Friend or foe?A special report on China’s place in the world December 4th 2010

ChinaCOV.indd 1 23/11/2010 15:55

The Economist December 4th 2010 A special report on China’s place in the world 1

China insists that its growing military and diplomatic clout pose nothreat. The rest of the world, and particularly America, is not so sure,says Edward Carr

years of colonial humiliation.Taken like that, the parable of Goujian

sums up what some people nd alarmingabout China’s rise as a superpower today.Ever since Deng Xiaoping set about re-forming the economy in 1978, China hastalked peace. Still militarily and economi-cally too weak to challenge America, it hasconcentrated on getting richer. Even as Chi-na has grown in power and rebuilt itsarmed forces, the West and Japan have runup debts and sold it their technology. Chi-na has been patient, but the day when itcan once again start to impose its will isdrawing near.

However, Goujian’s story has anotherreading, too. Paul Cohen, a Harvard schol-ar who has written about the king, ex-plains that the Chinese today see him as anexample of perseverance and dedication.Students are told that if they want to suc-ceed they must be like King Goujian, sleep-ing on brushwood and tasting gallthatgreat accomplishments come only withsacrice and unyielding purpose. ThisGoujian represents self-improvement anddedication, not revenge.

Which Goujian will 21st-century Chinafollow? Will it broadly t in with the West-ern world, as a place where people wantnothing more than a chance to succeedand enjoy the rewards of their hard work?Or, as its wealth and power begin to over-shadow all but the United States, will Chi-na become a threatan angry country set

Brushwood and gall

IN 492BC, at the end of the Spring andAutumn period in Chinese history,Goujian, the king of Yue in modern Zhe-jiang, was taken prisoner after a disastrouscampaign against King Fuchai, his neigh-bour to the north. Goujian was put to workin the royal stables where he bore his cap-tivity with such dignity that he graduallywon Fuchai’s respect. After a few years Fu-chai let him return home as his vassal.

Goujian never forgot his humiliation.He slept on brushwood and hung a gallbladder in his room, licking it daily to feedhis appetite for revenge. Yue appeared loy-al, but its gifts of craftsmen and timbertempted Fuchai to build palaces and tow-ers even though the extravagance en-snared him in debt. Goujian distracted himwith Yue’s most beautiful women, bribedhis ocials and bought enough grain toempty his granaries. Meanwhile, as Fu-chai’s kingdom declined, Yue grew richand raised a new army.

Goujian bided his time for eight longyears. By 482BC, condent of his superior-ity, he set o north with almost 50,000warriors. Over several campaigns they putFuchai and his kingdom to the sword.

The king who slept on brushwood andtasted gall is as familiar to Chinese as KingAlfred and his cakes are to Britons, orGeorge Washington and the cherry tree areto Americans. In the early 20th century hebecame a symbol of resistance against thetreaty ports, foreign concessions and the

An audio interview with the author is at

Economist.com/audiovideo/specialreports

A list of sources is at

Economist.com/specialreports

The fourth modernisationChina is becoming a military force to reckonwith in the western Pacic. How shouldAmerica respond? Page 4

Less biding and hidingChina is becoming more nationalistic andmore assertive. How will other countriesreact? Page 6

In the balanceTheir wealth depends on China, their security on America. Which way should Asiancountries face? Page 9

Friends, or elseLiving with China’s rise will test America’sdiplomacy as never before. Page 11

Strategic reassuranceMany things could worsen relations betweenChina and America. Here are ten ways tomake them better. Page 13

Also in this section

AcknowledgmentsMany people helped with this special report. The authorwould especially like to mention: Rob Ayson, Chen Zhimin,Jae Ho Chung, Malcolm Cook, Admiral William Fallon, KimFam, Andrew Ferrier, Charles Finny, Charles Freeman, PaulGebhard, Richard Grant, Andrew Krepinevich, MichaelL’Estrange, Ma Jiali, Jim McGinlay, Russell Moses,Craggy Ridge, Admiral Gary Roughead, DavidShambaugh, Robert Sutter, Hitoshi Tanaka, TomohikoTaniguchi, Jitsuro Terashima, William Tow, GeneralNoboru Yamaguchi and Zhu Feng.

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2 A special report on China’s place in the world The Economist December 4th 2010

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on avenging past wrongs and forcing oth-ers to bend to its will? China’s choice ofrole, says Jim Steinberg, America’s deputysecretary of state, is the great question ofour time. The peace and prosperity of theworld depends on which path it takes.

Some people argue that China is nowtoo enmeshed in globalisation to put theworld economy in jeopardy through waror coercion. Trade has brought prosperity.China buys raw materials and compo-nents from abroad and sells its wares inforeign markets. It holds $2.6 trillion of for-eign-exchange reserves. Why should it pulldown the system that has served it so well?

But that is too sanguine. In the past inte-gration has sometimes gone before cona-gration. Europe went up in ames in 1914even though Germany was Britain’s sec-ond-largest export market and Britain wasGermany’s largest. Japan got rich and fellin with the European powers before it bru-tally set about colonising Asia.

Others go to the opposite extreme, argu-ing that China and America are con-demned to be enemies. Ever since Spartaled the Peloponnesian League against Ath-ens, they say, declining powers have failedto give way fast enough to satisfy risingpowers. As China’s economic and militarystrength increase, so will its sense of enti-tlement and its ambition. In the end pa-tience will run out, because America willnot willingly surrender leadership.

Reasons for optimismBut that is too bleak. China clings to its ter-ritorial claimsover Taiwan, the SouthChina Sea, various islands and with India.Yet, unlike the great powers before 1945,China is not looking for new colonies. Andunlike the Soviet Union, China does nothave an ideology to export. In fact, Ameri-ca’s liberal idealism is far more potent thantoken Communism, warmed-up Confu-cianism or anything else that China has tooer. When two countries have nuclearweapons, a war may not be worth ghting.

In the real world the dealings betweenrising and declining powers are notstraightforward. Twice Britain feared thatcontinental Europe would be dominatedby an expansionary Germany and twice itwent to war. Yet when America took worldleadership from Britain, the two remainedconstant allies. After the second world warJapan and Germany rose from the ashes tobecome the world’s second- and third-larg-est economies, without a whisper of a po-litical challenge to the United States.

International-relations theorists havedevoted much thought to the passing of

empires. The insight of power-transitiontheory is that satised powers, such aspost-war Germany and Japan, do not chal-lenge the world order when they rise. Butdissatised ones, such as pre-war Ger-many and Japan, conclude that the systemshaped and maintained by the incumbentpowers is rigged against them. In the anar-chic arena of geopolitics they believe thatthey will be denied what is rightfully theirsunless they enforce their claim.

So for most of the past decade the twogreat powers edged towards what DavidLampton, a professor at Johns HopkinsSchool of Advanced International Studies,calls a double wager. China would broadlyfall in with America’s post-war order, bet-ting that the rest of the world, eager for Chi-na’s help and its markets, would allow it togrow richer and more powerful. Americawould not seek to prevent this rise, bettingthat prosperity would eventually turn Chi-na into one of the system’s supportersaresponsible stakeholder in the languageof Robert Zoellick, a deputy secretary ofstate under George Bush junior and nowpresident of the World Bank.

For much of the past decade, barringthe odd ti, the wager worked. Before 2001China and America fell out over Taiwan,the American bombing of China’s embas-sy in Belgrade and a fatal mid-air collisionbetween an American EP3 spy plane and aChinese ghter. Many commentators backthen thought that America and Chinawere on a dangerous course, but Chineseand American leaders did not pursue it.Since then America has been busy withthe war on terror and has sought plain

dealing with China. American companiesenjoyed decent access to Chinese markets.China lent the American government hugeamounts of money.

This suited China, which concludedlong ago that the best way to build itscomprehensive national power wasthrough economic growth. According to itsanalysis, articulated in a series of white pa-pers and speeches in the late 1990s and ear-ly 2000s, the country needed a New Secu-rity Concept. Growth demanded stability,which in turn required that China’s neigh-bours did not feel threatened.

To reassure them, China started to jointhe international organisations it had onceshunned. As well as earning it credentialsas a good citizen, this was also a safe way tocounter American inuence. China led thesix-party talks designed to curb North Ko-rea’s nuclear programme. The governmentsigned the Comprehensive Test-Ban Treatyand by and large stopped proliferatingweapons (though proliferation by rogueChinese companies continued). It sentpeople on UN peacekeeping operations,supplying more of them than any otherpermanent member of the security coun-cil or any NATO country.

Inevitably, there were still disputes anddierences. But diplomats, policymakersand academics allowed themselves to be-lieve that, in the nuclear age, China mightjust emerge peacefully as a new super-power. However, that condence has re-cently softened. In the past few monthsChina has fallen out with Japan over a sh-ing boat that rammed at least one if nottwo Japanese coastguard vessels o what

The Economist December 4th 2010 A special report on China’s place in the world 3

2 the Japanese call the Senkaku Islands andthe Chinese the Diaoyu Islands.

Earlier, China failed to back South Ko-rea over the sinking of a Korean navy cor-vette with the loss of 46 creweventhough an international panel had con-cluded that the Cheonan was attacked by aNorth Korean submarine. When Americaand South Korea reacted to the sinking byplanning joint exercises in the Yellow Sea,China objected and got one of themmoved eastward, to the Sea of Japan. Andwhen North Korea shelled a South Koreanisland last month, China was characteristi-cally reluctant to condemn it.

China has also begun to include territo-rial claims over large parts of the SouthChina Sea among its six primary con-cernsnew language that has alarmeddiplomats. When members of the Associa-tion of South-East Asian Nations (ASEAN)complained about this in a meeting in Ha-noi in the summer, China’s foreign minis-ter, Yang Jiechi, worked himself into a rage:All of you remember how much of youreconomic prosperity depends on us, hereportedly spat back.

Last year a vicious editorial in China’sPeople’s Daily attacked India after its primeminister, Manmohan Singh, visited disput-ed territory near Tibet; Barack Obama wasshabbily treated, rst on a visit to Beijingand later at the climate-change talks in Co-penhagen, where a junior Chinese ocialwagged his nger at the leader of the freeworld; Chinese vessels have repeatedlyharassed American and Japanese navalships, including the USS John S. McCainand a survey vessel, the USNS Impeccable.

Such things are perhaps small in them-selves, but they matter because of thatdouble bet. America is constantly looking

for signs that China is going to welsh on thedeal and turn aggressiveand China islooking for signs that America and its alliesare going to gang up to stop its rise. Every-thing is coloured by that strategic mistrust.

Peering through this lens, China-watch-ers detect a shift. The smiling diplomacyis over, says Richard Armitage, deputysecretary of state under George Bush. Chi-na’s aspiration for power is very obvious,says Yukio Okamoto, a Japanese securityexpert. Diplomats, talking on condition ofanonymity, speak of underlying suspi-cions and anxiety in their dealings withChina. Although day-to-day trac be-tween American and Chinese governmentdepartments ows smoothly, the strategicmistrust between China and the US con-tinues to deepen, says Bonnie Glaser ofthe Centre for Strategic and InternationalStudies in Washington, DC.

There is nothing inevitable about thisdeterioration. Peace still makes sense. Chi-na faces huge problems at home. It benetsfrom American markets and good rela-tions with its neighbours, just as it did in2001. The Chinese Communist Party andthe occupant of the White House, of anypolitical stripe, have more to gain from eco-nomic growth than from anything else.

China’s leaders understand this. In No-vember 2003 and February 2004 the Polit-buro held special sessions on the rise andfall of nations since the 15th century. Amer-ican policymakers are no less aware that,though a powerful China will be hard tocope with, a dissatised and powerful Chi-na would be impossible.

Now, however, many factors, on manysides, from domestic politics to the falloutfrom the nancial crisis, are conspiring tomake relations worse. The risk is not war

for the time being that remains almost un-thinkable, if only because it would be sogreatly to everyone’s disadvantage. Thedanger is that the leaders of China andAmerica will over the next decade lay thefoundations for a deep antagonism. This isbest described by Henry Kissinger.

The dark sideUnder Richard Nixon, Mr Kissinger createdthe conditions for 40 years of peace in Asiaby seeing that America and China couldgain more from working together thanfrom competing. Today Mr Kissinger isworried. Speaking in September at a meet-ing of the International Institute for Strate-gic Studies, he observed that bringing Chi-na into the global order would be evenharder than bringing in Germany hadbeen a century ago.

It is not an issue of integrating a Euro-pean-style nation-state, but a full-edgedcontinental power, he said. The DNA ofboth [America and China] could generate agrowing adversarial relationship, much asGermany and Britain drifted from friend-ship to confrontationðNeither Washing-ton nor Beijing has much practice in co-op-erative relations with equals. Yet theirleaders have no more important task thanto implement the truths that neither coun-try will ever be able to dominate the other,and that conict between them would ex-haust their societies and undermine theprospects of world peace.

Nowhere is the incipient rivalry sharp-er than between America’s armed forcesand their rapidly modernising Chinesecounterparts. Globally, American arms re-main vastly superior. But in China’s coastalwaters they would no longer confer suchan easy victory. 7

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THIRTY-FIVE years ago Deng Xiaopingaccused the People’s Liberation Army(PLA) of bloating, laxity, conceit, extrava-gance and inertia. Even so, three years lat-er, when he set about modernising China,he put the PLA last in the queue, behindfarming, industry and science. And whenthe commander of the navy in 1982 laid outhis plans for China to become a world seapower, he did not expect his goal to be real-ised before 2040.

Later military modernisation becamemore of a priority, thanks to two demon-strations of American repower. First,America’s use of precision weapons in Op-eration Desert Storm during the rst Gulfwar convinced China that it could no lon-ger base its defence on the weight of num-bers. Second, when the PLA was hectoringTaiwan with missile tests in 1996, PresidentBill Clinton ordered two aircraft-carrierstrike groups into the region, one of themheaded by the provocatively named USSIndependence. China had to back down.

The collapse of the Soviet Union hadpersuaded China’s leaders that an armsrace with the world’s only superpowercould squander enough money to pose athreat to the party’s grip. To challengeAmerica head on made no sense. InsteadChina put its eorts into aordable asym-metric weapons.

This unorthodox strategy has made thePLA’s progress harder to measure. Westernopinion is deeply divided. Military an-alysts are alarmed at what they see as agrowing threat to American maritime su-premacy in the western Pacic. China se-curity specialists tend to sco at all thescaremongering. Who is right?

Three areas of the PLA’s modernisationstand out. First, China has created what thePentagon calls the most active land-basedballistic- and cruise-missile programme inthe world. The Second Artillery has about1,100 short-range ballistic missiles facingTaiwan and has been extending their rangeand improving their accuracy and pay-load. The Second Artillery is also improv-ing its medium-range ballistic missiles,able to carry either conventional or nuc-lear warheads. The PLA has deployed sev-eral hundred air- and land-launched long-range cruise missiles. And it is developing

the world’s rst anti-ship ballistic missile,tted with a manoeuvrable re-entry vehi-cle for added menace.

Second, China has transformed and en-larged its submarine eet, which can nowberth in the newly completed base on Hai-nan Island, just o China’s southern coast.In the eight years to 2002 China bought 12Russian Kilo-class submarines, a big im-provement on its own noisy Ming- and Ro-meo-class boats. Since then the PLA navyhas been introducing longer-range andstealthier Chinese designs, including thenuclear-powered Jin class, which carriesballistic missiles, and the Shang class, a nu-clear-powered attack submarine. Chinahas about 66 submarines against Ameri-ca’s 71, though the American boats are su-perior. By 2030, according to the KokodaFoundation, an Australian think-tank, Chi-na could have 85-100 submarines.

And third, China has concentrated onwhat it calls informatisation, a tongue-twister that Jiang Zemin coined in 2002 todescribe how the PLA needs to function asone force, using sensors, communicationsand electronic and cyber-warfare. Chinanow has a good idea of what is going on farinto the Pacic, thanks to a combination ofsatellites, over-the-horizon radar, medium-range surface-wave radars, reconnaissance

drones and underwater-sensor arrays.China has also been working on anti-

satellite weapons. American satelliteshave been dazzled by lasers red fromthe ground. And in 2007 a ballistic missilelaunched from Xichang space centre in Si-chuan blew up a broken weather satel-liteno mean feat, though other countrieswere furious because it produced morethan 35,000 new pieces of space debris.

Chinese hackers have been busy, too. InMarch last year Canadian researchers dis-covered a spy network containing morethan 1,300 computers, many of them inChina, that had got into governments’ sys-tems. Taiwanese and Western targets suf-fered from severe Chinese cyber-attacks atleast 35 times in the decade to 2009, accord-ing to Northrop Grumman, an Americandefence contractor. The Pentagon con-cedes that it is not sure the PLA was behindsuch attacks, but argues that authorita-tive analysts in the PLA see cyber-warfareas important.

The new arsenalWhat does this amount to? Military ex-perts in America, Australia and Japanthink China’s new arsenals are a greaterthreat than its higher-prole plans tolaunch aircraft-carriers in the next decade

The fourth modernisation

China is becoming a military force to reckon with in the western Pacic. How should America respond?

The Economist December 4th 2010 A special report on China’s place in the world 5

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or so. Alan Dupont, of the University ofSydney in Australia, says that missilesand cyber-equivalents are becoming theweapons of choice for the conventionallyoutgunned.

According to the Centre for Strategicand Budgetary Assessments (CsBA), anAmerican research institute, Chinese re-power threatens America’s Asian bases,which until now have been safe from allbut nuclear attack. The Second Artillery’smissiles could swamp the bases’ defencesand destroy runways as well as large num-bers of ghters and ships. Japan is alreadywithin range of Chinese missiles, many ofthem currently pointing at Taiwan. Guamsoon will be (see chart 1, previous page).

China’s submarines, missiles and anti-ship cruise missiles threaten America’s air-craft-carrier strike groups within 1,000 to1,600 nautical miles of the Chinese coast.According to Ross Babbage, an Australiandefence analyst and founder of the Ko-koda Foundation, if China had an anti-ship ballistic missile, coming in fast andwithout much warning, it would be evenharder to defend against. And China’sspace and cyber-weapons could serve aswhat Chinese planners label an assas-sin’s mace in a surprise attack designed tosmash America’s elaborate but fragile elec-tronic networks. That would leave Ameri-can forces half-blind and mute, and itsbases and carriers more vulnerable still.

In sum, China’s abilities to strike havesoared far beyond seeking to deter Ameri-can intervention in any future mainlanddispute with Taiwan. Today China can pro-ject power out from its coastline well be-yond the 12-mile (19km) limit that theAmericans once approached without asecond thought. Mr Okamoto, the Japa-nese security expert, believes China’s strat-egy is to have complete control of whatplanners call the First Island Chain. Ulti-mately, China seems to want to stop theAmerican eet from being able to secure itsinterests in the western Pacic.

America’s most senior ocials havetaken note. Last year Robert Gates, the de-fence secretary, gave warning that invest-ments [of countries like China] in cyber-and anti-satellite warfare, anti-air and anti-ship weaponry and ballistic missiles couldthreaten America’s primary way to projectpower and help allies in the Pacicin par-ticular our forward air bases and carrierstrike groups.

Mr Babbage is blunter: Current de-fence planning is invalid, he says. He andthe analysts at CSBA argue that Americaneeds to rethink its strategy in the Pacic. It

should strengthen its bases and be able todisrupt Chinese attacks with decoys andby spreading aircraft and ships around theregion. American forces must have betterlogistics and be able to ght even whentheir information networks are impaired.Crucially, they must be in a position to dis-able China’s electronic reconnaissance,surveillance and battle-damage assess-ment, some of which is protected by a sys-tem of tunnels beyond easy reach ofAmerican weapons.

Pacic in name onlyCritics say the cold warriors are sueringfrom a bad case of enemy-deprivationsyndrome. For a start, the impression thatChina’s defence spending has soared ismisleading. The PLA’s budget has broadlykept pace with GDP in the past decade,after two decades in which its share ofGDP fell (see chart 2). Experts dier aboutthe size of China’s defence budget, whichis only partly disclosed. Sam Perlo-Free-man, of the Stockholm International PeaceResearch Institute, puts overall spending in2009 at $99 billion in 2008 dollars, thoughsome estimates are higher and the ocialtotal is only $70 billion. The United Statesis planning to spend $663 billion. As ashare of GDP, China spends less than halfthe American gure and less than it did atthe start of the 1990s. There is not muchevidence of an arms race, says Mr Perlo-Freeman.

Some doubt the quality of China’sequipment. One retired American admiralsays that much of the Russian equipment itbought was junk. Despite China’s pro-gress, it lags in guidance and control, tur-bine engines, machine tools, diagnosticand forensic equipment and computer-aided design and manufacturing. Chinahas come a long way fast, says ProfessorDupont, but military modernisation gets

harder from here.Some have doubts about China’s man-

power, too. The PLA is much more profes-sional now than when it was a peasantarmy, but it lacks experience. Nigel Inkster,of the International Institute for StrategicStudies (IISS), recalls one of the foundersof the Chinese navy once telling him: It’snot that I didn’t know much about sailing,but I hadn’t ever seen the sea.

Complex subjects like submarine war-fare take years to master. If you ght, thereare holes, says the IISS’s Christian LeMière. And until you do, you don’t knowwhere they are. The retired admiral thinksChinese forces suer from a lack of trust,which could slow them up in battle. Wegive our people responsibility and initia-tive, he says. That’s anathema to them.

Robert Ross, a professor at Harvard, ar-gues that the pessimists overestimate Chi-na’s threat and underestimate America’spowers. The United States is better able totrack the other side’s submarines; it is su-perior in cyber-warfare and less vulner-able than China in spaceif only becauseit has built-in redundancy. China wouldstruggle to penetrate the countermeasuresand electronic camouage that protectAmerican ships. Carlyle Thayer, of theAustralian Defence Force Academy, notesthat it has already deployed 31of its 53 fast-attack submarines and three Ohio classnuclear submarines to the Pacic.

For all the uncertainties in this debate,three things are beyond dispute. First, Chi-na has already forced American ships tothink about how and when they approachthe Chinese coast. The closer Americanvessels come, the more missiles and sub-marines they face and the less time theywould have to react to a strike. Anyonesailing a carrier worth $15 billion-20 billionwith a crew of 6,000 would think twiceabout taking on that extra risk. To deny

2A question of perspective

Source: SIPRI *Estimates

Military spending

0

100

200

300

400

500

600

1990 95 2000 05 09

China*

Japan

United States

Total spending, 2009, $bn

0

2

4

6

1

3

5

1990 95 2000 05 08

Japan

China*

United States

% of GDP2008 $, 1990=100

99

663

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America possession of seas it has domin-ated for decades, China does not need tocontrol its own coastal waters; it just has tobe able to threaten American ships there.Hugh White, a former Australian securityand defence ocial, foresees the westernPacic becoming a naval no-go zone.

Second, China’s ability to project pow-er is improving. Its submarines, missiles,and cyber- and electronic warfare, oncepoor, now pose a threat. Its J10 would be amatch for Israel’s fast jet. China’s weaponswill continue to improve, and its forceswill gather experience. Provided that theeconomy does not fall over, budgets willgrow, too, absolutely and possibly as ashare of GDP. Other things being equal,China can project power into its backyardmore easily than America can project pow-er across the ocean. At risk is what MrGates has called the operational sanctu-ary our navy has enjoyed in the westernPacic for the better part of six decades.

Third, although the United States is ableto respond to China, it will have to over-come some obstacles rst. America’s mili-

tary spending in Asia is overshadowed bythe need to cut overall government spend-ing and by other military priorities, such asAfghanistan. Jonathan Pollack, of theBrookings Institution, points out that someideas, such as replacing aircraft-carrierswith more submarines, would inevitablyrun into opposition from the navy andfrom politicians whose constituencieswould suer. For many ocers the navy’score institutional identity is indelibly tiedto carriers and the power-projection mis-sion they perform, he says. Reducingtheir numbers is going to be a very painfulprocess. Above all, big shifts in militaryplanning take decades: America needs tothink now about China in 2025.

All this points to an important princi-ple. Military planning is framed dierentlyfrom diplomacy. Diplomats are interestedin what they think states intend to do, butmilitary planners have to work with whatthey think states can do. Intentions changeand states can mislead. If you are chargedwith defending your country, you need tobe able to meet even improbable threats.

That logic works in China, too. Americahas not been shy of going to war in recentyears. Not long ago a retired Chinese admi-ral likened the American navy to a manwith a criminal record wandering justoutside the gate of a family home. Ameri-can strength in the 1990s made China feelinsecure, so it transformed the PLA to shoreup its policy on Taiwan and protect its eco-nomically vital coastline. Yet by adding toits own security, China has taken awayfrom that of its neighbours and of the Un-ited States. Perhaps China does not meanever to use its weapons aggressively. ButAmerican defence planners cannot rely onthat, so they must respond.

In this way two states that never intendharm can begin to perceive each other asgrowing threats. If you do not arm, youleave yourself open to attack. If you do,you threaten the other country. A Britishhistorian, Herbert Buttereld, called thisthe absolute predicament and irreducibledilemma. It is one reason why relationsbetween China and America will proba-bly sour. 7

WHO is your enemy? It was a neBeijing day in early summer thisyear. In the seminar room on the campusof Peking University one of a delegation ofvisiting American academics posed thequestion to Wang Jisi, dean of the Schoolof International Studies. There was a mo-ment’s silence. Mr Wang hesitated beforelooking up and replying: Most Chinesewould say the US is the enemy.

And yet, as Robert Ross sets out in hisbook, Chinese Security Policy, Americaand China have had a remarkably produc-tive partnership since President RichardNixon and Henry Kissinger turned up inBeijing in 1972. At rst this was based on ashared antagonism towards the Soviet Un-ion, which China had fought in borderclashes in 1969. Under Mao, China had of-ten bullied its neighbours, but had nowsubordinated this part of its foreign policybecause co-operation with America wasmore important. Under Deng Xiaoping,Mao’s eventual successor, China even re-luctantly accepted America’s continuingarms sales to Taiwan.

When the Soviet threat evaporated,

China continued to put foreign policy sec-ondthis time for the sake of economic de-velopment. Again, that required co-opera-tion with America, the best source ofdemand, technology and investment.Deng summed up the policy in a famousslogan: Coolly observe, calmly deal withthings, hold your position, hide your ca-pacities, bide your time, accomplish thingswhere possible. When the world began toworry about China’s surging power, a se-nior ocial tried to calm fears, pledging aheping jueqi (peaceful rise). Even that hadto be watered down, as the jue in rise sug-gests towering as a peak. These days HuJintao, China’s leader, prefers the deliber-ately bland harmonious world.

Over the years China’s leaders haveworked hard to steer relations with Ameri-ca through their inevitable crises. By andlarge, they have succeeded. Now China’sbehaviourmost recently towards Japan,South Korea and the South China Seahasbegun to alarm China-watchers. Yet whywould the country’s leaders suddenly riskundermining a policy that has broughtChina such prosperity?

There are two possible reasons. One isthat China’s strategy has begun to change.Some Chinese argue that, now their coun-try is strong, it no longer needs to kowtowto American power. The other is that Chi-nese society itself has begun to change. Inwhat Richard Rigby, of the Australian Na-tional University in Canberra, calls a frag-mented authoritarian one-party state, theleaders need to listen more closely to whatother people think.

If we can, we willStart with China’s changing strategy. Chi-na has a keen sense of its growing nationalpower and American decline, sharpenedby the nancial crisis, which uncoveredaws in America and Europe and foundChina to be stronger than many had ex-pected. There is a perception in China thatthe West needs China more than Chinaneeds the West, says one diplomat in Beij-ing. America’s dicult wars have added tothe impression. According to Raaello Pan-tucci, a visiting scholar at the ShanghaiAcademy of Social Sciences, Chinese an-alysts gleefully conclude that NATO

Less biding and hiding

China is becoming more nationalistic and more assertive. How will other countries react?

The Economist December 4th 2010 A special report on China’s place in the world 7

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forces will lose in Afghanistan.We used to hide our powerdeny our

power, a Chinese scholar told DavidLampton of the School of Advanced Inter-national Studies in Washington. But thenthis became increasingly impossible as ourstrength increased. For a time this led toredoubled eorts to reassure America andthe region. But today, according to YuanPeng, of the China Institutes of Contempo-rary International Relations in Beijing,many Chinese scholars suggest that thegovernment give up the illusion of US part-nership and face squarely the profoundand inevitable strategic competition.

China’s desire to assert itself springsfrom a natural appetite. A rising country islike a diner sitting down to a full table: untilhe starts eating, he does not realise howhungry he is. Power changes nations,writes Robert Kagan, an American foreign-policy commentator. It expands theirwants and desires, increases their sense ofentitlement, their need for deference andrespect. It also makes them more ambi-tious. It lessens their tolerance to obstacles,their willingness to take no for an answer.

China has been good at suppressingthat appetite, but it also has growing rea-sons to project power. Chinese companiesare scouring the globe for the raw materi-als they need. Already China is Saudi Ara-bia’s biggest customer. It imports abouthalf of the oil it burns, a share that will riseto two-thirds by 2015 and four-fths by2030. China cares what happens in thecountries that supply it.

An irony not lost on Kurt Campbell,America’s assistant secretary of state, isthat China’s strategy of acquiring naturalresources has so far been based on what hecalls an operating system provided bythe United Stateswhich guarantees sta-bility and the free ow of maritime trac.One reason why China is now building anocean-going navy is to protect its raw mate-rials and goods from embargoes.

This reects a lack of faith in the globaltrading system, part of an underlying fearthat the West is fundamentally hostile toChina’s prosperityWesternising, divid-ing and weakening, as the slogan goes.Jonathan Paris, a London-based securityspecialist, says young Chinese are disen-chanted by what they see as Western Chi-na-bashing. Some inuential groups thinkthat foreign calls for China to be a respon-sible stakeholder are in fact designed tokeep the country down, and that it shouldco-operate only if the West makes conces-sions on issues such as Taiwan and Tibet.

The question is whether China’s lead-

ers agree that now is the time to assert thecountry’s power. The apex of Chinese poli-tics is so closed to the world that analystscannot be sure. In 2009 Mr Hu said Chinacould actively make modest contribu-tions to international issues. On their an-nual summer retreat, at the resort of Bei-daihe, the country’s leaders reportedlydebated whether China should edge awayfrom Deng’s bide and hide slogan. Someinuential party journals that may reectthe leaders’ thinking have concluded, notyet. However, even that position strikes

some diplomats as a shift. In the 1990s theargument was about whether China couldwork with America in the long run. Now itis about when to apply pressure.

Whatever the leaders think, they areoperating in a society that is changing rap-idly. These days they are more inuencedby a new set of foreign-policy interests, in-cluding resource companies, nancial in-stitutions, local government, research or-ganisations, the press and online activists.Linda Jakobson and Dean Knox of theStockholm International Peace ResearchInstitute (SIPRI), who have studied thesegroups, say many of them feel strongly

that China should be less submissive to-wards the outside world.

Such people’s assertiveness partly re-ects the patriotism that the governmentencouraged in order to prop up its legitima-cy after it brutally put down the protests inTiananmen Square in 1989. First came aweekly ag-raising ceremony with a rous-ing address in every school. Next, muse-ums and relics were designated patrioticeducation bases. In 1991 Jiang Zemin, thengeneral secretary, wrote that patriotic edu-cation let the Chinese people, especiallythe youth, enhance their pride and self-condence in the nation and prevent therise of the worship of the West.

The rise of nationalismThe rst generation to get that treatment isnow nearing its 30s, and its nationalismshows every sign of being genuine andwidespread. On Tibet and Taiwan it’s notjust Chinese ministers who bang tables,says Lord Patten, who negotiated the hand-over of Hong Kong from Britain to China,but Chinese dissidents, too. This is apeople with a sense of their past greatness,recent humiliation, present achievementand future supremacy, says Mr White, theformer Australian security and defence of-cial. It’s a potent mix.

China’s more commercial media havefound that nationalism sells. According toSusan Shirk, an American academic andformer deputy assistant secretary of state,readers like stories complaining about Ja-pan, Taiwan and Americaand the cen-sors are usually happy to see coverage ofsuch things. SIPRI found that the most in-uential journalism on foreign policy ap-pears in the Global Times, which is writtenby hardline nationalists.

The country’s excitable netizens tendto spread the idea that China is misunder-stood and to see a slight round every cor-ner. In 2008, during a Chinese row withVietnam over the South China Sea, anoth-er suggested teaching the Vietnamese a les-sonand published an invasion plan toshow how. This feeds China’s sense of vic-timhood. One blogger and journalist,called Fang Kechang, worked out that since1948 the Chinese people had ociallybeen humiliated at least 140 timesandthat the insults were more common in thereform era than in Mao’s time.

What passes for public opinion in Chi-na is not the only source of pressure on theleaders. The factions within China’s eliteselectorate, no passive monolith, havealso been nding their voice. And that, too,tends to nudge policy towards national-

8 A special report on China’s place in the world The Economist December 4th 2010

2 ism. Foreign aairs used to be the businessof the pro-detente foreign ministry. It wasmocked as the ministry for selling out thecountry and, supposedly, was sent calci-um pills by members of the public whowanted to stien its spine.

Now the issues are more complex, do-mestic ministries and mid-level bureau-crats are also involvedand they tend to bemore nationalistic than senior foreign-ministry ocials. The SIPRI researchersfound that the ministry of state security, inparticular, has a bigger role in foreign poli-cy. At the climate-change talks in Copenha-gen authority lay with the National Devel-opment and Reform Commission, chargedwith economic development. China at-tracted foreign criticism for taking a hardline, against the foreign ministry’s advice.

The PLA’s inuence is harder to read.On the one hand since the 1992 party con-gress no ocer has been picked for the all-important standing committee of the Polit-buro. At the end of the Cultural Revolutionmore than half the Politburo was from thePLA; now only two out of 24 are. On theother, writers from PLA research institu-tions are more outspoken and conspicu-ous than they used to be, using newspapercommentaries and television appearancesto put over the PLA’s views.

Unlike professional Western armies,the PLA speaks out on foreign policy. In hisbook The Party, Richard McGregorpoints out that it contains roughly 90,000party cellsone for every 25 soldiers. Al-though promotion these days depends oncompetence as well as ideology, the PLA’spolitical role gives it a voice in securitypolicy. Unlike Mao and Deng, today’s lead-ers did not have a military background, sothey may need to hold the PLA close.

There is no reason to believe that theleaders’ authority has dimmed. If theythink a policy is of paramount importancefor the country or the party, they will gettheir way. The authorities can still putdown pretty much any demonstration ifthey choose. But politics is rarely black andwhite, even in China. Government is usu-ally about shades of grey. When the lead-ers hear a single message from the press,netizens and their own advisers, they mayfeel they need to listen. When public opin-ion is split, they can usually aord to ig-nore it. James Reilly, of the University ofSydney, who has studied China’s policy to-wards Japan, says that public pressure ismost potent when the elite is divided.

Either way, the authorities will watchpublic opinion, if only because protest canbecome a covert form of opposition. Anti-

Japanese demonstrations in South Koreain the 1960s fuelled the pro-democracymovementjust as protests against Afri-can students preceded the Tiananmenprotests in 1989. Foreign policy has a his-tory of destabilising governments in Chi-na, says Rana Mitter of Oxford University,and the Chinese are quick to blame foreignfailures on domestic weaknessdisorderat home, calamity abroad, they like to say.

Nationalism may frame an issue beforethe leaders get to deal with it. By the timethe row over, say, the disputed Senkaku/Diaoyu Islands reaches their desks, thepropaganda department, along with com-mentators in the press and statementsfrom the PLA, may have created a contextthat they cannot back away from withoutlooking weak.

This dynamic is not new. It greatly com-plicated the mid-air collision between aChinese ghter and an American spyplane in 2001, which the PLA had (wrong-ly) blamed on the Americans. But just now,in the run-up to the change of the country’sleadership in 2012, seeming to be a push-over could wreck careers.

The risk, writes Ms Shirk, is that com-promise is likely to be viewed as capitula-tion. That creates dangers for anyone inChina who favours detente. Speaking toMr Lampton about Taiwan, one Chinesescholar put it this way: If we suppose thatthere are two options and they use toughmeasuresðand the leader fails to resolve[a problem], he is justied. But if [he] usestoo much honey and he fails, he is regardedas guilty by all future generations.

In the long term the leaders’ scope foraction will depend on China’s economicgrowth. A booming China will indicatethat the country is strong enough to pressits case in the world. A weak China wheregrowth has stumbled and the party feelsunder pressure at home could stir up trou-ble abroad. That does not leave muchscope for a less assertive China.

Supposing that the leaders want tocleave to Deng’s original injunction to

bide and hide, three things are in their fa-vour. First, popular nationalism counts formost in territorial disputes, such as Taiwanand the islands o China’s coast. Accord-ing to Jian Yang, of Auckland University,New Zealand, nationalism plays less of apart in technical areas such as economics,which may matter as much, if not more, toChina’s leaders. Second, China does notobviously have a grand alternative visionto the liberal order that America has spon-sored since the second world war. It neednot run into ideological battles abroad.

But third and most important, there is alot that America and China agree on. Bothwant a healthy world economy, a stableAsia, peace in the Middle East, open sealanes, a limit to proliferation, an open trad-ing system, and so on. They have plenty ofreason to want good enough relations toaccomplish such things.

Turn up the assertivenessThe most likely outcome is a more asser-tive China that wants to get more doneabroad without fundamentally upsettingthe world order. On sensitive territorial is-sues where the party’s credentials are atstake, China may be uncompromising andincreasingly unreasonable. Elsewhere itsleaders will probably be looking for dealsthough they will insist on better terms, asbets a global power.

How easily will the world accommo-date this more assertive China? For thebest part of a decade China has tried hardto reassure its neighbours that they havenothing to fear from its rise. So its new as-sertiveness will be doubly uncomfortable,especially if it is mixed up with bad-tem-pered territorial disputes. In other words,Asian security will be determined not justby how China uses its new strength but byhow other countries react to it. This wasthe idea behind China’s conciliatory NewSecurity Concept. Other countries will re-lax if they are reassured that China doesnot pose a threat. Unfortunately, the charmoensive has not altogether worked. 7

The Economist December 4th 2010 A special report on China’s place in the world 9

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IN HIS book The Rivals, Bill Emmott, aformer editor of this newspaper, quotesa senior Indian foreign-service ocial onthe subject of India and China. The thingyou have to understand, he says, is thatboth of us think that the future belongs tous. We can’t both be right.

When economists and businesspeoplelook at China’s rise, they see a blessing inwhich everyone stands to gain from every-one else’s prosperity. The country has be-come the chief trading partner for mostparts of the regioneven if the West is animportant source of nal demand. As Chi-na becomes richer, it will become a marketfor the rest of Asia, just as the region willbecome a bigger market for China.

Alas, security does not work that way.When two countries do not really trusteach other, greater security for one under-mines the security of the other, as that In-dian ocial revealed. In a troubled conti-nent like Asia, countries therefore look toAmerica to save them from an increasinglypowerful Chinato the water far awayfor protection from the re nearby.

Naturally, Asian countries want to haveit both ways: to resist China’s power but tocontinue trading with it; to benet fromAmerican security but without sacricingChinese commerce. This is a dicult trickto pull o, and if relations between Ameri-ca and China become harder to manageover the next decade or so, as looks likely,the region will sit uncomfortably betweentwo poles. The lesser powers could evenadd to the tension between the two giants.

That would frustrate China, which hasbeen at pains in recent years to reassure itsneighbours by doing the right thing, aswell as by soft-soaping them with all thetalk about a peaceful rise. It has, for in-stance, gone out of its way to settle its bor-der disputesand on notably generousterms. Taylor Fravel, of the MassachusettsInstitute of Technology, concluded that insettling 17 of its 23 territorial disputes Chinausually agreed to take less than half of thecontested land. It has also usually beengenerous in economic diplomacy, signinga series of free-trade agreements acrossAsia. In the space of a decade, accordingto Marc Lanteigne, of Victoria Universityin Wellington, New Zealand, China has

transformed itself from a sceptic of liberal-ised and preferential trade into one of theirstrongest proponents.

China has joined multinational group-ings (even, in the Shanghai Co-operationOrganisation, helping to found one). It isnow a member of more than 50 intergov-ernmental and over 1,000 internationalnon-governmental outts. You can ndChinese delegates at the ASEAN RegionalForum, ASEAN Plus Three, the ASEAN De-fence Ministers’ Meeting and APECandthat is only the meetings starting with A.Asian states hope that, like Gulliver, Chinacan be bound by these regional threads.

That is to put a lot of faith in multina-tional forums, however. Criticising dip-lomats for trying to talk peace might seemharsh, but Asia has too many regional as-semblies. The Japan Centre for Interna-tional Exchange counted 277 multilateralintergovernmental meetings about securi-ty in 2007 alone.

Nick Bisley, of La Trobe University inAustralia, who has studied Asia’s regional-security groups, concludes that this seem-ing abundance is really a mask for mis-trust, as each Asian country tries to shop inits own favoured forum. Meetings can besupercial and leaders tend to shy away

from taking real, binding decisions. Beingin the media spotlight does not help. Asia’svarious forums and treaties looks morelike a list of cats and dogs than a coherentand predictable framework for the future,writes Gary Schmitt of the American En-terprise Institute in Washington.

Part of the trouble is that these forumshave to purge a lot of bad blood. AlthoughChina gets on better with its 14 neighboursnow than it has done for centuries, it stillfully trusts none of themand vice versa.Relations with Japan have never got overthe imperial occupation. Since 1949 Chinahas skirmished with Russia and fought theUN in Korea and India and Vietnam.

Naval battlesIn addition China has pressed its seaclaims with a vehemence that it has most-ly avoided in land-border disputes, per-haps because sh and mineral riches are atstake. In the past 36 years China has skir-mished over the Paracel Islands with Viet-nam (1974); over the Spratly Islands withVietnam (1988) and the Philippines (1994);with South Korea over Socotra Rock(2006); and with Japan over the OkinotoriIslands (2004) and the Senkaku/Diaoyu Is-lands (most recently, 2010).

With so many neighbours pulling in somany dierent directions, Beijing’s foreignpolicy faces inevitable contradictions.When North Korea sank the Cheonan, Chi-na had to choose between security and itsincreasingly close ties to South Korea. Insiding with the North, it sent a damagingsignal to the South that it was unwilling orunable to control its ally. Likewise, Chineserelations with India are complicated bywhat happens in neighbouring countries.Not only does India mistrust China in Paki-stan, but it vies with it in places such as Ne-pal and Sri Lanka that it sees as within itsown sphere of inuence.

How, then, do Asian countries copewith China’s strength and the shortcom-ings of multinational organisations? Theyare slowly but steadily buying weapons asthey get richer. In its defence white paperlast year Australia worried aloud about apowerful China and suggested renewingand doubling its submarine eet as well asdesigning a more capable future frigate.

In the balance

Their wealth depends on China, their security on America. Which way should Asian countries face?

10 A special report on China’s place in the world The Economist December 4th 2010

2 Vietnam has ordered six Kilo-class subma-rines from Russia. Earlier, Singaporebought two Swedish Archer-class subma-rines and Malaysia and India betweenthem bought eight French Scorpène-classsubmarines.

Japan, too, has been arming itself in aroundabout way. Although its ocial de-fence budget is only 1% of its GDP and overthe past decade has shrunk by about 5% innominal terms, in real terms it has re-mained almost static. Japan has also beenshifting resources towards its navy, whichis still more than a match for China’s. AndRichard Samuels, of the Massachusetts In-stitute of Technology, has shown that theJapanese coastguard, nanced outside thedefence budget, now has a eet of shipsand rules of engagement that are laxer

than those of the self-defence forces. As well as arming themselves, Asian

countries have drawn closer to the UnitedStates. This was on dramatic display at theASEAN regional forum in Hanoi in July. Ina piece of choreography that infuriatedChina, ASEAN members complained oneafter the other about the heavy-handedway their neighbour was asserting a claimover the South China Sea. The statementsculminated with Hillary Clinton, Ameri-ca’s secretary of state, underlining how hercountry would intercede to ensure safepassage through international waters.

Progress has been made bilaterally, too.In August Vietnam and America beganhigh-level military co-operation, with ameeting in Hanoi. Vietnamese ocialshave been aboard the aircraft-carrier USS

George Washington o the Vietnamesecoast. American naval ships have dockedin Vietnam, which has agreed to repairAmerican Sealift Command vessels. Itseems longer than 35 years ago that thetwo countries were at war.

So-so about Uncle SamYet there is nothing straightforward aboutlooking for security to AmericaAsia’sleast distrusted power, as Lee Kuan Yew,Singapore’s Minister Mentor, has de-scribed it. Sometimes countries have toovercome obstacles at home. DuringGeorge Bush’s presidency, India andAmerica cemented their new entente witha deal to work together in nuclear power.Yet even that degree of intimacy stirred updomestic opposition from left-wing Indi-

ans. A fully edged defence agreementwith America to contain China does notseem on the cards for now. India wouldnot relish a junior role and it prides itselfon its non-alignment.

Nor would it wish completely to castout Chinaa rival, yes, but also an ally onsuch things as climate change and globaleconomic issues. Besides, as Rahul Roy-Chaudhury of the IISS points out, Indianpoliticians are disconnected from thearmed forces. Without an eective nation-al security council in which to make itscase, the navy has only slowly been able toconvince the government that China maybecome a threat.

The Indian services can mount impres-sive operations, but in a new book on thecountry’s military modernisation Stephen

Cohen and Sunil Dasgupta argue that theyalso suer from inter-service rivalry, poorprocurement and a lingering suspicion ofthe use of armed force (which from inde-pendence was associated with British co-lonial rule).

Or take South Korea, a long-term Amer-ican ally, which has veered from securityto economics and back again. Under Presi-dent Roh Moo-hyun the country peeled ofrom America in an attempt to demon-strate its independence as an Asian powerwith increasingly close economic links toChina. In 2007 Roh won America’s agree-ment that from 2012 South Korea wouldonce again have command of its ownforces in the event of a war. He also sup-plied the North when America cut o en-ergy aid. However, his successor, Lee My-ung-bak, has wrenched policy towardsAmerican security once more. He has de-layed the transfer of wartime command to2015 and taken a hard line on North Korea.

In Japan dierent factions exhibit allthese tendencies and more. Parts of the go-verning Democratic Party of Japan havesought to move Japan closer to China. Partsof the Liberal Democratic Party, now in op-position after decades in government, re-sent the presence of 36,000 American mil-itary personnel in bases dotted across thecountry. Others are so wedded to pacismthat the Americans wonder if the Japanesewould actually turn up if they were need-ed. And yet others harbour doubts wheth-er Japan can always count on America. Tomany Japanese, the row over the Senkaku/Diaoyu Islands has shown how pricklyChina can be. After the coastguard arrestedthe shermen, China cancelled meetings,gummed up Japanese trade and stoppedexports of rare earths. Japanese diplomatswere pleased that Mrs Clinton spoke out intheir support. Yet MIT’s Mr Samuels thinksAmerica needs to reassure Japan, its mostvital ally in Asia. If Japan appeared todoubt it, America would see all of its Asianalliances suer.

The calculation for China is dierent. Itseorts to cultivate its neighbours have pro-duced only mixed results. Economic tiesbuy a certain amount of goodwill, butmuch of the region rushes o to Americaat the rst sign of trouble. As China’s appe-tite to assert itself grows, that could easilybecome a source of dissatisfaction, whichwould feed the superpowers’ mutual mis-trust. Either way, America and China arelikely to compete to win the loyalty of theregion. That, too, could poison the mostimportant relationship of allthe one be-tween China and America. 7

The Economist December 4th 2010 A special report on China’s place in the world 11

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IN A recent essay Hugh White, a formerAustralian security and defence ocial,describes the following exchange with hisAmerican counterparts: I put this cate-chism to them: ‘Do you think Americashould treat China as an equal if its powergrows equal to America’s?’ The answer isalways no. Then I ask, ‘Do you think Chinawill settle for anything less than beingtreated as equal?’ The answer to that is al-ways no, too. Then I ask, ‘So how do youexpect the US and China to get along?’ Iusually get a shrug by way of reply.

That shrug is a measure of America’sdiculty in designing a China policy.America wants China to be a thriving mar-ket for its goods. It also wants China to be-come an active, responsible power inworld aairs. Yet at the same time it feelsthreatened by China’s growing economic,industrial, diplomatic and military might.When America dislikes a position Chinahas taken, it cries foul. This mix of partner-ship and rivalry is a recipe for confusion.

One way to resolve these tensionswould be to put security rst. Americacould aim to block China now before it getsany stronger. America won the cold war byisolating the Soviet economy and stale-mating its armed forces. But trying thatagain would be a bad idea, as Robert Artexplains in a recent issue of Political ScienceQuarterly. For one thing, the cost would beastronomical; for another, America mightsuer as much as China. The two coun-tries’ economies are intertwined and Chi-na owns more American government debtthan anyone else. In war, nations overridesuch factors out of necessity. If an Ameri-can president tried to override them inpeace out of choice, he would face dissentat home and opprobrium abroad.

The risks of containmentIn any case, a policy of containment risksbackring, except against an unambigu-ously hostile China. Unless America couldpersuade large parts of the world to join in,China would still have access to most mar-kets. A belligerent United States would risklosing the very alliances in Asia that it wasseeking to protect. And Joseph Nye, of theKennedy School at Harvard, has arguedthat the best way to make an enemy of Chi-

na is to treat it like one.America may one day feel it has no

choice but to focus on security alone,which is what China fears. By contrast, tofocus on economics and forget securitymakes no sense at all. America has vital in-terests in Asia. It wants to prevent nuclearproliferation in the Korean peninsula andJapan. It has allies to protect and threats topolice. It needs accessible sea lanes andopen markets. America is the world’s pre-eminent power. It cannot surrender Asiawithout losing inuence everywhere else.

Hence for the past 15 years America hasfallen back on a two-track China policy. Ba-rack Obama articulated the rst track onhis visit to China in November last year. Hetold the students at Fudan University, inShanghai: The United States insists we donot seek to contain China’s rise. On thecontrary, we welcome China as a strongand prosperous and successful member ofthe community of nations. This means, asthe president later explained in front of HuJintao, his Chinese opposite number, thatChina’s growing economy is joined bygrowing responsibilities.

Engagement is backed by a secondpolicy, best described as hedging. Americamust be able to deploy enough force to de-ter China. Presidents do not articulate thistrack quite so eagerly, but Admiral RobertWillard, head of Pacic Command, wasclear enough in his remarks to Congressearlier this year: Untilðit is determinedthat China’s intent is indeed benign, it iscritical that we maintain the readiness ofour postured forces; continually reinforceour commitment to our allies and partnersin the region; and meet each challenge bythe PRC in a professional manner that isconsistent with international law.

America faced some straightforward, ifterrifying, calculations in its monochro-matic relationship with the Soviet Union.By contrast, its technicolour dealings withChina are less apocalyptic, but many timesmore complexalmost unmanageably so.

In principle, the policy’s two tracks ttogether well. Engagement is designed toreward good behaviour and hedging to de-ter bad. In practice, however, the hedgerisks undermining the engagement. To seewhy, consider that the existence of two

tracks acts as an excuse to leave importantissues unresolved in America. Chinahawks and China doves can all support thepolicy, because both can continue to thinkthat they will ultimately be proved right.

That is politically handy in Washing-ton, but hardly ideal as a policy. The en-gagement tends to be run by China special-ists in the state department and the hedgetends to be run out of the Pentagon. In the-ory the policy’s two dimensions should beweighted according to whether or not Chi-na’s behaviour is threatening. With thebest will in the world, the departments ofstate and defence do not always work welltogether. All too often, a twin-track policycan function as two separate policies.

Read my lipsThat matters because Mr Obama’s gener-ous words towards China are not taken atface value there. However sincere, no presi-dent’s words could be: pledges are brokenand presidents come and go. Americasends a signal when it redeploys navalforces to the Pacic and its admirals tellCongress that China’s interest in a peace-ful and stable environmentis dicult toreconcile with [its] evolving military capa-bilities. Those judgments make goodsense for America’s security, but they get inthe way of the message that the UnitedStates welcomes China’s rise and has nointention of blocking it.

Hedging is not engagement’s only com-plication. For much of the past 15 years,commerce drew America towards China.Indeed, globalisation became a large partof the engagement story. But now that onein ten Americans is without work, eco-nomic policy has taken on a protectionisttinge. If China loses the political backing ofAmerica’s big-business lobby, which haslately been growing restive at its treatmentin China, then the tone in Washington willshift further. Thus commerce could alsostart to add to Chinese fears that Americawill ultimately choose to block it.

The second doubt about America’s Chi-na policy is whether America has fully ac-cepted what engagement asks of it. Thepolicy rests on two notions. First, that Chi-na can develop as a satised poweronethat feels no need to overturn the post-war

Friends, or else

Living with China’s rise will test America’s diplomacy as never before

12 A special report on China’s place in the world The Economist December 4th 2010

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order created and maintained by America.And second, that if China more or lessabides by global norms, America will beable to accommodate its interests. So en-gagement supposes that China and Ameri-ca can nd a stable mix of Chinese adher-ence and American accommodation.

Does China abide by global norms?At one time the common belief was that, asBill Clinton said, when it comes to humanrights and religious freedom, China re-mains on the wrong side of history. SomeWestern analysts like to issue caveatsabout devious, far-sighted Chinese strat-egy. Against this racial stereotype, how-ever, it was America, not China, thatfounded its policy on the maxim of SunTzu that it is best to win without ghting.

Chinese values have changed beyondrecognition since Mao’s day, when terrorwas dismally routine. As Richard McGre-gor writes in his book, The Party, terror isnow used sparingly. Hu Jintao’s Chinaworks on seduction and bribery ratherthan suppression. And yet China is still aone-party state and terror remains essen-tial to its survival. When the party needsprotecting, it is applied without scruple.

Likewise, in international aairs Chinano longer backs insurgencies against itsneighbours or routinely adopts intransi-gent positions, seemingly for the sake of it.Yet the West still nds it a dicult partner.American critics such as Gary Schmitt ofthe American Enterprise Institute in Wash-ington accuse China of a supermarket ap-proach: it buys what it must, picks upwhat it wants and ignores what it does not.

Hope is not a policyThe hope is that in years to come Chinawill indeed grow to be more democraticand that it will play its part in world aairs.But, says Richard Armitage, deputy secre-tary of state under George Bush, hope isnot a policy. Given the problems of West-ern democracies and China’s economicsuccess and relative stability, says RichardWoolcott, a special envoy for the Austra-lian prime minister, China’s conversion toa multiparty democracy no longer seemsquite so inevitable. Just now, the Commu-nist Party looks rmly in control.

Suppose, therefore, that China remainsa communist, authoritarian, one-partystate with a growing appetite to get its way.Can America accommodate it?

Some American thinkers, like JohnIkenberry, of Princeton University, makethe argument that America has created arules-based system that is uniquely able toabsorb new members. Institutions like the

United Nations, the G20, the Nuclear Non-Proliferation Treaty (NPT) and the WorldTrade Organisation (WTO) could, in the-ory at least, operate even without Ameri-can leadership. According to this picture,America can accept China so long as it tsin with this order.

But the picture is awed. America hasindeed been willing to be bound by rulesin ways that 19th-century European pow-ers never were. That is one reason why somany countries have been prepared to liveunder its sway. However, when Americathinks important interests are at stake, itstill ignores the rules, just like the next he-gemon. In 2005 the bid of the China Na-tional Oshore Oil Company to buyAmerica’s Unocal was, in eect, blockedafter a public outcry. When America want-ed a nuclear deal with India, it rode a coachand horses through the NPT. It fought inthe Balkans in the 1990s and again in Iraqin 2003 without the endorsement of theUnited Nations. It may yet go to war withIran on the same basis.

This is not to dispute the merits of eachcase, though some of those decisionslooked foolish even at the time. Rather thepoint is that superpowers break the ruleswhen they mustand nobody can stopthem. Over time that logic will increasing-ly apply to China too. America must de-cide whether accommodating Chinameans living with this or denying it.

In fact, there are diculties with judg-ing whether China is a responsible stake-holder. From the Chinese point of view,America always seems to dene accept-able international conduct as falling inwith its own policy. In the words of YuanPeng, of the China Institutes of Contempo-rary International Relations in Beijing,

America’s complaint is not that Chinasays no to global responsibility or deniesits role in world aairs, but rather that it de-clines to say yes to every US request.

Accommodation is easy when thatmeans letting China do what Americawants. But will America let China dothings that it does not want? The shadowoverhanging America’s engagement poli-cy is that China will not change enough tosatisfy America and America will not yieldenough to satisfy China. That may soundabstract, but it could at any time becomebrutally real, either on the Korean Peninsu-la or across the Taiwan Strait.

Korean conundrumNobody knows whether the North Koreanregime will survive, nor what might comeafter Kim Jong Il and Kim Junior. But imag-ine for a moment that, on the death of theDear Leader, North Korea descends intoanarchy or lashes out, as it did in the islandattack last month that killed South Koreanservicemen and civilians. The ensuing cri-sis would severely test the capacity of Chi-na and America to live with each other.

Everyone would be worried aboutNorth Korea’s nuclear weapons. Americamay want to seize them, but China wouldnot like American soldiers on its borders.Nor would China wish America or SouthKorea to assert control over the North, anally and a buer. In the longer run, Chinamay expect to regain the sort of inuenceover a unied Korea that, as the dominantAsian land power, it has exercised through-out most of history.

This raises a host of questions. WouldAmerica trust China to mop up North Ko-rea’s plutonium and enriched uranium?Would China accept the idea that SouthKorean troops should re-establish order inthe North? Would it allow Korean reuni-cation? If that happened, would Americacontemplate ultimately withdrawing itstroops from the peninsula?

Depressingly little thought has beengiven to these questions. As far as anybodyknows, China is not willing even to discussthem with America, because it does notwant to betray a lack of condence in its ec-centric ally in the North. Yet, if talkingabout Korea is awkward now, it will beeven more fraught in the teeth of a crisis.

If the two Koreas share the world’s scar-iest land border, the Taiwan Strait is its scar-iest sea passage. China’s insistence on re-unication is absolute. The story is told ofhow, a few years back, the editor of aShanghainese newspaper celebrated anew semiconductor factory in the city as

The Economist December 4th 2010 A special report on China’s place in the world 13

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BIDING your time and hiding your pow-ers makes sense if you are a weakcountry that expects to become strong.Eventually, though, you will want to takeadvantage of the opportunities that yournew power has created. Has that momentarrived for China? Its military power is,globally, no match for America’s. But thePLA is beginning to deny America’s 65-year dominion over the Western Pacic.Fuelled by nationalist opinion, a debate isunder way within China’s elite overwhether now is the time for the country tostand up. This will inuence China’s lead-ers, even though the signs are that for thetime being they would prefer to concen-trate on economic growth and their hugedomestic problems.

The outside world is suspicious of Chi-na and worried about what sort of powerit will turn out to be. Asian countries aretorn between looking to China for theirwealth and turning to America for their se-curity. If China throws its weight around,they will vigorously resist.

America feels increasingly vulnerable,too. Its armed forces have identied thethreat in the Pacic. Its economic diplo-macy has become aggressive and unpre-dictable. This further complicates Ameri-ca’s China policy, an uneasy andpotentially confusing combination of en-gagement and hedging.

That makes for a highly dangerous mixof forces. After a decade in which Americawas distracted by terror and China preoc-cupied with economic growth, China’s for-eign relations are now likely to becomemore dicult. The risk has been under-lined in the past few months by a series ofdisputes, with Japan over some islands,over the sinking of the Cheonan, and overclaims to China’s coastal waters.

Those one-o rows must not be al-lowed to frame China’s relations with therest of the world. Yet each assumes inordi-nate signicance, because of the fear thatChina will be aggressive and the suspicionin China that America means to block itsrise. Every incident is seen as a test of whatwill come next.

Prevention, not cureThe solution is to nd ways to minimisethe mutual mistrust between China andAmerica. This will be dicult but nothopeless. China is not looking for new col-onies and it has no ideology to export. Itshares many American aims: stability, nuc-lear non-proliferation and, most of all, athriving world economy. These goals arebest served by peace.

Mistrust feeds upon mistrust, aggres-sion upon aggression. In geopolitics, as inlife, the best medicine is prophylactic. Ifever the relationship falls into antagonism,

it will be hard to pull back. The leaders ofAmerica and China talk volubly abouttheir desire for good superpower relations.If they mean what they say, here are tengoals to aim for:¹ China needs to be certain of having a nu-clear second strike. As Robert Art of Bran-deis University argues, both China andAmerica will feel more condent if theyknow their homelands are secure. Chinahas been spending money to ensure that itcould answer a rst strike. America shouldwillingly surrender this military advan-tage because it is destabilisingand insta-bility frustrates the overriding policy aim,which is China’s peaceful rise.¹ America should seek to maintain mili-tary superiority in the Western Pacic. Forthe sake of all its Asian alliances, the Un-ited States must be able to guarantee thesea lanes and to present a credible threatthat it will come to Taiwan’s aid against aChinese attack. For the time being, it stillcan. But to retain that advantage, Americawill need to harden its forward bases, in-vest in missile defence and submarinesand counter China’s capacity in asymmet-ric electronic, cyber and space warfare.This will inevitably add to Chinese insecu-rity. On the other hand it will add to the se-curity of China’s neighbours. Just now thatis more important.¹ China needs to share more of its nuclear

Strategic reassurance

Many things could worsen relations between China and America. Here are ten ways to make them better

the biggest in China. Because he had for-gotten about Taiwan, he had to oer self-criticism and take a pay cut.

However, rather than beat Taiwan witha stick, China these days spoons it honeyinstead. Hundreds of ights a month linkthe mainland to Taipei. The free-tradeagreement with Taiwan signed this sum-mer included measures to help Taiwanesefarmers, who tend to support the pro-inde-pendence Democratic Progressive Party(DPP). China has recently hinted that itmight one day be willing to point its mis-siles away from Taiwan.

For the moment the policy seems to beworking. The DPP lost power in 2008. Nev-er mind that its successor, the Kuomintang,is the Chinese Communist Party’s old ene-my. Under Ma Ying-jeou, Taiwan is beingpragmatic. The Taiwanese people appear

to want neither to enrage China by seekingindependence, nor to want to surrendertheir democracy to a one-party state.

This is just ne with America. Its armssales to Taiwan continue, but it could justabout live with a single China so long asunication came about peacefully. What itcould not abide would be unication byforce. Strictly, the Taiwan Relations act of1979 does not compel America to come toTaiwan’s aid. However, barring egregiousprovocation of China by Taiwan, Americawould have little choice but to intervene. IfAmerica just stood by, it would lose thetrust of its allies across the world.

Taiwan remains a ashpoint. Taiwan-ese democracy could lead to a desire for in-dependence, Chinese nationalism couldmake reunication more urgent, andAmerica could be afraid of appearing

weak. Even now, when the mood is good,the island is a test of Chinese and Ameri-can restraint. America needs to be clearthat it will not be manipulated: Taiwancannot rashly bid for independence on theassumption that America will protect it.China needs to understand that coercionwould destroy its credentials with the restof the world. America does not expect Chi-na to renounce its aims; it does expect Chi-na to satisfy them within the system.

Policymakers often sneer at diplomatsfor their compromises and half-truths. Yetthe high calling of diplomacy is to ndantidotes to the rivalries that poison geo-politics. Not since the 19th century havethey had as great a task as managing the re-lationship between China and America. InMr Obama’s administration they have aname for this: strategic reassurance. 7

14 A special report on China’s place in the world The Economist December 4th 2010

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and conventional military doctrine withAmerica. Compared with the elaboratecold-war communication between Ameri-ca and the Soviet Union, China and Ameri-ca do not talk. Military-to-military linkswere among the rst things to go whenAmerica sold arms to Taiwan earlier thisyear, just as they were in 2001 when Do-nald Rumsfeld, then secretary of defence,severed them after that mid-air collision.Military-to-military contacts are not a re-ward for good behaviour but an essentialpart of building trust. ¹ Asia needs rules to help prevent mari-time disputes from escalating. Collisions atsea, for instance, are much easier to man-age if the rules have been set out before-hand. Collisions are less likely to happenat all if a code determines what counts as asafe passage. In 2002 ASEAN and Chinasigned an agreement encouraging good be-haviour in the South China Sea, but it hasbeen neglected. Only after the recent fussdid China show a renewed interest. ¹ America and China need to talk nowabout the things that look likely to lead todisputes later on. That means contingen-cies for North Koreain secret if necessary.As Kenneth Lieberthal, of the Brookings In-stitution in Washington, DC, argues, it alsomeans talking about such issues as spaceand cyber-warfare. The two countrieshave put a lot of work into their Strategicand Economic Dialogue, but this tends tobe dominated by the news of the moment.It should focus on the future.¹ America should abide by its own rulesand if it must break them, it should factorin the real cost of doing so. America wantsChina to be prepared to live with the worldas it is. If it breaks the rules, it will feed sus-picions in China that, one way or the other,its rise will be denied. In terms of security,keeping the rules means avoiding actionsthat, in Mr Art’s words, appear punitiveand unprovoked. In economics it meansavoiding protectionism, which is doublyself-defeating as it both undermines Chi-

na’s faith in the system and makes Ameri-ca poorer and less able to defend itself.¹ The Chinese Communist Party shouldstop using censors and commentators tospread a virulent form of nationalism. Itsleaders will nd foreign relations easier tomanage if they draw less on historic griev-ances. That will be hard for the party,which craves the legitimacy that comesfrom having seen o Westerners and theJapanese. But it should eschew resentmentif it wants China to co-exist easily with therest of the world.¹ China and America should try to do asmuch business as they can through multi-national forums, such as the G20 and theUnited Nations. Bilateral dealings are easi-er and less time-consuming. But they areopaque and they leave the rest of Asiawondering what is really going on. Noth-ing builds the capacity of the system asdoes using it successfully.¹ Asia needs to sort out the thicket of re-gional-security organisations. With Amer-ica and Russia set to join as full membersnext year, the East Asia Summit looks themost promising place to become the re-

gion’s security forum. That will take a leapof faith from countries like Singapore,which has a special place in ASEAN. How-ever, Asia needs to put collective securityrst for once.¹ Asian countries should put more eortinto non-traditional security. According toKatherine Morton, of the Australian Na-tional University, a lot of work is to bedone in such areas as climate change,health, the environment, piracy and terro-rism, where threats by their nature crossborders. Just as important, however, non-traditional security presents a chance forAsia’s military forces to learn how to worktogether without the usual tensionsaswhen China sent its ships to help an inter-national naval force prevent piracy in theGulf of Aden. Some Asian countries aresqueamish about the eect of non-tradi-tional security on their sovereignty. Theyshould swallow hard.

Time to chooseAfter King Goujian won his famous vic-tory over the kingdom to the north, he sorevelled in his power that he turned intosomething of a despot. One faithful advis-er ed for his life, another fell on his swordat the king’s command. In the 1980s someChinese writers saw this as an allegory forthe cruelty of the triumphant Mao Zedong.

There are many interpretations of KingGoujian’s story. It can stand for vengeance,despotism, self-improvement and muchelse. Likewise, China’s rise is neither guar-anteed to be chiey about the prosperityof 1.3 billion people nor condemned to beabout antagonism or conict with the restof the world. The future, like the story, iswhat we make it. 7