Fri, Apr 10, 2009 page8

• Rumblings in US-China relations

  • By Sushil Seth
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  Despite US Secretary of State Hillary Clinton’s recent trip to China (as part of a wider visit to Asia), the rumblings in US-China relations are starting to surface.

  The most serious has been a tussle on the sea between a US naval ship, the Impeccable, and a flotilla of Chinese sea vessels. Both sides questioned the other’s motives, with Beijing accusing the US of conducting “activities in China’s special economic zone in the South China Sea [near Hainan Province] without China’s permission.”

  In other words, the US was engaged in surveillance activities in and around Chinese waters.

  The US, on the other hand, said it was operating in international waters, thus casting China’s behavior as aggressive in nature.

  It might be recalled that in April 2001, a US Navy surveillance plane operating in international airspace over the South China Sea, near Hainan, had a midair collision with a Chinese jet fighter that was stalking it.

  The incident resulted in the death of the Chinese pilot and led to the detention of 24 US service people for 11 days after the plane made an emergency landing on Hainan Island.

  The collision and death of a Chinese pilot created a volatile situation that was somehow resolved peacefully. The incident occurred just a few months after former US president George W. Bush took office in January 2001.

  It was speculated at the time that the Chinese were testing the resolve of the new Bush administration.

  If so, this new incident, not long after the inauguration of US President Barack Obama, sets a pattern for Beijing’s “warm welcome” of new US presidents.

  Dennis Blair, director of US national intelligence, said this latest naval tussle was the “most serous” between the two countries since the 2001 midair collision.

  He told a US Senate hearing that the Chinese “seem to be more militarily aggressive” in general.

  There is, however, no clear sense as to why China acted the way it did. As a spokesman of the US Pacific Command said: “It is not clear what the Chinese intentions were. There have been a few incidents over the past week and a half. But who orchestrated this latest one, and why, we don’t know.”

  It is clear though that when it comes to its perceived territorial waters, China is hypersensitive to its military secrets, particularly because it has built a submarine base on Hainan Island.

  As it has done with Taiwan, China claims the South China Sea as its sovereign territory. This means that Beijing will claim the right to interfere with foreign naval vessels if it sees them in a surveillance role or threatening its security.

  That is how the Impeccable was viewed as conducting surveillance in Chinese “territorial waters.”

  The danger is that if China starts claiming and enforcing its writ over the South China Sea, there might be more incidents in the future like the one involving the US ship.

  China is unhappy with Washington’s decision last year to sell more than US$6 billion in weapons to Taiwan, a decision that led to the suspension of Chinese and US military-to-military contacts.

  It appeared though that following Clinton’s visit to China, things might improve. But the tussle over the sea has created additional strain on US-China relations.

  The US is obviously worried about China’s growing military power, which is spurred on by annual double-digit increases in its defense budget over the years.

  The recently released Pentagon report Military Power of the People’s Republic of China 2009 highlights the modernization of China’s armed forces in the midst of utmost secrecy, and the consequent dangers.

  Pentagon press secretary Geoff Morrell said: “We have advocated time and again for more dialogue and transparency in our dealings with the Chinese government and military, all in an effort to reduce suspicion on both sides.”

  About the Pentagon report, he said that it should be read as calling for “deeper, broader, more high-level contacts with the Chinese.”

  A similar message was conveyed to Chinese Foreign Minister Yang Jiechi (楊潔箎) when he recently met Obama in the White House.

  Obama told his Chinese visitor that the two countries needed to raise “the level and frequency” of military dialogue “in order to avoid future incidents” like the one with the Impeccable.

  Of course, high level dialogue between the two militaries would be helpful. But how do you resolve the issue of China’s presumed sovereignty over the whole of the South China Sea when the US and other countries regard much of it as open to international navigation?

  Military rumblings aside, China is also getting edgy about its investments in US Treasury notes and other US financial instruments. Chinese Prime Minister Wen Jiabao (溫家寶) recently sought US guarantees for investments in its debts amounting to about US$1 trillion.

  “President Obama and his new government have adopted a series of measures to deal with the financial crisis … We have lent a huge amount of money to the US. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried,” Wen said.

  The Chinese premier called on the US “to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

  At about the same time, People’s Bank of China Governor Zhou Xiaochuan (周小川) advocated the creation of a new currency reserve system managed by the IMF.

  Zhou said a new system was necessary because the global economic crisis had revealed the “inherent vulnerabilities and systemic risks in the existing international monetary system.”

  In his paper on the need for a new currency reserve, Zhou advocated the expansion of the IMF’s Special Drawing Rights based on a basket of several currencies.

  The goal, in his view, would be “to create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run.”

  Earlier, at the World Economic Forum in Davos, Switzerland, Wen blamed the global economic crisis on “inappropriate [US] microeconomic policies, an unsustainable model of development characterized by prolonged low savings and high consumption … blind pursuit of profit … and the failure of financial supervision.”

  All these recent observations by Chinese leaders, while reflecting Beijing’s concerns about large US budget deficits impacting on Chinese investments, are also intended to seek an influential role in global financial management.

  The global economic crisis was an important topic at the G20 summit in London, with China playing an important role.

  Although the Chinese economy is in trouble, which is increasing the danger of social unrest in the country, its huge foreign currency reserves of about US$2 trillion gives it important leverage, especially when the US needs international credit to finance its stimulus packages.

  Diplomacy is about creating leverage to influence and shape the policies of competing powers.

  While the US remains the dominant world power, Chinese options for power projection are still limited.

  But China will exercise its leverage at multiple levels with its military, economy and policy to reap maximum mileage in its relations with the US.

  Sushil Seth is a writer based in Australia.
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