U.S.-China: illusions of partnership

January 30, 2009
4:00 - Critical Issues in the Asia-Pacific Region

By John J. Tkacik, Jr.

The central question for world peace in the 21st Century is “can we assume that China will be a partner for peace rather than an enabler of instability?”

The short answer is “I'm afraid not.” If global peace requires a stable international policy structure that encompasses the following goals:

-- respect for universal human rights;
-- nonproliferation of weapons of mass destruction and their delivery systems;
-- rules-based free trade undergirded by stable and rational exchange rate mechanisms;
-- mitigation of global environmental degradation;
-- product safety and consumer health;
-- the expansion of the freedoms of representative democracy;
-- the defeat of transnational terrorism in its myriad guises and, of course,

. . . then China’s behavior cautions that China does not share those goals.

China is now the second most powerful nation on earth. It has arrived at this happy state primarily because – and here I simplify a bit – because the United States needed to develop a new geopolitical power on the Eurasian landmass that would balance the Soviet Union. Through the 1970s and 80s, U.S. policy was to integrate China into the global trade structure that could provide the resources for China's growth.

With the collapse of the Soviet Union, however, the grand organizing principle behind U.S. economic support and preferences for China – still a totalitarian state after the Tiananmen Massacre – evaporated. Yet since 1992, virtually all American leaders have argued that America's increasingly generous trade and financial treatment of China are needed to co-opt China into global economic structures, as well as political, strategic, environmental, etc., in order to make China a "responsible stakeholder" in the status quo of the international system.

Now, 30 years to the month after the inauguration of Deng Xiaoping's "Reform and Opening" strategy in 1979, as China has taken full advantage of America's sponsorship in the global economic order, China's GDP has grown annually at about 10 percent, and is the second most powerful economy on earth. China is not interested in maintaining this status quo. Rather, in the words of Harry Harding at GWU, China seeks to be a "rule-maker" rather than a "rule-taker."

One economist puts it simply. “China[‘s economic growth] is losing its capacity to shock . . . however astonishing it would be elsewhere.” Since 2004, China’s annual gross domestic product (GDP) growth in U.S. dollar terms has been 25 percent a year – twice the officially published rate. Its industrial sector is growing even faster. And the Chinese government officially acknowledges military spending growth of 17-18 percent annually – while U.S. intelligence agencies suggest China’s total military outlays at between double and triple Beijing’s announced figures – if you do the math.

The official Chinese GDP figures for 2008 were published January 23 and they showed probably show that China's 2008 GDP growth was a 9 percent – compared to likely negative U.S. GDP growth – but in US dollar terms, China's GDP was US$ 4.39 trillion, compared to America's $14.4 trillion. And although "real" growth was pegged at 9 percent, China's GDP grew from $3.47 trillion in 2007 to $4.39 trillion in 2008.

Although China’s economy is now the world's third largest, after the United States and Japan (overtaking Germany in 2007, according to the latest revised figures) China’s industrial output in 2008 was second only to the United States. China's industrial sector is already up in the magnitude of $2.134 trillion -- compared to $2.96 trillion for the United States' industrial and manufacturing sector (significantly, U.S. industrial production and capacity utilization was down -7.8% for 2008 – but double Japan's 2007 figures at $1.19 trillion , and Germany's 2007 of about $990 billion. One study estimates that for 2008, the United States accounted for 16.9 percent of global value-added factory output, with China at 15 percent.

Already, China is the world’s largest steel producer; in the words of one alarmed U.S. trade official, "China now has more excess steel capacity than the entire steel production capacity of Japan. In addition, China produces more steel than the United States, European Union, and Japan combined,” an observation he capped with the conclusion that, “China is not investing in steel on a market basis.” The immensity of China’s other primary industries – aluminum, copper, cement, petroleum, – is staggering. More important -- China has overtaken the United States in output of information technology products.

These trends indicate China’s industrial sector could overtake the United States’ in a matter of a few years, not several decades. So, too, will China’s military industrial infrastructure also overtake America’s is current trends continue. This has historical significance because America's industrial output was more than double the combined output of Japan and Germany in the Second World War, and remained more than double the USSR's throughout the entire Cold War.

But let's do the math for 2007: China’s announced GDP for 2007 was $3.47 trillion dollars, and the CIA estimates military spending at 4.3 percent of GDP – or about $150 billion (while China's published military spending for 2008 was about US$59 billion ). That figure does not take into account the World Bank’s “purchasing power parity” factor which calculates that a dollar’s worth of Chinese currency can purchase double the amount of goods and services in China that a dollar can buy in the United States. So, for comparative purposes, a purchasing power parity figure for China’s defense outlays in 2008 could reasonably be pegged in the neighborhood of $300 billion.

China is already the world's largest shipbuilder in terms of deadweight tonnage (though not in dollar-value), but As China continues to field new classes of super-quiet nuclear submarines with heavy loads of new ICBMs, top line jet fighters and a dazzling array of new space systems, the strategic importance of China's industrial and manufacturing sectors is already apparent to the Defense Department. The Defense and Energy Departments say that China is the "only major nuclear power that is expanding the size of its nuclear arsenal."

China is now a recognized economic superpower, or perhaps something more challenging: it is an economic superpower where absolute authority over economic decisions rests with the leadership of the Chinese Communist Party (CCP).

Many who hear this will ask . . . "So what?"

About a year ago, I read and article, covering a half page, complete with graphics and photos in one of South China's most popular daily news papers . . .The headline read "Yuan Peng: America's three major schemes to impede China's rise".

Now, this got my attention because I know Dr. Yuan Peng, he was a visiting fellow at the Brookings Institution and is now in Beijing as one of the top America experts at a think-tank called "CICIR" (China Institute for Contemporary International Relations). CICIR's influence as a think tank is understandable – it is a branch of the Chinese Ministry of State Security.

But the sentence in the article that caught my eye was this:

“In the world today, virtually all of America’s adversaries are China’s friends.” And I have to admit, it's true. I met up with Dr. Yuan in Beijing last February and asked him about the article. He smiled as I enumerated America's "adversaries": North Korea, Iran, Burma, Sudan, Zimbabwe, Uzbekistan, Syria, Hamas, Hezb'ollah, Uzbekistan, to name a few. Then there are other problematic states, Venezuela, Russia, which seem intent on being very pushy these days. And Dr. Yuan agreed, they are all China's friends. Did he have any other countries in mind, I asked, thinking that maybe there were some of China's friends that perhaps the United States was pushing around like a bully that China was trying to defend. But, no, that was about it.

I thought to myself, though, that there are of course, other countries -- Taiwan, India, Vietnam and Japan – to name a few – which China would never admit in public are it's "adversaries" but which nevertheless drive China's military modernization campaigns.

So, I thought I'd share with you Dr. Yuan's observation because I think it poses the central question for World Peace – and, to be a bit parochial – for U.S. foreign policy in the 21st Century: “can the United States conduct an effective national security strategy on the assumption that China will be a partner rather than a spoiler?”

To me, it's clear. The short answer is “I'm afraid not.” Perhaps I'm a bit idealistic, but I believe the new Obama Administration's foreign policy goals are:

That said, China’s behavior (and the behavior of its ‘friends’) cautions that China does not share those goals.

Can Americans feel reassured the “new multipolar world order” that China's leaders demand will be hospitable to American leadership or values in the coming decades? Or is there a grave potential for collision as the international system enters a power transition phase? University of Chicago's John Mearshiemer pointed out last year, in an article about China's rise, "as history shows, powerful states on the rise often fight wars with other major powers.”

Let us run down the list:

-- respect for universal human rights; If China's behavior in Sudan and Zimbabwe, in Burma or North Korea, are any indication, China is very tolerant of regimes that are the most horrific abusers of the most basic rights of their own people. And inside China, while the Chinese people enjoy new prosperity, the Chinese Communist Party demands monopolistic authority over every aspect of their lives – from religion and procreation, to labor organizing, and political expression, from cultural cohesion to major economic decisions, the ruling communist party demands authority – and all who challenge it – as the signers of the December 9, 2008, "Charter '08" discovered – will be sanctioned by the state.

-- nonproliferation of weapons of mass destruction and their delivery systems; China continues to supply the volatile Middle East with ballistic missiles and cruise missiles; In the United Nations Security Council, China has been the major protector (with Russia) of both North Korea and Iran, ensuring that both countries do not suffer from U.N. sanctions.

-- rules-based free trade undergirded by stable and rational exchange rate mechanisms; China's current economic model can only be described as "state mercantilism" which undersells economic competitors on world markets, and prevents foreign competition from competing in the China market – unless, of course, foreign competition is completely controlled by the Chinese state and makes decisions that encourage Chinese production

-- mitigation of global environmental degradation; Aside from its own disinclination to protect the Chinese environment, The Chinese government continues to demand that the "developed world" carry the entire burden of mitigating global climate change. Moreover, the Chinese government tolerates the despoliation of hardwood forests throughout South Asia, Southeast Asia and Latin America, constructs irrigation and power generation projects on major riverine watersheds that feed South and Southeast Asia, and seems unconcerned with the vast atmospheric pollutants that plague China's neighbors in the Western Pacific (especially Taiwan, South Korea and Japan), or oceanic pollution that has resulted in a large flotsam continent of Chinese plastic that now floats in the central Pacific.

-- product safety and consumer health; China ignores foreign complaints about health dangers and safety risks of Chinese products, either blaming foreigners for hyping the problem, or denying they exist. Even in cases when Chinese government agencies promise "cooperation" to mitigate these problems, they seldom follow through.

-- the expansion of the freedoms of representative democracy; The Chinese Communist Party, of course, believes that representative democracy is unnecessary because the Party is capable of fulfilling the needs of the people.

-- the defeat of transnational terrorism in its myriad guises; China has been eager to gain intelligence on terrorism from other countries, but has rarely (if ever) offered "actionable" intelligence. Quite the contrary, China continues knowlingly to supply weapons and explosive bomb components to Islamic terrorists via Iran.

On this last matter let me add a bit:

China's foremost scholar of U.S. affairs, Professor Wang Jisi, pointed out in August 2004, "facts have proven that it is beneficial for [China's] international environment to have the United States militarily and diplomatically deeply sunk in the Middle East to the extent that it can hardly extricate itself." Nonetheless, he concluded that "the United States is still China's greatest strategic adversary."

One way to keep the United States militarily "sunk" in Iraq, the Chinese government believes, is by aiding terrorists to kill U.S. soldiers. I apologize if this sounds harsh, but it is an extremely unfortunate fact. By 2007, it was increasingly clear that China had been enthusiastically supplying Iran’s Revolutionary Guards with massive quantities of small arms, explosives, and complying with Iranian requests to remove serial numbers from small arms and mortar rounds, and helpfully suggesting that cargos be airshipped.

In May 2008, Deputy Secretary of State John Negroponte told a congressional hearing on U.S.-China ties “Just the other day, Monday, when I was in Beijing, this was one of the issues I raised — concern about Chinese weapons or Chinese-designed weapons showing up in some of these battle areas, be it Iraq or Afghanistan.” Negroponte went on to say that his "Chinese interlocutors" had assured him they had "scaled way back" their sales of conventional arms to Iran, and that "there's been quite a bit of cooperation" with China on the issue. Yet, if Negroponte is still raising the matter as late as May 2008, it is clear the problem has persisted for years with little improvement.

So, the short answer to the China puzzle is, "no, we cannot assume that China will be a constructive agent for world peace."

But of course, there is a long answer: “China is now too big to confront, and managing China’s rise now requires a quiet, coherent, multi-dimensional and disciplined strategy that must be coordinated with allies and friendly democracies.” Crucial to achieving global peace is consensus among the world’s democracies to “balance” China’s rise. The key obstacle to this consensus is China’s sheer economic weight and Beijing’s willingness to use it to punish its competitors. Unless the United States takes the lead, the world’s democracies must perforce acquiesce in China’s ascent and ultimately will acquiesce to Beijing’s world view.

China is now an economic superpower, and it is simply too big for the United States to inflict trade, financial or economic sanctions on it – even if it wanted to. To do so would be “mutual assured economic destruction.” But there is no need for the world’s democracies to avert their eyes and pretend that China is, somehow, a “responsible stakeholder” in the international effort to protect human rights.

But I have not been asked here to tell you what to do about it . . . just to tell you what the problem is.

Notes

1. “Economists React: China Economy Still Risks Overheating,” The Wall Street Journal online edition , October 25, 2007, at
http://blogs.wsj.com/economics/2007/10/25/economists-react-china-economy....
China's statistical bureau pegged the country's GDP in 2004 at $1.7 trillion U.S. dollars. See Report on the Work of the Government - "China's GDP in 2004 reached 13.65 trillion yuan, an increase of 9.5% over the previous year." (Delivered at the Third Session of the Tenth National People's Congress on March 5, 2005), Wen Jiabao, Premier of the State Council, at http://www.gov.cn/english/official/2005-07/29/content_18351.htm. Three years later, China reported 2007 GDP at $3.46 trillion. "Guonei Shengchan zongzhi (2007 nian 1-4 jidu) chubu gaisuan" [Gross Domestic Product (quarters 1-4, 2007) preliminary figures], National Bureau of Statistics of China, January 24, 2008, at http://www.stats.gov.cn/tjsj/jdsj/t20080124_402460186.htm (February 1, 2008 - no longer posted).
Gordon Fairclough and Jason Leow, "China's Military Boost May Stir Fear," The Wall Street Journal, March 5, 2008, p. A10, at http://online.wsj.com/article/SB120462837702610135.html.
China State Statistics Bureau, "Guonei shengchan zongzhi (2008 nian 1-4 jidu)" [Gross Domestic Product for 2008 (QI-QIV)], January 22, 2009, at http://www.stats.gov.cn/tjsj/jdsj/t20090122_402534594.htm. The official exchange rate on Friday, January 30, 2009, was 1 US Dollar = 6.84970 Chinese Yuan Renminbi.
The Federal Reserve reported the Gross Value of Final products and nonindustrial supplies at $2,963.7 for 2008 (http://www.federalreserve.gov/releases/G17/Current/table9.htm).
Japan’s 2007 GDP was $5.328 trillion, Takashi Nakamichi and Takeshi Takeuchi, "Japanese Ministers Signal Concern Over Yen's Climb," The Wall Street Journal, March 5, 2008, at http://online.wsj.com/article/SB120465592214210787.html. The Factbook estimates Japan’s industrial sector at about 26.5 percent of GDP, or $1.41 trillion. See also Japan Cabinet Office website statistical roundup at http://www.esri.cao.go.jp/jp/sna/qe074/kjissuu.pdf which indicates industrial sector output was $1.19 trillion at contemporary exchange rates.
Germany’s 2007 GDP was about 2,423.8 billion euros, or about $3.29 trillion. See Table 5, German Economy, First Quarter 2008, German Statistical Office, at http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/EN/Co... (563.12 for industry (including energy) and 88.24 billion for construction. - 671.30 billion euros - at an exchange rate of one euro = $1.52 – is about $990 billion.
Peter Marsh, “China to overtake US as largest manufacturer,” Financial Times, August 10, 2008, p. 1, at http://www.ft.com/cms/s/0/2aa7a12e-6709-11dd-808f-0000779fd18c.html.
The official was Timothy Stratford, Assistant U.S. Trade Representative for China. See “Effect of China on U.S. Economy Too Serious To Not File Cases in WTO, USTR Official Says,” Regulation & Law, No. 26, Friday February 8, 2008, p. A-2.
David Lague, "China corners market in a high-tech necessity," International Herald Tribune, January 22, 2006, at http://www.iht.com/articles/2006/01/22/business/rare.php.
For an excellent but perhaps overly sanguine survey of China’s economic growth, see Albert Keidel, “China’s Economic Rise – Fact and Fiction,” Carnegie Endowment for International Peace, Policy Brief, No. 61 July 2008, at http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=20279.
These figures were posted in the Central Intelligence Agency’s World Factbook 2008 on July 24, 2008, at https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html. Note that, for no apparent reason, the CIA adjusted downward its estimate of China’s military spending to 3.8 percent of GDP in 2007, but revised the figure back to 4.3 percent in the latest publication. Files for previous Factbooks dating to the year 2000 are available at the CIA website at https://www.cia.gov/library/publications/download/index.html.
Gordon Fairclough and Jason Leow, "China's Military Boost May Stir Fear," The Wall Street Journal, March 5, 2008, p. A10, at http://online.wsj.com/article/SB120462837702610135.html.
After an exhaustive study of 2005 prices in China, published on December 17, 2007, the World Bank's International Comparison Program (ICP) determined that, one only needed about 3.4 yuan to buy in China a dollar's (8.28 yuan) worth of equivalent goods on the U.S. market -- less than half of the official exchange rate. See the International Comparison Program (ICP) Tables in 2005 ICP Regional Summary: East Asia and Pacific, at http://siteresources.worldbank.org/ICPINT/Resources/ICPregionalsummaries.... Since then, the Chinese currency has appreciated about 15 percent against the dollar. The Economist magazine suggests a primitive "purchasing power parity" figure by checking the prices of "Big Macs" at McDonald's restaurants around the world (The Economist sharpened its China figure to 3.42 in its July 24, 2008 issue). A “Big Mac” that costs $3.57 in Atlanta, Georgia, sells for 12.50 yuan (or about $1.83) in Guangzhou, China - a price multiple of about 1.95 times the Chinese cost. See “Big Mac index; Sandwiched,” The Economist, July 25, 2008, http://www.economist.com/markets/rankings/displaystory.cfm?story_id=1181... .
"National Security and Nuclear Weapons in the 21st Century," Departments of Defense and Energy, September 2008, at http://www.fas.org/programs/ssp/nukes/doctrine/Document_NucPolicyIn21Cen...
Reported in Bill Gertz, "Pentagon: China only major nuclear power 'expanding the size of its nuclear arsenal'," East-Asia-Intel.com, October 10, 2008 http://www.east-asia-intel.com/eai/2008/10_08/4.asp.
"Superpower" is a charged word, but, there it is. Read the opening sentence of C. Fred Bergsten, "A Partnership of Equals - How Washington Should Respond to China's Economic Challenge," Foreign Affairs, July/August 2008, at http://www.foreignaffairs.org/20080701faessay87404/c-fred-bergsten/a-par....
In Chinese, his phrase is "zai shijieshang, jihu suoyou Meiguode duishou dou shi Zhongguode pengyou." See Yuan Peng, "Yuan Peng: Meiguo san da shouduan yanyuan Zhongguo jueqi" (Yuan Peng: America's three major schemes to impede China's rise), Guangzhou Ribao, November 23, 2007, p. A20, at http://gzdaily.dayoo.com/html/2007-11/23/content_86129.htm (June 27, 2008). Dr. Yuan Peng is now a senior specialist in American affairs at the Chinese Institute for Contemporary International Relations (CICIR), the research arm of China’s Ministry of State Security. For a discussion of CICIR’s role in the Ministry of State Security see Michael Pillsbury, China Debates the Future Security Environment, National Defense University Press (Washington, D.C.) 2000, pp. 365-366.
Among others, Professor John Mearsheimer makes this point with reference to the United States and China. See John J. Mearsheimer, “Rivalry in the Offing,” China Security, Vol. 4, No. 2 Spring 2008, pp. 9, 11 at http://www.chinasecurity.us/cs10.pdf.
Wang Jisi, "Meiguo zhanlue tiaozheng dui Zhong Mei guanxide yingxiang" [Impact of US strategic adjustment on China-US relations], Beijing Xuexi Shibao [Study Times], internet version, August 16, 2004, (a version of which is the third article at http://www.tecn.cn/data/detail.php?id=5949f)(July 18, 2008).
John J. Tkacik Jr., “The Arsenal of the Iraq Insurgency; It's made in China,” The Weekly Standard Volume 012, Issue 45, August 13, 2007, at http://www.weeklystandard.com/Content/Public/Articles/000/000/013/956wsp...
See Panel I of a Hearing on "U.S.-China Relations in the Era of Globalization," Senate Foreign Relations Committee, May 15, 2008, transcript by Federal News Service.

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