Hongkong:  The deterioration of US-China relations may be more due to a change in  emotions  than of national self-interest, but it complicates the region and may mean important policy choices for  Asian countries which could be avoided when the relationship blossomed.

by Philip Bowring

How serious will be the regional fall-out of US-China
antagonism? The question cannot be answered but has to be

China-US relations have begun to stabilise after the Belgrade
embassy bombing, the Cox report on alleged Chinese spying and
the 10th anniversary of the Tiananmen suppression. Peace in
Kosovo would help too, if only by ending President Jiang's
curious attempt to play international statesman via implicit
support for President Milosevic.

Nonetheless, there is no denying that there has been a
fundamental change in public attitudes on both sides. Indeed,
Cox and Yugoslavia seem to be more symptoms than cause of the
deterioration of relations since the nominal high point of
President Clinton's China visit a year ago.

The change has more to do with emotions and perceptions than
any substantive shift in the interests of either country.
China's priority remains the modernisation of its economy and
institutions. After that comes building up its military
capability so as to be treated seriously as a global, nuclear
strategic player, and able to project its conventional forces
in the region.

The US interest, at least as understood in the White House,
lies in promoting the emergence of a free market, trading
economy in China, evolving into a liberal democracy. It also
involves cooperating with China in maintaining east Asian
stability -- especially on the Korean peninsula -- within the
context of the regional supremacy of the US and its ally,

But both sides tend to overreact. The US has long exaggerated
the potential (for itself) of the China market and of the
prospects for Jeffersonian democracy. As a result it poured
money into China and gave it astonishing -- and largely
unreciprocated -- access not just for goods but for arms and
technoloy too. Now the worm has turned. China is seen as a
threat to US assumptions of hegemony, and as a cynical
exploiter of trade and scientific access.

Meanwhile in Beijing a perverse and singularly anti-American
picture of events in Yugoslavia, to which the embassy bombing
gave some credence, have become a rallying point for
nationalist emotion designed as a smokescreen for the lies
about June 4.

Almost no one in east Asia is happy about this turn in US-
China relations. Take Taiwan, which in theory should be
enjoying the discomforture of Beijing. US sympathy for its
cause has risen. Congress wants to enhance the Taiwan
Relations Act via mandated arms sales, training and even overt
defence links. Some of this will rub off in terms of defence
procurement whatever Beijing says. But Taipei is concerned
about the fate of WTO membership, which it views as important
not just for Taiwan's economy, and its mainland investments,
but for the path of reform itself. Nationalist sentiment
towards the US quickly translates into heigtened emotion over
Taiwan, whose separatist aspirations can be laid at the door
of US imperialism.

If WTO cannot get through this year, as now seems likely, it
faces enhanced hazards for the next two years -- the US
elections and the likelihood that the US economy will finally
go into recession, when non-members of WTO would be especially
vulnerable to protectionist sentiment. China of course is top
of the list because of the size of its trade surplus, which is
all the more worrying for reformers in Beijing who know that
fully one third of all exports now end up in the US.

A US recession will underline for all of Asia the importance
of developing regional trade and boosting domestic demand.
However, a China outside WTO is unlikely to push ahead with
import liberalisation. Meanwhile the jury is out on trade
liberalisation elsehwere in the region. IMF strongarm tactics
have help open up some markets (eg Korea) but ASEAN free trade
goals are -- despite rhetoric to the contrary -- being
gradually eroded as industries seek "exceptional" protection
from regional overcapacity.

The rest of Asia is unlikely to welcome any attempt by China
to move into their markets if the US one gets difficult. There
is too much export competition already.
Indeed there could be a reversal of goodwill that China has
gained in the region from its "no devaluation" policy -- a
policy unlikely to survive beyond next year even if WTO is

In the long run, China can be an engine of growth for the
region. But only so long as it continues to liberalise, and
can be a complementary rather than merely competitive economy.

A more inward looking China resulting from WTO exclusion would
not only cause regional trade problems but inhibit overseas
Chinese investment in the mainland -- already much reduced by
the poor returns available. In theory, exclusion might lead to
Asian nations making bigger efforts to develop regional
alternatives to the global body. But that looks a long way
off, and would require much greater political cohesion than
the region seems capable of achieving.

Any weakening in US-east Asia ties, whether the result of
trade or political issues, will pose policy dilemmas for the
region. While US-China relations blossomed, it was easy for
the rest of the region to simultaneously develop their China
ties while increasing their defence ties with the US.
Sinagpore has been the leader in building on both ends of the
China-US axis.

The littoral states of the South China Sea will find policy
making even more difficult in the face of a China which could
become even more pushy than it is already. Do they try to
forge stronger alliances with the US and Japan? Or do they
accept that discretion is the better part of valour and
quietly acquiesce in China's de facto hegemony? Will new pro-
and anti-China states evolve as a new cold war, built around
local as well as US-China issues, erupts?

That may seem a bit far fetched. But there is no doubt that
old props of the China-US "strategic alliance" no longer exist
or are of declining significance. In particular, the Soviet
threat is no more. Though a decline in US-China ties will make
resolution of the Korean issue more difficult, the threat from
the North (despite Pyongyang's missile and nuclear potential)
has dwindled to the point that the need for a US ground
presence is debateable. 

Seoul is concerned about China-US strains. But China's
position in South Korea will grow because of trade and its
ability (limited though that is) to influence the North. Seoul
has already made much of its decision not to join the US/Japan
Theatre Missile Defence (TMD) project. In practice, TMD would
add almost nothing to the South's particular defence needs,
but not joing has won lavish praise from Beijing. Looking
ahead, Korea may seek to move its historic role of trying to
maintain a balance in relations between China and Japan (now
plus the US).

In sum, the US-China relationship has been a positive regional
catalyst for twenty years. Any sharp change in it would have a
knock-on effects which would be varied and unpredictable.
It would not be disasterous. The US military paramountcy will
remain for a long time. Economic revival in Japan may provide
a new boost to the region. And the continuing global market
success of the Taiwan and Korean technology-driven economies 
will continue to have a positive impact on southeast Asia. But
new circumstances will demand new solutions.





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