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Transatlantic Trends: China may worry about EU numbers

BRUSSELS — The 2007 Transatlantic Trends report confirms a couple of the trends that have been worrying policymakers in Beijing of late. The gradual cooling of European ardour for China since the honeymoon days of 2004 continues. Then polling”warmth” levels (on a 100-degree scale) across Europe of over 50 degrees, comparable to the United States, China has this year slipped to 43 degrees in the eyes of Europeans, on par with European feelings toward Russia. The alignment of U.S. and European attitudes toward China is also marked. Similar proportions €“ 48% of Europeans and 54% of Americans €“ see China as more of an economic threat than an opportunity, and even the differences in numbers viewing China as a military threat €“ 50% of Americans and 32% of Europeans €“ will be far from reassuring to Beijing. While the United States and China regularly game out war scenarios over Taiwan, making the relatively high U.S. figure understandable, the sheer unlikelihood of any military confrontation between China and any European state would have been expected to result in considerably lower numbers across the EU.

This was not supposed to happen. Three years ago, the story was of Europeans blinded by commercial enthusiasm, Chinese”soft power,” and a barely-disguised desire to counterbalance American unilateralism, looking to seal a new alliance with China through the lifting of the 1989 arms embargo. Even seasoned observers of China and Europe such as David Shambaugh wrote about an “emerging axis” €“ and many in Beijing believed it. Yet when the hard choice was put in 2005, the Europeans chose not to risk the damage to transatlantic relations, and the embargo remains in place. Amid growing criticism from European businesses about slow progress on market access, the tougher language of the European Commission’s October 2006 communication, setting out a new China strategy, elicited Chinese concern about the “Americanization” of the European position. And with the departure from the scene of Chirac and Schroeder, China lost the two lynchpins of the proto-EU-China strategic partnership. Intra-European divisions persist €“- the survey shows that populations in northern European countries such as the Netherlands and the U.K. are far more disposed to see China as an economic opportunity than those in southern or eastern Europe. But the”China opportunity” camp is also broadly a transatlanticist one, giving relatively little opportunity for China to exploit these differences.

The snapshot that the data provides €“- this is the first year that the survey has posed the opportunity/threat questions this way €“- mirrors a number of other recent polls showing that while China’s standing in the developing world is often high, its image in the West is showing few signs of improvement and some signs of decline. The survey, moreover, was conducted before the peak of the Chinese product safety scandals and recent reports of”cyber-attacks” not only on the U.S. Department of Defense but also on German, French, and British government ministries. Although there are natural differences between the United States, as a Pacific power, and Europe, with its negligible security role in East Asia, the basic attitudes toward China’s rise among publics on both sides of the Atlantic look similarly ambivalent.

Posted in China, European Union, Transatlantic Relations, Transatlantic Trends, United States0 Comments

China – democracy in Africa “the root of disaster”

BRUSSELS — The publication of this article in the People’s Daily caused an interesting ripple of reactions, not least in Africa itself. Although China professes ideological neutrality in its foreign policy, its officials and a number of Chinese intellectuals are still eager to leap on any evidence that €˜Western-style democracy’ is €˜unsuitable’ in any number of places, whether Taiwan €“ where many claim democracy has brought €˜chaos’ €“ the Middle East, Russia, and now Africa. While the article does not represent the official position of the Chinese government, its appearance in the Chinese Communist Party’s leading publication certainly implies a level of official sympathy for Li Xinfeng’s view.

China has moved some way in its policies towards the world’s worst regimes €“ the manifestly unsuccessful autocracies such as Burma, North Korea, and Zimbabwe €“ which its diplomats quietly, and sometimes not so quietly, push towards political and economic reform. But it cannot be anticipated that this shift will continue to a point where China is like-minded in its approach to dealing with the less clear-cut cases. Failing democracies and successful autocracies still provide China with an external source of legitimacy for its own domestic political system, and senior Party officials are heavily conditioned in their international outlook by their own experiences in maintaining CCP rule. It is difficult to foresee active Chinese support for shoring up fragile democracies such as Kenya or facilitating efforts to exert pressure on would-be democracies such as Pakistan. U.S. and European policymakers, even as they develop dialogues with China on Africa (and elsewhere), need to look hard at how much convergence of views they can realistically expect. Across a number of fields €“ whether supporting economic development or heading off the risks of acute instability and conflict €“ there is potentially a great deal, but in other respects China is likely to remain a €˜values competitor’ as well as just an economic one.

The view that China will become the unequivocal backer of dictatorships across the globe at least has the virtue of simplicity and clarity €“ as does the view that China will see its interests moving ever closer to those of Western democracies. But there is every sign that the reality will be a great deal messier €“ and the task for policymakers in the West that much more complicated.

Posted in China0 Comments

On China policy, the game has moved on

The Beijing Olympics have seemed destined to be about something €“ anything €“ other than the games. Last year, we were preparing for the €˜Genocide Olympics’. Then the €˜Burmese Junta Olympics’. This year the €˜Oppressed Tibetan People Olympics’. More recently, the prospect of a €˜Robert Mugabe Olympics’ loomed. The usually neglected Uighurs made a late bid for the stage with a grenade attack in North-West China. And a predictable list of internal problems have taken the headlines in the last few days, whether Beijing’s dire air; foreign journalists whose promised freedom-of-movement was curtailed by a policeman’s boot; visas denied to potentially troublemaking Olympians, or the spottily lifted restrictions on the internet.

At every stage, a disparate coalition of groups has argued that a threatened boycott of the opening ceremony €“ or the entire Games €“ would provide the necessary leverage over China to solve whatever problem was at hand. Yet instead of an embarrassing no-show, today we see the largest line-up of political leaders outside a UN General Assembly, including the U.S. President and excluding Beijing’s election-stealing friend from Harare. Veteran China-watcher James Mann notes the contrast with major U.S. presidential visits in the 1990s: despite a set-piece speech from President Bush in Bangkok about China’s domestic political situation, this visit is not going to coincide with a toughly negotiated set of concessions on the human rights front. In fact, there seem to have been few concessions from China on any front. It was thought that Beijing would be too nervous about its party being spoiled to block a UN Security Council resolution imposing sanctions on senior Zimbabwean officials. It vetoed. The scale of public outrage over Tibet was supposed to force China into serious dialogue with the Dalai Lama. There are no serious talks taking place. There have been modest, pragmatic shifts for the sake of international public opinion €“ support for a peacekeeping mission in Darfur and a few protest pens in Beijing €“ but no deviation from the bottom line.

The mystery is why we thought it would be otherwise. While the Chinese government still hears the same 1990s language coursing around western politicians’ speeches, it knows that human rights €“ at home or abroad €“ don’t make the A-list of the agenda any more in its dealings with the major powers. For the United States, the economic stakes are too high for Chinese macroeconomic policy and trade relations to be anywhere but number one on that list. Nukes come next. China’s role in the North Korean nuclear crisis is pivotal to the success €“ or otherwise €“ of the negotiations. Couple that with Iran, where keeping China on board for the gradual squeeze of sanctions-tightening remains a fraught task. And the security side of the list is rounded off by Taiwan, where the modus vivendi reached between Washington and Beijing €“ alongside the election of the more China-friendly Ma Ying-jeou €“ has dramatically reduced the prospect of conflict in the straits, the real worst-case scenario in the relationship. Burma, Sudan, and Tibet sometimes make the upper end of a B-list but that is not where the real political capital is being spent. The two presidential candidates are not shaping up that differently either €“ neither one going close to the €˜strategic competitor’ language of the 2000 campaign, let alone the €˜butchers of Beijing’ from 1992.

Other countries face similar prioritizing dilemmas in their China policies. While everyone attempts to pretend, at least publicly, that they can continue to lobby China just as effectively on all fronts as they ever could, they can’t. We have a list of policy areas on which we want China to move that is twice as long as it used to be. The stakes for the most important issues are twice as high. And, in dealing with a far more powerful China than the second-tier economy it was ten years ago, we have half the leverage. Even the NGOs struggle with their focus €“ human rights at home? Darfur? Burmese monks? Tibetan monks? Climate change? The critical reaction from the Chinese public over the Tibet protests has made many of them additionally nervous about the consequences of their efforts to link each of these causes to the Olympics.

The net result is clear. On most of the €˜soft’ issues, while there is a fair volume of noise, the Chinese government now faces little targeted international pressure and can move pretty much to its own timetable. Indeed, it is China that has demonstrated the capacity to target and punish countries for stepping out of line politically €“ Japan over Koizumi’s visits to the Yasukuni Shrine, Germany and France over Tibet.
It is still possible that a single cause will flare up in the next two weeks and dominate the Games. But while Beijing 2008 is rarely going to be written about without the words €˜dogged by concerns about [fill in the blank]‘, on the substance of the issues China is largely off the hook. The Olympics were a major test of whether a particular set of campaigning tactics would still work on China €“ and on Western governments in their relations with China. The answer appears to be that they don’t. Do Western governments still have the leverage? Yes. But they’re choosing to use it elsewhere. The pretence will continue, but China policy isn’t about human rights any more.

Posted in China, United States0 Comments

Russia casts a pall over China’s day in the sun

BRUSSELS — 8/8/08 is not going to be remembered the way China would have wanted. Despite a widely praised opening ceremony, the first few days of the Olympics have been vastly overshadowed by the conflict in Georgia. In one sense, this has taken some of the heat off nervy Chinese officials. After a highly politicized lead-up to the Games, journalist friends in Beijing have commented that, with the serious diplomatic action taking place elsewhere, the interest of their editors has switched to the sport. And in the unfolding crisis, China has €“ predictably €“ kept its head down. A spokesman from the Ministry of Foreign Affairs issued China’s call for restraint and a ceasefire on Saturday but the reports of Putin’s meeting with Hu Jintao the same day carried no mention of South Ossetia. China has not played a prominent role in discussions in New York over a possible UN Security Council Resolution, leaving the disputes there to play out between Russia and the West. The Georgian ambassador met with Chinese Foreign Minister Yang Jiechi in Beijing to ask for China’s help but evidently received a non-committal response. A Chinese interpreter was too apprehensive even to translate one journalist’s question about Russia to the Georgian athletes, who had decided on the eve of the Games €“ after 3am instructions from Tbilisi €“ to stay in the competition.

But China is not going to be able to duck this one. Privately, Hu and Wen must be cursing the timing of their Russian friends, who have left them facing a different PR battle from the one they had anticipated. For many columnists, the juxtaposition has been too hard to ignore: the coincidence of the opening of the Beijing Olympics and Russian aggression in Georgia symbolizes a new authoritarian age. In today’s Financial Times, U.S. Managing Editor Chrystia Freeland argues that “figuring out how to contain the 21st century’s monied authoritarians is our most pressing foreign policy dilemma”. Similar arguments are on show in the Wall Street Journal, the New York Times and the Washington Post. The alternative argument has been made by several other commentators in the same pages: whatever you may think of the Chinese, at least they don’t behave like the Russians. Because they are developing an economy that requires much more integration into the global order to succeed, “they do not make sudden moves and do not try to provoke crises“.

For many officials in Beijing, the fact that this debate is playing out at all must indeed seem terribly unfair. While Russia has been escalating its disputes with neighbors, China has largely been doing the opposite. Its two most fractious €“with Taiwan and Japan €“ have seen serious improvements over the last couple of years, with much of the credit due to Chinese efforts. Its approach to the West has been firmly non-confrontational too. Political and economic tensions yes, but no crises since the EP-3 spy plane incident seven years ago and no Putin-style nose-thumbing.

In truth though, the Chinese have done plenty to keep the “authoritarian axis” theory alive. Diplomatic coordination with Russia in New York is a demonstrable fact €“ Beijing’s two vetoes in the UN Security Council in the last two years have been undertaken jointly with Moscow. Officials in the Pentagon were dismissive of the first round of Sino-Russian joint military exercises in 2005 €“ the first since the Sino-Soviet split €“ with their embarrassing number of deaths from friendly fire. They took the 2007 round more seriously. And Georgia itself is the emblem of the shared ideological interest that brought the two sides even closer €“ preventing “color” revolutions, a goal that is institutionally embodied by the Shanghai Cooperation Organization (SCO). One Chinese journal, attached to the Ministry of State Security, describes such revolutions in terms that would sound familiar (albeit less stilted) coming from the Kremlin: “squeezing [non-democratic] big powers’ geopolitical development space via €˜democratic transformation’ of [their] neighboring states with the ultimate aim to overturn the non-democratic system of the big powers at an opportune moment”. Which prompts the question: how would China’s leaders deal, say, with a Burmese Saakashvili if their efforts to prop up the junta fail? The approach towards the Dalai Lama, let alone Chen Shui-Bian, doesn’t exactly inspire confidence.

But we should be careful not to draw the wrong inference from 8/8/08. To conclude that the West is operating in a new strategic environment is one thing. To lump China and Russia together as a single “authoritarian threat” would be counterproductive. Whatever the appearance, the relationship between the two sides remains characterized by a series of tensions. Russia is uncomfortable about China’s role in Central Asia, and sees the SCO for what it really is: a cover for China to extend its influence in the region without rousing Moscow’s ire. Arms sales from Russia to China have tapered to a halt. Russia is uneasy about China’s growing military power and continues to sell higher technology equipment to the Indians. And while Putin and Hu evidently get on well, lower down the chain officials on both sides are often dismissive and suspicious of the other. “This is why so many of the agreements take so long to come into effect after the summits”, as one Chinese ambassador noted (with approval). In his new book, Bobo Lo argues that the relationship is an “axis of convenience” €“ while the two sides find”common tactical cause” over shared concerns about Western interference, he contends that they share”no strategic like-mindedness”.

At the very least, we should put this to the test in the coming years. There is much rethinking needed by the United States and Europe about how best to promote liberal values in a world of illiberal powers. But liberal democratic interests will likely be better served if “strategic like-mindedness” is discouraged rather than treated as an established fact. Playing on the differences between Russia and China is a preferable strategy to pushing the two sides any closer together.

Posted in Asia, Black Sea, China, Georgia, Russia0 Comments

Will Beijing bail the West out – or is China going down too?

Commentators have been jumping over each other to spell out the likely implications of the geopolitical power shift brought about by the global financial crisis. And there’s one big winner. In a recent paper, Brad Setser compares today’s United States and China to Great Britain and the United States circa the Suez crisis. The moral: “a debtor’s ability to project military power hinges on the support of its creditors [yet] in some ways, the United States’ current financial position is more precarious than Britain’s €¦The United States’ main sources of funding are not allies”. Arvind Subramanian of the Peterson Institute was moved to suggest in last week’s FT that China offer a $500 billion loan to bail out the U.S. banking system €“ but apply strict conditionality, a la the IMF, in order to overcome the American “ideological obsession against €˜socializing’ banks”. This, of course, since seems to have been happened without the imposition of any €˜Beijing Consensus’.

But all these geopolitical strutting scenarios depend on China weathering the storm. And while the Chinese banking system may be secure, the rumblings about the rest of the Chinese economy have already begun. In an article China: all bets are off, the Times claimed on Sunday that €˜the economic miracle has been halted in its tracks’, citing a series of alarming bankruptcy and unemployment statistics to argue that “the world credit crisis may €¦pose the greatest threat to economic reforms since they began”. Today’s Wall Street Journal points to capital outflows from China, as the property market and export sectors look likely to take a hit and the yuan’s rise against the dollar judders to a halt. Rio Tinto followed with a red flag over slowing Chinese demand for commodities and warned that China is “not insulated” from an OECD recession.

In China, the consequences of a global downturn may go beyond the economic. Growth has not dipped below 7% since the bleak period after Tiananmen €“ when the economic reform process really was under threat €“ and the destabilizing effects on the Chinese political system could be serious. One Chinese commentator raised the risk of a “comprehensive crisis” if global conditions continue to worsen. This €“ and the risk of major losses on China’s dollar assets €“ has prompted some analysts to suggest that it is in Beijing’s interest to deploy its near $2 trillion of reserves (whichever proportion of them are actually deployable). Andrew Graham today argues that China has”a massive incentive to help stop the US economy and its currency descending into chaos” and that this is”the only way to avoid global recession”.

That doesn’t seem to be the prevailing view in Beijing. Some commentators, such as Li Daokui, have suggested that this moment represents an opportunity to buy up cheap foreign assets and entrench Chinese influence at the heart of the Western financial system. But senior officials have reason to raise their eyebrows at this sort of advice. Stung by the disastrous investments in Blackstone (which lost half its value well before the crisis) and Morgan Stanley, the political stock of the advocates of these deals has gone down with the share prices. And any approval for such investments will be slow-moving and cautious €“ hardly conducive to the frenetic deal-making of the past weeks. The consensus instead seems to be in favor of a more inward-looking solution €“ a serious increase in domestic spending, particularly on infrastructure. Major investment projects in China that had been held up while Chinese policymakers were firefighting inflation and economic overheating will be given the green light. Government surpluses will be run down. The turmoil may even be the catalyst for China to move forward with long-suggested measures to stimulate private consumption, by some measures the lowest, in share of GDP, of any country in the world. At the top of the list: putting the health and welfare systems in place that would push down the problematically high precautionary demand for savings.

If China is indeed able to ride out the crisis and rebalance its economic model away from exports and towards domestic demand while much of the rest of the world stutters, Chinese policymakers will be lauded for their strategic foresight. But if they fail, questions will be asked about why such a rebalancing didn’t take place before €“ and whether, if it had, the current crisis may have been averted some time ago. A few fingers are already being pointed. In Asia’s revenge, Martin Wolf nods to the “savings glut” as the key factor sustaining cheap money at a time of rapid global economic growth €“ which “encouraged an orgy of financial innovation, borrowing, and spending”. The world’s biggest surplus country? China. Sebastian Mallaby similarly attributes the “root cause” of the crisis to a “flawed response to China”, whose cheap products kept global inflation low while its capital surplus contributed to asset bubbles around the world. When people grow bored of the current crop of villains, there are plenty outside the ranks of the economics columnists who would be delighted to put China in the dock next €“ especially if it is perceived not to be pulling its weight while everyone else scrambles to save the system.

So will China emerge as a winner from the crisis? Probably €“ but the economic risks are real and the political risks equally so. Don’t expect Chinese geopolitical swaggering for a good while yet.

Posted in Asia, China, Economics, United States0 Comments

Afghanistan-Pakistan: Bringing China (back) in

BRUSSELS — Of all the regional actors engaged in Afghanistan and Pakistan, China’s role is perhaps the most opaque. Alternately coaxed as a potential savior and condemned as a parasitic free-rider, the transatlantic allies have not yet worked out how to harness Beijing’s undoubted influence and economic clout. This is not altogether surprising: China’s motives are complex and at times contradictory. But if the United States and Europe play their hand well, an opening exists — Beijing’s security calculus is changing in ways that are increasingly favorable to greater cooperation.

The potential benefits are clear. China is one of the very few nations with the capacity and risk-tolerance to make multi-billion dollar investments in both Afghanistan and Pakistan. Projects such as the Aynak copper mine and the expansion of the Karakorum Highway are only the most visible. From telecommunications in Afghanistan to power-generation in Pakistan, China €˜s involvement in major economic sectors is already substantial. Ever more importantly, China’s close, longstanding relationship with Pakistan, including in sensitive areas of Pakistan’s nuclear weapons and military programs, give it a unique level of influence, insight, and trust. On the rare occasions when Beijing exercises its leverage, Islamabad acts.

But China is torn between competing imperatives. While being uncomfortable with the U.S. and NATO presence so close to its borders, Beijing is at the same time fearful of a precipitous Western withdrawal and quietly happy to see the United States bogged down militarily. Notionally supportive of international efforts to combat extremists, China is still wary of provoking them and is single-mindedly focused on Uighur groups such as ETIM rather than the broader transnational terrorist threat. China is also an inveterate hedger. In the absence of a winning U.S. strategy, Beijing sees no reason to make an enemy of the Afghan Taliban, however unpleasant it finds them. The lack of clarity about future U.S. policy in Afghanistan makes a wait-and-see approach the easy default option. And every upsurge in violence in its restive northwestern region, Xinjiang, only heightens Beijing’s sense of caution about the reactions of its own Muslim population.

China’s broader dealings with Pakistan are equally tricky to navigate. This is a relationship in which the Chinese military plays an unusually important and not especially progressive role. While Beijing is eager to emphasize the unchanging nature of its friendship, in practice its relations with the Pakistan People’s Party, and President Zardari in particular, have been cool. It doesn’t take much to prompt Chinese officials to express their longing for Musharraf and military rule. China’s willingness to provide economic support to the current civilian government is correspondingly diminished. Moreover, despite Chinese anxieties about the risks of Indo-Pakistani conflict — and willingness to deal constructively with crises such as the Mumbai terror attacks — Beijing still benefits from tensions on the subcontinent that keep the Indian military diverted to its western borders and pinned down in Kashmir.

The combination of these considerations with China’s innate foreign policy conservatism would seem to be a recipe for inaction. But China’s growing concerns about stability on its periphery are changing the way it perceives its interests.

Chinese investment projects in the region are now important not simply in scale but in their strategic nature. The Gwadar port and the linked prospect of an energy corridor to China’s northwest, for example, are valuable well beyond their economic worth. Yet all of these projects — including the much-touted Aynak mine — are go-slow until Chinese confidence about stability has returned. The Pakistani military is no longer able to ensure that Chinese interests are given a privileged and protected status. Whether it comes to attacks on Chinese assets or the kidnappings and killings of Chinese workers, the threats have been growing as the situation in Pakistan has deteriorated. China has become a target for groups well beyond ETIM and Baluchi nationalists ever since its involvement in the Red Mosque incident. Political tensions with the Pakistani government over these issues have grown markedly in the past year.

Even more worryingly, since the riots in Urumqi, China has faced warning signs that it is becoming a first-order target for transnational terror groups. While Beijing could be dismissive of the AQIM statement in July threatening Chinese overseas personnel, this month’s video from a senior Pakistani-based Al Qaeda figure, Abu Yahya al-Libi, urging a holy war in Xinjiang, is harder to ignore. The threat to China’s domestic security is starting to expand well beyond a tiny group of Uighur extremists. China is also profoundly worried about Pakistan’s long-term security situation. It has become one of the only countries where Beijing has undertaken crisis contingency planning for scenarios ranging from state collapse to loose nukes. And all of their planning makes one thing clear: China needs to coordinate effectively with other major powers if its interests are to be protected. It is no longer clear that pursuit of a narrow set of bilateral objectives is the best Chinese strategy.

Beijing has responded positively to the new U.S. administration’s regional outreach initiative. Nevertheless, eliciting meaningful Chinese cooperation will be a slow process. China is still testing U.S. openness to involving it seriously in the future of the region rather than just episodic crisis management €“ and trying to gauge what level of pressure it will come under if it holds back. European efforts have so far been much weaker. While individual member states such as the U.K. and France have launched their own initiatives with China, Afghanistan and Pakistan have occupied a lowly role in EU-China discussions, and NATO contact with China is highly underdeveloped.

The existing efforts are also overly focused on Afghanistan. The value China can add and its sense of responsibility and anxiety about the situation in Pakistan are many times greater. While the results may not be swift, there is genuine scope over time to find ways of coordinating the targeting of economic and military support, political messages, strategies for dealing with extremist threats, and even some limited discussion of contingency planning. Beijing is reluctant to address Pakistan in multilateral forums or to risk creating perceptions of condominiums with the United States and the Europeans that may damage its close relationship. But the West will in any case benefit more from Chinese efforts that are seen to be bilateral, such as the recent political and practical support given by Beijing to the Pakistani military’s campaign in Swat.

If it can be secured, the omens for cooperation are good. The last time China and the West were aligned against a common threat in Southwest Asia, Chinese arms and Chinese mules played their part in a famous victory. Can Deng Xiaoping’s successors deliver again?

Posted in Afghanistan, Asia, China, Energy, European Union, NATO, Transatlantic Relations, Transatlantic Take, United States0 Comments

A Gift (in Disguise) to Europe and Japan: the G2

BRUSSELS — For a supposedly stillborn concept, talk of a G2 — actual or potential — has proved remarkably durable. Why, despite the implausibility of the notion, does it continue? Anyone looking for signs of an emerging Sino-American global condominium in Tuesday’s comprehensive joint declaration would indeed have had slim pickings. President Obama’s visit has been conducted during probably the warmest first year of U.S.-China relations for an incoming American president. Yet on almost any issue of mutual concern — economic rebalancing, Copenhagen, Iran, North Korea, or Afghanistan — this week’s meetings in Beijing, as expected, have delivered little real progress. For skeptics of the notion, the reasons are blindingly obvious: substantial differences between the two sides make U.S.-China accord on most global challenges difficult to reach.

More modest formulations for the G2 seem no less questionable. One Chinese diplomat based in Europe who is partial to the idea suggested an interpretation: U.S.-China agreement may not be a sufficient condition for progress on major issues but nowadays it is a necessary one. Yet except in a narrow sense — China’s acquiescence is needed on the UN Security Council, as it always was — that’s not quite true either. There is still a sizeable list of topics where Sino-U.S. accord is desirable but certainly not required. Chinese disagreement with the United States over the Middle East peace process, Iraq, NATO expansion — or even the situation in neighboring Afghanistan — barely registers. However appealing the “veto on everything” principle might be to some in Beijing, China remains some distance yet from being a genuinely global power whose consent is always vital.

So why does the G2 idea survive? Partly just because it is a new and neat coinage. Partly because it is flattering to China — and therefore elicits plenty of coy denials from Beijing. But some of the loudest G2 references have come from U.S. allies. While it may not be an accurate description of a current or likely state of affairs, it is an accurate encapsulation of the fears of those who stand to lose most from it — Europe and Japan.

In barely a year, the economic crisis has hastened China’s ascent to the number two slot in the global GDP pecking order, displacing Japan from its long-held perch. The G8 has effectively been retired. The pressure to give up the disproportionately large European grip on other institutions such as the IMF and the World Bank keeps growing. U.S. pre-eminence remains assured, but the position of traditional allies is being squeezed. The process of power transition goes well beyond China. But for those seeking clear manifestations of the threat to their privileged position in global decision-making — and ways to galvanize action — the G2 notion is a gift, albeit one in disguise.

Japanese anxiety about Washington-Beijing flyovers has a longer standing, but for Europeans this is genuinely new. A slew of “G2-threat” think-tank reports and commentary has been emerging as decisions loom for the allocation of top EU jobs after the ratification of the Lisbon Treaty. François Godement, a French China specialist at the European Council on Foreign Relations, wrote on Tuesday that “the specter of the G2 €¦is haunting European governments as much as the specter of revolution haunted its courts in the days of Karl Marx’s Communist Manifesto.” For those who believe in a stronger, more globally active Europe, the simple clarity of the concept makes the case almost obvious. The most succinct summary comes from the man who might himself have been (had he wanted) a top candidate for running European foreign policy, British Foreign Secretary David Miliband: “The choice for Europe is simple — get our act together and make the European Union a leader on the world stage or become spectators in a G2 world shaped by the U.S. and China.”

If all this puts helpful pressure on allies, it is doing the same thing to China. Chinese officials, far from comfortable with the responsibilities implied, fear the new burden of expectation that comes from being number two. They also worry about what happens if, as seems likely, they fail to deliver on it. How long can China, population 1.3 billion, justify contributing fewer international peacekeepers than Rwanda, population 9 million? How long can China hold off deciding between its energy relationship with Iran and the threat of proliferation? Beijing is better able to resist pressure than it was before, but perceptions of China as a free-rider can still prove costly €“ and the G2 notion ups the ante.

There are few concepts whose very mention serves to support the globally-minded constituency among America’s friends while raising the bar for China at the same time. Politeness may dictate its disavowal; it may be more ghost story than genuine threat. By all means keep rubbishing the G2, but just don’t stop talking about it.

Andrew Small is a Transatlantic Fellow at the German Marshall Fund.

Posted in Afghanistan, Asia, China, Economics, Energy, European Union, Iran, Middle East, NATO, Transatlantic Relations, Transatlantic Take, U.K. Politics, United States0 Comments

Dealing with a More Assertive China

BRUSSELS — The mood on China in Western capitals is beginning to darken. From cyber-attacks to obstinacy in Copenhagen, Beijing’s assertiveness and the hardening tone of its diplomacy are prompting a rethink. If the competitive aspects of the relationship with China are going to dominate in the years ahead, have the United States and Europe got their strategies right? And if not, what are the options?

The deterioration in the West’s outlook on China has been startling. This is partly a result of the sheer range of different fronts on which Beijing’s assertiveness has been on display in recent months. It has been the primary blocking force against tougher sanctions on Iran and the lead obstructionist at the climate talks. It delivered a harsh sentence on pro-democracy activist Liu Xiaobo and executed the mentally-ill Briton Akmal Shaikh. And then there was Google’s announcement that the scale and nature of recent attacks may result in its pulling out of China, which illustrated both the growing anxieties about Chinese cyber-intrusions and the worsening climate in China for Western businesses.

Disagreements between the West and China on these and other issues are not new; what has startled China’s interlocutors is the brashness with which Beijing now asserts its interests — and its willingness to prevail, even at the expense of appearing the villain. President Obama’s borderline-humiliating visit to China in November was repeated in Copenhagen, where Beijing repeatedly snubbed meetings of heads of government by sending junior officials — one of whom nonetheless felt sufficiently empowered to shout and wag his finger at the U.S. president. European officials have recounted private Chinese demands that the EU’s next China strategy paper should be written “together” and Chinese statements that a failure to lift the EU arms embargo would mean that in the future Europe “will not be able to buy its arms from China.  These incidents, although minor in their own right, reveal a China far less worried about cooperating or preserving smooth relations with the West than it once was.   The West had hoped that Beijing would become a “responsible stakeholder” and use its stronger position to bolster the international system.   Instead China seems intent on freeing itself from its constraints.

A nationalist public opinion and insecurities at home have played their part in this development.   But it has mostly been driven by a change in Beijing’s perception of power relations since the global economic crisis.   China’s success in surviving such a precipitous downturn has given the government a greater belief in its own resilience.   And the perception that the United States and Europe need China more than China needs them has been fed by the new U.S. administration, whose conciliatory gestures toward Beijing have been treated as signs of weakness rather than goodwill.

Many Western officials believe, however, that China has miscalculated — and is shooting itself in the foot.   Talk of giving Beijing more space on sensitive issues has evaporated.   Support from business lobbies has weakened.   Heads of government who would happily push China into the “important but not urgent” file have begun to review their strategies.

Already, Beijing is feeling the effects of this pushback.   Recent weeks have seen the announcement of arms sales to Taiwan, confirmation of a U.S. presidential meeting with the Dalai Lama, and public criticism from President Obama and Secretary Clinton of China’s currency policies and its stance on the Iranian nuclear issue.   The West hopes China will realize it has overplayed its hand and will make some conciliatory moves — such as a modest revaluation of the yuan and acquiescence to tougher sanctions on Iran — to reverse the political dynamic. For all the noise in the last week, Washington has made only a modest tactical shift. But the United States and Europe may yet see this as a wake-up call and make a more serious set of changes to their China policies.

What could that actually amount to? Here are some options being discussed:

– Threats of targeted measures that limit Chinese free-riding, such as stricter sanctions against Chinese companies dealing with Iran. Punishment for currency manipulation, and carbon tariffs.

– A move from comprehensive to selective engagement and integration.   Parts of the vast architecture of dialogues and summits may be dismantled.   Right now, China is the one to cancel and postpone dialogues, and Western powers are the perpetual demandeurs.   This can be stopped.   The headlong rush to give a new seat to China at every table in every international process can also be slowed.

– A move to a less Sino-centric engagement and integration policy.   Rather than making a bilateral beeline for Beijing, more effort could be employed in coordinating China policy with other like-minded countries.

The United States has plenty of room to deepen its cooperation with its treaty allies in Europe and Asia.   But more diplomatic energy could be focused on other potential members of a progressive coalition — India, Brazil, Indonesia, South Africa. Expanded economic, technological, security, and trade advantages can be offered to those countries that are willing to act as system-strengtheners rather than spoilers.

– More consciously competitive policies could be initiated in areas where disagreements on values are likely to persist, such as aid policy or dealing with rogue states. The West would focus less on reaching agreement with China and more on maneuvering around it.

Beijing still has the opportunity to demonstrate that these steps are unnecessary. But it needs to appreciate that the concerns are genuine: a free-rider on China’s scale is just too great for the global security, economic, political, and environmental order to bear. And unwillingness to assume responsibility may come at a price.

Andrew Small is a Transatlantic Fellow with the German Marshall Fund in Brussels.

Posted in Asia, China, Climate, COP 15, Economics, Environment, European Union, Iran, Transatlantic Relations, Transatlantic Take, United States8 Comments

China in check? The limits to Beijing’s assertiveness

BEIJING – After a rough start to the year, last week’s U.S.-China Strategic and Economic Dialogue — the mammoth biannual consultation led by Secretaries Hillary Clinton and Timothy Geithner — capped off a three-month period that has returned the Sino-U.S. relationship to a state of fragile equilibrium.   Strategic mistrust remains pervasive, as the continued breakdown in military ties demonstrates, and there are few issues on which the two sides genuinely see eye-to-eye. But the missteps of 2009 provided some important lessons for better management of future differences.

It is clear that China has no inclination to take on greater responsibility for maintaining the global order. Quite the opposite — Beijing feels better able to resist international pressure than it has in the past, sees calls for China to take up new burdens as a “trap,” and intends to use its strengthened position to focus more intently on domestic policy. Nevertheless, the Chinese leadership has shown no stomach for a full-on fight with the United States. In the face of a toughened U.S. stance in 2010, Beijing blinked first. This reflects both successful diplomacy from the Obama administration and a China that is more realistic about the scope of its newfound power.

But while Beijing reaffirmed the importance of the U.S.-China relationship, there is only so much that can be delivered through bilateral bargains. With international unease over Beijing’s assertiveness growing, the moment is still ripe for Washington to build a China policy that is more global in scope, more resilient to future shifts in the balance of power, and more effective in exerting pressure across a wider range of issues.

Last year saw China emerge from the global financial crisis emboldened but lacking a well-calibrated sense of the limits of its strength. Some of the conciliatory gestures made by the Obama administration encouraged a more inflated sense in Beijing of China’s power — and U.S. dependency — than was borne out by reality. This translated into an openly uncooperative Chinese stance on major policy areas and a brash diplomatic manner.   The Copenhagen climate summit saw its apogee, but it was far from an exception.

The reality check came at the beginning of the year, with an announcement of U.S. arms sales to Taiwan, a presidential meeting with the Dalai Lama, and rumors of a looming Treasury citation for currency manipulation. After some initial rhetorical bluster — including threats to sanction U.S. companies — China’s leadership “looked into the abyss,” as one American official put it, and decided to pull back. A March trip from Deputy Secretary of State James Steinberg and NSC Senior Asia Director Jeffrey Bader paved the way for a carefully choreographed mutual de-escalation before Chinese President Hu Jintao’s visit to Washington for the nuclear security summit.

Crucially, while the moves on the U.S. part were mostly about atmospherics, China’s were on substance. The most significant has been on Iran, where Beijing’s agreement to a new round of sanctions has so far held through the Brazil-Turkey fuel announcement — described by Chinese analysts as “the perfect excuse” to pull back. Instead, China has moved closer to final sign-off, last week producing its list of Iranian companies for targeting in the draft UN Security Council resolution. Chinese signals on currency revaluation have become consistently positive, even if the euro crisis has derailed progress before the upcoming G20 meeting. And while China’s response to North Korea’s attack on a South Korean destroyer in late March has been painfully slow, leadership advisors suggest that China will — at the very least — not block a UN Security Council condemnation of Pyongyang.

The limits to Chinese flexibility are apparent. China has been willing to take modest steps in areas subject to the toughest U.S.-China bargaining — what the Chinese call “U.S. core interests” — but little beyond that. This is not “responsible stakeholder” territory. On Iran, China has acted under pressure, not conviction. Progress in cooperation with China on issues such as Afghanistan and Pakistan has been virtually nil. Yet alarm over Beijing’s assertive turn has created a propitious strategic environment for Washington to develop an approach to China that transcends the bilateral relationship and with the potential to shape Chinese choices on a larger set of concerns.

The list of disaffected countries is long. European leaders emerged with strongly negative views after China’s behavior at Copenhagen — and have seen no subsequent rapprochement. Future EU China policies will likely take on a tougher and more focused character. The same is true in China’s neighborhood. Beijing has treated the opening provided by troubles in the U.S.-Japan alliance with complete indifference. South Korea has been insulted by China’s approach to the Cheonan incident. Sino-Indian tensions have been left to fester. And Southeast Asian nations have grown anxious over Beijing’s recalcitrant stance on territorial disputes in the South China Sea.

The opportunities this has afforded the United States in Asia itself have been obvious. China’s inept handling of Pyongyang has helped tighten both the U.S.-South Korea and U.S.-Japan alliances, and the list of Southeast Asian states seeking deeper defense cooperation with Washington has grown. More novel have been recent U.S. efforts at coalition-building outside the region: the Gulf States and Israel joining the U.S.-EU press on China’s Iran policy, and India and Brazil joining U.S. and European calls for currency revaluation. The scope to extend this approach across a range of economic and foreign policy issues is substantial.

This year, the Obama administration’s firm stand on key U.S. interests, coupled with face-saving ways for Chinese leaders to portray to their public that they are acting of their own volition, has begun to deliver some clear successes. It has also restored a level of sanity to a relationship that was starting to lurch out of joint. But in the absence of a real convergence in views between Washington and Beijing, this approach will not be enough. U.S. China policy needs to move further outside the bilateral box.

Andrew Small is a Transatlantic Fellow for the German Marshall Fund in Brussels.

Posted in Asia, China, Economics, India, Iran, Japan, Middle East, Transatlantic Take, United States0 Comments

China presses ahead with Pakistan nuclear deal – and contemplates U.S. withdrawal from Afghanistan

In Beijing last week to catch up with Chinese security experts on Afghanistan and Pakistan, with two issues the main focus.

Having talked on-and-off with people there about the Chashma-3 and 4 deal since it was first announced, this was the first occasion where I was greeted with disciplined – and largely unapologetic – talking points on the subject. Once the predictable lines were out of the way – the deal has no military application, Pakistan needs energy, the plants will be under IAEA safeguards – the Chinese analysts I spoke to were entirely explicit about the fact that it was a tit-for-tat strategic response to the India-U.S. deal. No-one, however, suggested that there would be anything comparable to the U.S. campaign to win approval from the Nuclear Suppliers Group. Instead the expectation was that it would simply be allowed to slip by – as one put it: “Obama needs China’s help on Iran and Pakistan at this stage; the United States will not really oppose it”.

I was also struck by the emergence of a different conversation about Afghanistan: “We are talking about withdrawal now – we think that’s where it’s headed – and we are saying to the Americans that if you do withdraw, it will be a disaster for you”. Neither of those claims represents a settled consensus: many in the strategic community are more than happy to see the United States pull out, “as long as it’s responsible”, and plenty of other analysts expect only a minor drawdown of American presence in the coming years. But the topic is now firmly on the agenda, and there is a degree of frustration about China’s options: “In the event of withdrawal, we can work with Russia and we can work with Pakistan. We can’t do anything ourselves, it’s too dangerous to risk”; “We don’t have so many instruments in Afghanistan – we only have economic tools – this is why we support reconciliation with the Taliban and a neutral Afghanistan. All the other regional countries have the groups that they can work through – we don’t”.

And while there were some gleaming eyes about mineral deposits, the mood among Chinese companies appeared somewhat sour: “Security is always the number one issue. Why is the Aynak investment proceeding so slowly? China Railway Group admitted that they underestimated the cost and risk of their road-building project…and MCC Group [which runs Aynak] pulled out of the Hajigak bidding process”. One way to mitigate that – Chinese security presence. Reports persist of “decommissioned” Chinese military personnel at the Aynak facility. “Sure, if they’re wearing plain clothes, what’s wrong with that?” quipped one Chinese former diplomat. All those people asking for Chinese troop contributions may already have their wish.

A longer piece looking at China’s policy in Afghanistan and Pakistan was published in the July edition of the Washington Quarterly.

Posted in Asia, China, International Security, United States0 Comments

Afghanistan: The Consequences of a “Conceptual Withdrawal”

KABUL—“We have moved from a narrative, which lasted for years, that everything was fine when it wasn’t to a narrative that everything is going wrong when it isn’t.” This lament from a former Western official, who, like others quoted in this piece, did not speak for attribution, summed up the frustrations of many in Kabul about the growing disconnect between the political timetables inside and outside the country. The concern is not only that the various transition deadlines are unrealistic, but that their very existence is creating counterproductive pressures that will make them even harder to achieve.

After last weekend’s Wikileaks publication of more than 90,000 classified military documents that paint a bleak picture of the war at the grassroots level, it has become even more difficult to argue that there is indeed any good news coming out of Afghanistan. But the one thing about last week’s Kabul Conference on which everyone agrees is that the event happening at all was a tremendous success.

The largest gathering of foreign leaders to be held in Afghanistan in 30 years passed off without any serious security incidents. Forty foreign ministers flew in to sign off on plans that will channel at least 50% of development aid through the government’s core budget and transfer security responsibility to Afghan National Security Forces by the end of 2014. For Karzai, this constituted the most visible show of international endorsement since last year’s controversial presidential elections. One senior Western diplomat – a noted critic of the president – described him as more confident, more engaged, and more willing to take on responsibilities he had previously evaded.

Still, the balance of opinion in Kabul remains pessimistic. This is due in part to long-standing reasons: a dire security situation; minimal progress in addressing pervasive corruption; doubts about the government’s capacity to extend its writ across the country whatever the success of U.S. military efforts; and profound concerns about the speed with which Afghan security forces can be built up. Many of these problems have been expected to coalesce during the parliamentary elections in September.

The newfound fear is that while the battle here is still on, it may already have been lost in western capitals. As a senior Asian diplomat here put it: “The theater is now Washington, DC, not Afghanistan; there has already been a conceptual withdrawal.” This is not to say that there is any collective expectation of a major military drawdown. In views that were widely repeated, one prominent Afghan security analyst argued, “More and more, people don’t believe that the U.S. is going to leave us anytime soon…at the very least, the five major bases will stay.” Rather, the fear is that there is a collective rush to shake off political responsibility: the pressure from national capitals is now directed toward finding a narrative to justify disengagement rather than delivering the best settlement possible in the circumstances.

Not all consequences of the shortening timeframes are bad. The exit dates are helping to force the pace on certain issues. Some diplomats who have no belief that Afghan security forces will be ready by 2014 contended that the effort to meet the commitment will at least speed up the process. And advocates of reconciliation are pleased that there is now a broad international consensus behind the principle, even if it has come about as a result of desperation rather than conviction.

Yet few fail to note the damaging repercussions of the newfound focus on deadlines. If talk of a withdrawal beginning in July 2011 gave the Taliban the scent of victory, the wider political and diplomatic ramifications of the new withdrawal dynamic are just as acute. Corruption is expected to worsen. As one Afghan political adviser said, “The attitude in the ministries is: if people are going to leave in two years, we should make money while we still have time.” And there is even greater anxiety about the risks of an overly hasty effort at reconciliation, on which so many hopes are now being pinned. “We should try to do it seriously, but instead we’re getting the view emerging that a stitched-up deal backed by Pakistan would be the best thing…the Taliban and Pakistan are only going to need to produce the illusion of peace at the right moment, and even that will come at a heavy price,” as one former Western diplomat put it. This dynamic may have been reinforced by the WikiLeaks documents. Afghan officials in Kabul suggested that the task of “selling” reconciliation internally has been made more difficult since the reports created the impression that the key deal to be struck is with Islamabad.

These observers harbor few if any illusions about what the West can still achieve in Afghanistan; indeed, many of them have taken a consistently skeptical  position toward the U.S. administration’s more ambitious goals. But there is a striking consensus across the opinion spectrum that the current cycle of implausible expectations, crashing disappointments, and ever-shortening deadlines are making even a more modest set of objectives increasingly difficult to achieve.

Andrew Small is a Transatlantic Fellow with the German Marshall Fund’s Asia Program in Brussels

Posted in Afghanistan, European Union, International Security, Middle East, Transatlantic Relations, Transatlantic Take, United States0 Comments

Beijing is Worth a Missed Dinner—Lady Ashton Goes to China

BRUSSELS — As aspiring Middle East peacemakers descend on Washington this week, one absentee has already been noted. Baroness Catherine Ashton, the EU foreign policy chief, chose to pass up dinner at the White House and instead pressed ahead with her trip to China, where she inaugurated a new strategic dialogue with her Chinese counterpart. Despite some consternation in Paris, Ashton’s decision reflects a well-founded conviction that China policy is one of the few areas where the new post-Lisbon foreign policy machinery could make a real difference.

The existing obstacles to framing an effective European China strategy have not gone away. The EU struggles to form common policies toward most major powers. Differences among member states persist over how accommodating to be to Chinese sensitivities over Tibet, Taiwan, and human rights. The nature, scale, and relative benefits of trade with China vary considerably across Europe. And Beijing tends to be smarter at maneuvering around the politics of the EU than the other way around.

Still, the conditions for shaping a European China policy worthy of the name are more propitious than they have been for years.

The most important development is that the endemic competition among the “Big 3” to be Beijing’s best friend in Europe has receded. Over the last two years, Germany, France, and the U.K. moved in rapid succession from being China’s favorite to being out on their ear, as meetings with the Dalai Lama, threats of Olympic boycotts, and protests over Beijing’s decision to execute a mentally ill Briton took their toll on the respective relationships. 2010 has been a great deal calmer, but memories of diplomatic freezes, cancelled summits, and state-sponsored protests outside Carrefour supermarkets are still fresh.

The time spent in the doghouse reflecting has been productive. As China’s power has grown in the last few years, it has become clearer to even the largest member states that their individual influence over Beijing is limited and is only going to diminish. While still hesitant, national capitals are now more willing than they were to kick things up a level and see whether a genuinely EU-led approach might be a better option. The newfound assertiveness in Chinese diplomacy – most notably at the Copenhagen climate talks, which left many European political leaders stunned – precipitated a series of separate national policy reviews that came to similar conclusions about the need to strengthen the EU’s hand in China policy. Even the Eurosceptic British Conservative party included a line about it in their manifesto.

In Brussels itself, after a bruising few years, a realistic spirit has descended on officials. The vaulting ambitions for EU-China partnership have been scaled back, and any belief that Chinese foreign and domestic policy could gently be coaxed toward European norms by wise counsel and judicious use of incentives has disappeared. Instead, the talk of “leverage,” “bargaining,” and much else that would characterize a more competitive relationship has become ubiquitous.

But none of these factors would be sufficient were there not also the prospect of using this occasion to draw together the various instruments of the EU machinery. Enter Lady Ashton. EU China policy has for a long time lacked even a notional address. The European Trade Commissioner’s office – the closest department to running point for the EU on China – was clearly an inadequate home for the spectrum of issues that relations with China now encompass. Ashton’s double-hatted position changes that, spanning as it does the role of both Vice-President of the European Commission and High Representative for Foreign and Security Policy. There is now a natural home for the formulation and coordination of a China strategy that can draw both on the EU’s economic and foreign policy capacities.

Even the new dialogue format should help. In recent years, the focal points of the relationship were the dysfunctional EU-China summits, which were characterized by an overly expansive Commission-led agenda, and high-level meetings with member states, which were consumed by bilateral trade. Although they came up, subjects such as Iran and climate change tended to be lost in the morass. By contrast, Ashton’s talks with her opposite number, State Councillor Dai Bingguo, at least provide the prospect of addressing some of the overarching issues in the relationship in a more systematic and less cluttered fashion. The comparable U.S.-China senior dialogue did much to set the framework for relations between Washington and Beijing under the second Bush administration – arguably in a more useful manner than the unwieldy structure instituted by the Obama administration.

But will member states invest Ashton with the requisite authority to pull the task off? The post-Copenhagen angst about China has already faded somewhat and the French complaint this week suggests precisely the sort of difficulty she is likely to face. But a process has been set in motion. Ashton has been tasked with presenting an outline for the EU’s future relations with emerging powers—above all, China—at the EU summit in mid-September. And improving EU China policy will not require a revolution in thinking. A greater level of focus and prioritization; a more open-eyed view of the relationship’s nature and prospects; and a sharper sense of Europe’s objectives and capacities – all this would already constitute a notable success, and is hardly out of reach. For all Bernard Kouchner’s objections, even Paris must admit that Beijing is worth a missed dinner.

Andrew Small is a Transatlantic Fellow with the German Marshall Fund in Brussels

Posted in Asia, China, Culture, Economics, European Union, Transatlantic Marketplace, Transatlantic Relations, Transatlantic Take0 Comments

Beijing’s behavior increases risk of war on the Korean Peninsula

BRUSSELS — Beijing’s leadership role in the Six Party Talks on North Korea once embodied U.S. hopes that China would become a responsible stakeholder in issues of regional and global security. But its behavior toward an erratic and belligerent Pyongyang increasingly belies them.

China now has become almost reflexively dismissive of international calls to assume responsibility for restraining North Korea. Beijing contends that its current approach of providing virtually unconditional protection to Pyongyang is driven by an overriding concern for stability in its neighborhood and the need to avoid cornering an unpredictable regime in transition.

But China’s unwillingness to pursue a balanced response to North Korean aggression is becoming a source of regional instability in its own right. By blocking any effective international response to the sinking of the Cheonan or the shelling of Yeonpyeong, and failing to take credible bilateral measures of its own, it is Seoul that is being pushed into a corner by Beijing. The result, a shortening of the odds on a military rather than a diplomatic escalation on the peninsula in the event of future North Korean attacks, is as harmful to China’s interests as anyone else’s.

The cables from U.S. diplomats in Beijing published by WikiLeaks have been read as offering hope that Beijing is rethinking its approach. Besides providing evidence of China’s frustration with Pyongyang’s “spoiled child” behavior, the documents cite the South Korean national security adviser’s striking claim to have received assurances from Chinese officials that they believe the peninsula should be reunified under Seoul’s control. This is wishful thinking. Anyone looking for a shift in China’s approach would observe precisely the opposite phenomenon: while there has undoubtedly been private griping and debate about its North Korea policy, Beijing has notably strengthened its relationship with Pyongyang and has been far less willing to take publicly critical positions than it was a few years ago.

Despite its reputation as the DPRK’s protector-in-chief, China did not provide such unequivocal backing in the past. Beijing is believed to have cut off oil supplies in 2003 when Pyongyang pulled out of the NPT. In 2006, it denounced North Korea’s nuclear test as “brazen,” agreed to a biting UN Security Council Resolution, and cooperated in the freezing of DPRK banking assets. China’s bottom line never changed: its concern to avoid overly alienating or weakening the regime has always trumped any desire to force a resolution of any of the issues at stake. But Chinese willingness at least to calibrate its responses to North Korean provocations was an essential element of international efforts to moderate Pyongyang’s behavior.

The last three years – and recent months in particular – have seen that calibration virtually disappear. Following the sharpest of the disputes between Beijing and Pyongyang after its first nuclear test, China decided that the re-establishment of closer bilateral ties and the extension of its influence in the country should not be held hostage to the denuclearization issue. Economic and political support from China has since expanded, just as the Lee administration in South Korea has been cutting it back. More recently, China’s worries about regime weakness have grown considerably. Kim Jong Il’s failing health, a disastrous attempt at currency reform, and uncertainty about succession arrangements shifted Beijing’s calculus to focus almost exclusively on considerations of internal stability – and pushed Kim to become yet more reliant on China’s support across its vulnerable transition period.

Chinese concerns about stability are not just rhetorical. At points they have focused on the implications of an actual collapse of the state: the loss of a strategic buffer, the prospect of hundreds of thousands of refugees flowing into China, and the risk of confrontation with American or South Korean troops in the event of an uncoordinated set of military interventions.

But since the succession arrangements for Kim Jong Un were put in place, it appears that Chinese officials have become more confident about the capacity of the North Korean state to hold together, at least until Kim Jong Il himself dies. Of greater concern to China is the erratic international behavior of the regime while it consolidates itself. Beijing’s calculation has been that “hugging them close” with economic support and diplomatic protection will reduce the likelihood of Pyongyang lashing out.

This strategy is becoming increasingly indefensible. China’s position of uncritical backing to Pyongyang over the Cheonan sinking had already laid it open to charges of irresponsibility. But following a near-identical response to North Korea’s artillery attack last week, when it was the only P5 member to refuse to condemn a classic act of aggression, its approach can now barely be distinguished from a policy of giving Pyongyang carte blanche to stage international provocations at will.

The repercussions are already serious. China has suffered substantial damage to its relations with Seoul, and has watched the tightening of security cooperation between the United States, South Korea, and Japan with discomfort. By nullifying multilateral efforts even to apportion responsibility for the attacks, China has also forced South Korea to augment its own efforts at military deterrence, with demonstrably high risks of miscalculation.

If, in the weeks ahead, Beijing is unable to provide reassurances that it has privately read the riot act to the North Koreans, the result of China’s supposed commitment to neighborhood stability will be a heightened risk of war on the Korean peninsula.

Andrew Small is a Transatlantic Fellow with the German Marshall Fund in Brussels

Posted in Asia, China, International Security, Transatlantic Relations, Transatlantic Take, United States0 Comments

China steps forward, moves backward

BRUSSELS — Hu Jintao’s visit to Washington comes after what can only be described as a bad year in Chinese diplomacy.

Beijing has long managed its foreign relations with a laser-like focus on ensuring an advantageous environment for its economic development and an unchecked accumulation of power, in part by reassuring its neighbors and the United States of its peaceful intentions. But since China’s successful emergence from the global economic crisis, important constituencies have decided that the moment for biding their time has passed. So Beijing has pushed to convert its strengthened position into more tangible political rewards and has taken an increasingly uncompromising stance in its relations with the rest of the world.

The reaction to China’s assertive efforts to advance its “core interests” has been a near clean-sweep in the deterioration of its major relationships.  China’s assertiveness has been felt most sharply in its immediate neighborhood. It has upgraded expansive claims over the South China Sea, with the Chinese foreign minister startlingly dismissing the concerns of “small countries” in Southeast Asia. It has failed to restrain or condemn North Korean attacks on South Korea, wreaking lasting damage on its relationship with Seoul.  Pressing disputes with India over their contested border has entrenched its strategic rivalry with the world’s other major rising power. And escalating a minor maritime dispute with Tokyo guaranteed that the new Japanese government would abandon plans to rebalance its relationship with Washington. Further afield, European leaders — burned by the Copenhagen climate negotiations and facing a tide of corporate complaints about worsening business conditions in China — have toughened their trade and diplomatic policies. Arab and Israeli leaders pushed back against China’s stance on Iran. And Beijing’s lock-step partnership with Moscow in the UN Security Council unraveled, most strikingly over North Korea.

The disputes are diverse in nature but there is a clear collective concern that if China continues to define its interests narrowly and pursues them more aggressively, its rise is going to be more difficult to deal with than many had previously hoped. As a result, a range of countries have intensified informal consultations on how to respond. While not yet a balancing coalition, the early signs of a closer coordination on China policy are evident. At the center of this process is the United States. Whether it be allies (Japan, South Korea) or new partners (India, Indonesia), ties with Washington have intensified as anxieties about China have grown. The administration has deftly handled the opportunities this has presented, and not only in Asia: its marshaling of multilateral pressure on China over Iran, for instance, involved a geographically diverse coalition. Most galling to Beijing is that, despite its accusations about U.S. containment, this process is as much demand-led as it is a Washington-driven strategy.

In the past, China had made progress in shifting the strategic terrain by chipping away at America’s global alliances. It was a whisker away from getting the EU arms embargo lifted in 2005. It skillfully exploited differences between the United States and South Korea. It was able to contrast itself with America as the partner of choice for some in South East Asia. And it was cautious not to get dragged down by its old ally, North Korea.  But over the last year, not only did China fail to capitalize on U.S.-Japanese disputes over the Futenma airbase, but its stance on Northeast Asian regional security issues actively helped to bridge those differences between Tokyo and Washington, and encouraged closer coordination between Tokyo and Seoul to boot.

Many in China’s foreign policy community recognize the problematic implications of last year’s missteps, and recent months have seen some remedial efforts, such as “make nice” investment tours of Europe and India by Chinese leaders, and indications that China is finally reining in Pyongyang.  But as the stealth fighter test flight during Defense Secretary Roberts Gates’ recent trip to China attested, powerful constituencies like the Chinese military are no longer happy to temper their behavior even in the lead-up to an important state visit by their president. The party leadership is either unable or unwilling to restrain the more assertive forces in the Chinese system. And with a major political transition looming in 2012, little progress can be expected in the foreseeable future, as “lame duck” leaders wind down and the fifth generation of leaders establishes its credentials.

For the most part, this is bad news: global problems will be more difficult to solve with a recalcitrant China, and tensions in East Asia will grow. But it is providing the United States with some important advantages. Washington’s economic diplomacy may have fallen short at the Seoul G20 summit, but in foreign and security policy, China is the one becoming more isolated while its capacity to mount a bid for regional primacy, let alone global primacy, is being systematically undermined by its current behavior. It is becoming easier for Washington to argue that China’s approach is self-defeating and that a benign international environment for its rise will only exist if Beijing takes on a more constructive international role. There may be an uncomfortable period ahead. But between them, the United States and its friends and allies have the leverage to show Beijing that China has embarked on a losing strategy.

Andrew Small is a Transatlantic Fellow with the German Marshall Fund in Brussels.

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Pakistan’s China card

ABBOTTABAD, Pakistan— For at least a handful of Chinese soldiers, the television footage of Abbottabad around the Osama bin Laden raid was familiar. In December 2006, the city was the site of an extensive set of joint Sino-Pakistani counterterrorism exercises. The “large-scale intelligence gathering,” “ambushes,” and “search and destroy missions” unfortunately failed to get anywhere near the world’s most wanted terrorist, who is believed to have set up house in this Pakistani garrison town earlier that year.

It is understandable that the Sino-Pakistani relationship provokes suspicion. And since the U.S. Navy Seals conducted their more efficacious mission here, speculation has been rife that China is primed to take advantage of the deterioration in U.S.-Pakistani ties. Beijing’s expressions of solidarity with Islamabad, coupled with announcements that it will expedite the delivery of 50 JF-17 fighter jets and may assume operational control of the port at Gwadar, have given some the impression that Chinese support is now a plausible back-up plan for Pakistan. This has been reinforced by certain Pakistani politicians who have been keen to demonstrate, both to the West and to their own public, that even in the tightest of spots they still have a reliable (and generous) friend.

Indeed, China has privately assured Pakistan that it would protect it from any international sanctions push that might ensue.  Beijing is also pressing ahead with initiatives on the ground, despite countless slowdowns and security challenges. Chinese companies likely will assume responsibility for Gwadar following the resolution of a legal case against its current Singaporean operator. Work continues on the expansion of the Karakoraum Highway connecting the two countries. And major power projects, including the controversial Chashma nuclear power plants and an assortment of hydro-electric dams, are expected to proceed. Military cooperation, too, will remain at the core of the relationship. China’s desire for Pakistan to maintain a strategic balance with India means that aside from conventional arms supplies and the joint development of frigates and jet fighters, Beijing is willing to provide continued support to the most sensitive elements of Pakistan’s weapons programs, such as ballistic missile technology. China hopes this support will engender a stable, economically capable Pakistan that can act as both security balancer and trade corridor, though no one in Beijing is holding their breath.

But although the scope of Sino-Pakistani ties is undeniable, there is also a mutual appreciation of their limits. Beijing has made it clear that it sees more risk than opportunity in the worsening U.S.-Pakistani relationship. And despite the rhetoric, expectations in Islamabad of the level of Chinese support are realistically modest. While China is willing to fund tangible projects in Pakistan, it has been consistently reluctant to provide direct financial assistance on a serious scale. Beijing is already frustrated with the current level of assistance it feels it needs to provide; Chinese “investments” in Pakistan are effectively bilateral aid, financed through state companies and banks with no expectation of an economic return.

The widespread impression that bin Laden was living under protection from elements within the Pakistani state has also played into growing Chinese concerns over extremist sympathies among Pakistan’s security services. And this has all come at a time of marked pessimism in Beijing over Islamabad’s future trajectory and the implications of the security situation in the country for its ambitious economic projects. The outstanding obstacle to closer Sino-Pakistani ties is not Washington but Pakistan’s own internal problems. As one Pakistani security analyst said, “China’s message to us at the moment is: ‘We’ll support you, but get your own house in order and don’t do anything stupid.’”

The assault on bin Laden’s compound did yield one clear dividend for China — the chance for a good look at a downed U.S. stealth helicopter. Otherwise, Beijing’s reaction has been more one of apprehension than glee. China does not want its ties with Pakistan to become a source of tension in its relationship with the United States. It is concerned that any withdrawal of U.S. financial support would either weaken Pakistan or leave China with the task of bailing it out. Even if China did offer Pakistan a guaranteed annual budget line of billions of dollars to break off security ties with the United States, decision-makers in Rawalpindi would quickly decline the offer. Aside from other strategic considerations, the military has no desire to become dependent on equipment from Beijing, which is not seen as a technological match for what it gets from the United States. And the broader Pakistani elite, which has minimal cultural and educational ties with China, does not want to be stuck in Beijing’s camp either. There are plenty of reasons for the decline in U.S.-Pakistani relations. The specter of China’s checkbook is not one of them.

Andrew Small is a Brussels-based Transatlantic Fellow with the German Marshall Fund’s Asia Program.

 

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Kurt Campbell with Chen Guangcheng at US Embassy May 1, 2012

The Lid Cracks Open on Beijing’s Black Box

WASHINGTON — After a long period of stasis, Chinese politics have entered a dramatic new phase. While no one expects major change to arrive quickly, the previous sense of inevitability about China’s internal trajectory is beginning to give way to growing unpredictability. For a long time, the animating China challenge for policymakers in the United States and Europe had been the integration of a rapidly rising power into the global economic and security order. Now they will need to do that while navigating a nation in political transition.

The echoes of Tiananmen Square have been coming thick and fast. Chen Guangcheng’s escape to the U.S. embassy evoked leading dissident Fang Lizhi’s getaway 23 years ago. The fall of populist Chongqing party boss Bo Xilai, after his wife had been linked to the murder of a British businessman by his own police chief, has been widely deemed China’s “gravest crisis since 1989.” Even Premier Wen Jiabao’s last-ditch attempt to push through political reforms has revived fading hopes that the man who stood at Zhao Ziyang’s right hand as he tearfully told students in the square that “we came too late” might yet prove to be the spiritual successor of the liberalizing party secretaries of the 1980s.

The last decade had seen most of China’s public life conducted in the shadows, as the fourth generation of China’s communist leadership turned anti-charismatic politics into an art form. Little of the transformative excitement of China’s rise could be found in speculation about back-room maneuvering in the party headquarters at Zhongnanhai or President Hu Jintao’s leaden pronouncements. While the odd story spilled out of the black box — the anointing of Vice President Xi Jinping as China’s next leader or the ousting of Shanghai party chief, Chen Liangyu — the lid quickly closed again. The main factions in the party, the Youth League and the princelings, made a good show of resolving their differences through consensus. And the narrative took hold that Beijing had established a model of adaptive authoritarianism — economically open, responsive to public opinion, but repressive when confronted with real political dissent — that could see off any challenges to its rule for a long time to come.

But now, from the top levels of government to the leading lights of the Chinese blogosphere, the sense that China’s ossified politics is at a turning point has become pervasive. The failures of the party to make progress on curbing corruption and social injustice or tackling the next phase of China’s economic reform have run up against rising public expectations and a rapidly changing communications environment. From the outrage over attempts by the authorities to cover up last year’s high-speed train crash to the expulsion of corrupt party officials and police by the villagers of Wukan, incidents that could once have been discreetly suppressed now cascade across bulletin boards and microblogs. The result is an unprecedented set of opportunities to shape the attitudes of the Chinese public — and pressures to respond to it.

Some of the figures who have sought to ride this new wave of popular opinion have been dissidents and activists, whether Liu Xiaobo’s Charter 08 manifesto, the shadowy progenitors of calls for a “Jasmine Revolution,” or artist Ai Weiwei’s performance-taunting of the party. But it has been the populist appeals and public rifts among top government officials that have proved even more potent. Bo Xilai’s populist campaigns had the barely-concealed goal of translating his public support into a coveted seat on the next politburo standing committee, making his Maoist revivalism and “Chongqing model” of governance a matter of national debate. The ramifications of his spectacular demise are still being felt, with speculation increasing that China’s first leadership transition in a decade may need to be delayed in order to deal with the political fallout. Bo’s most forceful opponent, Wen Jiabao, used his last annual press conference not to reflect on ten glorious years at the helm of government but to make an open call for the urgency of reform, or risk China facing “historical tragedy.”

Hopes that outside powers can stay above the fray will be in vain. The United States and Europe have already had to deal with the protagonists of these dramas literally knocking on their embassy and consulate doors. From Nobel Peace Prize winners to jailed artists, support and protection for dissidents is becoming once again a more active factor in day-to-day relations with China. De facto involvement in factional battles will at times be unavoidable. And for all the geo-strategic and geo-economic issues that are now at stake, at important junctures — such as last week — even these risk being overshadowed by raw domestic politics.

Andrew Small is a Transatlantic Fellow with the Asia Program of the German Marshall Fund of the United States in Washington.

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Seizing Opportunities with a Less Reserved Beijing

WASHINGTON — China wasn’t even close to making it on to either the agenda or the invite list for the NATO summit in Chicago. While China’s growing power is profoundly reshaping the global strategic environment, NATO has taken on very little role in responding. The reasons for this are understandable. As a strategic threat, China is simply too big a challenge for NATO to take on, and years of fraught relations between the two sides have made partnership appear a difficult prospect. But from Libya to Afghanistan, counter-piracy to energy security, the two sides are rubbing up against each other with greater frequency. And with Beijing lifting some of the last formal barriers to an expanded relationship, NATO could yet play a part in the crucial process of China’s integration as a global military actor.

The legacy to the NATO-China relationship is still toxic. When U.S. and Chinese officials met in the aftermath of last year’s border incident that saw 25 Pakistani soldiers killed, Ma Xiaotian, deputy chief of China’s general staff, could not resist harking back to the 1999 NATO bombing of the Chinese embassy in Belgrade, jibing: “Were you using the wrong maps again?” NATO has long been seen by China through an ideological prism, and for many years serving Chinese military officers were barred from contact with NATO counterparts. Over the last decade, the attention paid to NATO in Beijing has corresponded largely to the degree of Chinese anxiety about the alliance’s presence in China’s periphery — Central Asia and Afghanistan — and the state of NATO’s relationships with its regional rivals, most notably Japan.

Yet more recently, China has been showing increasing willingness to put aside its traditional antipathy. From the first baby steps, when Beijing sent its diplomats to occasional meetings at NATO headquarters, contacts have evolved into a regularized dialogue at the assistant secretary general level. More recently, military-to-military interactions have been stepped up. Early in 2012, the director general of the international military staff at NATO, Lt. Gen. Jürgen Bornemann, visited China, and the two sides agreed to hold annual military staff talks. Reciprocal visits have taken place in the Gulf of Aden between Chinese and NATO flagships. And at Beijing’s initiative, some non-sensitive courses at NATO School and NATO Defense College were opened up to Chinese officers.

There are a number of reasons for the shift in China’s stance. Even though Beijing still harbors residual suspicions about NATO, it has become less concerned that it is part of an encirclement or containment strategy. NATO operations in Afghanistan, Libya, and the Gulf of Aden have all been of substantial interest to China, yet its understanding of them has been limited by its self-imposed restrictions. China also sees value in establishing a regular military-military dialogue that has Chinese and U.S. participation but is less subject to political pressures than bilateral U.S.-China exchanges.

And most importantly, as China’s military acquires a global presence, the opportunities for learning from the advanced militaries of NATO offer substantial benefits, without the level of sensitivity inherent in bilateral exchanges. For Europe and the United States, the change in Chinese attitudes provides an important opportunity. While it is roundly agreed that “integrating” China as a global security actor is a crucial task, finding a mechanism by which greater cooperation and trust-building can take place remains tricky. The efforts of individual countries, such as the U.K. or France, to upgrade military ties with China are liable to prompt misgivings from others that they are “going too far” or seeking to gain bilateral advantages. Using NATO gets round many of these problems.

At present, enthusiasm within the alliance for expending political energy on NATO-China relations is limited. Suggestions from Secretary General Rasmussen about exploring an enhanced dialogue with China have largely petered out, as first Libya and then defense budget cuts consumed attention. Yet an understandable focus on more pressing imperatives for the alliance should not obscure the long-term challenge of relations with the world’s most important rising military power.

Andrew Small is a transatlantic fellow at the German Marshall Fund of the United States in Washington D.C. 

Posted in Asia, China, International Security, Libya, NATO, Transatlantic Take0 Comments

China: The Invisible Dragon in the Room

SINGAPORE—At last weekend’s Shangri-La Dialogue, China did much to bear out James Joyce’s maxim that absence is the highest form of presence. In deciding not to send their defense minister and offering only an elliptical justification, China made itself the subject of even greater speculation and theorizing than usual. But by leaving only a few embattled academics to defend its amorphous and indeterminate claims in the South China Sea, Beijing also ensured that much of the focus was placed on Washington’s own conundrums in dealing with friends and allies in the region. The central one for the United States at the moment: how does it provide effective reassurance and deterrence over territorial disputes without also engendering recklessness?

In theory, it is China that is in a difficult spot. Its assertive maritime behavior, especially in the last couple of years, has been the principal reason that its neighbors have stepped up their security ties with the United States. Beijing has virtually guaranteed that the U.S. military’s rebalancing towards Asia, laid out in some detail by U.S. Secretary of Defense Leon Panetta during his speech on Saturday, would be welcomed with open arms. But some countries have been a little too enthusiastic for comfort. The spotlight on this front has moved from Vietnam to the Philippines, whose dispute with China over Scarborough Shoal has threatened to spill over in recent months. Manila received only lukewarm support from within ASEAN, and the United States has been left with the tricky task of calibrating how much to support and how much to restrain its treaty ally while hawks in China occasionally growl about launching a “limited war.”

This would be difficult enough as a purely military issue, where there has been a careful attempt to ensure that the Philippines does not overreach itself. Panetta was left continuously stressing that the United States “isn’t taking sides,” could not be expected to keep “charging in,” and that a regional dispute settlement mechanism was essential to prevent this story repeating itself. But it is a game that is playing out in the economic realm too. As it did with Japan before, China has decided to use its trade relations with the Philippines as a point of leverage, temporarily halting imports of bananas and placing a block on the visits of Chinese tourists.

Beijing’s approach — saber-rattling and economic coercion — certainly does not come without costs. Every new demonstration that China is a reliable economic partner only to the compliant will further heighten the desire of states in the region and elsewhere to ensure that their economies are not overly dependent on Chinese goodwill. But there is only so much that countries can do to limit their exposure to the world’s second-largest economy, and however routinely officials may dismiss this dimension of China’s trade policy as crude, capricious, and self-defeating, the nervousness that it elicits is still tangible.

The Scarborough Shoal dispute itself shows signs of de-escalation. The moderating of rhetoric from both sides was again in evidence from the Philippine defense minister over the weekend, and a mutually imposed fishing ban reduces the risk of incidents. No-one is expecting fireworks when the Philippines’ President Benigno Aquino III visits Washington next week. But the broader pattern is set. China keeps pushing and probing, repeatedly testing the limits of U.S. commitment and the willingness of states in the region to defend territorial claims in the face of an economic and political squeeze. So far, the United States had played its hand well and with restraint. But Beijing only needs to “win” once to start sowing seeds of doubt about how the next phase of the game will play out.

Andrew Small is a Transatlantic Fellow with the German Marshall Fund’s Asia Program in Washington, DC.

Image by DoD Master Sgt. Jerry Morrison (RELEASED)

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Europe and China: Boring is Better

China-EU summits don’t produce quite the political frisson they used to. Stories about China not bailing the eurozone out are now as tired as stories about the EU not lifting its arms embargo. Chinese Premier Wen Jiabao’s valedictory appearance in Brussels in September inevitably prompted observers to reflect wistfully on the days when the EU-China strategic partnership was firmly in the geopolitical spotlight. Yet this nostalgia is misplaced. Geopolitical heat is precisely what both sides need to avoid. Navigating an influx of Chinese investment and an upgrading of EU-China military ties, vital tasks not just for China and Europe but for the future global economic and security order, will depend on a continuation of the no-drama relations that were in evidence at the 2012 EU-China summit rather than the grandiose ambitions of previous years.

The supposed high point of the EU-China relationship, back in 2004/5, was in reality based on a series of false assumptions: that trade and economic tensions could be resolved purely through goodwill; that a closer security relationship could be developed without reference to Europe’s traditional alliances; and that the two sides had an overlapping vision of the rules of global order. Since then, the EU has made more headway when it has been willing to play hardball on trade policy, whether through the opening of subsidy investigations into Chinese companies or its proposed reciprocity rule for public procurement projects that targets access to China’s restricted market. It has taken steps to coordinate its Asia policy more closely with the United States, as the joint statement by EU High Representative Baroness Ashton and Secretary Clinton at the ASEAN Regional Forum in July laid out. And while a majority in Europe may have seen eye-to-eye with China on the U.S. invasion of Iraq, disputes over Syria and Libya have again laid bare the fundamental differences between the two sides over issues of civilian protection and the use of force.

If the vision of the relationship once embodied by Jacques Chirac and Gerhard Schroeder has faded, recent years have also seen another false dawn of sorts. Since 2010, speculation has abounded that China would deploy its financial arsenal to mop up the bonds of imperiled eurozone members, invest massively in the European Financial Stability Facility (EFSF), or simply unleash a vast flow of direct investment. In practice, China has been no more willing to throw money around indiscriminately than anyone else. While much of the EU-China summitry in the last couple of years has been absorbed with the eurozone crisis, Beijing has only judiciously increased its investments in the EFSF, eurozone bonds, and hard assets. The eurozone’s troubles have also had the inevitable effect of channeling greater Chinese political and economic focus towards the principal powerbroker in the crisis, Germany, with Angela Merkel paying her second visit to China this year barely weeks before the summit.

Yet this progressive stripping away of fantasies about the EU-China relationship is no bad thing. The two sides are developing a pattern of ties that is better attuned to power realities, less prone to the disappointment of false expectations, and more honest and transactional about differences. What it lacks in excitement it makes up for in maturity and stability. This foundation will be crucial if two of the most important developments in the partnership are to be successfully maintained.

First, the relationship is finally entering into a phase where the distribution of economic rewards appears better balanced. The trade deficit between the two sides has come down in 2012, with imports from China stabilizing and exports from the EU continuing to rise during a time when many other export markets are seriously troubled. While trade numbers can be a relatively retrograde way of thinking about economic benefit, even more important in the coming period is the dramatic shift in China’s status from an importer to an exporter of capital. The true depth of the EU’s economic relationship with its largest partner, the United States, lies not in the flow of goods and services but in the mutual integration of each other’s markets, investments, companies, and professionals. From Greek ports to British nuclear power plants, Swedish car companies to French utilities, the beginnings of this process are now underway with China too. While the scale of what has already taken place has often been oversold, the potential is enormous. The impact of what could be as much as $1 trillion of inbound Chinese investment to the EU by 2020 would be greater for EU-China relations than any other development in the last decade. Yet it will also be politically challenging for both sides. The sensitivity in Europe has already been evident from the urging by European Commissioners Tajani and Barnier to President Barroso that an investment screening process be put in place at an EU level. While some security and economic concerns are warranted, the normalization and deepening of Chinese investment flows should undoubtedly be the primary goal.

The other promising development over the last year is the establishment of a new EU-China defense and security dialogue. As China’s security relationships with many of its neighbors and with the United States become characterized by greater tension, the role of the EU in building deeper ties with the Chinese military could potentially be an important one. China is seeking to develop an advanced military with global reach, able to address a range of new challenges for Chinese interests overseas, such as counter-piracy, peacekeeping, and non-combatant evacuations. European militaries offer China the advantages of cooperation with some of the world’s most experienced and capable forces without the corollary difficulty faced with the United States – that the two sides also have to prepare for potential conflict scenarios. As well as drawing China into taking on a greater role in the provision of global public goods in the security sphere, closer ties would aid the integration of a military that still harbors deep suspicions about the West. While dialogues and exchanges already exist with individual member states, and to a limited extent with NATO, the EU layer should provide the existing security relationship with additional strategic momentum, coordination, and transparency, which can help to allay any concerns that might be raised by Europe’s traditional allies.

Both processes – integrating China as an investor in Western markets and a global military actor – would yield advantages that go well beyond the EU-China relationship itself. But they depend on being able to avoid the sort of geopolitical hyperbole, both angst and over-optimism, that once characterized it. Wen may have wanted a headline grabbing final act, such as the long-sought-after market economy status. Laying these foundations should prove a more enduring legacy.

This article was prepared for the Europe-China Research and Advice Network.

Image from the President of the Council of Europe’s Flickr photostream.

Andrew Small  is a  Transatlantic Fellow with the German Marshall Fund of the United States in Washington, DC. 

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