Pete’s blog

China poses several big foreign policy challenges for the US. Militarily it is a rising power in Asia, challenging US dominance. Politically, China remains an authoritarian country in a region increasingly democratic. Economically, China supports the US dollar, while flooding the US economy with low-priced consumer goods. Asses the history of US policies toward China and critically evaluate the record and promises of the Bush Administration’s China policy.

Once sharing a very cordial relationship, the United States and China have had a distant and occasionally hostile relation since the revolution in 1949. President Nixon reopened formal relations with his visit to China, but progress was slow. It has only been in the last 4 years, during the Bush Administrations term in office that Sino-American relations and China’s place in the world have reached a new level. President George W Bush’s policies towards China and in other parts of the world have played a significant role in the re-emergence of China as a great power, while also creating new threats and challenges to American interests.

Immediately after the Second World War, relations between America and China were at an all time high, having just fought as allies against the Japanese. The communist revolution in 1949 dramatically changed this relationship, putting China in ideological opposition to the United States. The Korean War reinforced this split, as the two countries now fought on opposing sides. Relations continued to be distant until President Nixon made the breakthrough, first by secretly sending Dr. Henry Kissinger in 1971, and then visiting the country himself in 1972. This visit led to the resumption of formal diplomatic relations in 1979. One of the consequences of this was the complication of the Taiwan issue. The Chinese Nationalist government had fled to Taiwan during the revolution and the US embassy had followed. Both mainland China and Taiwan considered themselves to be the official government of China, and the Chinese considered Taiwan to be part of mainland China. Diplomatic relations with either were therefore mutually exclusive. In order to establish formal diplomatic relations, the United States had to endorse China’s position that “there is only one China and that Taiwan is a part of China.”[1] However the United States also wanted to maintain ties with Taiwan and introduced the Taiwan Relations Act which allowed unofficial relations to continue.[2] This dualistic relationship has required careful management by the Americans and will take skilful diplomacy to resolve peacefully.

Relationships with China continued to improve throughout the 1980’s, with trade agreements signed and cultural exchanges taking place. The Tiananmen Square massacre in 1989 led to a disruption of these relations, with the United States imposing certain trade sanctions on China. Relations eventually recovered, with the visit to America by Chinese president Jiang Zemin in 1997 and the visit by US president Bill Clinton to China in 1998.[3] The United States’ policy towards China from 1980 to the end of Clinton’s presidency was “predicated on the conviction that continued economic and cultural engagement is the best way to induce democratization.”[4]

President Bush’s policy towards China has been significantly different throughout his presidency. During the first months, prior to 9/11, Bush’s policy was essentially to develop “such overwhelming capabilities (military, economic, and technological) that no other state or coalition of states would dare confront the United States.”[5] Furthermore “right-wing opinion in the United States had it that China was the most likely challenger to U.S. hegemony and that the “China threat” should be a priority for the new administration.”[6] This policy may have resulted in clashes with China in the long-term, either over Taiwan or over the deployment of a missile defence system, but America did not want potential clashes to escalate. James Kelly enforced that point – “China is not an enemy and our challenge is to keep it that way,” and “American interests are served by a China that is developing economically and politically.”[7] The policy appears to have had the objective of making it difficult or impossible for China to compete militarily with America and thereby deterring them from attempting to challenge US hegemony, but also to always maintain and strengthen relations with Beijing. Whether this policy would have been successful or sustainable was never put to the test. The events of September 11, 2001 led to a dramatic shift in US policy – overwhelming military power could offer no protection against this new threat. The “War on Terror” became Bush’s primary focus, and in order to fight this war he needed the support of as many nations as possible, especially permanent members of the United Nations Security Council. China was quick to offer its support after 9/11, China had its own problems with terrorism and saw many opportunities in supporting America. You Ji believes that “there is no doubt that China has taken advantage of the world campaign against terror in order to serve its domestic politics and foreign pursuits.”[8] As part of this support “China voted in favour of UN Security Council Resolution 1373, publicly supported the coalition campaign in Afghanistan, and contributed $150 million of bilateral assistance to Afghan reconstruction following the defeat of the Taliban.”[9] This marked the beginning of the end of the United States’ “anti-China containment policy”[10], whether real or perceived. Bush needed a China who would support any US efforts, as well as be able to assist in resolving regional Asian problems, allowing Bush to focus all his energy on terrorism. The new policy became to develop “a relationship that is pragmatic, based on mutual respect, and focused on furthering peace and stability in the world.”[11]

Even though there have been several shifts in policy towards China since 1950, the goals of US policy have been generally consistent. Most of the shifts have been in the means by which to accomplish these goals and the terms on which to base relations. The United States’ policy objectives towards China can be broken into 3 areas – political, military and economic. Politically the United States have always wanted to see a democratic, open government in China. Militarily, they have wanted a peaceful relationship and a military in China that does not rival or attempt to rival the United States military. Economically, the US has wanted a market based economy in China and its inclusion in the rules-based world economic system. Bush has brought one more objectives to the fore, “China as a global partner, able and willing to match its growing capabilities to its international responsibilities.”[12] From 1950 to 1970, the means to attain these objectives was primarily military containment, with proxy wars being fought between the two on the Korean Peninsula and in Vietnam, and very low level diplomatic engagement. Nixon’s visit to China shifted the focus to cultural exchange and limited trade as a means, with the belief that reform would come by exposing China to American society and values. This policy achieved mixed success – trade relations were established and grown with China and diplomatic relations generally improved, however the Tiananmen incident highlighted that political reform was still very slow. Military relations were occasionally strained, Taiwan being a constant issue, but peace was maintained. This policy may have significant long-term benefits as most of the “future crop of senior leaders (known as the “fifth generation”) were educated in the United States, and thus possess a sophisticated understanding of how [the US operates] in the world.”[13] Bush initially appeared to signal a return to the military containment idea, but after 9/11, in order to obtain China’s support for US initiatives, constant diplomatic engagement, including an unprecedented number of high level visits (the two leaders of the countries had met 5 times by November 2003[14]), became the means to achieve this objective. With China’s entry into the World Trade Organisation (WTO) at the end of 2001 and the normalisation of US trade relations with China at the beginning of 2002[15], trade became the other primary means of obtaining their objectives. As President Bush stated:

“WTO membership, for example, will require China to strengthen the rule of law and introduce certain civil reforms, such as the publication of rules. In the long run, an open, rules-based Chinese economy will be an important underpinning for Chinese democratic reforms.”[16]

Militarily, Bush’s policies have achieved few breakthroughs. The Taiwan question remains unresolved and old-fashioned military beliefs still endure on both sides – the US Nuclear Posture Review report of 2002 listed China as one of seven possible targets for nuclear attack, most likely in a conflict over Taiwan[17], and a Chinese general recently suggested that “China would engage in a nuclear war with America if it intervenes to defend Taiwan.”[18] The build-up of China’s military, although in line with economic growth, has also raised some concern in the US, the annual Pentagon report on ‘The Military Power of the People’s Republic of China’ painted “a picture of a country whose military build-up appears worryingly at odds with its stated peaceful intentions.”[19] Either very naively or very optimistically, Donald Rumsfeld believes that “no nation threatens China”[20] and there is therefore no need for China to increase its forces. In terms of its policy objectives, America wants China to choose a path of “peaceful integration and benign competition”, rather than one of exerting “dominant influence in an expanding sphere.”[21] The expansion of its military indicates China is starting on the latter path, but its true future path will be determined by its performance in the political and economic spheres.

Politically, China has developed enormously in its external relations and roles. It is the host and key player of the six-party talks on North Korea, held with limited success since 2003[22]. Identified as part of the “axis of evil” by President Bush in 2002[23], the issue of how to deal with “one of the world’s biggest security problems”[24] has been a fundamental part of US foreign policy. The involvement of China in negotiations has allowed the US to focus on other issues (Iraq) and with China’s long history with North Korea, is more likely to achieve a favourable result. China’s role in these talks has gone a long way to improving Sino-American relations and furthering Bush’s objective of China meeting its global responsibilities. China has also been actively building its relations with other countries in the region and internationally – agreements have been made with the Association of South East Nations (ASEAN), which may result in one of the world’s largest free-trade agreements[25]; relations have been built in Latin America[26], Africa and other countries. China’s growing international role has also supported some American interests, for example in the “Asia Pacific Partnership on Clean Development and Climate” [27], an alternative to the Kyoto Protocol which America does not support. The external politics of China have therefore dramatically improved during Bush’s term, in some ways arguably outstripping America, in that China has tended towards multilateralism and cooperation, and the US towards unilateralism and pre-emption.[28]

Internal politics in China have evolved far less. China’s government is still undemocratic and very authoritarian and China’s human rights record remains poor[29]. There have been some limited reforms and the government is far more open, but there is still a long way to go. However, there is unlikely to be a rapid change in China’s political structures and therefore any small change in the right direction can be viewed as a success for US policy. Bush’s policies of engagement and the building of political and economic relations do hold a lot of promise that reform will continue in the right direction.

It is in the economic sphere that Bush’s policies have been most the successful, perhaps too successful. Although China had implemented some market reforms in the 1980’s, only once it had joined the WTO in 2001, did its economy take a big leap forward. China’s GDP growth rate has been over 8% for the last three years[30], US exports to China have grown 80% since they joined the WTO and China is now the world’s third-largest trader[31]. China is also the second largest economy in the world (measured on a purchasing power parity basis) [32] and the largest foreign investment destination[33]. The National Intelligence Council (NIC) predicts that China “will be among the economic heavyweights” by 2020[34]. This rapid growth has forced China to make several reforms, steadily bringing them closer to a fully market-based economy. The inclusion into the WTO and its developing trade relations with other countries have been a key components of integrating China into the international rules based economy. China’s growth also holds promise for political change, a larger middle-class and wealthier population will begin to demand greater rights and freedoms. Greater trade and integration with other countries will lead to the exchanging of ideas and a more open and tolerant society. Militarily, as trade increases, China will have more to lose by acts of aggression. Already war over Taiwan is becoming less likely – with the level of trade between China and America, and the level of Chinese investments in America, China (not to mention America) would have a lot to lose if relations were broken off. From this point of view, America’s policies have been resoundingly successful in achieving its objectives for China. Unfortunately this success has brought a whole new range of problems and issues.

China newfound economic wealth has allowed it to spend more on its military, creating the concerns in the US, mentioned earlier, over what it intends using its military for. Minxin Pei argues that China’s economic growth is increasing the risk of political crisis, as China’s infrastructure and government are increasingly strained[35]. But it is in the economic sphere that the Chinese have created the most headaches in America. China has, until recently, had its currency (the renminbi) pegged at an artificially low rate to the US dollar. This has altered the terms of trade between America and China, making Chinese imports cheaper. This has created increasing levels of protest in America, with accusations of the Chinese not competing fairly, of stealing American jobs and of flooding the market with cheap Chinese goods. The trade deficit with China has increased to $100 billion[36] with the uneven terms of trade. Under mounting pressure from the US and threats of punitive tariffs[37], in July 2005 China revalued its currency by 2.1% and switched its peg to the Dollar to a “managed float” against a basket of currencies[38]. Although it is a step in the right direction and may delay US action, this new exchange rate policy is unlikely to improve the situation. In order to maintain the artificially low exchange rate, China has been buying up both US treasury bonds and agency debt, now holding nearly $300 billion in total[39]. This increased demand for US debt has driven yields down, allowing America to maintain low interest rates as well as a large current account deficit. China and other countries have essentially been funding a wild American spending spree. The dangers to the world economy of this artificial and unsustainable relationship have prompted warnings from both the International Monetary Fund and the World Bank[40].

China’s economic success has also introduced a new threat to America. Rather than a military rival, it now faces an economic rival. China has been buying support from countries around the world, in particular it is leveraging “its economic influence with countries of the Asia-Pacific region and beyond to generate support for [China’s] stand on Taiwan.”[41] One wonders how the United States would react if China seriously flexed its economic muscle on an issue contrary to US interests. Already resentment of Chinese economic influence is growing in America – China recently withdrew from a bid for the US oil company Unocal due to a hostile political reaction in America[42]. Clashes will only increase as China spreads its economic influence.

Relations between the United States have evolved rapidly during Bush’s presidency. The focus has shifted from political and military objectives to economic objectives. The policies have been outstandingly successful, China is more integrated and more active in the global arena and its economic success is the talk of the town. But in creating a “confident and prosperous”[43] China, Bush may have created the one thing he did not want at the beginning of his presidency – a rival to the United States. China may soon challenge America’s hegemony and power, not militarily, but economically.

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[1] “Background Note: China”, US Department of State, Bureau of East Asian and Pacific Affairs, http://www.state.gov/r/pa/ei/bgn/18902.htm, March 2005

[2] Ibid

[3] Ibid

[4] Talbott, S, “Democracy and the National Interest” in G. John Ikenberry, American Foreign Policy, Theoretical Essays, Longman, New York, 1999, pg 306

[5] Van Ness, P, “China’s Response to the Bush Doctrine” in World Policy Journal, Winter 2004/05, pg 38

[6] Ibid, pg 40

[7] Kelly, J, “The Future of U.S.-China Relations”, http://www.state.gov/p/eap/rls/rm/2001/2697.htm, 1 May 2001

[8] Ji, Y, “China’s Post 9/11 Terrorism Strategy” in China Brief, vol. 4, no. 8, Jamestown Foundation, 15 April 2004

[9] op. cit. “Background Note: China”

[10] Lam, W, “China’s Reaction To America’s Iraq Imbroglio’” in China Brief, vol. 4, no. 8, Jamestown Foundation, 15 April 2004

[11] Kelly, J, “U.S.-China Relations”, http://www.state.gov/p/eap/rls/rm/2003/24004.htm, 11 September 2003

[12] Revere, EJR, “The Bush Administration’s Second-Term Foreign Policy Toward East Asia”, http://www.state.gov/p/eap/rls/rm/2005/46420.htm, 17 May 2005

[13] Barnett, TPM, The Pentagon’s New Map, Putnam, New York, 2004. pg 381

[14] Larson, AP, “China’s Role in the World Economic System”, http://www.state.gov/e/rls/rm/2003/27026.htm, 5 November 2003

[15] “President Grants Permanent Trade Status to China”, http://www.whitehouse.gov/news/releases/2001/12/20011227-2.html, 27 December 2001

[16] Bush, GW, “President Welcomes China, Taiwan into WTO”, http://www.whitehouse.gov/news/releases/2001/11/20011111-1.html, 11 November 2001

[17] Van Ness, P, op cit., pg 40

[18] “Sizing up the dragon”, The Economist, http://www.economist.com/displayStory.cfm?story_id=4198701, 21 July 2005

[19] Ibid

[20] “Secretary Rumsfeld’s Remarks to the International Institute for Strategic Studies”, http://www.defenselink.mil/transcripts/2005/tr20050604-secdef3002.html, 4 June 2005

[21] The Military Power of the People’s Republic of China 2005, Office of the Secretary of Defense, Washington DC, 2005, pg 7

[22] “Now what?”, The Economist, http://www.economist.com/world/asia/displayStory.cfm?story_id=4277390, 11August 2005

[23] Bush, GW, “President Delivers State of the Union Address”, http://www.whitehouse.gov/news/releases/2002/01/20020129-11.html, 29 January 2002

[24] Revere, EJR, op cit.

[25] “China in landmark Asean pact”, BBC News, http://news.bbc.co.uk/1/hi/world/asia-pacific/4051653.stm, 29 November 2004

[26] Noriega, RF, “China’s Influence in the Western Hemisphere”, http://www.state.gov/p/wha/rls/rm/2005/q2/44375.htm, 6 April 2005

[27] “An alternative to Kyoto”, The Economist, 30 July 2005, pg 51

[28] Van Ness, P, op cit., pg 42

[29] “China - Country Reports on Human Rights Practices 2004”, http://www.state.gov/g/drl/rls/hrrpt/2004/41640.htm, 28 February 2005

[30] Rajan, R, “Global Current Account Imbalances: Hard Landing or Soft Landing”, http://www.imf.org/external/np/speeches/2005/031505.htm, 15 March 2005

[31] Hill, CR, “Emergence of China in the Asia-Pacific: Economic and Security Consequences for the U.S.”, http://www.state.gov/p/eap/rls/rm/2005/47334.htm, 7 June 2005

[32] The World Factbook 2004, Central Intelligence Agency, Washington, 2004

[33] Larson, AP, op cit.

[34] “The Contradictions of Globalization”, Report of the National Intelligence Council’s 2020 Project, http://www.cia.gov/nic/NIC_globaltrend2020_s1.html, 15 January 2005

[35] “Dangerous Denials”, Foreign Policy, Special Report, January/ February 2005, pg 56

[36] “From T-shirts to T-bonds”, The Economist, 30 July 2005, pg 65

[37] “US urged to be patient over China”, BBC News, http://news.bbc.co.uk/1/hi/business/4617919.stm, 24 June 2005

[38] “How China runs the world economy”, The Economist, 30 July 2005, pg 13

[39] Adler, L, “China holdings of GSE debt drives US policy”, Reuters, http://today.reuters.com/investing/FinanceArticle.aspx?type=bondsNews&storyID=2005-08-12T173431Z_01_N12640632_RTRIDST_0_FINANCIAL-AGENCIES-CHINA.XML, 12 August 2005

[40] “You need us and we need you”, The Economist, http://www.economist.com/agenda/displayStory.cfm?story_id=3834261, 6 April 2005

[41] Hill, CR, op cit.

[42] “Bogus fears send the Chinese packing”, The Economist, http://www.economist.com/agenda/displayStory.cfm?story_id=4244565, 2 August 2005

[43] Revere, EJR, op cit.