The dragon comes calling

Sep 2nd 2005
From The Economist print edition

No bilateral relationship is more important than America's and China's. Yet as George Bush and Hu Jintao prepare to meet, it is in a fractious state

IN 1979 China's late leader, Deng Xiaoping, impressed many Americans by donning a Stetson at a rodeo in Texas. The impromptu gesture was taken as a sign that China was at last ditching Maoism and fervent anti-Americanism, including distaste for its “bourgeois” line in hats. America was to be its new friend in the cold war with the Soviet Union. In Washington next week, on his first visit since he took over as Communist Party chief in 2002, President Hu Jintao will try to convince Americans that China is still a friend and that its growing economic and military power is nothing to worry about. He will have a far tougher time of it.

Some of Mr Hu's handicaps are personal. Foreign affairs are still a bit of a maze to him, and he knew little of them before he assumed the leadership. Nor does he seem to have hit it off with President George Bush, though they have met several times elsewhere. He remains an enigmatic figure, with none of Deng's crowd-pleasing ways. Diplomats say he prefers to stick closely to his brief.

Relations, besides, are so tricky just now that the two sides cannot even agree on how to describe the visit. Rather than accept Mr Bush's invitation to hold informal talks at his ranch in Crawford, Texas, Mr Hu chose a more formal reception at the White House, presumably hoping it would boost his image as a statesman at home. But the Americans have refused to glorify the trip by calling it a “state visit”, the term Chinese officials use. Mr Hu will get a 21-gun salute, but not a state dinner in the evening. These niceties may sound inconsequential, but they send a clear signal that all is not well.

And the reasons are not hard to see. In recent months, China-bashers have emerged all across the American political spectrum. On the left, the unions think that China's harsh labour conditions are a form of unfair competition that destroys American jobs. On the right, defence hawks feel threatened by China's accelerating military build-up, not to mention its record of supplying arms to pariahs. Congress recently assumed that a Chinese bid for a middling American oil firm might mark the beginning of an attempt to “buy up America” and imperil its security. Mr Bush's Christian supporters look askance at an atheist dictatorship that persecutes Christians. And it would be hard to find an American who is not repelled by, for example, Chinese officials' habit of persecuting those who exceed birth quotas.

As China sees it, America's current Sinophobia is beginning to rival its preoccupation with terrorism. Bush administration hawks who had fallen silent on China—of whom the defence secretary, Donald Rumsfeld, looms largest in Chinese minds—are beginning to take up the cudgels again. China now frets that its professed willingness to help fight global terrorism and resolve the nuclear crisis in North Korea is of limited value in keeping Americans happy. America's trade deficit with China, which has almost doubled in the past four years (see chart below), has compounded the problem. China's fear is that tensions could grow, jeopardising its access to its biggest overseas market and fuelling military rivalry, too. Small wonder that Mr Hu will not be treated to White House consommé and crystalware.

The great free-trade war

On the trade front, the two countries' interests are mostly identical. Both would benefit from free trade. But China exports six times as much to America as it imports from it. After many years of American hammering for better access to China's market, it is now the Chinese who are on the free-trade offensive.

Talks in Beijing this week between American and Chinese officials produced no progress in their dispute over a massive surge in China's textile exports to America. On Thursday September 1st, America decided to restrict imports of Chinese-made bras and some synthetic fabrics. Chinese textile imports have risen by 97% in the six months since quotas were lifted, in January. An editorial this week in the official China Daily newspaper declared that America's textile industry, instead of seeking protectionist measures, should instead embrace “restructuring”—for which read the further migration of manufacturing to countries such as China.

Many Americans assume that the Chinese are not playing fair. In fact, China's economy is relatively open by developing-country standards. For a long time, the yuan was undervalued in what seemed, to American officials, a deliberate attempt by China to make its exports more competitive. After persistent complaints from both America and Europe, China adjusted its currency-exchange policy in July, allowing the yuan to strengthen by 2%. But the adjustment is still too small to make much of a dent in the deficit, and the Americans want more. Minxin Pei of the Carnegie Endowment for International Peace, a think-tank, predicts that “things will get ugly next year”. And although Mr Hu will ask Mr Bush to treat China as a market economy under American trade law, which would make it harder to slap anti-dumping measures on Chinese goods, his request is unlikely to be granted.

There are some brighter spots. In Seattle, where Mr Hu is due to meet business leaders, there will be praise for China's confirmation in August of a $5 billion order for 42 Boeing 787 Dreamliner jets. This was a big show of support for the new model, which is being made in Seattle and is seen by Boeing as crucial to the company's future development. But China's common tactic of winning friends abroad with aircraft orders will not impress America's disgruntled workers, at least outside the north-west.

Another hot economic issue is China's galloping demand for energy, which is one reason why oil prices are so high. (The other big one is American demand.) Because petrol is so lightly taxed in America, motorists there are hurt more by oil-price rises. They want someone to blame, and they may have heard that China is scouring the world to lock up oil supplies for its own “energy security”.

In June, CNOOC, a Chinese state-controlled corporation, tried to buy Unocal, a mid-sized American oil firm. Security hawks were horrified that such a strategic asset might fall into potentially hostile hands. So were 73% of the American public, according to one poll, and the House of Representatives, which voted 398 to 15 to urge a presidential “review” of the bid. CNOOC took the hint and withdrew.

Free-traders were outraged. James Dorn of the Cato Institute, a libertarian think-tank, scoffed at the idea that the bid for Unocal, whose American oil wells account for only 1% of American consumption, might affect national security. Others noted that China might reasonably conclude from the episode that it cannot rely on global trade rules to secure its energy supplies, and should look instead to mercantilist or even military means to do so. Mr Bush will try to convince Mr Hu that this is not true, but Congress has undermined his case.

General Zhu's bombshell

American defence planners also view China's rise with apprehension. Here is a nasty authoritarian regime with a rapidly modernising army far larger than its defensive needs require. As China gets richer, it can pay for more and smarter weapons, some of the scariest of which (more than 700 short-range ballistic missiles) it is placing near the Taiwan strait. A recent Pentagon review noted that “China does not now face a direct threat from another nation. Yet, it continues to invest heavily in its military, particularly in programmes designed to improve power projection.” The review added that current trends in military modernisation could pose “a credible threat to modern militaries operating in the region”. Such as America's.

A flurry of books and magazine articles boast titles such as “China: The Gathering Threat” and “How We Would Fight China”. Several weeks ago, a Chinese general, Zhu Chenghu, threatened that China would lob nuclear weapons at “hundreds” of American cities if the two countries came to blows over Taiwan. Chinese generals often make such incendiary remarks, and are rarely punished for it.

In fact, war between China and America is neither imminent nor likely. General Zhu's nuclear bombshell does not reflect official policy, as the Chinese foreign ministry stressed shortly after he dropped it. Tensions over Taiwan have cooled since last December's legislative elections there, and Mr Bush will reassure Mr Hu that America still has a “one China” policy. But America is also committed to helping Taiwan defend itself if it is attacked by the mainland, and China this week issued a warning that “relevant countries” should not think of protecting Taiwan with a missile-defence system. Mr Hu and other Chinese leaders believe that stronger Chinese armed forces, with a capability to attack American forces if necessary, are essential to deterring Taiwan from moving to formal independence.

Both sides, wary of the other's strength, are seeking to strengthen regional alliances: America by schmoozing India and persuading Japan to be more assertive, China by cosying up to Russia and the Central Asian states.

In August, Russia and China staged their first joint military manoeuvres. They strenuously denied that these were aimed at any third country, and tactfully called the 10,000-man exercise in eastern China an anti-terrorist operation. But it is hard to believe that a message to America was not implied. Both countries are members of the Shanghai Co-operation Organisation, a grouping of Central Asian nations that both China and Russia have been nurturing (with limited success) as a counterbalance to America's influence in the region.

The Americans are unlikely to be unduly worried. They know that Russia has its own anxieties about China's rising power, and that China and Russia both regard their ties with America as considerably more important than China-Russia relations. More disturbing to the Americans are Russia's efforts to profit from China's demand for sophisticated arms. Russia is China's biggest foreign arms supplier. At the recent exercises it deployed strategic bombers, which military experts say China would like to buy as part of its preparations for possible conflict with America over Taiwan.

America and China are in harmony on one subject: both agree that North Korea is a menace. The two governments are working together to try to persuade Kim Jong Il, the North Korean despot, to give up the nuclear weapons that he claims—and most observers believe—he has. An American official close to the stop-go six-party talks (including America, China, both Koreas, Russia and Japan) on this issue says that China has been “very helpful”.

But China and America have different priorities. For America, disarming North Korea is the top goal. For China, that comes second to making sure that North Korea does not collapse and unleash even more refugees into China than it has already done. This is perhaps why the government in Beijing has not used all the levers at its disposal. Although it could shut off North Korea's oil supplies, it has only done so once, for three days in 2003.

Almost every aspect of Sino-American relations is complicated by the fact that only one of the two powers is a democracy. To take a small example, America is holding a handful of Uighurs it captured in Afghanistan. It wants to release them, but cannot hand them over to China. The Uighurs, Muslim separatists in the far western province of Xinjiang, are often involved in violence against the Chinese state. Chinese officials are already furious about the establishment last year in America of a Uighur government-in-exile. For all these reasons, as well as China's rickety justice system, there is no hope that the Uighur prisoners would get a fair trial there.

Mr Hu is not about to give ground on any human-rights issues. He has shown no eagerness to promote political reforms at a time of growing social turbulence caused by rapid economic change. Chinese officials have accused the Americans of instigating the revolutions in Georgia, Ukraine and, most worryingly for China, neighbouring Kirgizstan during the past two years. Mr Hu will dismiss out of hand any suggestion by his American hosts that China should embrace democracy too.

Since last year, China has refused to talk to America about human rights, in protest against America's decision to sponsor an abortive attempt to have China censured at the UN Human Rights Commission in Geneva. In December China's top policeman, Zhou Yongkang, gave warning of growing social unrest and urged police officers to put a stop to any organised dissent. He accused foreign religious groups, including American Christians, of stepping up their activities in China, including a “new trend” of “infiltrating” universities and government departments.

China doubtless feels secure in its belief that the Bush administration, like others before it, will not allow human rights to make or break the relationship. To defuse tensions over this and the host of other contentious issues, Mr Hu is likely to use his public appearances—including a speech at Mr Bush's alma mater, Yale—to put a positive spin on the relationship. The message, according to a Chinese diplomat, will be that “China is a force for peace and that China's development is peaceful in nature”. Such protestations will be greeted with scepticism.

Grounds for hope

The biggest danger to the relationship is not so much the lack of warmth between Mr Bush and Mr Hu. Both governments, despite misgivings about each other's policies, appear to recognise that they have enormous stakes in each other's continuing prosperity. Reluctant though it is to say so publicly, China even sees certain benefits in a Pax Americana, particularly in north-east Asia, where it worries about a resurgence of Japanese military power if the Americans retreat.

But China's economic rise has been accompanied by the growth of an increasingly vocal, occasionally virulent, nationalism. Mr Hu sometimes feels obliged to make concessions to this, as when the leadership tolerated, for a time, the widespread anti-Japanese protests earlier this year. The control of China by an authoritarian and secretive Communist Party (attributes which Mr Hu unwisely fosters) fuels this xenophobia in China, as well as American wariness.

Chinese officials, confused by the change of American mood from the rodeo-and-Stetson days, like to see the problem as one of presentation. During a visit to America in 2003, China's prime minister, Wen Jiabao, used the term “peaceful rise” to describe China's growth. But Chinese leaders later backed away from the phrase. Hardliners felt it limited China's options for handling Taiwan, and liberals felt that even the word “rise” was too provocative. Jia Qingguo of Peking University says both governments need to encourage positive thinking among their publics. But he cautions that “China can only do so much. Americans have to reassure themselves.”

How might they do so? In the long term, there are three reasons why the “China threat” may be overstated. One is that, unlike the American government, Osama bin Laden or the old Soviet Union, China's ruling party is not trying to spread an ideology. It has none to spread.

In a narrow sense, of course, it offers a rival to the American-sponsored liberal-democratic model; China has shown that a country can prosper, at least in the short term, by allowing economic freedom but not the political sort. And its needs for energy and raw materials can prompt it, Soviet-style, to back pariah states such as Sudan and Iran. But for all the talk of revolutionary solidarity, China's leaders recently decided not to extend a regime-saving loan package to Zimbabwe's tyrant, Robert Mugabe, for the pragmatic reason that he has a terrible credit history.

The second reason for calm is that, as Adam Segal of the Council on Foreign Relations puts it, China's economic reforms may spur democratic ones. There is plenty of domestic pressure for change, though only at low levels: the Chinese government counted 74,000 protests last year, mostly against local misrule. A more democratic China might not be nicer: it could be unpleasantly nationalist. “Ultimately China will find its own way politically,” says a senior American official. “How it does so will depend in part on how we shape them. The consensus is we need to be engaged. We want them to grow in a rules-based way.”

The third reason not to panic is that China's economic explosion cannot continue for ever, not least because the one-child policy has probably doomed China to grow old before it gets rich. A hard landing for the Chinese economy would harm the rest of the world in many ways, but it would ease fears that the next superpower will be a dictatorship.

America has agonised before over the emergence of an Asian rival whose unfair trade practices, gluttony for raw materials and ruthless nationalism were thrusting the two countries towards a collision. That was the argument of “The Coming War with Japan”, a book that was taken seriously when it was published in 1991. The unstoppable Japanese economic juggernaut, you may recall, stalled around the time “The Coming War” came out. In a decade or two, will the widespread current fear of China seem as laughable as the Japanophobia of yore?

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