The dragon and the eagle try to get along When George Bush visits China this weekend, he and his counterpart, Hu Jintao, will stress their common ground. But the two countries continue nervously to appraise each other's intentions The Economist | Nov 17th 2005 See related graphix and pic at: http://www.economist.com/agenda/displaystory.cfm? story_id=5165029&fsrc=nwl
HU JINTAO, China's president, has a favourite phrase these days: "harmonious world", in which countries of different outlooks live together in peace. Mr Hu first unveiled this idea, more Lennon than Lenin, in a speech at the United Nations (UN) on September 15th. During recent visits to Asia and Europe, his official talks have been peppered with it. And President George Bush will doubtless hear it too during his first trip to China since Mr Hu took office, which begins on Saturday November 19th. Mr Hu does not say so himself, but the Chinese media have made it clear that "harmonious world" is, in part, a rebuff to American "hegemonism". Countries with different political backgrounds should be listened to and shown respect, the argument goes. Everyone should interact "democratically" through the UN. The implication is that China, as an emerging power at odds with American ideology, would be a beneficiary of a world order in which American power was constrained. Mr Bush isn't short of opinions on China's rise either. In Kyoto this week, on the first leg of his Asian tour, he said: "As China reforms its economy, its leaders are finding that once the door to freedom is opened even a crack, it cannot be closed." He went on to heap lavish praise on Taiwan's democracy, in a move sure to irritate his hosts in China, who consider the island to be a renegade province. Yet, though many in the West view China as a nascent superpower that America must fear, the two countries offer each other opportunities as well as threats. Both leaders seem to realise this: Mr Bush praised China elsewhere in his speech, and China's foreign minister said in response that "our common points outnumber our differences". The challenge for both Mr Bush and Mr Hu is to control their nationalists at home. And this challenge comes in two parts: economic and strategic. Encircling the dragon? A bipartisan panel from America's Congress has just issued a gloomy 263-page document saying that "China's methodical and accelerating military modernisation presents a growing threat" to American security interests in the Pacific, though a Pentagon report in July noted that China's ability to project force beyond its periphery is "limited" for now. But as China continues to spend huge sums on its armed forces, including adding around 100 ballistic missiles to the coast facing Taiwan each year, hawks in America are bound to worry. Though America still recognises only one China, it has promised to come to Taiwan's aid if it is attacked from the mainland. China, meanwhile, is trying to strengthen its relationships in Asia and further afield. This is partly a precaution against encirclement by a string of American bases around the region (see map) and an enhancement in recent years of American security ties with Japan and Taiwan. China has no bases abroad. In Central Asia, the Shanghai Co-operation Organisation (SCO), a security forum comprising four central Asian states plus China and Russia, is increasingly challenging America's military presence in the region. In July the SCO, prompted by China and Russia, demanded a timetable for the withdrawal of American troops from member states. In August, China and Russia staged their first joint military manoeuvres since the cold war. "Peace Mission 2005", billed as a counter-terrorist exercise, looked far more like preparation for a Chinese assault on Taiwan. China has also irritated America by forging ties with states especially energy suppliersshunned by Washington. These include Iran, Sudan and Venezuela. On the other hand, China has impressed America by hosting talks on ending North Korea's nuclear ambitions. But many Americans believe that the government in Beijing could do much more to pressure the isolated and impoverished Hermit Kingdom, which counts China as one of its only friends. China, meanwhile, has used the talks to cosy up to South Korea, with which it shares a view of North Korea as a worry but not an imminent threat. Yuan a fight? As China and America each draw up military budgets with the other in mind, there is the threat of a growing mutual suspicion that will be hard to ratchet down. But both countries have an incentive to get on: the huge and growing entanglement of their economies. In America, China looms enormous in the public's fear of globalisation. According to a recent Harris Poll, four in ten Americans believe that China will be stronger than America within a decade, and most reckon the Asian giant will have a negative effect on the future of America's economy. China's economy is still less than a fifth the size of America's, at the market exchange rate. But that exchange rate reflects China's undervalued yuan. China's blistering growth rates worry industries that are shedding jobs in America. America's current-account deficit is big and growing, and this is a legitimate cause for concern. The bilateral trade deficit with China is headed toward the mark of $200 billion per year. But too much blame has been heaped on China, which accounts for under a quarter of America's trade deficit. The imbalance has more to do with Americans' unwillingness to save, combined with an over-abundance of savings in other countries. However, China's economic policies do play a part. Chinese growth is increasingly reliant on demand elsewhere: China's overall external surplus will reach around 8% of GDP this year, and the country has accumulated over $750 billion in foreign-exchange reserves. Hence pressure in Congress, from Charles Schumer, a New York Democrat, and Lindsey Graham, a South Carolina Republican, to threaten a 27.5% tariff on Chinese goods unless Beijing revalues the yuan by a similar amount. In July, China revalued by 2% and pegged the currency to a basket of foreign currencies, rather than just the dollar. But the yuan has appreciated by just 0.3% since then, and the threat of protectionism remains. This year, America fought off a bid by China's state-owned oil company for Unocal, a mid-sized American oil firm. And last week, the Bush administration caved in to demands for quotas on Chinese textiles to be extended until 2008. Despite this, Bush administration officials, known more as dogged salesmen of ideological policies than as pragmatists, have been nuanced in their relationship with the Red Kingdom, resisting the no- doubt-powerful political urge to demonise China as the White House struggles with other woes. Protectionists in Congress and hawks in the Pentagon will continue to do their best to make Americans worry about China's rise. Chinese officials, for their part, occasionally fan the flames with irresponsible rhetoric over Taiwan. But Robert Zoellick, America's deputy secretary of state, who formerly served ably as its trade representative, made a practical point in a recent, optimistic speech. "Picture", he said, "the wide range of global challenges we face in the years aheadterrorism and extremists exploiting Islam, the proliferation of weapons of mass destruction, poverty, diseaseand ask whether it would be easier or harder to handle those problems if the United States and China were co-operating or at odds." He has a point. But as his speech in Kyoto demonstrated, Mr Bush can and will continue to press China to change, opening up its politics and expanding personal freedoms. This will rankle in Beijing. As Messrs Bush and Hu meet, they may indeed find that common points outnumber differences. But the differences are not trivial, and both leaders have a difficult task in finding the right relationship between the world's only superpower and its proud and growing rival. o o o o Copyright © 2005 The Economist Newspaper and The Economist Group. All rights reserved. ------------------------ Yahoo! Groups Sponsor --------------------~--> Get fast access to your favorite Yahoo! Groups. Make Yahoo! your home page http://us.click.yahoo.com/dpRU5A/wUILAA/yQLSAA/NJYolB/TM --------------------------------------------------------------------~-> «¤»¥«¤»§«¤»¥«¤»§«¤»¥«¤»§«¤»¥«¤»§«¤»¥«¤»§«¤»¥««¤»¥«¤»§«¤» This is ZESTEconomics. Post economics-related articles and event info to [email protected] If you got this mail as a forward, subscribe to ZESTEconomics by sending a blank mail to [EMAIL PROTECTED] OR, if you have a Yahoo! 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