US-China relations in crisis

S P SETH

There has lately been plenty of media commentary and analyses here suggesting that the US-China relations might be reaching a crunch point regarding the issue of sovereignty over old and newly reclaimed islands/islets/rocks that China claims and has occupied. Other regional countries that include Vietnam, the Philippines, Malaysia, Brunei and Taiwan, which China regards as its own renegade province, contest China’s sovereignty claims. The US comes into the picture as some of the regional claimants, like the Philippines, are US allies and others, like Vietnam, are new friends. The US, though, maintains that it has no position on the question of sovereignty but simply would like China to resolve it peacefully through dialogue with its neighbours. But, apart from this, there is a bigger issue involved here.

 Which is that China’s virtually blanket claim and its assertion through building military facilities on the old and newly-reclaimed and dredged islands/islets will turn almost all of South China Sea into its exclusive lake, thus impeding freedom of navigation through these important waterways. And it is this right to freedom of navigation the US has challenged by sending a naval ship through the 12-nautical miles exclusive zone around the Chinese claimed and dredged islands. And the US is insisting that it will continue to sail, fly and operate through these international waters. China has reacted furiously to this threat to its “sovereignty and security interests.” A Chinese foreign ministry statement said that it had “monitored, followed and warned” the US warship during its journey and it would “take all necessary measures” to safeguard its sovereignty against any “premeditated provocation.” A US statement said that their mission to cruise through the international waters “was completed without incident.”

According to media reports here, “…more than half the world’s merchant tonnage plies back and forth through this navigable chokehold between the Western Pacific and Indian oceans…” And with China claiming ownership and intent on prevailing with political and military means, there is enough fuel for a conflagration, as the US seems equally determined to challenge China’s 12-nautical miles exclusive zone through the Spratly islands.

During a panel discussion on Australia’s relations with China at a highly rated TV forum here, a Chinese panelist was asked about what would be Beijing’s reaction in such an event. He had no answer but he reiterated China’s sovereign claim over the disputed islands and the waters surrounding them. But an answer of sorts was underlined in a 2011 editorial in China’s Global Times, which bluntly warned, “If these countries [opposing China] don’t want to change their ways with China, they will need to prepare for the sounds of cannons. We need to be ready for that as it may be the only way for the disputes in the sea to be resolved.” Even accounting for its rhetorical flourish, it is quite a serious way of putting China’s “core interest” as Beijing has defined it. In other words, there is not much scope for compromise as Beijing sees it; mercifully, though, the situation remains under control.  

It was in 2011 that the visiting President Obama announced in the Australian parliament the US “pivot” to the Asia-Pacific region---a ‘rebalancing’ of US focus from a decade of engagement in the Middle East. Which meant that the US would be deploying more of its military assets in this region and intended to remain a strong Pacific power. In other words, the US was not thinking of leaving the Asia-Pacific region for China to establish its primacy. And in this respect, Australia would become an even more important regional ally. As part of this renewed regional focus, the US would rotate and station its forces and other military assets through Australia. In other words, the US will use base facilities in Australia as part of its revived Asia-Pacific strategy.

In Australia, the view across the political divide, backed by majority of its people, is in favour of a strong US alliance to face any threat from China. And its projection of power in the South China Sea is considered a serious threat to regional stability. It is, therefore, considered necessary to let China know that it will have costs. And for that there is need to make a stand that might require challenging the 12-mile excusive zone. This issue featured in recent US-Australia strategic talks in the US.  Australia’s new Prime Minister Malcolm Turnbull has reportedly emphasized that, “We have to stand up for a rules-based international order, which means that the strongest power [in the region] cannot just do whatever it likes…” as China is apparently doing in the South China Sea.

As regards the US naval patrol through the Chinese line, Canberra has supported the US action. Its defense minister Marise Payne said, “It is important to recognize that all states have a right under international law to freedom of navigation and freedom of overflight, including in the South China Sea. Australia strongly supports these rights.” She added, “Australia is not involved in the current United States activity in the South China Sea.”

Canberra’s dilemma is how to reconcile its primary trade relationship with China and its priority strategic relationship with the United States. China is Australia’s top trading partner and they have recently signed a free trade agreement to further boost their economic relationship. This is sustainable only if Australia doesn’t find itself in the position of having to confront China in the South China Sea as part of its security alliance with the US, if and when called upon to make a common cause. Indeed, Washington might ask Australia at some point to join the US to sail through the 12-nautical mile zone, and having supported the US action in principle and as a security partner, Canberra might not be able to get out of it. And that could trigger a crisis in China-Australia relations.

Australia is somehow hoping that it will not come to this. And some analysts in Washington and Canberra have been trying to read this into President Xi Jinping’s comment during a White House press conference, when he was recently visiting the US, that China had no intention of militarizing the Spratly Islands. On the other hand it could simply mean that China’s understanding of its new facilities on the islands is that these are civilian outposts. But Xi’s comment was picked up as a hopeful sign that China might not, after all, be pushing he confrontation button. Australia’s foreign minister, Julie Bishop, seemed relieved as she observed that, “We do note and we do welcome President Xi’s statement when he was here in the United States, in Washington, that the Chinese government did not intend to militarize the Spratly Islands [in South China Sea].” She added, “And we welcome that statement and we’ll certainly hold China to it.”

It would only mean that both China and the US (and its ally Australia) want to avoid confrontation. But both sides are trying to read their own meaning into the developing situation in the South China Sea that is increasingly tense and has the potential of becoming ugly.

Note: This article was first published in the Daily Times.

Contact: sushilpseth@yahoo.com.au 

Xi Jinping goes to the US

S P SETH

Has the recent US visit of the Chinese President Xi Jinping cleared the air between the two countries? It is generally known that their relations are difficult, and might even be entering a hostile phase. China’s rise is tending to upset the US-led post-WW11 international order with Beijing refusing to fit into it. It refuses to accept the US narrative that China’s rise and prosperity in the existing international order is proof, if any needed, that it has gained from the present order, which continues to serve it well. And any attempt by Beijing to undermine or replace it is bound to disrupt and destabilize what is and has worked so well. For China though it is a self-serving US narrative to maintain its primacy and dominance underpinned by established international rules and institutions.

China obviously is not keen on playing a subordinate role. Apart from the fact that it is now the world’s second largest economy and is likely to overtake the US soon, its historical memory propels it to be a power centre in its own right. This historical memory is played out at two levels. At the first level, it is the humiliation heaped on China during the 19^th century when it was forced to open its markets to opium trade in the name of free trade. The country was bankrupted and virtually parceled out in the name of free trade. And later, in the thirties and forties, Japan simply went in and declared war on China. Until very recently, China had followed the advise of its late leader Deng Xiaoping to “hide your strength and bide your time.” China apparently feels that the time has come to flex some of its new muscle to assert and project its power. Therefore, at one level, China seems determined to wash off its humiliation by asserting its new power.

At another level, having been a great power historically bearing the name Middle Kingdom, its more confident leaders want to restore that glory. And there is a sense that the US-led international system is seeking to constrain and contain China. This is reflected strongly in China’s assertion of its claimed sovereignty (contested by some regional countries) in the South China Sea where it has been building military facilities in old and newly dredged islands/islets, which it regards as its own territory and waters. And this is meeting resistance from the US and its friends and allies, fearing that China is virtually turning all of South China Sea into its internal lake to impede/deny freedom of navigation and trade through international waters. And the US is prepared to challenge China’s control and assert such freedom of navigation, raising specter of naval confrontation. During a recent speech in the UN General Assembly, President Obama maintained that, “We have an interest in upholding the basic principles of freedom of navigation [in South China Sea] and the free flow of commerce, and in resolving disputes through international law, not the law of force.” But peaceful resolution might not be easy.

During Xi’s US visit, there doesn’t seem to have been any progress in this regard. Both sides reiterated their respective position, with the US advocating a peaceful diplomatic solution, and China asserting its sovereignty. In other words, the question of sovereignty in the South China Sea, and between Japan and China in the East China Sea, remain serious issues affecting peace and stability in the region.

Lately, the question of cyber security has also come to cloud US-China relations. According to US reports, Chinese hackers have stolen security data of over 20 million federal employees and contractors, thus posing great security and commercial risks for the US. Indeed, even a unit of the Chinese army was also said to be involved, and the US has charged some of them with illegal activities. Beijing, of course, denies it and claims that it too has been a victim. Not surprisingly, the issue of cyber security featured in preparatory talks before President Xi’s visit and the issue was also discussed during his US visit. There was talk of establishing a “hotline” for cyber attacks between the two countries. And according to reports, Beijing agreed that, “Neither country’s government will conduct or knowingly support cyber-enabled theft of intellectual property including trade secrets or other confidential business information, with the intent of providing competitive advantages to companies or commercial sectors.” The problem with all such understandings, whether in regard to state secrets and/or commercial information, is how to prove and enforce cyber-related crime. And it is further compounded if the relationship is marred by mutual distrust. In other words, no amount of understanding on the issue of cyber crimes is likely to bridge the gap. But it is still worth maintaining functional relationship between the world’s two most powerful countries.

Another issue that has marred relations between the US and China is the question of human rights. Its generally accepted meaning is the freedom of expression and free assembly for citizens without fear of being locked up for exercising that freedom. It also means the citizens’ right to periodically elect their own government, which might involve rejecting the incumbent regime. By these standards, the monopoly power of the Communist Party of China (CPC), with citizens denied the right to choose their own government, is a denial of basic human rights. Those demanding to exercise that right often end up behind bars.

According to reports, such arbitrary arrests have become a feature of the Xi Jinping’s regime, which is not apologetic about the monopoly power of the CPC. The argument on Chinese side is that every country has its own history and the system that shapes it. Indeed, the US is regarded as self-serving in advocating its system, which too is said to have serious human rights problems and violations. And its advocacy of democracy and human rights is considered subversive as far as China is concerned. Which led the CPC to issue an internal memo not long ago that reportedly warned against seven “false ideological trends, positions and activities” including “Western constitutional democracy”, “universal values”, “the West’s idea of journalism”, and civil society. And there is no prize for guessing that China and the US strongly disagree on the idea and practice of democracy.

With such divergent views and interests on a whole gamut of issues, President Xi Jinping’s US visit was not expected to bring about any significant meeting of minds. But both countries seem interested in keeping up the dialogue and not let things get out of control. And as long as that is maintained, it is not too bad.

Note: This article was first published in the Daily Times.

Contact: sushilpseth@yahoo.com.au

How vulnerable is China?

S P SETH

China’s stock market has been very volatile lately, affecting adversely the fortunes of its small investors who number in the millions. We will come to that later but first let us see how Xi Jinping is faring since taking over as president and secretary general of the Communist Party of China (CPC), late 2012. Since then, President Xi Jinping has been busy consolidating his power internally and projecting it externally. Internally, he moved fast to get rid of Bo Xilai, the powerful Communist Party Secretary of Chongqing, who reportedly had his own political ambitions. Bo’s wife, Gu Kailai, testified against her husband and that was enough to seal his fate. It took a little longer for another powerful political foe, Zhou Yongkang, a former security chief and member of the Party Standing Committee to be put on trial and convicted for life. In Zhou’s case, his wife and son testified against him. According to reports circulating at the time, both Bo and Zoe were considered fellow conspirators, though their trials and convictions were on corruption and related charges. Convicting on the basis of the testimony of close relatives is a bit over the top but that is how Bo and Zhou ended up. They both accepted the justice so delivered. Xi’s power is now virtually unchallenged.

Simultaneously, he is unapologetically entrenching the CPC’s monopoly power under his leadership. And he has no time for western notions of democratic elections, free speech and human rights. A leaked party document cautioned against such subversive notions and activities designed to undercut the CPC’s power. In other words, China’s model of one party rule is a legitimate alternative. Indeed, it is considered necessary and effective for economic growth and social stability and enabling China to uphold and protect its “core interests”. And these “interests” include its territorial sovereignty and integrity as projected into South China Sea and East China Sea, where China has contested sovereign claims over a bunch of island/islets/reefs. It has simultaneously been creating artificial islands out of the sea and creating a network of military facilities that is bringing the US and some of the regional countries together to counter-balance China.  For instance, Japan participated, for the first time, in joint military exercises here in Australia,that included US, Australia and New Zealand and reportedly involved 30,000 troops. The Japanese government is also pushing ahead to ditch its pacifist constitution, enabling it to be part of collective defence with the US. All this is happening against the backdrop of China’s projection of power in the region.

At the same time, China is also committed to pursue its economic growth. In the absence of any demonstrable index of popular approval, like periodic elections and a free press, the validity and durability of China’s political system depends essentially on a healthy growth rate of its economy, providing employment and a modicum of economic prosperity for its people. Which China has achieved, though there are pockets of economic deprivation here and there. There is a fairly broad sense of dissatisfaction and resentment, though, with widening income disparities between rich and poor and between rural and urban sectors. And such resentment is fortified and accentuated with widespread corruption at all levels of the party hierarchy and administration. Which Xi Jinping is seeking to deal with, though it has a strong whiff, at times, of settling some old political scores.

All in all, China’s economic growth since the eighties has been remarkable, though it is starting to slow down. But, at 7 per cent, it is still impressive. The Communist Party under Xi Jinping’s leadership not only intends to keep it this way but improve on it by liberalizing and broadening the economy. In the midst of such self-assurance on economy, the recent volatility of the stock market must have come as a rude shock. In a few turbulent weeks, the market lost over $3 trillion, about one-third of its total valuation. And this is despite all the measures the authorities took to stop the rout. In its efforts to broaden the Chinese economy, the government had encouraged China’s middle classes to invest in the stock market. And they took to it with great passion at playing the market. With very low returns on bank deposits, the stock market seemed the ultimate casino which promised easy way to riches. And that was mostly true as China’s stock markets reached dizzying heights till recently.

As the markets fell, China’s nearly 90 million middle class stock market players had to reckon with margin calls for failing stocks. Which further increased the pressure to sell. With the authorities doing all they could to stop the fall, but with limited success at that point of time, the all-powerful image of the CPC took a bit of a hit. Some small investors, who lost heavily, were critical of the government for not doing enough. They reckoned they were simply following what their government had encouraged them to do. Indeed, the authorities had even encouraged investors to play the market by using their property as collateral. The stock market volatility, therefore, affects the economy in all sorts of way.

First and the foremost, it is the fading of the wealth effect. And once that takes on, it might affect consumer spending across the board. At a time when China is transitioning to a consumer-driven economy, rather than lopsided emphasis on investment in construction, infrastructure and export sector, any loss of consumer confidence from a falling or static stock market is not helpful. Its knock on damaging effect on property market would be another worry. The authorities have been doing everything possible to stabilize the situation. They suspended trading in almost half the stocks. They have injected liquidity. They have extended a hefty credit line to the country’s major brokerages to buy up shares. And they have cut interest rates. Which has helped but doesn’t rule out another bout of volatility.

Even though the government has lost some shine to its virtually omnipotent image, some analysts believe that the stock market turbulence will settle down, at least in the short period. Even though the stock market lost over $3 trillions, nearly one-third of its value in a short period, it comes after a much steeper rise over the past 12 months. In other words, the diminishing wealth effect might be more psychological than real. But psychological effect does feel real to many people. It is this image of things going wrong that would need to be tackled. As one analyst commented, “A failure to stabilize the market (indeed to achieve a notable recovery from current levels) could lead to a crisis of confidence in the heretofore infallible state apparatus.”

Note: This article was first published in the Daily Times.

Contact: sushilpseth@yahoo.com.au

      

        

How serious is the Asia-Pacific situation?

S P SETH

The ongoing tensions between China and its Asia-Pacific neighbours over contested sovereignty over a bunch of islands/islets in the South China Sea are creating a dangerous situation, with potential for escalation into an armed conflict. The US wants China to back off from its unilateral actions to change the status quo. China claims exclusive sovereignty and is taking steps to assert control of the islands. It is simultaneously dredging out new surface areas to build military facilities. Admiral Harris, the commander of the US Pacific Fleet, had earlier sounded an alarm in a speech in Canberra when he said, “China is creating a Great Wall of Sand with dredgers and bulldozers over the course of months.”  He added, “When one looks at China’s pattern of provocative actions towards smaller claimant states… and the deep asymmetry between China’s capabilities and those of its smaller neighbours---, well it’ no surprise that the scope and pace of building manmade islands [by China] raises serious questions about China’s intentions.” The issue also was the focus of the regional security dialogue in Singapore, with the US raising concerns and China reiterating its position of exclusive sovereignty.

It would appear that China seems unconcerned, on the surface at least, about what the US and its Asian neighbours are all about. It is pretty sure about its sovereignty over the islands and much of the waters in the South China Sea, making it into a virtual Chinese lake. Beijing feels confident hat it has the military capability to deter any military challenge to its “sovereignty” from the United States, which it believes is behind some of its neighbours’ counter claims. As China’s foreign minister, Wang Yi, has warned that “the determination of the Chinese side to safeguard our own sovereignty and territorial integrity is as firm as a rock, and it is unshakable.” Indeed, in its latest defence white paper, Beijing has signaled its intention to expand “offshore waters defence” to include “open seas protection.” China regards the US as an external power with no business to interfere in the region, which it regards, though not explicitly, as its own backyard.

During his recent China visit, the US secretary of state, John Kerry, urged Beijing to “reduce tensions and increase the prospect of a diplomatic solution.”  However, any diplomatic solution would require some flexibility regarding the claims and counter-claims from China and its regional neighbours and that is not forthcoming. If this tense situation persists, it is quite possible that this might develop into a nasty confrontation. The concern in the US is that China is seeking to create a de-facto situation where its control becomes unchallengeable. And it starts interfering with freedom of navigation in these busy sea-lanes for trade and other activities. In that event, the US might find itself eventually eased out of the Pacific region, where it has been, and still is, the dominant naval power. It is, therefore, keen to impress on China that its actions might have consequences.

It is reported that US military officials are drafting options for President Obama, including sending warships within 20 kilometres of the reclaimed reefs and rocks to make clear that the US considers them international waters. Some of it is already happening with warnings from China against US aerial surveillance. At another level, the US is planning to put long-range bombers in Australia to deter China. As David Shear, the US defence department assistant secretary for Asian and Pacific Security Affairs, has reportedly said that, “we will be placing additional air force assets in Australia as well, including B-1 bombers and surveillance aircraft.” Which has created a controversy here, with both Canberra and the US embassy saying that Mr Shear “misspoke”. Which would suggest that he probably spoke too soon and too clearly, even though the broad thrust of his statement was to the point.

A US embassy spokeswoman in Canberra clarified that “we [the US and Australia] are currently exploring a range of options for future rotations [of US forces] with our Australian counterparts, and the specifics of future force posture cooperation have yet to be finalized.” In other words, both the US and Australia are worried about Chinese activities in the regional waters requiring a coordinated response. At the same time, Australia doesn’t want to damage its relations with China, which is its biggest trading partner. It is, therefore, not surprising that Prime Minister Tony Abbot sought to brush aside the statement of the Pentagon official, maintaining that the Pentagon official “misspoke and that the US does not have any plans to base those aircraft in Australia.”

However, Peter Jennings, who chairs the Abbot government’s advisory panel for drafting the upcoming defence white paper, has reportedly recommended greater military cooperation between Australia and the United States, including sending military aircraft and ships to the South China Sea to stop China from asserting control across some of the world’s most important trading lanes. Jennings also said that to maintain its credibility, the US would have to puncture the Chinese claims by sending US vessels and aircraft through Chinese-claimed waters and air space, maintaining that Australia would need to follow suit. The Australian government, however, continues to believe that it can somehow reconcile its closer security relations with the United States to counter China’s projection of power while continuing to expand economic opportunities with China. That will become increasingly difficult as China continues to flex its muscles. And when you bring Japan into the picture, which has its own maritime sovereignty issue with China in East China Sea, the emerging strategic picture in the Asia Pacific region is quite disturbing, to put it mildly.

The US and Japan are entwined in a security alliance, with the US committed to its defence. But this is steadily changing its character, where Japan might also now be willing to help in regional defence and not just be the recipient of the US military protection. This triangular strategic counter to China, including the US Japan and Australia, would be designed to impress on Beijing that there would be consequences if it continued to press ahead with its plans. Under Prime Minister Shinzo Abe, US-Japan relations have become much more active. Indeed, Abe was the first visiting Japanese Prime Minister to recently address the US Congress, as well as attend a state dinner at the White House.

In his speech to the Congress, Prime Minister Abe strongly supported the Trans-Pacific Partnership (TPP), a proposed free trade agreement between the US and other regional countries. China is excluded from the proposed TPP. While dwelling on the values of TPP, Abe thus emphasized its strategic value: “Long term, its strategic value is awesome… The TPP covers an area that accounts for 40 per cent of the world economy and one-third of global trade.” And he meaningfully added against the backdrop of China’s threat, “We must turn the area into a region for lasting peace and prosperity.” In other words, China must be contained and countered in a comprehensive way to include economic, political and military cooperation.

  

Note: This article was first published in the Daily Times.

Contact: sushilpseth@yahoo.com.au