Insight: China’s pacific accommodation with America

Juwono Sudarsono, Jakarta | Tue, 08/23/2011 7:00 AM A | A | A |-Klipping the Jakarta Post.

Talks of growing strategic rivalry between the US and China have gained steam among columnists, book writers, think tanks and strategic analysts. Themes of American imminent decline (“Post American World”, “Asia’s New Globalism”) are juxtaposed with the growing rise of China’s economic and military profile.

Concern over current plans to cut America’s military spending (US$345 billion over the next 10 years) coincide with reports on China’s soaring defense budget ($120 billion a year and rising). Worry over a “dangerous confrontation” between the US and China is compounded over concerns that China may replace the US as the region’s “essential security guarantor”.

For the moment, the reality is less worrying. First, current American economic travails must be viewed in the context of the long-standing fusion of the economies of the US, Japan, Korea and China as inseparable trade, investment and financial trans-regional entities. The $14.5 trillion US economy is directly linked to South Korea (GDP $1.8 trillion), Japan GDP ($5 trillion) and China (GDP $5.2 trillion).

Notwithstanding the persistent trade and fiscal surpluses with the US for almost 20 decades, all three East Asia economies remain strongly welded to the American trade and financial markets. The US dollar remains the only currency with the backing of a credible and flexible market. The presence of well over $10 trillion in treasuries and foreign exchange reserves held by Korea, Japan and China are clear indications of the staying power of US stock, whatever the fluctuations of the bond and money markets. Chinese bankers agree there is no viable alternative to US treasury bonds.

Second, global markets do not and cannot operate in a security vacuum. Therein lies the importance of understanding the economic and security interface among the US, Korea, Japan and China. The fiscal and monetary positions of each of the East Asian economies are inextricably linked to the prevailing security assurance of US military preponderance, especially of its naval forces. Three generations of Korean and Japanese and two generations of Chinese economic officials implicitly understand the imperative of American naval, air and land forces providing strategic assurance throughout Northeast Asia.

While China’s leaders implicitly acknowledge the imperative of American dominance, its more pragmatic leaders must periodically defer to their hard-line factional rivals and register open defiance over America’s role in Taiwan, the Korean Peninsula and in the South China Sea. From Deng Xiao ping to Hu Jintao, China’s more pragmatic leaders in the end prevailed in accepting American dominance, albeit as a “transient necessity”.

Like their Korean, Japanese counterparts, Chinese economic and business leaders understand that access to iron ore, oil, gas and other strategic minerals from points in Latin America, Africa, the Middle East and Southeast Asia rely on the secure sea lanes provided by America’s unmatched US Navy carrier strike groups in the Western Pacific, the Indian Ocean and in the Gulf region. In short, China’s future economic sustenance depends on continued American strategic preponderance.

US military power ensures that the stock, bond and financial markets in Seoul, Tokyo, Shanghai and Hong Kong are inextricably linked to the New York Stock Exchange and to Chicago Mercantile. Hong Kong and Shanghai’s global financial links to New York, London and Frankfurt are based on the premise that Chinese access to world markets rest a stable American military assurance. Japanese, Korean and Chinese holdings build manufacturing bases in the US because their parent companies were secured by American strategic assurance in Northeast Asia.

The habitual concern over China’s increased military assertiveness is a reflection of the enduring factionalism between hardline nationalists and pragmatic internationalists within the Chinese Communist Party leadership. It is also a constant feature of policy differences between China’s hard-line defense ministry nationalists and pragmatist internationalists in the foreign policy and economic bureaucracies. Issues over Taiwan, the Korean Peninsula and the South China Sea are part of the perennial contest for key policy decisions. These gyrations are reflected in the US between hardliners, who want to “punish” or “roll back” China, and those who understand that China’s assertiveness carry more rhetorical style than hard policy substance and that American prevalence, if not dominance, will continue for another generation.

China’s anti-satellite capability, its recent launch of its first aircraft carrier and stealth fighter capability, and other features of China’s military modernization, have important symbolic value to satisfy Chinese pride but they do not adversely reduce American strategic presence in East Asia. On this score, cool-headed defense and military leaders in the US and China share a much more in tacit understanding than appears in reported public debate.

There is finally the all-important but less publicly discussed issue of China’s severe internal economic and social problems, with their attendant dangers of political, economic and cultural unrest. It is in the interest of the US and of China’s neighbors in Northeast and Southeast Asia that China’s current internal political, economic and social unrest do not fuel passion within the country’s masses and its elites, giving fuel to channel aggressive nationalism abroad.

The “Fifth Generation” of China’s leaders who will gain top leadership positions in 2012 are expected to continue to focus on both surmounting the dangers of internal unrest and maintaining the path of peaceful accommodation between America and China. All nations and economies of Northeast Asia, Southeast Asia and indeed the rest of the world, watch with keen anticipation that China’s peaceful development complements its continued peaceful accommodation with America.

The writer is a professor of international relations and geopolitics at the University of Indonesia and former defense minister.