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America & China (Int'l Edition)


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AMERICA & CHINA (int'l edition)

Deck: Washington wants a fresh start with Beijing--and the timing couldn't

be better for a breakthrough

The date is sometime not too far into the next millennium. China's $2 trillion economy is still chugging along, growing by 8% a year. Its days as a runaway export machine are fading, and a new consumer class is starting to give a lift to economies nearby and across the globe. While there's still an authoritarian edge to domestic politics, the Communist Party's absolute rule has softened. And China's leaders are eager to work with the U.S. and Japan to keep Asia stable. China is a superpower, but rather than being angry and threatening, it is at ease and working comfortably with the rest of the world.

The scenario may sound utopian, but it's the prize U.S. policymakers have in mind as they prepare for the first visit by a top Chinese leader since 1985. Today, no one has any illusions that the vast differences in everything from culture to commerce that separate the two Pacific powers can be bridged overnight. But as Presidents Bill Clinton and Jiang Zemin sit down in the White House on Oct. 29, U.S. policymakers realize that they must aim for ambitious progress across a broad front of issues.

Throughout the 20th century, dominant nations struggled, often with disastrous consequences, to cope with the rise of new powers such as Germany, Japan, and the Soviet Union. Now the U.S. confronts the same challenge with China. "This is the defining issue for American interests in the next century," says James J. Przystup, director of the Asian Studies Center at the Heritage Foundation.

NEW GAME. Building a new framework of relations with China overshadows in significance other foreign policy issues such as NATO enlargement. President Clinton is finally consigning the West's policy of containing communism in Asia to the history books. It was a policy forged in the cauldron of the 1949 communist takeover of China and the Korean War that followed. President Richard M. Nixon's overtures to China in 1972 were intended to put pressure on Russia. But now the process he set in motion is gaining a sense of urgency as China's economic and geopolitical might becomes apparent.

Washington wants to make a fresh start with Jiang's China. An essential part of the new game is a firm embrace of the Middle Kingdom. "If we treat China as an enemy, we'll make China an enemy," warns White House National Security Adviser Samuel R. Berger.

The timing for a breakthrough in relations couldn't be better. This summer's handover of Hong Kong went smoothly and China is respecting its commitments there. Sweeping reforms in China announced recently, from privatization of state-run companies to further tariff cuts and currency liberalization, have narrowed the ideological divide over economics. Political dissidence is still not tolerated. But freedom of movement and freedom of enterprise--two key building blocks for a prosperous and politically engaged middle class--are greater than ever.

China is eager to join the world community as a full member. The U.S., as gatekeeper, has a lot of potential leverage. Already, China's need for legal and management expertise--as well as for services and consumer goods to satisfy a growing number of well-off urban dwellers--is enhancing the role of the U.S. inside China (page 20).

The core of Washington's strategy is to entice Beijing to accept the rules of international institutions, such as the World Trade Organization (WTO). In return, the Chinese will get permanent market access to the West and enormous international prestige. World bodies will also put pressure on China to respect global norms of behavior in areas as diverse as trade, weapons proliferation, and human rights. But China won't lose face by having to kowtow to Washington. The aim, says Robert Kagan, a senior fellow at the Carnegie Endowment for International Peace, is to "tie them up with strands around Gulliver and rope them into the international system."

The Chinese have plenty to gain from better links with the U.S. China requires increasing amounts of global capital, technological expertise, and managerial knowhow as it upgrades its economy. Besides, it needs the U.S. market, which absorbs over 30% of China's exports, and wants assured preferential access through permanent most-favored-nation status. Jiang stands to benefit personally, too. His stature as a statesman will rise at home if he can manage a smooth relationship with China's powerful Pacific rival.

GODZILLA. The payoff could be enormous. China's opening and reforms have changed the balance of world economic power in a few short years. Corporate chieftains from Paris to Tokyo have staked their own growth strategies on China's continued success. The U.S. nuclear industry, for instance, figures it alone could sell $60 billion of plants to China in the next 20 years.

But if China hews to Asia's export-led growth model exclusively, it could become a Godzilla that roils the world economy. As it quickly moves into medium-technology products such as autos and chemicals, its capacity for creating global economic mayhem increases exponentially. It could spark global price wars and deflation if it pursues beggar-thy-neighbor policies. "If they are going to build walls of protections around important sectors of their economy, they are not going to get into the WTO, and at some point, there will be a reaction from other members of the world trading system," warns U.S. Ambassador James R. Sasser.

Security is another area in which U.S. engagement will be tested. Many top Chinese officials argue that with China's emergence, the U.S. no longer has any policing role in Asia. If the Chinese start to act on that belief, tension levels will shoot up, perhaps setting the region up for an armed conflict. Japan recently signed a new security treaty with the U.S., which unnerved China. "We are three giant elephants," says Japan's Foreign Ministry spokesman, Nobuaki Tanaka. "If we fight, the ground will be destroyed."

Domestic politics in both countries heighten the tensions. "Neither Clinton nor Jiang is in an easy position," says Yuan Ming, director of Peking University's Institute of International Relations. Clinton faces a diverse coalition of labor, human rights, and anticommunist groups opposed to engagement with China. Their growing clout is reflected in a raft of bills, introduced in Congress, aimed at punishing Beijing for everything from religious persecution to arms sales to Iran. Even Hollywood is operating on the collective psyche by demonizing China in a slew of new films (box). Indeed, some Administration officials fear that the 25-year-old consensus to move toward engaging China is fracturing as the gap between Congress and the White House widens.

A possible wild card in Washington's China policy is the business community. It has been a huge booster for engagement, pushing relentlessly for better relations. But now it wants some serious concessions from the Chinese. It's pressing Washington to demand greater protection of intellectual property and fair treatment in China's courts. Many in business are troubled by continuing weak profits in China, despite billions in investments. "The problem operating in an emerging market is that you don't have the same kind of legal system and the same kind of banking system," says Jack Perkowski, chairman of Asimco, a U.S. firm that invests in Chinese manufacturers. "We're playing an away game."

Back home, Jiang is under similar pressure from rivals not to cave in to the U.S. Plenty of Chinese in the military and government still don't want to cozy up with a superpower that they believe wants to contain China. "Some people at home don't like the strategic dialogue," says Yuan.

There is also resistance to further fast economic liberalization in China. New Chinese foreign-investment guidelines are now being drafted with an eye to helping Chinese companies that feel under siege from new competition. So the guidelines may turn out to be more protectionist, not less as outsiders had hoped. And China is taking a hard line on U.S. demands to open financial services and telecommunications markets. "There doesn't seem to be any intent by the government to open these sectors," laments Anne Stevenson-Yang, director of China operations at the U.S.-China Business Council. "There is a sense of battering against a brick wall here."

RIG THE RULES. There are frustrations on both sides. China wants the global system to accept its special needs and allow it plenty of time to adjust. It wants to be subjected to less stringent rules by the WTO. Washington objects to that, arguing that China is already a big economy that is running a $50 billion trade surplus with the U.S. alone. Besides, the state sector is so huge that Beijing can still rig the rules over important issues such as dumping. So granting China's wishes would give it an unfair advantage on world markets.

Matters would be much simpler if China were just another Japan in the making: an Asian trader that will continue to run huge trade surpluses long after it becomes an advanced economy. But China is not a problem that can be managed solely through the WTO. Unlike Japan, which was happy to remain a strategic minnow, China views itself as a rising political power with its own global interests.

The long-run implication is that the U.S. will have to work with China not only as an economic force but as a vital player on the world political stage. The White House summit conveys a very public acknowledgment of China's power to shape events. China and the U.S. have recently worked together to persuade North Korea to end its nuclear-weapons program. At the United Nations, China has cooperated on all the peacekeeping issues that the U.S. has raised. Both the U.S. and China have actively reduced tension levels in the Taiwan Strait.

Yet it's true that Sino-U.S. relations have made some of their biggest gains when prospects seemed bleakest. Nixon first went to China at the peak of the Cultural Revolution. Ronald Reagan visited China after local bishops were arrested. And George Bush sent an emissary to Beijing to keep the relationship alive after the Tiananmen Square massacre.

Relations with China under Clinton have been similarly rocky. Unproved allegations of illegal Chinese campaign contributions have made the U.S. suspect Chinese motives. Last year, relations hit rock bottom when the Administration allowed Taiwan President Lee Teng-hui to visit the U.S. The U.S. and China approached the brink in March, 1996, when China lobbed missiles near Taiwan. Washington sent aircraft carriers to the Taiwan Strait. The Administration assuaged Beijing by reaffirming its one-China policy and urging Taipei not to be provocative. But the issue could erupt at any time--for example, if the U.S. sells Taipei an anti-missile defense system, as some lawmakers in Washington want.

It may take a generation to determine whether China will turn out to be the benign global citizen its friends hope--or the rogue state its critics fear. The U.S. can only influence, not determine, the path this giant nation will take. It's up to the leadership in Beijing to determine whether the Middle Kingdom will continue to live in its own realm or embrace the rules that govern the rest of the world.By Stan Crock in Washington, Dexter Roberts in Beijing, and Joyce Barnathan in Hong Kong, with Paul Magnusson in Washington, Emily Thornton in Tokyo and bureau reportsReturn to top


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