on china's economic war with the us, page-2

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    August 3 2003

    Two wary lions try to find solutions, writes Graham Barrett.

    In one of the most important and encouraging trends of our time, China is beginning to emerge from its Middle Kingdom inwardness to develop a role as a global power with an acceptance of the responsibilities that such status entails.

    A key aspect of this shift, from which Australia can only benefit as John Howard prepares to visit China later this month, is a growing understanding between Beijing and Washington. It is an unlikely pact, given that each power possesses a belief in its own superiority and correctness.

    But from every crisis comes an opportunity, as the Chinese say. The opportunity in this case arose from the events of September 11 and Beijing's calculation that it could benefit from empathising with Washington in its hour of panic.

    Things might have been different had September 11 passed just like any other day. Until al-Qaeda overhauled his world view, George Bush and China seemed intent on regarding each other as the leading international threat.

    Today, two years after the United States spy plane affair, bilateral relations are - if not trouble-free - as good as they have been since the Nixon-Kissinger breakthrough.

    A list of shared interests is growing, encouraging the two powers to work together despite United States Congressional resentment over a bilateral trade imbalance. The North Korean crisis is the big test, with Beijing and Washington (and Australia) co-operating in the search for a diplomatic solution.

    China could probably rearrange the status quo in Pyongyang if it really wanted to. Kim Jong-il knows how dependent he is on Chinese oil and food, and that there are limits to Beijing's preference for maintaining a divided Korean peninsula with a compliant North.

    China is worried about the potential for nuclear proliferation in north-east Asia as a result of failing to end the North Korean alarm, with the risk that Kim Jong-il will provoke Japan, South Korea and Taiwan into going nuclear themselves. This, China would find highly destabilising and undesirable. So would the United States and Australia.

    Containment of another modern menace, Islamic terrorism, is another shared obsession as Beijing seeks compliance among its restive Muslims in Xinjiang, which borders the unstable "-stans" of Central Asia. It may be an excuse to legitimise internal repression, with the US muting its concern for human rights in return for Chinese co-operation.

    China has played the Iraq issue in a similarly savvy way, eschewing the French and Russian threats to veto a US request for Security Council backing on the invasion and suggesting that it would abstain instead. A cheaper and more reliable flow of oil to China's hungry economy is now to Beijing's advantage.

    Stability is, after all, the top priority in Beijing as it seeks to keep 1.3 billion people under control at a time of huge internal pressures. Only two things stand a chance of holding China together in the years ahead. One is the threat of force - truly a last resort given the enormous damage that another Tiananmen Square massacre would do. The other option is to maintain China's hectic rate of economic growth, which would help to meet all those rising expectations through jobs, profits, foreign direct investment and trade. And for high growth, China needs stability, which in turn means the preservation of a good working relationship with the US.

    After all, the point on which the two countries share the most interest is in the desire to make money, as China acknowledged in signing up to World Trade Organisation conventions. It is too reliant on Western trade and capital to jeopardise its future.

    This is why it is so significant that Taiwan, biggest potential trigger for hostilities between Beijing and Washington, is now steadily increasing its already big investments on the mainland in what is becoming a de facto blending of the two economies that may in time lead to a political accommodation.

    Both powers are relieved at this trend. Yet mutual suspicions persist. China still fears encirclement. The new "fourth leadership" in Beijing is easing itself in, learning from the SARS fiasco that relations with the world must be managed responsibly if China's interests are to be protected. Its sophisticated approach to the Hong Kong demonstrations is a sign of this new maturity.

    Adjusting to the speed of being part of the wider world is stressful given that the Chinese take a longer view of history than Westerners. Self-interest will continue to motivate the foreign policies of China and the US, and there will be times when these diverge.

    In 20 years or so, China will overtake Japan to become second only to the US among world economic powers, with a commensurate military capacity. By that time, we will know whether it has succeeded in that most devilish of tasks: managing the political expectations that are a by-product of economic reform.

    Graham Barrett was the external affairs adviser for East Asia and the Pacific at the World Bank 1995-2003 and is a former foreign editor and foreign correspondent of The Age.
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