20100706 The arrogance of Chinese power

The arrogance of Chinese power

By Brahma Chellaney
Tuesday, Jul 06, 2010, Page 8

Success breeds confidence, and rapid success often produces arrogance. That, in a nutshell, is the problem that both Asia and the West face in China, as demonstrated once again at the G20 summit in Canada.

Rising economic and military power is emboldening Beijing to pursue a more muscular foreign policy. Having earlier preached about its “peaceful rise,” China has now taken off the gloves.

That approach has become more marked following the global financial crisis, which China has interpreted as marking both the decline of Anglo-American capitalism and the weakening of US economic power. That, in turn, has strengthened Beijing’s belief that its brand of state-steered capitalism offers a credible alternative and its global ascendance is inevitable.

Chinese analysts gleefully point out that “free market” advocates such as the US and the UK bailed out their financial giants at the first sign of trouble. In contrast, state-driven capitalism has given China economic stability and rapid growth, allowing it to ride out the global crisis.

Indeed, China’s exports and retail sales are soaring and its foreign-exchange reserves now approach US$2.5 trillion, even as US fiscal and trade deficits remain alarming. That has helped reinforce the Chinese elite’s faith in the country’s fusion of autocratic politics and state capitalism.

The biggest loser from the global financial crisis, in China’s view, is Washington. The US remains dependent on China buying billions of dollars in Treasury bonds every week to finance its yawning budget deficit — a sign of shifting global financial power that China is sure to use for political gain in the years ahead.

The spotlight may be on Europe’s financial woes, but the bigger picture for China is that chronic deficits and indebtedness in the US signal its decline. Add to the picture the two wars that the US is waging overseas — one of which appears increasingly unwinnable — and Chinese leaders consider the US to be a victim of what historian Paul Kennedy called “imperial overstretch.”

Against that background, Beijing’s growing assertiveness may be unsurprising. Chinese leader Deng Xiaoping’s (鄧小平) advice — “Hide your capabilities and bide your time” — no longer seems relevant. Today, China is not shy about showcasing its military capabilities and asserting itself on multiple fronts.

As a result, new strains are appearing in China’s relationship with the West and were on full view at last year’s Copenhagen ­climate change summit, where Beijing — the world’s largest polluter with the fastest-growing carbon emissions — deflected pressure by hiding behind developing countries. Since then, China has added to the strains by continuing to manipulate the value of the yuan, maintaining an abnormally high trade surplus and restricting goods manufactured by foreign companies in China from entering the domestic market.

On political and security issues, China has aroused no less concern. Indeed, Beijing’s expanding naval role and maritime claims threaten to collide directly with US interests.

It is undeniable that economic and military problems are limiting US foreign-policy options vis-a-vis China. Washington seems more reluctant than ever to exercise the leverage that it still has, to press China to correct policies that threaten to distort trade, foster huge trade imbalances and spark greater competition for scarce raw materials.

By keeping its currency undervalued and flooding world markets with artificially cheap goods, China pursues a predatory trade policy. This undercuts manufacturing in the developing world more than in the West. However, by threatening to destabilize the global economy, China threatens Western interests as well. Furthermore, its efforts to lock up supplies of key resources mean that it will continue to lend support to renegade regimes.

Despite this, the US shies away from exerting any kind of open pressure on China in stark contrast to its unabashed exercise of leverage in the 1970s and 1980s, when Japan emerged as a global economic powerhouse. Japan kept the yen undervalued and erected hidden barriers to foreign goods, resulting in periodic US pressure for concessions.

The US cannot adopt the same approach with China, largely because Beijing is also a military and political power, and the US depends on Chinese support on a host of international issues — from North Korea and Burma to Iran and Pakistan. In contrast, Japan has remained a fully pacifist economic power.

It matters greatly that China became a global military player before it became a global economic power. China’s military power was built by Mao Zedong (毛澤東), enabling Deng to focus single-mindedly on rapidly building the country’s economic power. Before Deng launched his “four modernizations,” China had acquired global military reach by testing its first intercontinental ballistic missile, the DF-5, with a range of 12,000km, and developing a thermonuclear warhead.

Without the military security that Mao created, it might not have been possible for China to build economic power on the scale that it has. In fact, the 13-fold expansion of its economy over the past three decades generated even greater resources to enhance its military.

As such, China’s rise is as much Mao’s handiwork as it is Deng’s — but for Chinese military power, the US would treat China like another Japan.

Brahma Chellaney is ­professor of strategic studies at the Center for Policy Research in New Delhi.