20100404 Sino-American relations are in crisis

Sino-American relations are in crisis

By Sushil Seth
Sunday, Apr 04, 2010, Page 8

There is an air of triumphalism in China these days. This was reflected at the recent National People’s Congress (NPC) jamboree where Chinese Premier Wen Jiabao (溫家寶) presented his annual report.

Commenting on the global financial crisis, he said that, “our economy was the first in the world to have made a turnaround,” which would testify “that no difficulties or obstacles can impede the course of the great rejuvenation of the Chinese nation.”

He added: “The past year was truly extraordinary and inspiring ... and raised China’s international standing and influence.”

This kind of self-­congratulation is mostly directed at the domestic audience to distract attention from popular disenchantment with the way the country is functioning.

The country is racked by widespread corruption, nepotism, gangsterism (particularly at local and regional levels), the absence of accessible avenues to redress peoples’ problems, repression of dissent and so on.

The country’s oligarchs seem to think they are God’s gift to the nation by the way they have projected China on the world stage.

The people are told that they are lucky to be part of the vibrant Chinese nation “with the incomparable superiority of the socialist system.”

In other words, China’s socialist system has no peers.

Therefore, all the talk of Western democracy as the way to go for China and other authoritarian regimes in the world is nonsense. China’s one-party rule, indeed, is a superior model for the world.

In the Chinese narrative, the US is a country where “civil and political rights of citizens are severely restricted and violated,” contrasting it with China’s social and political harmony.

At the same time, people all over the world are “suffering a serious human rights disaster caused by the US subprime crisis-induced global financial crisis,” which the Chinese Communist Party (CCP) oligarchs have sought to rescue out of the goodness of their hearts.

China’s socialist system is supposedly not only doing wonders for the country, but also showing the way to the rest of the world.

This is, of course, all self-­serving to perpetuate one-party rule.

The simple rebuttal to this is that if CCP rule in China is so superior, why does it need to repress political dissent and throw the dissidents into jails?

While trumpeting his country’s economic turnaround from global recession, Wen was also blaming the US for present difficulties in their bilateral relationship.

At his news conference after the NPC session, he accused the US of creating disruption in their relationship by meeting the Dalai Lama, and by its decision to sell weapons to Taiwan.

He said: “The responsibility for the serious disruption in Sino-American ties does not lie with the Chinese side but with the US.”

As for the snub at Copenhagen where Wen didn’t turn up at a meeting hosted by US President Barack Obama, he retorted that this was in response to the “shock” of not being invited to a smaller leaders’ group meeting.

And on the question of currency valuation, Wen said emphatically: “I don’t think the yuan is undervalued.”

On the other hand, he worried about the volatility of the US dollar and hence China’s investments in US Treasury bonds.

In short, all the difficulties in Sino-American relations are the latter’s responsibility and thus the onus for resolution lies with the US.

This is a new China, an arrogant and inflexible China that seeks to define and reorder the Sino-American relationship entirely on its own terms.

Remarkably, the US is so far refusing to buy into Chinese provocations.

However, it is quite possible that the US might not be able to maintain its forbearance for long.

And the issue to trigger this is likely to be China’s undervalued currency, giving it an unfair trade advantage.

China has accumulated vast reserves of US dollars from a trade surplus with the US.

The resultant loss of competitiveness with China has cost the US many jobs, adding to unemployment in that country.

With unemployment in the US at about 10 percent — including under-employment and those who have stopped looking for jobs, that estimate goes up to around 17 percent — there is increasing pressure on the US to formally declare China a “currency manipulator.”

And if that happens, a trade war between China and the US seems likely, further widening the gap between the two countries.

Paul Krugman, an influential New York Times columnist, Nobel laureate in economics and a professor at Princeton University, says “it’s going to be really hard for them [the US treasury] yet again to fudge on the obvious fact that China is manipulating [its currency].”

“Without a credible threat, we’re not going to get anywhere,” he added.

It is important to note that Obama himself accused China of “currency” manipulation during his presidential campaign. After becoming president, his government has tried to fudge the issue for diplomatic reasons.

But like so many other US overtures, this too has failed.

It would appear the US is preparing for the eventuality of a confrontation over trade, if Larry Summers’ remarks at the World Economic Forum in Davos are anything to go by.

Summers, who is Obama’s top economics adviser, reportedly said that free trade arguments no longer held when dealing with “mercantilist” powers, a reference to China.

This and other issues, like Obama’s meeting with the Dalai Lama, and the sale of US weapons to Taiwan, are building into a potentially serious crisis in Sino-American relations.

From the assertions made by Wen at his recent press conference, it doesn’t seem that Beijing is going to backtrack or compromise on any of the issues clouding this relationship.

Wen subscribes to a black-and-white view of things. And since, according to him, it is the US that is doing the wrong things and making unreasonable demands (on the currency issue, for instance), it is not on China to take any corrective action.

In other words, without the US backing down, the ground is being set for a showdown.

It doesn’t mean that there will be a military showdown in the near future; though an escalation of naval skirmishes/incidents in the South China Sea cannot be ruled out with China asserting its sovereignty over the waters and islands in that area.

The likely scenario is that of a serious diplomatic crisis and a trade war of sorts.

In the long run, as John Mearsheimer has observed: “If China continues its impressive economic growth over the next few decades, the US and China are likely to engage in an intensive security competition with considerable potential for war.”

The case of a fast-rising Germany demanding the restructuring of the global order to its advantage, leading to World War I, is illustrative of this.

Sushil Seth is a writer based in Australia.