Sino-U.S. Relations: Aunt Flo is Visiting

On January 29, 2010, the U.S. government informed Congress of its decision to sell Taiwan a total of $6.4 billion worth of arms, including Black Hawk helicopters, Patriot-3 anti-missile systems, Osprey minesweepers, Harpoon missiles and a multi-functional Information Distribution System. On the 30th, the Chinese Foreign Ministry, Ministry of National Defence, National People’s Congress, Chinese People’s Political Consultative Conference and Taiwan Affairs Office respectively expressed their opposition and responded the most swiftly in 60 years. They pointed out that such actions by the U.S. seriously violate the principles of the three Sino-U.S. Joint Communiques, especially the August 17 communique, acutely contravened the principle of the Sino-U.S. Joint Statement, inflicted critical harm to China’s national security and core interest, will cause great disturbance to the military relations between China and America and serious trouble to the Sino-U.S. partnership regarding the peace and stability in the Taiwan Strait. This is round one, during which perhaps no one can change what has been done. The Chinese military expressed its great indignation and resolute opposition to America’s faithlessness, interference with China’s inner affairs and undermining of China’s national security interest. The director of foreign affairs, Major General Qian Lihua, met the military attaché of the U.S. embassy in China to advance China’s stern opposition. On the same day, the U.S. State Department spokeswoman Laura Tischler said to reporters in Washington, D.C. that such arms sales are made in the good hope of helping to maintain security and stability in the Taiwan Strait. As tension mounts, the Sino-U.S. relationship is destabilizing. This is the first great challenge China faces in 2010, the greatest challenge for Sino-U.S. relations in the past 30 years and the most fierce sword-crossing between China and America since the Tian’anmen incident in 1989. It is very likely that the Sino-U.S. relationship will return to a state of troublesomeness, turbulence and stiffness comparable to that which followed the Tian’anmen incident.

On January 8, the U.S. State Department spokesman Crowley rebutted that according to the Taiwan Relations Act, America has the right to provide Taiwan with necessary weapons and services; America has not stopped in the past 30 years and will not presently halt selling arms to Taiwan (for details, see CNN’s report on January 8th on arms sales to Taiwan). On January 9, a Wall Street Journal editorial quickly shouted out: Arms sales to Taiwan this week, Obama did the right thing. The editorial said that in the past 30 years, the relationship between Washington, D.C. and Beijing has not changed because of America’s arms sales to Taiwan. It is a wise move if the Obama administration approves the sale — the sooner Beijing knows that America will stand up for its ally, the friendlier it will be to America. Clearly, all the communiques signed between China and America are not worth as much as the Taiwan Relations Act. In the past 60 years, the way America has balanced China and Taiwan is to give preference to each for 30 years. During 2010, and in less than a month’s time, America veered off from its old Chinese policy for dealing with Taiwan and the Dalai Lama.

On February 2, round two began — this time regarding the Dalai Lama. Of course Mr. Obama will not abandon the convention of meeting the Dalai Lama. On February 3, Obama promised in a strategic session of the Democratic conference in the Senate that the U.S. will take a tougher stand in regard to its trade with China to ensure that China will keep its market open to America. The U.S. will assertively require China to carry out an RMB exchange rate reform. With America’s half-century of hegemony and China’s ambition during the 21st century, will America have a wolf (China) by the ears in 2010? Now that we are in the era of China’s rise, when can the U.S. play the political trump card of Taiwan and the Dalai Lama? Soon afterward is the economic card of RMB appreciation and China’s export, foreign currency and trade deficit, which are the obstacles that America and the EU cannot easily overcome in 2010. Sino-U.S. relations have worsened: Google might quit China, America’s arms sales to Taiwan incurred strong opposition from Beijing and Obama may meet the Dalai Lama very soon. What kinds of pros and cons will Beijing and Washington, D.C. face, and what is the future of the Sino-U.S. relationship?

2010 is the most important year for China in the past 60 years. On one hand, since October 1, 2009, the world has seen a demonstration of China’s strength. In the darkness of the financial crisis, almost all countries were suffering from the depression. Only China’s economy shined like a lighthouse in a deep night. After that, China became almost the second strongest country in the world. Since 2009, China seems to be able to do whatever it likes and achieve whatever it wants. However, China is still one of the absolutely weakest and poorest countries — with a population of 1.3 billion, the average GNP is only $3,000 to $4,000, even less than one tenth of the western countries’ average GNP. There is still much to improve about China’s legal system, and even now China has serious social conflicts in need of resolution before social harmony is achieved.

On the other hand, China’s economy is rising rapidly. Passing 2010 and looking into the future, what else will China be short of: money? It has plenty! China’s rapid transit railway construction and investments have already surpassed those of all the developed countries, its state-owned banks have grown from nothing into world top-10 banks and China Mobile, China Life Insurance, China Petrochemical and China National Petroleum have all become elites among their global peers. Are they short of talent? They have the world’s largest think tank of 1.3 billion people.

In the past 60 years, the only thing China has been short of is self-possession. China needs to keep calm when it achieves its consecutive success that has lasted for the past 100 years. China needs to focus on its future ambition of achieving harmony between the nation and the world. Will it show generosity when interacting in world politics? Will it have confidence when dealing with international affairs? More importantly, the ambition of harmony between China and the world has yet to materialize, whereas the clock of history will not stop ticking. For example, the Chinese peasants’ citizen rights are still not guaranteed, and Chinese citizens only have a little wealth. The constitution China uses to regulate the political party, country and politics while forming a state with an adequate legal system is the same one used 60 years ago, that five-zero constitution — zero execution, zero jurisdiction, zero function, zero humanity and zero regulation.

I. Political Oversight

We do not know whether China will continue the policy it used 60 years ago when dealing with Taiwan (Taiwan, also known as the Republic of China, coexists with PRC in history and still does today) and the Dalai Lama. Will it alter its policy gradually, precipitately or fundamentally? Firstly, in the past 60 years, when dealing with international affairs such as Taiwan and the Dalai Lama, China was weak-kneed, but today, China has risen up. Will it keep its weak attitude, or will it change itself outright and hold out a strong hand? Now U.S. President Obama will meet the Dalai Lama, and China expressed its strong opposition, but every American president (Bush and Clinton, just to name a couple) has met the Dalai Lama. In the past 60 years, many western countries’ leaders met the Dalai Lama, but now, suddenly, it becomes wrong and unacceptable for Obama to do so. After 2009, how will China change such a situation and face the future?

Furthermore, China, Taiwan and the United States are in a triangular relationship. Apart from the three Sino-U.S. Joint Communiques and the August 17 Communique signed between China and America, the U.S. government also has to abide by the Taiwan Relations Act, which was signed before those communiques with China. How long have China and America been friends, and how long has America been selling arms to Taiwan? Although China has always been expressing its resolute opposition to America’s arms sales to Taiwan, the sale actually has never stopped in more than half a century. The only way to stop the argument over Taiwan is to replace the Taiwan Relations Act, which was signed by ROC, approved by the U.S. Congress and passed by the House and the Senate in 1979, with the Mutual Defence Treaty between the U.S. and China. Clearly, the resolution does not lie in the Obama administration abolishing the Taiwan Relations Act, which has been approved by the U.S. government and followed for over 30 years, but in China’s new policy and its wisdom. It takes time to gradually make things right from the foundation up.

On January 7, 2010, the United States announced another arms sale to Taiwan, including Patriot missiles and other regular weapons the U.S. has been selling to Taiwan over the past 30 years. Through January 10, the Chinese Foreign Ministry and Ministry of National Defence have expressed their resolute opposition five times in three days to urge America to stop the sale. Chinese Foreign Ministry spokesman Jiang Yu said sternly on January 7 that China requests America to stop the arms sales to Taiwan, for fear of damaging the cooperation between China and the U.S. The Chinese Ministry of National Defense said it will act upon the right to take further measures, and China implored America to respect China’s core interest, stop selling arms to Taiwan immediately and cut off the military relations between the U.S. and Taiwan, for fear of damaging the military relations between both sides and the regional peace in the Taiwan Strait. China will surely act upon the right to take further measures. China and America have held established diplomatic relations for almost 30 years, and in the aspect of arms sales to Taiwan, China has expressed its resolute opposition for 30 years while America has kept selling arms to Taiwan for these same 30 years. There is no precedent in the U.S. government to repeal a decision just because China strongly opposes it. So, whether 2010 will be a historical turning point for America’s Chinese policy to stop the arms sales to Taiwan is yet to be seen.

To decide whether to act assertively or passively when dealing with Taiwan and the Dalai Lama, China needs to be careful, remain calm and use the wisdom, confidence, insight and tactics of a large, newly born country to tackle the tough problem. China has never succeeded in such difficulties and has no relevant experience. Can China really form a state with an adequate legal system? On the other side of the strait, Taiwan has surprised the world. The founding party of the ROC, the Kuomintang, has fundamentally reformed its party and adopted a new policy of being just, fair and open, giving Taiwan a good environment in which to develop. In 2010, facing America’s 60-year-old arms sales to Taiwan and the truth that foreign leaders have always met the Dalai Lama, will China keep running away or will it stand up and confront the truth?

II. The Economy Sunk, China Kicked Back.

On September 15, 2008, a worldwide financial crisis broke out. China had nothing to do with the crisis, but it turned out to be the crisis’ victim in the end due to the root of China’s economy and economic structure. Obviously, China was restricted in many ways during the crisis.

A. The exports of “made in China” products slumped. There is no other country in the world developing and getting rich solely by earning foreign exchange through exports. According to the statistics of China Customs in 2009, the total value of imports and exports of China was $2.2 trillion, decreasing 13.9 percent from the previous year, including exports of $1.2 trillion, a decrease of 16 percent, and imports of $1 trillion, a decrease of 11.2 percent. The trade surplus for the whole year was $196 billion, a decrease of 34.2 percent (according to a report on Xinhua.com on January 10, 2010, “China’s exports might be the highest in the world, but it hardly has the strongest trade”). China is using others’ money to achieve its development. In the future, China will be a new hot spot for the world economy and a global energy leader.

B. Using foreign capital to achieve development is another Chinese trait. Will China keep this characteristic, or will it abandon the old trick? China’s foreign exchange reserves have exceeded $2 trillion. Will China continue to enlarge its American debt, or will it call it quits? If not reserving U.S. dollars, what other currency could China collect — gold, oil, or rare metal?

C. The RMB exchange rate will be the key point of China’s economic development. RMB internationalization calls for the RMB to obey the game rules of the USD and Euros, or else the rise of China will come to a halt, and the competition with USD and Euros will obstruct its development. China’s economy is like a cask — one short board will let the wealth drain out.

III. China, America and Europe Compete for Wealth

China’s rise will be short-lived if the country does not seek international cooperation regarding a wide range of necessities, such as oil, nuclear energy or iron sources. The World Climate Conference in 2009 proved the influence of the G2, but the G2 are bounded by the argument about redistributing world wealth, and they sank into a deadlock of conflicting interests.

1. China has the highest government operation cost in the world. Apart from the ever-high government expenditures over the past 60 years, all parties, corporations, associations and local government departments have shares in government finance. Under such circumstances, China can participate in world affairs for one, two or three years, but things will eventually get out of order in the long run.

2. America has profited nearly $100 billion from imposing tariffs on Chinese imports. China has resolutely opposed these, like always, yet America still does what it has to do, like always, to gain so-called fair trade opportunities. Europe follows the steps of the U.S. and keeps stifling Chinese imports with taxes, stimulating the interest conflicts among China, America and Europe.

3. Nobody can end the global popularity of low-priced “made in China” products. Therefore, fighting a trade war is the only way for high income countries to save themselves. Then, a worldwide, long-term battle among RMB, USD and Euro will continually restrict China’s development.

4. From 2010 onward, with the world recovered from the crisis, these challenges also arose: developed countries vs. developing countries, the old uni-polar world system vs. the gradually forming non-polar world system; old free market capitalism vs. the uprising national capitalism. The world no longer has one superpower, but now every country contends with another seeking its own interest. Though China is still rigid, it has become more flexible than before. However, in regard to trade, investment and exchange rate, what we can anticipate is more conflicts than cooperation in the future. In 2009, despite China’s strong opposition and sharp accusations of trade protectionism, America announced punitive taxation and investigations regarding Chinese tires and iron tubes — totaling 261 investigations, including 103 trade remedy, 67 anti-dumping, 13 anti-subsidy, 16 protectionism, 7 curb, and 6 American 337 investigations, directly worth $12 billion (see January 8, 2010, Chinese Business Affairs Department affiche No. 1, 2010 ). China has no advantage in international conflicts since around 80 percent of anti-dumping investigations in the world take place in China.

5. Clearly, China has not learned how to win the worldwide competition for hegemony and wealth. Moreover, with a political system in which the Communist Party of China decides everything, China cannot compete with the western countries.

The relations between the CPC and the developed countries will change greatly every few years for political reasons. Even if China becomes the second strongest country in the world in 2010, this historical environment cannot be changed. 2010 is a new era for the 234-year-old America, the 27 wealthy European countries and the 60-year-old PRC. Yet they are not on the same starting line — Europe and America will not give China footing in the market economy.

In the future, economic interest will bear down political interest. This is the only difference between China and Western countries when weighing the economy and politics. With China rising up quickly in the 21st century, the time for America being the only superpower will be gone. The world is entering an era that entails new forms of economic competition and political wisdom.