My friend Professor Steve Hanke warns in his article of the Cato Institute that the schizophrenic monetary polices of the Fed - "When it comes to the big elephant in the room — bank money — she (Yellen) is very tight. But, when it comes to state money, she is loose" - causes huge hot money flows to emerging economies and greatly destabilizes the world's monetary system.
His analysis serves to underpin the fact that the United States continues to use its ""exorbitant privilege" as the world's unchallenged arbiter of fiat money, treating the world's monetary system as a greenback-centric "closed" universe, thereby acting as a global destabilizer.
Professor Hanke refers to Prof. Ronald McKinnon's argument in "The Unloved Dollar Standard: From Bretton Woods to the Rise of China"- (Oxford University Press, 2012) that "China has been a major stabilizing force. China has injected stability into the international sphere by smartly, and ironically, linking the Chinese yuan (more or less tightly) to the U.S. dollar since 1995".
To maintain global stability, Professor Hanke suggests that the greenback should now form a closer union with the Euro, trading with each other in a narrow range and committing to defend each other, while the Asian dollar block should strengthen its ties to the greenback. Other emerging economies could choose either to tie to the greenback or the euro. Professor Hanke's formula is designed to avert the disruptive effects of a global "currency war"".
While such a formula has many merits to commend itself, it ignores certain new, game-changing, global realities.
First, the Chinese yuan (the RMB) has eclipsed the greenback as the world's ipso facto "reference currency", according to Professor Subramanian of the Petesen Institute for International Economics ("Eclipse - Living in the Shadow of China's Economic Dominance, September 2011). Click here This is supported by the fact that China has already displaced the US as the largest trading nation. There are now 126 countries which have China as the largest trading partner, compared to only 76 in the case of the United States. Admittedly the vast majority of world trade is still being conducted using the greenback. But the RMB is gaining traction as an international currency. It has already displaced the euro as the world's most used trading currency. This momentum is being driven by China promoting RMB internationalization through currency swaps and issue of more RMB-denominated investment products. All indications point to the RMB becoming a fully-convertible currency within about five to ten years. Click here The days of an Asian dollar block are therefore numbered.
Second, likewise, the European Union has displaced the United States as China's largest trading partner. There is no reason why the EU should choose to defend the greenback unless it coincides with her main economic interests. This is not to mention the growing divergence in views between the EU and the US about their respective roles in a changing world.
What should help in stabilizing the world's economic and monetary systems is for the United States to re-balance its economy towards more savings and less consumption while China is actively doing the opposite. That way, the United States could export more to China while retaining more savings to re-build its crumbling infrastructure. Additionally, the United States must also re-sharpen its economic competitiveness through improving the educational level of its workforce.
Moreover, as the two countries are at very stages of advancement, America can no longer afford to compete at the lower levels of products that a country like China still manages to do best. America, however, is miles ahead of China in high technological and scientific innovations, which are being wooed by China with open arms. What stands in the way is continued suspicions of a Rising China, which translate into many US restrictions on high-tech exports to the Middle Kingdom.
If America can sell more to China (as in the case of Germany) as China consumes more , this could help reduce the need to rely on America's "exorbitant privilege", which in any case is destabilizing to the world's economic and monetary systems as it is past its sell-by date as a panacea for America's fortunes.
“How China Is Ruled - Why It's Getting Harder for Beijing to Govern” is the subject of an adaptation in Foreign Affairs (January/February, 2014) by Professor David M Lampton from his book “Following the Leader: Ruling China, From Deng Xiaoping to Xi Jinping”, University of California Press, 2014. Professor Lampton is George and Sadie Hyman Professor of China Studies and Director of SAIS-China at the Johns Hopkins School of Advanced International Studies. Click here
Professor Lampton highlights a sea-change in how China is governed with better-educated and more open civil society, people power with a plurality of views and interests, and the imperative of responding to, rather than suppressing, people’s expectations except the most destabilizing of forces.
This periodic sea-change was also heralded by an earlier report of the European Council for Foreign Relations (ECFR) (Mark Leonard, ed., November, 2012), epitomized by the following observations –
"China is trapped in its own success and needs to enter into a new era. After Mao’s political revolution (‘China 1.0’) and Deng Xiaoping’s economic revolution (‘China 2.0’), they are (the country is) expecting a ‘China 3.0’”. I have looked into what a China 3.0 would mean in “In face of multiple crises, China 3.0 needs to stay ahead with the times” Click here
Lampton's analysis is spot on with the key driver of change – the need to regain legitimacy in face of civil and economic plurality. The Communist Party of China (CPC) has been continually re-inventing itself to stay ahead.
To appreciate how the CPC works and how it hones its leadership, please visit "How China's leadership is tempered" here
Nevertheless, despite continual evolution, there is no sign that the CPC may contemplate eventual embrace of Western competitive multi-party democracy. The CPC does not believe that the Western model is suited to China, nor for that matter, it has always been effective in the West. Examples of government dysfunction caused by fractious party politics come to mind. Neither does Professor Lampton suggest that Western democracy is a pre-condition for preventing regime collapse
In fact, whether Western multi-party rule is necessary for China’s long-term sustainability was the subject of an earlier heated debate between Will Hutton and Martin Jacques over the latter’s controversial book “When China Rules the World”. Hutton argued that China would never be able to rule the world and would in fact eventually unravel if the country continued to resist Western democracy. On the other hand, while admitting China needs to become more liberal and enlightened, Jacques did not agree that the Western model is the only formula for China’s continuing survival, if not dominance. Click here
The Hutton/Jacques debate seems a little convoluted and confused by terminology at times. The real differences in opinions seem to boil down to the following questions –
(a) Would China eventually become at least one of the world’s dominant countries?
(b) Would a One-Party system be sustainable, and if so, how?
As for (a), I have provided an analysis In “Will China dominate the 21st century?” here
As for (b), perhaps it may be helpful to first answer the question whether "Western liberal democracy would be wrong for China". This very question took the form of a motion debate in London on 9 November 2012 sponsored by Intelligence Squared, a premier forum for debate and intelligent discussion. In the context of this question, the pros and cons of (b) are addressed at some length in my piece “China may not need to abandon one-party rule any time soon?”here
Coming back to Professor Lampton’s article in Foreign Affairs, governing a country the size of a continent with a population numbering a fifth of mankind has never been easy. Under Mao, it was the huge challenge of feeding so many mouths in face of unfriendly and vastly superior superpowers. Under Deng, it was the herculean task of unleashing the productivity of a behemoth steeped in abject poverty and bureaucracy. Under Xi, it is the harnessing a rising tide of civil and economic aspirations to achieve China’s Renaissance amidst growing global uneasiness with China’s ascendance.
How China rises to her destiny and how the world responds to China will not be just a matter for China and her people, but as Napoleon once said, “When China wakes, she will shake the world.”
With the rapid rise of a vast country as China, the international order is being shaken. "Will China dominate the 21st Century?" (*) is becoming a favourite debate amongst academics and researchers, as highlighted in a China Daily article of 19 January, 2014. Will Pax Americana give way to Pax Sinica?.
For a start, it may be argued that the world "dominate" seems to have lost significance as the world has become much more diffused, inter-dependent and multi-polar with many more state and non-state actors, as highlighted in recent National Intelligence Council reports. Click here Moreover, the time horizon to the end of the 21st century is too long to make any finite prediction. Many game-changers could happen during such a long time span. Nevertheless, there is reasonable ground to believe that at least by 2050, China is bound to exert a much greater influence in the world compared with the preceding Century largely dominated by the West.
First,China has just surpassed the United States as the world's largest trading nation. According to estimations in July 2008 (based on data from Goldman Sachs), by 2050 China's GDP is likely to become 70-80 % larger than that of the US. According to "China 2030: Building a Modern, Harmonious and Creative Society", a joint report by the World Bank and the Development Research Centre of China's State Council (under ""Global Megatrends", pp.6-7), "even if China's growth rate slows as projected, it would still replace the United States as the largest economy by 2030 ........ Some have argued that by 2030, China’s influence in the global economy could approach that of the United Kingdom in 1870 or the United States in 1945 (Subramanian 2011)". This is essentially a matter of arithmetic. China's population is four times the U.S. So provided China's average productivity exceeds a quarter of the U.S, its economy would be larger than the United States (China Choice, Hugh White, Black Inc, Australia, 2012, "The power of numbers" pp. 28-31).
Second, with a rapidly expanding consumer market, China is likely to remain the world's largest trading and logistical hub, supported by the location on her eastern seaboard of six of the world's busiest container ports with adjacent modern airports linked to the four corners of the globe. These regional transport links will be further enhanced by China's trans-continental rail system (much to be turned into high-speed networks) which connects China’s eastern seaboard across the country to Central Asia, then onwards to Western Europe’s ports such as Rotterdam. These massive rail links are known as Eurasian Land Bridges, the latest to pass through Turkey, some to branch out to the Mekong region and some to North Africa. Added to these is a project for a new and much wider and deeper canal cutting through Nicanagra, expected to be managed by a Chinese firm recently granted a 50-year concession by Nicanagra’s Parliament. This will be capable of accommodating the very large container ships calling at the world's deepest container port, Lianyuangang outside Shanghai. These vessels are simply too large for the Panama Canal, even after its current widening project.
Third, China is likely to step up to the plate of becoming at least one of the world's leading innovators. The World Intellectual Property Organization Report 2012 confirmed, for the first time, China as the world's leading filer of patents, trade marks and industrial designs. Click here The Royal Society in 2013 thought that China's peer-reviewed scientific papers were likely to top the United States in scientific citations in a year or so. The Wall Street Journal of 16 January 2014 featured a report showing how the country has embarked on a "New Era for China's Technology Industry". The drive for innovation will be supported by the dramatic output of university graduates. By 2020, China is expected to have 195 million graduates, more than the entire workforce of the United States at present. It would also benefit from the reform of China’s One Child Policy introduced at the Party’s latest Third Plenum.
Fourth, China is “Going Out” to the rest of the world, with leading footprints in Africa, Latin America, Central Asia, and many other places across the globe through outward investments, mergers and acquisitions, and various other business ventures. This global outreach will be supported by a proposed BRICS development bank, where China's financial muscle is likely to bolster the global influence of the Middle Kingdom. .
Fifth,the RMB is fast becoming fully convertible. It has already eclipsed the US dollar as an ipso facto “reference currency”. More currencies now move in tandem with the RMB than with the dollar, according to Arvind Subramanian of the Petersen Institute for International Economics. Click here Backed by a massive foreign currency reserve, the Chinese yuan is likely to become at least one of the major international reserve currencies. Click here
Sixth, concomitant with a vast economy, China is rapidly modernizing and building up its military, if only to safeguard her vulnerable trading and resource importing sea lanes, including the geopolitically-sensitive East and South China Seas. The country is expected to make up a fleet of five aircraft carrier battle groups by 2050, when China may outspend the United States in military expenditure. See a report in The Economist(The Dragon’s New Teeth, 7 April, 2012).
The Economist (20 November 2013) produces an interactive chart that allows different assumptions for either country on real GDP growth, inflation, and in the case of China, yuan appreciation, whereby the graphs of the two countries's trajectory will be automatically shifted to arrive at a different intersecting point to predict the year when China's economy is expected to overtake the United States. Even using fairly pessimistic assumptions for China (real GDP growth 4%, inflation 3% and yuan appreciation 2%) and quite rosy assumptions for the United States (real GDP growth 3.5% and inflation 1.5%), the predicted date would be 2028. It seems that in all probability, China's economy is reasonably set to overtake the United States by 2030 or thereabouts, at the latest.
However, even if China rises as predicted, given the country’s endowment with more people than resources, especially fresh water, China is likely to struggle in lifting her vast population, a fifth of mankind, to income levels approaching those in advanced countries. By 2050 and further beyond, despite being the world's largest economy, China’s GDP per capita is likely to remain a fraction of that of the United States. Additonally, even as China becomes more innovative, it is questionable whether the country would be able to leapfrog over advanced countries in the number of Nobel laureates in sciences. Moreover, unless the country changes its political spots, most peoples in the world are unlikely to embrace China's political and value systems. It is highly probable, therefore, that the world’s commanding heights in transsformational and cutting-edge technologies, the forefront of innovation, global brands and leading thoughts would remain largely in Western domains, provided that the West will not stay stagnant.
Above all, despite rapid modernization, China’s military technology, outreach, global presence and rapid readiness are still decades behind those of the United States, which, meanwhile, are expected to continue to stay ahead of the times. The overall gap is so wide in many important spheres that by 2050, while China should be able to narrow the gap substantially, the country is unlikely to overtake the United States in comprehensive, global military strength.
So even under the best scenario, China is unlikely to "dominate” the 21st Century. However, provided the country is able to maintain dynamism in face of acute social, economic, ecological and geopolitical constraints, which is by no means a foregone conclusion, by 2050 China is likley to become a leading world power in a class of her own with a much greater influence in the world at least approaching, if not surpassing that of the United States.
What this really means is that instead of one single superpower calling the shots, China is likely to gain enough global gravitas to be able to share influence with the United States on "equal terms" (**), standing head and shoulder above other peers, such as the European Union (as a block) and the so-called EAGLES (Emerging and Growth Leading Economies) including India, Brazil, Russia and Indonesia, with whom both the United States and China have to work together in a diffused, multi-polar world.
With a fast-changing China, questions are regularly being asked about what appeared to be growing tension between President Xi and “”hard-line Communists”. Click here Or between the Chinese Communist Party and the PLA. Click here Are these tensions real? And are they overstated or understated? Does rising Chinese power raise the likelihood of Chinese military action or lower it?
These are great questions. They serve to illustrate how much some Western observers still view China's Communist Party in terms of Mao and Tiananmen Square.
Even as the Party’s name remains unchanged, decades of water has passed under the bridge. If Maoist ideological struggles had persisted and if the PLA should continue to dictate to the Party, the country would have long unraveled, let alone delivering spectacular growth all these years with a much more open and law-based society.
Successive independent PEW public opinion surveys show that despite warts and all, the vast majority of the Chinese people remain largely satisfied with the direction the country has been taking. While there is rising discontent with inequality, corruption and pollution, there is hardly any widely-based support for regime change. Click here
The Party's legitimacy no longer rests on the barrels of a gun, nor just its ability to deliver economic growth. China has been churning out some 7 million university graduates a year. By 2020, China will have 195 million graduates, more than America's current workforce. The old-styled Communist rule by control and repression no longer works. Social harmony, quality of life, justice and equality are now as essential to political survival as economic growth, if not more so.
It is necessary to appreciate how the Communist Party works. It is no longer enough to rely only on political patronage without a credible track record through the bottom ranks. Indeed, at the highest level, no Chinese leader is parachuted from the top without a life-long trial. Unlike political winners in Western democracies, China's top leaders now are well-tried and highly capable administrators, the product of a fiercely competitive meritocratic system. Moreover, after President Jiang Zemin, a smoother system of leadership transition has been put in place. Regardless of merit or political clout, no one can become a member of the top leadership (the Politburo's Standing Committee) if at the time of entry, he or she reaches 68 years of age.
President Xi himself is a highly-connected ""princeling", but that is hardly a sufficient qualification. Don't forget that his predecessor Hu Jiantao, and previous Premier Wen Jiabao had humble beginnings. So has the new Premier Li Keqiang. Like his competitors, Xi had to prove his worth through the ranks. The Party has recently launched a campaign, involving diplomats abroad, to explain how a Chinese leader like Xi has been "tempered"". The following may serve as a taster. Click here
Yes, there are "factions" or "networks" of different career paths and policy leanings. But nearly all have tasted the bitter fruit of the Communist Party's painful past. While within the Party and its think-tanks, there is sometimes heated debate about how to address the threat of social division and corruption, there is no mileage in turning the clock back to ideological or political struggles. Perhaps (jokingly) not unlike the white smoke from the Sistine Chapel, the final selection of a Chinese top leader is derived from years of meritocratic assessments winning the support of a synod of cardinals who themselves have risen from the ranks.
However, after decades of breakneck economic growth, cracks are appearing in the Party edifice. Former Premier Wen famously said that China's development has become "unstable, unbalanced, uncoordinated and unsustainable" (March, 2007). The people are increasingly restless with pollution, consumer safety, inequality and corruption. Click here Energy-and-labor intensive growth is coming to a dead end. That's why after heated internal debates and taking expert advice, not least from the World Bank, Xi has launched a huge package of unprecedented reforms at the Party's latest Third Plenum. It is hoped that these may transform the nation closer to a China Dream of a higher-income nation by 2030. Click here
Indeed, social discontent is posing an existential threat to the Party's and the nation's very survival. Both Xi and his outgoing predecessor did not mince words in sounding this dire warning. It is reported that Alexis de Tocqueville's "The Ancien Regime and the (French) Revolution" (first published 1856) had done the rounds amongst China's top leaders. This has inspired a nostalgic call to Mao's early revolutionary ideal where the Party was clean and truly worked for the people. In enlightened intellectual debate within the party, the original Paris Commune is considered a form of local democracy and Mao’s revolutionary “mass line” as embracing the will of the “grass roots” against social injustice.This is very much part of Xi's Dream of a stronger, prosperous, equitable and sustainable China. Click here So, talking about political rift with hardliners within the Party seems to lose the wood for the trees.
However, the China Dream also encompass a militarily stronger China, able to defend her national interests, of which territorial integrity, a historical baggage, and energy security, a present-day threat, remain paramount. This also responds to the country's rising pride and nationalism. As China's economic power and global outreach grow, it is only natural for China to double up her military modernization to safeguard very long borders and critical maritime interests, complicated by disputed islands, huge reserves of natural resources, and America’s Pivot to Asia..
There is also China's grand prize - Taiwan. Nevertheless, the island is becoming more and more integrated with Mainland China economically, socially and culturally. Zbigniew Brzezinski, a doyen of American foreign policy, outlines how America should try to accommodate China's growing regional clout, including the Taiwan question, in order to balance a ""Complex East"". (Strategic Vision, America and the Crisis of Global Power, Basic Books, New York, 2012) Click here
The upshot is that China needs a peaceful and harmonious domestic and global environment to build a prosperous, equitable and sustainable nation by 2030. Unless China is first fired upon, fighting a war of uncertain escalations would risk dashing the China Dream completely. Moreover, time is on China's side.
Nevertheless, the China Dream entails what President Xi refers to as new "Great Power" relations with the United States, as was the theme of Xi's initial tete a tete with Obama at Sunnylands. Click here These aim to avoid history repeating itself that great power transitions inevitably ended up in wars.
However, poked by increasingly confrontational tactics of Japan shielded by an American defense treaty, Xi opted to start from a position of strength by announcing her own Air Defense Identification Zone (ADIZ). The curtain has now been raised on how ""Great Power" relations may play out. None of the parties wants a war, but none can afford to back down. The situation needs careful management including cooling-off and crisis management mechanisms, plus top-level hotlines. Click here
"Western liberal democracy would be wrong for China" was a motion debate in London on 9 November 2012 sponsored by Intelligence Squared, a premier forum for debate and intelligent discussion.Click here
The debate was timely. A slowing and increasingly protest-prone China with a dwindling labour pool was at a crossroads pending a new leadership, notwithstanding impressive economic rise within three and a half decades. Nevertheless, according to successive PEW survey findings, despite a plethora of ills, the majority of the Chinese people remain generally satisfied with the way the country is progressing. Few demand regime change. This contrasts with sputtering economies in the West with political gridlock and rising social discontent, liberal democracy notwithstanding.
The debate managed to thrash out most of the issues, that freedom and democracy are universal values, that much of China’s growth is inequitable, and that behind the façade of impressive growth lies a host of ugly repression, corruption, widening inequalities, vested interests, and ecological degradation.
The outcome of the debate was not unexpected, considering how informed the audience really was about the pros and cons of China’s development model. It implied that a one-party system must be universally bad and the sooner it is given up, the better.
However, the following arguments beg to be answered -
(a) Would multi-party liberal democracy have delivered for China at least similar outcomes in terms of economic and social development, lifting as many people out of poverty in as short a time? The example of India may be instructive.
(b) Would elections have succeeded in maintaining national unity for a country as vast and diverse as China? Recent cases of Egypt, Thailand, and yes, even the United States, do not seem to inspire confidence.The Economist (The United States of Ameoba, 7 December, 2013) graphically shows here how America's politics have become morbidly polarised. Elsewhere, there seem to be signs of fatigue, if not failure, of multi-party democracy.
(c) Multi-party or single-party systems all end up in one government. The proof of the system must be its ability to deliver the goods for most of the people. History seems to suggest that a one-party state does not necessarily do worse. If anything, an enlightened one-party system seems to be better equipped to achieve results as it doesn't have to worry about the next election. It is not without reason that Thomas Friedman, influential author and New York Times columnist, laments in his popular book, Hot, Flat and Crowded (Penguin Books, 2009) that America should become "China for a day (but not for two)" (Part V, Chapter 18).
(d) While western liberal democracies reward successful politicians, the current Chinese party system seems to select more able leaders through competitive meritocracy built over an entire career, political infighting notwithstanding. See here how the Communist Party now works.
(e) According to United Nations Human Development Indices, China's model outperformed many democratic developing countries in virtually all indicators including life expectancy, economic well-being, law and order, health, and education, except, by definition, civil and political rights (China Modernizes, Randall Peerenboom, Oxford University Press, 2007). There is no lack of examples to show that, for certain developing countries, democracies have failed where benign authoritarianism has succeeded.
(f) The Intelligence Squared debate seems to be fixated at Tiananmen Square 1989. However, a lot of water has past under the bridge. To maintain stability, the Party must now continually earn the trust and support of the people. Their aspirations are becoming more diverse and liberal with a rapidly rising and better-educated middle-class. This means that the Party has to keep breast with the times to stay relevant. One can see why such bold reforms as unveiled at the Party’s latest Third Plenum are now necessary. Click here If only gradually, such reforms embrace certain norms of human dignity, rule of law, judiciary independence, and civil society. These norms are not the prerogatives of liberal democracy. Provided a one-party state is able to respond to people’s rising aspirations, co-option of liberal norms may enhance its legitimacy without multi-party politics.
(g) China’s ancient dynasties offer plenty of lessons in governance. The “mandate of heaven” was forfeited where a ruler failed to connect with the people, where the dynasty became short-lived. On the other hand, certain dynasties prospered and proved long-lasting, such as the glorious Tang dynasty (618-907 A.D.), when the ruler and the ruled enjoyed long periods of stability, prosperity and national strength. Naturally, we are way past dynastic times. But the analogy of the legitimacy of ability to connect with the people remains valid.
(h) This is not to say that China's model is without faults and serious drawbacks. Previous Premier Wan Jiabao famously said that China's development is ""unstable, unbalanced, un-coordinated and unsustainable" Nor is this to say that China's model is the ideal solution. China refuses to tout her development as any model for anyone, as each country's circumstances are different and each stage of development demands different approaches. Above all, China does not believe in any one-size-fits-all model that suits all countries at all times, including China herself.
I was conscious of the risk of my article being accused of political propaganda. The Western mind can hardly accept that a one-party state has anything positive to commend itself at any time. I hope to raise the possibility, if only for unbiased debate, whether and how an enlightened One-Party state may well suit a stage of development of a vast country like China better than multi-party democracy, at least for now. Indeed, provided the Party continues to change with the times, as it has vowed to do, it begs the questsion whether China may not need to abandon one-party rule any time soon.
My full-length research Paper on "The Ascent of the RMB, the Chinese currency". It consists of 5,730 words, excluding the Abstract, biography and footnotes.
The Abstract reads as follows -
Throughout history, empires from Rome, Spain to Britain have been defined as much by military might as by how their currencies are accepted for international exchange. After the British Empire started to crumble before the Second World War, Pound Sterling gave way to the dollar following the Bretton Woods accords. Even after de-linking from gold, the greenback continues to reign supreme as the world’s premier fiat currency. This Pax Americana is now being challenged by a rising China, whose currency, the renminbi, is increasingly being accepted for international trade settlements and bond issuance. China is the largest trading partner to 126 countries, compared with 76 for America. The yuan’s progress to eventual full convertibility is speeding up. London and other leading financial centres all want to share a larger slice of this expanding cake. This article delves into the changing national and global dynamics of the yuan’s trajectory, outlines recent capital flow liberalization measures, and examines, in the light of reforms in the latest Communist Party Third Plenum, whether and how the RMB could become one of the leading reserve currencies, as well as what this would mean for the world’s economic order and the future of the world reserve currency system.
Tension continues to simmer over China’s newly-declared ADIZ (Air Defence Identification Zone). America has encouraged its civilian aircraft to comply in the interest of passenger safety but refuses to recognize the zone’s validity, stating that American military surveillance flights will continue to operate as normal. Japan has taken the matter to the International Civil Aviation Organization and has vowed to rally the support of the international community to put pressure on China to rescind the zone.
China's neighbours including Korea are getting anxious. The United States, as the status quo guarantor of regional security, is rightfully alarmed. Vice President Joe Biden is to raise US concern and seek clarification during his forthcoming visit to Beijing.
What game is China playing?
First,many countries have such identification zones. The United States was the first to set them up many years ago. Japan's version likewise covers the disputed islands with China. Now China announces her own zone so that she can have a legal basis to be treated equally.
Second, China hopes that her zones will be accepted as a norm as in the case of other countries. If so, they will strengthen China's continuing territorial claims in the region, including the Diaoyu (or Senkaku) Islands under dispute with Japan. They will also boost China's air defenses following America's Asian Pivot military strategy.
Third, none of the three parties involved wants a war. Japan needs to re-jig her economy. Rising nationalism notwithstanding, her people do not relish a repeat of aggressive militarism leading to Japan's inglorious end in the Second World War. American constituencies are more concerned about jobs and the economy. They have grown tired of wars and are unlikely to risk blood and treasure over some rocks in the East China Sea. As for China, the new leadership has just unveiled a massive reform package. Peace rather than war is necessary to deliver the goods.
Fourth,most of China’s neighbours have China as the largest trading partner, providing them with jobs and investment. However, they also rely on the American pivot, re-worded as ""re-balancing", as a military hedge against a rising China. On her part, China feels that this is a trap to embroil her in a regional conflict while she is trying to double her economy to become a middle-income country. So, in a power play, China is likely to prefee a much stronger hand of economic prowess rather than confronting a far superior military adversary.
Fifth,the biggest prize for China is not the tiny Diaoyu/Senkaku islands but Taiwan. Strait-relations are now on a more peaceful course, economically, socially, and financially. While formal unification may well remain a pipe-dream, the prospect of Taiwan coming back to China’s fold in one form or another in the not-so-distant future is becoming less illusive (*). Time is on China’s side. If China is involved in a regional war now, no matter what the outcome would be, this would dash the hope of any peaceful "unification" by another name, perhaps indefinitely, in view of Taiwan’s special relationship with America.
Sixth, according to Trefor Moss, formerly Asia-Pacific Editor at Jane’s Defence Weekly, there are seven reasons why China won't go to war with Japan (**). These are (a) a nightmare possibility for China of an ignominious defeat (b) mutual economic dependence (c) doubts about China’s military readiness (d) unsettled politics in China (e) unknown quantity of U.S. intervention (f) China’s consistent policy of avoiding military confrontation and (g) China’s hard-earned peaceful development image. So Moss suggests that "Abe should be able to push back against China – so long as he doesn’t go too far", and "It is also timely for Japan to push back now, while its military is still a match for China’s. Five or ten years down the line this may no longer be the case, even if Abe finally grows the stagnant defense budget".
Seventh, notwithstanding many valid constraints on China's military option, there is the burning issue of mounting nationalism of the Chinese people, especially against an old foe who is popularly perceived as not showing any genuine atonement for atrocious war crimes in China. Coupled with China's centuries of national humiliation at the hands of foreign aggressors, this is an overwhelming historical baggage no Chinese leaders could afford to treat with less than the full might of the nation if things are pushed too far, Japan's US defense treaty notwithstanding. This is buttressed by China’s vastly modernised military, including a full range of “anti-access/area denial” (A2/AD), cyber and other asymmetric warfare capabilities as well as survivable long-range nuclear missile and submarine deterrence. It is no surprise that China decides to demonstrate her resolve on territorial integrity by dispatching her newly-fitted aircraft carrier battle-group to a military exercise in the South China Sea.
Eighth, neither China nor Japan with the U.S. can afford to appear weak to their respective political constituents. Hence, a game of chicken is being played. What is more, China wishes to normalize treatment of her status as a great power. President Xi, ahead of his earlier historic tête-à-tête with President Obama at a holiday retreat at Sunnylands, said that he wished to create "a new type of relations between major powers". He wanted to debunk the popular thinking that rising powers inevitably come to a crash with existing major powers, as in the case of the two World Wars. Click here But first, he opted to start from a position of strength.
However, over the Diaoyu/Senkaku Islands, all parties are well advised to put in place cooling-off mechanisms to prevent unintended consequences whereby any one side has no choice but to respond militarily. This would trigger a “security spiral” escalating into a full-blown catastrophic regional and possibly global war. Such mechanisms could include, for example, arrangements for a narrowly-defined "no-fly zone" and "de-militarized sensitive waters" near these disputed islands to prevent direct air or sea clashes. These should be supported by emergency hot-lines at the highest levels between China, Japan and the United States, coupled with pre-determined mediation procedures through the United Nations where necessary.
Regardless of geopolitical calculations, the last thing the world wants is a regional war of unpredictable proportions. The Rubicon must not be crossed.
(*) In “Strategic Vision: America and the Crisis of Global Power”(Basic Books 2012), Zbigniew Brzezinski, a doyen of American foreign policy, sees as historically inevitable that Taiwan may form some sort of a more formal re-association with Mainland China, subject to satisfactory arrangements to preserve its distinctive political, social, and military identity.
Arthur Guschin wrote on 14 Novemebr 2013 in The Diplomathere that unlike Russia's assertive stance in the Arctic, China, not possessing any direct territorial claims in the region, keeps her head down and builds good relations all around by focussing on scientific, ecological, native-cultural, tourism, and other soft areas of cooperation.
China is quietly edging for a seat in the Arctic Council. To buttress her interests in the Artic, China tries to develop the concept of "near Arctic" countries whose ecological and humanitarian interests would be seriously affected by developments in the Artic.
According to Guschin, now that the Arctic is melting fast, regardless of the impact of Climate Change, the ultimate aim is to develop geopolitically less vulnerable navigation routes for the importation of China's lifeblood of resoruces. Passage along the Norther channles will bypass Amercia-imposed choke points in the East and South China Seas and India Ocean. China's deep pockets will also put her in good stead for mutually-beneficial joint exploitation of the Arctic's cornucopia of resources.
This development tallies with what was presaged in a study by Trausti Valsson (How the world will change with Global Warming, University of Iceland Press, 2006) as reported in my blog on "The Bali Roadmap and the Geopolitics and Geo-economics of Climate Change" dated 18 January, 2008 here.
It now looks that however important in its own right Arctic research cooperation would be for China, it has the distinct adantage of ensuring that China's energy and geopolitical interests in the Artic are smoothened, buttressed and steadily advanced.