November 11, 2011

The Rising Superpower in the East

China’s enhanced international status heralds its transformation into the most significant geopolitical factor in the first half of the 21st century.

11.11.2011, Hannes Hanso
China’s enhanced international status heralds its transformation into the most significant geopolitical factor in the first half of the 21st century.
The People’s Republic of China has already possessed the attributes of a superpower for quite a long period. It has a seat on the UN Security Council, nuclear weapons, the world’s largest armed forces, a rapidly growing economy, an ambitious space programme, the world’s greatest foreign currency reserves, and human resources of immense potential. Despite these visible signs of supremacy, China has exhibited considerable restraint in international affairs until recently. Today, there is increasing evidence that the situation has changed – China is making more active and more refined efforts to contribute to the reinforcement of its rising status and the development of its ‘superpower attributes’. Its behaviour changed dramatically after the 2008 Beijing Olympics, which gave a massive boost to its self-esteem as a global player. China’s success in organising the grandiose Shanghai EXPO only fuelled its self-confidence. The nation’s ambition is to reclaim its ‘rightful position’ in the international arena. What exactly this rightful position means for China is still unclear to us, but its behaviour shows which path it has chosen. The nation has enjoyed great success in recent years, especially since the beginning of the financial crisis. For China, this crisis has actually been a very good one. All the essential prerequisites for obtaining superpower status – be they economical, political or military – vis-à-vis the rest of the world, and the USA and Europe in particular, are effectively being fulfilled. China is increasingly perceived not only as a regional centre of power, but also as a global player. Last year the Chinese economy surpassed that of Japan, becoming the second biggest economy in the world after the USA. Now it is only a matter of time before it takes the leader’s place. China is turning into a country that can offer solutions or that has a key role in finding them. This tendency has been accentuated since the financial crisis, with Europe suffering and urgently needing resources to maintain its credibility at least at a minimum level. In contrast to Europe and the USA, the key to China’s success lies in its uncanny ability to earn more than it spends. The nation’s ‘softer’ qualities, such as its foreign currency reserves and growing political clout, are complemented by another kind of facet – its armed forces modernisation efforts, space programme and cyber capabilities. China is keen to develop its armed forces in order to be able to defend its interests in a growing number of physically distant regions.
The EU’s efforts to solicit money from China for crisis management highlight the extent to which the situation has changed. In December 2008, French President Nicolas Sarkozy, who also held the EU Presidency at the time, met the Dalai Lama in Gdansk. Without further ado, China postponed a planned EU-Chinese summit for an indefinite period and practically froze all high-level contacts with France. Since then, their relations have gradually improved, but this has only happened on China’s terms. Today we live in a world where China is perceived as part of the solution to the financial crisis. It was none other than his Chinese colleague, Hu Jintao, whom President Sarkozy rushed to call after the eurozone crisis summit on October 27, so that they could discuss this topic among others. In the last days of October, Klaus Regling, the head of the European Financial Stability Fund, visited Beijing to promote EFSF bonds in China. In Regling’s words, participation in the EFSF is simply a profitable investment opportunity for the Chinese and nothing more. The Europeans hope to raise 100 billion euros for the eurozone bailout fund from China’s treasure trove. Paradoxically – especially in the light of recent developments – the EU continues to finance aid programmes in China worth tens of millions of euros.
From China’s perspective, there could be several compelling reasons for participation in Europe’s financial schemes. First, as it holds the world’s greatest foreign currency reserves, currently valued at approximately 3.2 trillion dollars – and still counting – China simply has to invest its assets productively and generate extra income from them. Second, China is making efforts to gradually decrease the share of US bonds in its investment portfolio with the aim of not having all its eggs in one basket, but of spreading them across several. In recent years, China has regularly voiced strong criticism at bilateral summits with the USA, targeting its poor financial discipline and insecure investment environment. There have been times when China has held up to 1 trillion dollars worth of US bonds. Beijing now thinks that this number is too high. At the same time, constant pressure from the USA to revalue the yuan angers the Chinese. Third, China’s investments in the eurozone bailout fund will probably come with certain political strings attached. For years, the Chinese have tried to drive a wedge between the USA and the EU in order to secure the lifting of an arms embargo imposed on China in 1989. They have come quite close to achieving their objective at least once – Germany and France, two big EU member states, sent positive signals to China, requiring a decisive intervention by the USA to straighten things out. Today we are in a situation where China could, once again, find out how far the Europeans are willing to go on this issue. Major arms procurements would probably delight many a nation with the necessary production capacity. Fourth, despite years of focus on gaining official recognition of its full market economy status from the EU, China has failed to achieve it. This topic has been included in the talking points of every summit. It was mentioned most recently by Chinese Premier Wen Jiabao at the World Economic Forum in mid-September. Market economy status would considerably increase the immunity of Chinese companies from Europe’s accusations concerning limited market access, entry restrictions on the Chinese market and anti-dumping measures. In addition, it would clearly be in China’s interest to persuade Europe to be less vocal about the human rights situation in the country and to isolate the Tibetan movement even further. These could be some of the issues that China might use as bargaining chips in exchange for its participation in the bailout fund. Fifth, China must also consider the scenario that a stagnant Europe will not be able to buy Chinese goods in the same amounts as it did before. Production for European markets affords employment to a sizeable proportion of the Chinese population, especially in the coastal industrial regions. A drawn-out crisis in Europe leading to the shutdown of or the reduction of workloads in hundreds of factories in China will certainly not benefit the Chinese. A fall in the consumption levels in Europe and elsewhere, brought on by the 2008 financial crisis, left several millions of migrant workers unemployed in China – Beijing would definitely not like to see this scenario repeated. These kinds of fears have been fuelled in recent months by statistics showing that the demand for Chinese goods has indeed declined. Last but not least, China needs the support of EU member states to increase its representation in international organisations, for example, the IMF.
It is unlikely that the EU could publicly make any binding agreements with China on all these difficult issues. At the moment, it is also uncertain whether or not China’s investments will reach the level desired by Europe. At least no such promise was given at the G20 summit in Cannes where the Chinese President was present.
What is clear, however, is that the continuation of financial difficulties in Europe and in the United States will leave the Chinese Communists holding all the ideological aces. As a result of frenzied over-borrowing, developed countries – which used to be patronising ‘lecturers’ to developing nations on politics and economics, but are now burdened with debts – have squandered a large share of the moral capital that previously gave them the edge over countries like the People’s Republic of China. At home, the Chinese Communist Party can look its people straight in the eye and say: “You see, comrades, we were right. Europe stands begging at our door. Our social and economic model is superior to theirs.” This political argument will not only serve domestic purposes. China’s development is followed closely – and with admiration – in many countries in Africa, Central Asia and South America. They will also learn their lesson and get guidance on how to proceed. Economic conditions and politics inevitably go hand in hand. A crisis in the Western world allows China to justify its political system not only at home, but much farther too. This will further undermine the West’s values-based approach. Despite its former weaknesses, China has managed to play its hand with remarkable sophistication and to come up trumps. In the future, this process might constitute a key element in the emergence of a new international system, especially if Western nations also ‘Sinicise’ their foreign relations, i.e. give up their values-based approach in dealing with non-western states.
The fact that Communist China has become a vocal critic of insufficient financial discipline (loan addiction) in the United States (which once was the epitome of the free market and the embodiment of capitalist ideology), publicly expressing its concerns about the security of its investments there (the USA must learn to live within its means), demonstrates clearly that new heights are being reached in global politics. China’s anti-American critique is also directed against protectionist measures, such as tariffs and internal market protection. The election of Barack Obama as president offered – from China’s perspective – an opportunity to warm up its relationship with the USA. However, friction between the two superpowers has increased, rather than diminished. Pressure from the USA to revalue the yuan, which would make exports from China more expensive and imports from the USA cheaper, is a source of constant irritation for China. The Obama Administration’s decision in January 2010 to sell 6.4 billion dollars worth of weapons to Taiwan was perceived in China as a grave insult and a fundamental breach of its core interests. After that, China threatened the USA – for the first time ever – with economic sanctions. President Obama’s determination to meet with the Dalai Lama in February 2010 falls in the same category of offence. Although conducted in framework of joint exercises with South Korea, US aircraft carrier assignments off the coast of China convey only one message to the Chinese – the USA and its allies are trying to encircle their country and to trample their interests. Beijing also found it difficult to stomach Hillary Clinton’s recent statement on the South China Sea being a region of ‘national interest’ for the USA, not to mention US Defense Secretary Leon Panetta’s announcement in October this year of their intention to increase – despite budgetary difficulties – US presence in the region to counterbalance China’s growing military strength.
A significant rise in China’s defence spending and consistent improvements in the quality of its weapons have created major headaches for China’s closer neighbours and those further afield. Observers point to a huge gap between the Chinese government’s rhetoric and its apparent intentions. The lack of transparency in defence spending is considered to be highly problematic. It has to be admitted that China has taken some steps to remedy this situation, for example, a ‘defence white paper’ has been published annually. Still, the paper’s content remains declarative (like the special paper published by Postimees, eulogising China and celebrating the 20th anniversary of Sino-Estonian diplomatic relations), without fulfilling its desired objective of building trust. China’s own figures differ radically from the real spending rates suggested by, for example, SIPRI, a Swedish research institute, or the Pentagon. Beijing claimed in the 2010 White Paper that its defence spending amounted to approximately 81 billion dollars, while SIPRI’s estimate was 114 billion and the Pentagon’s as high as 160 billion. In connection with defence spending, the central government stresses the need for pay rises and the improvement of living conditions for the military (a special emphasis is placed on, for example, clothing, accommodation and new bedding). Expenditure on the latter, of course, cannot be low because China maintains the largest armed forces in the world, with 2.25–2.3 million active-duty members.
Estimates of China’s defence spending as a percentage of GDP also vary greatly. At a party congress held in Beijing this spring, one of the Communist Party leaders, Li Zhaoxing, claimed that the ratio of China’s defence expenditure to GDP was at 1.4%. Li told journalists that the nation had no hidden defence costs and that its objectives were all strictly peaceful and defence-oriented. At the same press conference, it was also pointed out that India’s defence budget, together with its ratio to GDP (over 2%), was rapidly growing and that US defence spending represented approximately 4% of its GDP.
Today the campaign to deny full independence to Taiwan still continues to be among China’s military priorities. Although the relationship between Taiwan and the People’s Republic of China has been less strained in recent years, China has not slowed down the development of its military capabilities – the most modern attack and defence systems, together with an estimated 1,000–1,300 short range ballistic missiles, are all deployed in the military regions opposite Taiwan. In addition, China operates (without the need to refuel) 490 attack aircraft within range of Taiwan.
China places a high priority on cementing its status as a nuclear power to deter potential enemies. Its nuclear arsenal modernisation programme focuses on the development of mobile systems with intercontinental reach. Currently, the Chinese have nuclear weapons with operating ranges over 11,200–13,000 kilometres, covering most of the continental United States and Europe. The number of its intercontinental nuclear-armed missiles is estimated at 90. Submarines are thought to be carrying 24 of them, while the rest are land-based.
From the perspective of the People’s Republic of China, the debate over the growth and size of defence budgets is quite pointless. Beijing officials love to stress that with a population four times smaller, the USA still spends 7–8 times more on defence than China. Chinese Defence Minister Liang Guanglie said two years ago that the technological level of China’s armaments lagged 20 years behind that of the USA.
However, it takes more than these kinds of statements to appease China’s neighbours, especially India, Japan, Taiwan, Vietnam and the Philippines. Close neighbours see an ever clearer pattern emerging in China’s behaviour – the higher its economic growth and self-confidence on a global scale, the more aggressive and self-assertive it becomes in settling disagreements. Time and again, frustration boils over as China and Japan continue to quarrel over the Diayou/Senkaku Islands and the surrounding sea areas. This year tensions mounted further in connection with the territorial disputes in the South China Sea, specifically the Spratly and Paracel Islands. China’s territorial claims are impressively ambitious – if these were fulfilled, you would not be able, figuratively speaking, to go swimming in Brunei, in the Philippines or in Malaysia without entering Chinese waters. Recently, Chinese officials have mentioned – as if accidentally – that the South China Sea disputes were perceived as part of the package of China’s core interests. This would elevate the entire issue to a completely new level. Countries in South East Asia believe that there are two options to counterbalance China: one is to increase their firepower; the other is to forge closer ties with the USA. The budding friendship between two old enemies, Vietnam and the USA, represents a perfect example of the growing concerns of China’s close neighbours about its conduct. This August, representatives from Vietnam, with whom the USA established diplomatic relations only 16 years ago, were even welcomed on board the aircraft carrier USS George Washington. It would be difficult to send a more obvious message to China. There is quite a lot at stake in the escalation of tensions over the South China Sea – about one fourth of global trade passes through these waters.
In 2011, the layman was also given an official confirmation that the People’s Republic of China was close to completing the construction of its first aircraft carrier. For several years already, those interested could follow the construction works from the windows of an IKEA store in the proximity of the port area in Dalian, a northern coastal city in China, yet the existence of an aircraft carrier programme had not been officially announced. This year the Chinese began sea trials of their first aircraft carrier, which is an old, but completely refitted Soviet vessel. Today it does not yet carry aircraft, which still have to exercise on dry land. The current plan is to reach 100% operability only after several years. In the next decade, China intends to increase its aircraft carrier fleet several times over and to incorporate support ships into it.
Its efforts to become a seafaring nation with international reach culminated a few years ago when China took an entirely unprecedented step for itself – for the first time ever, China’s naval fleet sailed to the Indian Ocean to defend its commercial fleet against Somali pirates. Long-term operations far from home waters offer new and valuable experiences for China – logistics, supply, repairs, refuelling, port calls, etc. are all activities that the Chinese are only learning, while it is common practice for their competitors.
China is actively seeking to develop its national space programme, allocating billions of dollars for it. In 2010, it pulled off a record number of orbital launches – 15 in total. In addition, it has successfully sent some taikonauts – the English term used for Chinese astronauts – into orbit and also managed to get them back successfully. At the moment, two Chinese satellites are orbiting the Moon and a third similar mission is under way. By the time this article is published, a Chinese space probe should have been launched, with the aim of reaching and exploring Mars. One Chinese taikonaut also participated in a recently completed experiment in Russia, simulating a 500-day long voyage to Mars. Clearly, China’s interests in this field are not only research-oriented – the nation is trying to build an independent satellite navigation system called BeiDou/Compass and to increase its space surveillance capability. The Chinese reached a new level in space invasion at the end of October and at the beginning of November this year when they launched from a space centre in the Gobi Desert a rocket carrying an unmanned spacecraft, which a few days later managed to successfully dock with the Tiangong-1 module already in orbit at a distance of 340 km from the Earth. Having a space programme is quite a new experience for China. There is still a lot to learn and experiment with. By 2020, the country intends to design and set up its own 60-tonne space station. Admittedly, it will be considerably smaller than the 400-tonne International Space Station, but there is a crucial and symbolic difference between the two – China pursues its space programme independently, not in cooperation with other nations. This fact becomes even more significant when we take into account the extent to which other active spacefaring nations, for example, the USA, have had to curtail their space programmes.
China’s cyber capabilities and related threats point increasingly to one more topic that cannot be ignored. Security experts claim that the country has become a global hub for cybercrime. China’s interests in cyberspace are not strictly limited to military data and know-how, although these are the issues that pose the greatest challenge to Western governments. It is alleged that the Chinese effectively gather information on dissidents, human rights activists, politics, banks, industry, infrastructure, production, mineral resources, materials and all kinds of classified information. The Chinese government usually denies any connection with cyber-attacks (which is hardly surprising), claiming instead that it is a target for such attacks. Currently China has approximately 450 million Internet users and quite a few of them could be talented rogue hackers, but the high technological level of cyber-attacks originating from China persuades cyber security experts that these attacks cannot be carried out by isolated individuals without coordination. China’s huge national corporations, which are interested in technology and commercial secrets, could also be responsible for this kind of information theft. Mike Rogers, Chairman of the US House of Representatives Intelligence Committee, said lately that Chinese efforts to steal information via the Internet had reached an ‘intolerable level’. Rogers called on the US and other governments to pressure Beijing to stop. The same issue was on the agenda at a recent high-level conference on cyber security in London.
Today’s China is increasingly distancing itself – if not in words, then at any rate in deeds – from the early 1990s paradigm formulated by Deng Xiaoping, whose idea was to “observe calmly; secure our position; cope with affairs calmly; hide our capacities and bide our time; be good at maintaining a low profile; and never claim leadership.” Now China’s behaviour in defending its interests has transformed from reactive to directive and proactive. It is highly probable that this tendency will only strengthen. As it aspires ever more actively for superpower status, China can, if need be, substitute its soft power with a more confrontational and assertive attitude – the rest of the world will have to learn to cope with it. China’s road to the top will certainly not be easy – the higher the stakes, the greater the dangers and the risks.

Filed under: Commentary