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Charting a course for relations with the Middle Kingdom

By Ted Galen Carpenterand James A. Dorn

Tuesday, Apr 18, 2000, Page 9

The victory of pro-independence candidate Chen Shui-bian (陳水扁) in Taiwan's presidential election is almost certain to create additional strains between Washington and Beijing. US-Chinese relations had already become increasingly wary even before the election. Just two years ago, both governments spoke of a "strategic partnership" and sought ways to enhance already substantial economic and political ties. The bombing of the Chinese embassy in Belgrade, the release of the Cox report alleging systematic nuclear espionage by the PRC, and angry Chinese reactions to both developments, however, have produced a new round of tensions.

So, too, has the publication China's White Paper and its expanded threat to use force against Taiwan to regain the "renegade province." On the positive side, China's probable accession to the WTO, followed by Taiwan's inclusion, offers hope that future US-Chinese relations will improve.

Friend or foe

Is China a rising colossus that intends to bully its neighbors and dominate Asia? Should Washington adopt a more hard-line policy toward the PRC on trade, human rights, and national security issues? Or is China a country that has already moved far along the road to a market economy and a more open society and is committed to being a stabilizing, cooperative power? Those are the questions that US policymakers must examine as they consider both the short- and long-term prospects for the evolution of a peaceful and prosperous "new China" despite the background of 50 years of communist rule.

The dark side of the Chinese communist state is disturbing and must not be ignored. But that unsavory record should not be allowed to hide the progress that the Chinese people have made since economic reforms began in 1978. The expansion of markets relative to state planning has given millions of people new opportunities and has substantially raised living standards. China's leaders have reluctantly accepted economic competition while trying to maintain their monopoly of political power. But as people have acquired greater economic freedom, they have also sought greater personal freedom. The dilemma for the Chinese Communist Party is how to grow the productive nonstate sector and at the same time prevent an erosion of the party's power as market participants demand greater civil liberties and a meaningful political voice.

The US and other countries are betting that China's accession to the WTO will make China a more open society and eventually lead to democratic rule as well as a more stable and peaceful international policy by Beijing. However, while free trade is necessary for peace, it is not sufficient. The Communist Party may be willing to sacrifice substantial gains from trade in order to protect its power and privilege and sources of investment capital. Witness, for example, the latest threats against Taiwan, one of China's major trading partners.

The challenge for the US is to exploit opportunities for further gains from trade while moving closer toward a constructive partnership with the PRC -- but at the same time protect vital US interests. Unfortunately, the US policy debate thus far has been largely a contest between the Clinton administration's muddled and inconsistent approach and the extremely confrontational approach advocated by many conservatives. The latter strategy risks creating a self-fulfilling prophecy of China's becoming an enemy. Indeed, a growing chorus of voices in Congress and the US foreign policy community argues that the PRC is a belligerent dictatorship and an implacable future enemy of the US.

Painting China as an emerging global economic "superpower" and carrying that military metaphor over to foreign policy are dangerous. Free trade is mutually beneficial -- both China and other countries gain from trade liberalization. If the Chinese people become richer, is that a cause for concern in the West? There is no doubt that, as the Chinese economy grows, so will the Chinese military budget. But that is not unusual for a large nation state, and thus far China's military spending and its military modernization effort have been relatively modest. By most estimates, the PRC's current military budget is about US$37 billion, comparable to the budgets of such countries as Britain, France, and Japan.

It is true that no one can be certain how the PRC will behave on security issues in the future. Unlike Nazi Germany or the USSR, however, the PRC is not a messianic, expansionist power; it is a normal rising (or reawakening) great power. That can be difficult enough for other countries to deal with at times, but such a country does not pose a malignant security threat.

Proceed with caution

The best course is to treat China as a normal (albeit sometimes repressive and prickly) great power but avoid the extremes of seeing the PRC as either enemy or strategic partner. The US would also be wise to encourage other major countries in Asia to think more seriously about how they intend to deal with a rising China. A collection of diffident, militarily weak neighbors, wholly dependent on the US for protection, is not likely to cause Beijing to behave cautiously.

Beijing's behavior toward regional neighbors has been a curious amalgam of conciliation and abrasiveness. Examples of conciliation include efforts to dampen the border disputes with such important land neighbors as India, Vietnam, Russia, and Kazakhstan and a campaign to build close political and economic ties with South Korea. (The PRC has also been helpful in trying to discourage the North Koreans from pursuing a nuclear-weapons program.) At the same time, China's relations with Japan, the Philippines, and other countries (primarily its oceanic neighbors) are noticeably more confrontational, and Beijing still aggressively pushes its territorial claims in the South China Sea.

The Taiwan issue remains an especially dangerous flash point. Any move toward formal independence by Taipei would surely provoke military action by Beijing. Yet China's economic future depends strongly on Taiwan's prosperity, so military action must be seen as a last resort. The election of Chen Shui-bian and the defeat of the long-dominant Nationalist Party are stern reminders to the CCP that its own future is highly uncertain.

The domestic tension created by Beijing's strategy of opening China's economy to the outside world while preventing meaningful political change has to be released sooner or later. The question is how far and how fast will China go toward creating a fully open society based on private property and limited government. Gradualism appears to have worked reasonably well so far, but the inefficiency of China's nonstate sector is apparent and corruption is rampant.

china's changing tide

Yet it is undeniable that a significant transformation has occurred in the post-Mao era. Slowly but surely China is moving toward a stronger civil society, with the driving force being the market-oriented reforms initiated by Deng Xiaoping. Chinese intellectuals are now reading Hayek and Friedman rather than Marx and Engels. Whether China will go all the way toward a true free-market system, though, remains highly uncertain.

That uncertainty is why the US needs a clear, realistic and prudent foreign policy toward the PRC. Instead of painting China as a serious threat one day and as a de facto strategic ally the next, the US needs to formulate a balanced view consistent with our own principles -- one that recognizes our long-term interest in engaging China while at the same time protecting our national security. The PRC's claims to the South China Sea islands and its relations with Japan and Taiwan must be reviewed from that perspective.

It is also important to consider the future of economic, political, and social reform in China and how that future may be shaped by the liberal influence of Hong Kong and Taiwan. Will freedom from those sources spill over to the mainland or will Chinese communism slowly corrupt the rule of law and weaken the free market in Hong Kong and seek to absorb and subordinate Taiwan? It seems clear that without privatizing state-owned enterprises, China faces continuing problems of corruption and inefficiency. But wholesale privatization would undermine the last vestiges of party power. So the challenge for China's leadership is stark.

Ultimately, the creation of real as opposed to pseudo markets in China will require the full recognition of private property rights. The recent amendment to the PRC constitution, which places the nonstate sector and private enterprise on a par with state-owned enterprises, is a step in that direction. But without further constitutional and political reform that places rights to life, liberty, and property above the party, and allows for both economic and political freedom, there can be no certainty of ownership.

That is why it is so important for China to face foreign economic competition and to be exposed to new ideas. Every step in the direction of greater economic freedom will provide further opportunities for the Chinese people to enlarge their private space and shrink the relative size of the state. Pressures will then build for greater social and political freedom.

Toward a workable policy

As William McGurn of the Wall Street Journal points out: "The changes we see in China are real -- not because its leaders want such change but because those openings they have created constitute cracks in a system that people are quick to exploit. In the grossest terms, the bankruptcy of the socialist system, as much as real market openings, means that much of what was once provided by the state -- housing, health care, retirement, livelihood -- has become something the Chinese people are doing for themselves. It is inconceivable that even on this level such a shift would be without social and political consequences."

To agree with McGurn's conclusion does not mean that we should ignore the human rights abuses committed by the Beijing regime. But cutting off -- or even limiting -- trade with China in the hope of improving human rights would be self-defeating. Isolating China would strengthen the party and the state while harming the nascent market sector and reducing economic freedom. If free trade is restricted, the probability of conflict between the PRC and the US will also increase. The US should do everything in its power to expand contacts with the Middle Kingdom and push for liberal reforms.

The best concise answer to the question of whether China will be a constructive partner or an emerging threat in the early 21st century was given to us by an independent scholar in Beijing. In his view, the answer will "depend, to a very great extent, on the fate of liberalism in China: a liberal China will be a constructive partner; a nationalistic and authoritarian China will be an emerging threat." America must prepare for both possibilities, but its policies should avoid needless snubs and provocations that would undermine the prospect for the emergence of a democratic, peaceful China.

Ted Galen Carpenter and James A. Dorn are scholars at the Cato Institute and the editors of the forthcoming book, China's Future: Constructive Partner or Emerging Threat?
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