China-US Ties- Overcoming Stalemate

By Srikanth Kondapalli (*)

China’s President Hu Jintao’s visit to the United States last month is a turning point not only in their bilateral relations but also of global significance. Overshadowed by the unveiling of J-20 stealth fighter test, an aircraft refurbishment project, development of anti-ship ballistic missile and an assertive China in 2010 on territorial issues with India, Japan and Southeast Asian countries, Hu’s visit was aimed at positioning China at a vantage point in global affairs, despite the US reservations.

China’s foreign minister Yang Jiechi, a former ambassador to the US, stated that the outcome of Hu’s visit “bore rich fruit and opened a new chapter of cooperation between the two countries”. This is reflected in a number of areas – economic and trade relations, science and technology promotion, military exchanges, people-to people contacts, etc. Both signed a $45 billion worth deal involving U.S. exports in the fields of agriculture, energy, railways, etc. that enables the US to raise 235,000 new jobs. In a period of financial meltdown and electoral reverses, this deal is essential for shoring up President Obama’s domestic image. They also approved the setting up of a clean energy research centre – in addition to a Centre of Excellence on Nuclear Security – at Beijing.

On balance, the US also did concede to Beijing on a number of issues. The Joint Statement, issued on January 11, 2011 underlined that the US “welcomes a strong, prosperous, and successful China that plays a greater role in world affairs” while China suggested that the US could become “an Asia Pacific nation”.  While both agreed to work to overcome global and regional security challenges, however, there was no provision of such joint efforts at South Asian region, unlike the 2009 joint statement between the two countries. Nevertheless, the 2011 joint statement suggested that all previous (including the 2009) statements remain valid. New Delhi viewed this as losing ground to Beijing, despite the US assurances.

On a number of issues – diplomatic, political, economic and strategic – both, however, have differing views and these could impact global and regional issues in the coming years.

Diplomatic Issues

While both so far have 32 years of diplomatic relations, on a number of issues there are serious differences, despite the outward bonhomie. For instance, at the beginning of the US visit, Hu Jintao had laid down his expectations from this visit in the following five main points. They include:

1.      to develop a political relationship that featured equality, mutual trust and the precept of seeking common ground while reserving differences,

2.      to deepen their comprehensive, cooperative, mutually beneficial and win-win economic ties,

3.      to cooperate in meeting global challenges,

4.      to promote friendly exchanges between the two peoples and

5.      to establish a pattern of high-level contact based on in-depth communication and candid dialogue.

It is clear that through these “guiding principles”, stop-gap as they appear, Beijing is insisting that the US responses should be modified and thereby should be accommodative to the Chinese concerns, specifically on China’s sovereignty issues related to Taiwan, Tibet and South China Sea – with the latter issue coming in sharp focus in 2010 as the Southeast Asian nations sought US help in resolving the disputed islands issue. The key issue, as Beijing saw, is with the growing “strategic mutual mistrust” between the two leaderships, a phenomenon that exists not just with the US but also with several Chinese neighbours, viz., Mongolia, South Korea, Japan, Vietnam, India and others. Mistrust between the US and China, as former US ambassador to China Brandt recounted in the Wikileaks cable, include a host of issues ranging from possible US nudge to the disintegration of China to that of China’s support to “rogue” states.

While there are several similarities between the 2011 and 2006 Chinese positions, clearly China today occupies 2^nd position in the global economic profile along with the global financial crisis that affected US economy drastically, are new factors that changed China’s international profile and bargaining position. A dominant theme among the Chinese policy and scholarly circles in the last few years is that the US power is being gradually depleted with costly interventions in Iraq and Afghanistan. Clearly as well while China insists that the US tone down its position of extending support to Taiwan, Beijing is suggesting that both should join a condominium to resolve the global and regional issues – a suggestion that indicates a peaceful power transition between the two. Indeed, there has been some momentum in this direction as the US had extended support to Beijing and consulted the latter on a number of issues as mentioned above, despite the mistrust between the two. Eventually the joint communiqué stated that both will pursue “positive, cooperative, and comprehensive” relations.

Secondly the communiqué surprisingly omitted the 2009 statement regarding mutual respect for the “core interests” of the other. In 2009-10, China had extended its “core interests” to include not only its traditional concerns on Taiwan and Tibet but also that of the disputed islands in South China Sea. The US, then also clarified that the free navigation issues are part of its “core interests” – providing for potential clash between the two. Indeed, the Chinese navy had shoed away the US air craft carrier group USS Impeccable from the region as well as expressing concerns on USS George Washington’s exercises in Yellow Sea with South Korean Navy. With this omission on core interests, the US appeared to have regained the lost ground in the current 2011 statement.

Political Issues

One of the most sticking points between Beijing and Washington is the former’s lingering suspicion that the US is bent on ushering China into a pluralist society by breaking the authoritarian rule of the communist party. This is expressed in the Chinese opposition to any “peaceful evolution” phenomenon, meaning gradual nullifying the authority of the communist led government. The restriction placed on Google in 2010 by the Chinese government is a case in point, in which Google backed down finally its threat to withdraw from the Chinese cyberspace. The US is also accused of backing and harbouring the democratic rights activists in the aftermath of the Tiananmen Square incident in 1989 in addition to raising the issue of human rights violations in different parts of China. The Noble Peace Prize award to the Chinese dissident and democracy rights activist Liu Xiaobo and the Chinese demand that the Prize ceremony be boycotted evoked hardly any interest globally and indicated to the emerging bipolarity in ideological sense.

Trade and Economic Issues

In the three decades of diplomatic engagement with the US, China had been able to post remarkable economic results – bilaterally, mutually and in terms of its own comprehensive rise. Starting with a mere $12 million in bilateral trade in 1972, it had grown to nearly $433 billion in 2010, with overwhelming proportion of the trade in Beijing’s favour. In other words, trade with the US provided China with nearly $350 billion in 2010, while a large number of the US companies benefited as well with offshore joint venture manufacturing units in the coastal regions of China. In the same period, China emerged as the second largest economy in the world, with Deng Xiaoping seeking US blessings to the reform and opening up policies of China by visiting and discussing with the US leaders during his trip to the US just three months after the reform programme was announced in 1978. By 2010, China’s gross domestic product touched $5.6 trillion according to official figures, making it second only to the $14.2 trillion in GDP of the US. However, according to the Goldman Sachs report, China is poised to surpass the US GDP figures by 2027. This is the economic concern in the US, as a recent Pew survey indicated as also during the mid-term elections in last year.

The US Congress and the US Treasury Secretary (and European Union partners) have accused China of building huge foreign exchange reserves by deliberately under-valuing the Chinese currency renminbi by nearly 40 percent. The mounting trade deficits in favour of Beijing had been a major point of friction with the outside world. In order to overcome trade deficits, the US had demanded, as in the joint declaration between Hu and Bush in 2006 that China should open up its market for fair competition from the US and western companies. A time frame had been drawn then, but not yet fulfilled. This issue was also discussed during the current visit by Hu, albeit without any satisfactory programme from Beijing.

Another issue of friction between the two is the Chinese investments in the US treasuries. China had invested nearly $one trillion in US Treasury Securities (if one includes the share of Hong Kong as well) but as Wikileaks cables from Beijing indicated, China plans to divert some of its foreign exchange reserves (estimated at $2.8 trillion) into other emerging currencies (such as Euro, etc) or insist on US to manage its fiscal policies better. However, while China had indicated that it could sell part of its investments from the Treasury Securities, as China came to be dependent on the US and global economy for its exports, the negative consequences of such a move (in terms of possible stock exchange collapses) is dawning on Beijing. Little progress was forthcoming on the issue of protection of intellectual property rights by China.

Strategic & Security Issues

One of the most contentious issues between China and the US is in the strategic and security fields. This is the main source of mutual mistrust between the two. At issue is the fear of US losing its global dominance due to China rise, while for China, the US is the main source of containment for its rise, although both have entered into a period of mutually beneficial interdependence.

Over a period of time, China quietly is following a twin track policy to undermine the US power in the last three decades. Firstly, China had built up coalitions in the international system to counter what Charles Krauthammer wrote in a 1990 article “The Unipolar Moment”. Thus China was involved in working with European countries such as France, Germany and Russia, Asian countries such as India, Indonesia, Iran, while at the same time retaining its influence over North Korea, Myanmar, Pakistan and others. In Africa and South America, likewise, Beijing cultivated Zimbabwe, Sudan, Venezuela, Brazil in addition to Cuba. Through these Beijing supported a string of anti-US policies while carefully seeing to that it does not get too thick into such coalitions. In most of the major crises the world witnessed, China had followed such a policy of pitching other states against the US while retaining its strength and more importantly not muddying its hands and depleting its power. This is reflected in the Iraq campaign by the US and its fallout in the UN debates in 2003, as with Iranian nuclear issue or Doha rounds on tariff reductions, BRICs initiative and at the Copenhagen climate change proposals.

Secondly, as China increased trade with the US, it had also started buying US Treasury Securities (financed ironically with trade surpluses) and thereby nullifying the US which is dragged into the counter-terrorism campaign from 2001.  Quietly, China had also built up a favourable opinion for itself in the Beltway of Washington and is reflected in not only Kissinger’s untiring efforts to woo China in the last three decades of engagement, but also in Brzezinski’s famous 2009 Group – 2 construct (of tackling global and regional issues by the US and China). Recent slogans such as “Chimerica” or “Americhina” belong to this thought process and is reflected on joint collaboration on North Korea and Iran. Yet the ground reality is such that the US does not like to give away its supremacy, nor China is willing to be second rate partner in managing global and regional affairs given its economic rise which is translating into diplomatic and strategic weight in the international system. This then is the stalemate each wants to overcome.

(*) Professor in Chinese Studies at Jawaharlal Nehru University, New Delhi, India. This article published in The Diplomatist Plus vol. 3 no. 2 February 2011 pp. 18-21

March 2011, First Edition