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Monday, January 24, 2011

THE CHINA SYNDROME

The 1979 movie of the same title referred to the scientifically challenged case in which a "meltdown" at an American nuclear power plant would cause super hot nuclear material to melt its way through the entire earth and pop out the other side, presumably somewhere in China. If one chooses to engage in such metaphors, today they would more appropriately be labeled the "America syndrome" since development of nuclear energy in the U.S. has been on hold for generations while China has 27 nuclear power plants in the planning/construction stages. But the larger point is that the Chinese nuclear program is demonstrative of the remarkable industrial and economic changes in China largely coming since the major shift in ideological direction instituted by Deng Xiaoping in the late 1970s.

These changes and the developmental progress that have resulted were highlighted by the recent visit of Chinese President Hu Jintao . Much "analysis" of the state of U.S./Chinese relations and the proper direction of that relationship for the future has been dominating the media as a result. The commentary has ranged from common sense to exaggerated, ideological and impractical. A few facts to establish context are always valuable.

1. Trade:
The leading point of contention in U.S./Chinese relations currently is economic in nature. China is America's second largest trading partner (after Canada). Total bilateral trade was $$415.9 billion in 2010. The problem is the U.S. trade deficit which is enormous ($252.38 billion in 2010) and growing and which American government officials blame on China's unwillingness to let the value of their currency "float" according to market forces. By holding the value artificially low as a matter of government policy, the Chinese ensure that their exports will be artificially cheap, making the costs of similar domestically produced goods in importing countries like the U.S., relatively expensive and thus non-competitive. The sheer volume of Chinese products entering the U.S. has resulted in the Chinese holding over 800 billion U.S. dollars which they then invest back in the U.S., mostly in U.S. government securities. China has also created other barriers to free trade such as domestic government subsidies to Chinese manufacturers, restrictions on government purchases to Chinese products, and restrictive licensing and bureaucratic red tape to discourage imports.

Some progress in dealing with these issues was announced by President Obama and President HU during Hu's visit. A major sale of civilian aircraft by U.S. based Boeing Corp., which had been in negotiations for several years, and some concessions regarding Chinese government purchases were accomplished. However, the undervaluation of the Chinese currency remains the major issue and the trade relationship of the world's two largest economies clearly should be the focus for the future.

2. National security and the dramatic increase in Chinese military budgets and capabilities:

The Chinese military is engaged in a modernization program in all of its services. A new stealth fighter was recently tested, a new anti-ship ballistic missile has been reported and a continuing effort to expand Chinese sea power has extended the reach of the Chinese military into the early stages of a global player. The level of threat to U.S. security interests this portends is however still not clear. Some analysts see it as a direct threat that requires both a continued technological and a strategic policy response. However, Chinese efforts to exercise influence backed by implied military threats due to increased capabilities have been both limited and regional, mostly specifically focused on disputes with Japan, the Philippines and Viet Nam over small islands with potential energy based economic benefits, but no inherent geographical importance. China's military expansion and modernization cannot be ignored but the prospects for direct confrontation with the U.S. are remote in the light of the economic relationship mentioned above.

3. Human rights:
Much was made over this issue during President Hu's visit. He was lectured by Speaker of the House Boehner, President Obama, members of Congress and the press. This is pro forma in almost any high level government contact with Chinese officials. The reality is that China is not a democracy and Chinese officials have a long history of intransigence when pressed on this issue which they consider an interference in domestic affairs; an issue of national sovereignty. Most experienced American officials realize the lack of influence they will have but feel it necessary to play to the international human rights community. Media critics found fault with the 2009 Nobel Peace Prize recipient (Obama) entertaining the president of a country which currently holds the latest Nobel Peace Prize winner Liu Xiaobo, in prison. While Liu is to be admired for his courage in taking a public stand for political reform and human rights in China, his resume' is a bit thin (he wrote a book entitled "Charter '08 with this theme) for the Nobel Peace Prize and he appears to have been the recipient more for his suffering, an eleven year prison sentence handed down in 2009, than for his achievements. This is compatible however with the diminished standards used in the 2009 award. Obama had no visible achievements in the area of "peace" and his suffering was not to begin until the mid-term congressional elections of 2010. The larger point is that China is important and a cooperative relationship with the U.S. is essential. There is no denying that the Chinese government uses harsh methods to repress individual liberty but that does not diminish in any way the necessity for the building of a constructive relationship with the U.S. as we have with other quasi- democratic or authoritarian nations i.e. Pakistan, Saudi Arabia, and Russia. Chinese leaders have concentrated on economic development and have deferred political liberalization in the face of daunting problems; a population of 1.33 billion which includes thirteen major ethnic groups, many of whom speak different languages and several hundred million rural poor. As President Hu stated, "China is a developing country." The political leadership has observed the difficult transition to democracy in Russia, the failed efforts at premature democracy in Iraq and Afghanistan and the long history of political chaos in post-colonial Africa.  All these areas had no democratic tradition or cultural foundation for such. Thus those Chinese leaders inclined towards political liberaliztion have concluded that economic development, infrastructure and literacy should come first.

4. International cooperation:
China is on the cusp of super power status. It is the third largest country in the world; it now has the world's second largest economy and with its huge population might well become the largest in just a few decades. China is also a nuclear weapons state and holds a permanent seat on the UN Security Council. Chinese foreign policy intersects with U.S. foreign policy in several important areas and their future cooperation in these areas is vital.

China is the nation with the most leverage on North Korea an erratic regime prone to crisis making on the Korean peninsula and engaged in world wide conventional, and possibly nuclear, weapons proliferation. China has a financial/energy commercial relationship with Iran and has so far blocked the passage of strong economic sanctions in the UN Security Council on that country to pressure them to give up their own nuclear weapons ambition.

Thus the relationship with China may well be the most important for the U.S. for the foreseeable future. It will take skilled diplomacy and acceptance of real world conditions to manage this relationship. The visit by President Hu, despite all it's pomp and ceremony was a necessary part of the process.
 

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