ways. All of this, combined with increasing military capabilities, I think, is what I would worry about in Japan. Again, the capabilities that they have oriented toward Taiwan are not unlike the capabilities they would need to prosecute some sort of military campaign against Japan. I am obviously not talking about an invasion of Japan, but a campaign involving disputed territories or a coercion type campaign that would impact Japan's economy.

Q: How do you think we should deal with India, especially considering the rise of China and its expanding influence in the region?

A: I think there is a tendency for people in India to think and orient more toward the East. Some refer to it as the "Asianization" of India. I think this is something to be encouraged. Japan is probably better positioned to do this than the U.S. due to our own difficult relations with India. We have never had the opportunity to really establish a U.S.-India relationship that stood on its own merits and was not colored by the India-Pakistan competition or the Kashmir issue, among others. My understanding is that India is pretty enthusiastic about expanding economic relations with Japan and about the potential of the bilateral relationship. I think Japan can be more of a leader than the U.S. in a lot of ways, but it is something that we should be encouraging.

Q: I think it is fair to say that developed countries in the past competed with each other to advance their respective economic interests in China. One possible option is that developed countries will work together more closely to encourage China toward the sort of benign end of the spectrum of possibilities which you described earlier. Is this a realistic option? Or will China do this only as long as it serves its interests rather than due to a wider commitment to multilateralism per se? Do you think issues such as Taiwan will continue to hinder cooperation between developed countries with regard to China?

A: A lot of what led to our disagreement with respect to the lifting of the EU arms embargo was that we were not communicating well enough on how we see the future, the trends in China, the security environment, the impact on Taiwan, and the obligations we have there. We had an unpleasant experience that ultimately resulted, I think, in the right outcome: The EU made a decision to delay consideration of the lifting of the embargo and agreed to a new strategic dialogue with the U.S. on Asia.

I think we do have a chance to do good work with one another toward shaping China. There is commercial competition and we do have different equities on Taiwan. However, perhaps I am confident in the power of being like-minded, being democracies, and having shared values. I think China will resist this, but I am more optimistic that we can achieve consensus among the U.S. and the EU, and that we can set about trying to shape the strategic environment as partners rather than as competitors.

Q: First, what is your long-term prognosis on the Korean situation? Secondly, could you give us some insight into the nature of the U.S.-China dialogue and cooperation surrounding the Six-Party Talks?

A: The way I have always looked at China's role in the Six-Party Talks is that they simultaneously wear three hats. Number one, they convene and host the talks. That is not insignificant and I am not sure if anybody else could have pulled it off. Secondly, they have acted as an intermediary and have conducted shuttle-like diplomacy. Thirdly, they are a participant in the Six-Party Talks.

People mostly refer to the first two roles as being illustrative of the positive and cooperative relations between the U.S. and China. Whether the third role is a positive story for us has been less clear. It feels as though there are two camps in this process, the U.S.-Japan camp and the ROK-China camp; and the two camps have divergent views on how to motivate and get the right outcomes from Pyongyang. We strongly believe that bad behavior should not be rewarded. On the other hand, I think South Korea and China are not against the provision of incentives. This is a problem, although not an insurmountable one.

We have a proposal that meets everything the North Koreans have publicly said they want from us: security assurances, a path toward eventual diplomatic relations, and energy and food assistance. We want the opportunity to discuss the proposal, but we do not want to be undermined by a counter approach that does not place any pressure on the North Koreans. Getting back to the talks is a small part of the challenge. The hard part is to influence Pyongyang and motivate them to do the right thing. Again, while China's first two roles have been a positive feature of U.S.-China relations, there are some issues related to the third role.