Challenging China

The West, the US especially, has got itself into a fretful mood over the rise of China. Quite unnecessarily so. The Chinese growth rate is slowing. As a BBC commentator said today, reviewing this week’s government-issued statistics, China never will hit double digit growth again. Glitzy Shanghai, Guangzhou, Chengdu and their like, where growth is still well over 10% a year, make up only a part of China’s economy.

Much of the country has an income per head more akin to Ecuador. Between 1978 and 2003, when economic growth was accelerating, China’s GNP grew by 340% over a quarter of a century, compared with Japan’s 490% between 1950 and 1973. South Korea and Taiwan have done even better. Moreover, now that India is back in the game after two bad years, I would expect it to hit double digit growth within two to three years and start to give China a run for its money over the next decade.

Whilst China will grapple with its paradox of being communist but capitalist, India, unencumbered by a lack of democracy and intellectual and press freedom, will emerge as the better environment of the two for long-term progress conducted within stable institutions.

Why do we fuss so much every time China seems to kick over the traces a little – as with its declaration a few weeks ago of an “air defence zone” over the South China Sea? Henry Kissinger observes that China historically doesn’t go in for conquest. It prefers what he calls “osmosis”. China seems to have no territorial ambitions beyond its current borders, apart from Taiwan, which is a special case. The ruling communist party is not by nature evangelical.

Besides, he adds, “dominating Asia militarily would be a formidable undertaking”. China today faces an increasingly economically and political powerful Russia in the north; Japan (the world’s third largest economy) and South Korea, with their American military alliances, to the east; Vietnam and India to the south; and Indonesia and Malaysia not far away. “This is not a constellation conducive to conquest.”

The interconnectedness of trade and finance is an anti-conflict potion. These days the flag has very little to do with trade. Trade follows price, quality and availability. How could China benefit from depriving America of iron ore or computers? How could the US benefit from depriving China of oil or as a haven for its vast savings? What spat over the ownership of contested islands in the South and East China seas would be worth a breakdown in such commerce?

Simply put, the highest priority for the US is for the Chinese economy to remain vibrant, growing and open to US, Japanese, South Korean and European business; and for its politics to remain non-nationalistic- which means not provoking it.

A new book “The China Choice” by Hugh White, an Australian professor of strategic studies, argues that the US has three options. It can try and preserve the status quo – primacy – and stand up to China as its muscles grow. Or it can step aside and allow China to get on with allowing China to establish a friendly and tolerant hegemony in its neighbourhood (but not by means of war).

Or it can allow China a larger role but also maintain a strong presence of its own. “Many people don’t think the third option exists”, he writes of the one he favours. And the US at times seems to be leaning towards the first (although President Barack Obama has said one thing and Hilary Clinton, when secretary of state, said another).

At present, as White observes, “The two powers are equally matched in their capacity to apply pressure on the other, but China has a clear edge on determination. They are equally matched on power because, while America can apply more political and diplomatic clout than China, China can apply more financial and economic pressure.” It would be counterproductive for the US to commit itself to rivalry with China as China conceding defeat would be almost unthinkable.

The US, in fact, has no recourse but to share power with China in Asia. Over the long run this will mean the US diluting a great deal of its political authority in Asia. It must be prepared to accept Chinese equality. America must shunt aside its long held policy of “exceptionalism”. If it wants China to follow the rules of the global community it must set a better example itself.

In recent years the US has conducted naval hydrographic operations in China’s Exclusive Economic Zone. It has conducted naval exercises near the Yellow Sea. This is not good. The US must ratify the UN’s Law of the Sea and obey it.

The US certainly doesn’t want a hot war with China. Nor should it allow itself to let matters slide into a Cold War. Peace with China is far more important than power over China.