Tuesday, July 31, 2007

Charming China


In October, 2003, a few months after the toppling of Saddam Hussein and before the whole Iraq adventure turned sour, President George W. Bush arrived in Canberra, Australia’s capital, where he had been invited to address a joint session of parliament. He had every reason to expect a warm reception. After all, Australia and the US had fought side-by-side in the recent invasion – Australia being the third partner in the attack.

Instead, protestors dogged him from the moment his aircraft touched down in Sydney until he departed. In Canberra he had hardly begun his speech before Green Party senators began heckling him. After he left the chamber, he was booed by more protestors. Only a few days later, China’s president, Hu Jintao stood on the same dais, the first Asian leader, undoubtedly the first foreign communist, to address parliament. No heckling for him. Australia’s business community feted him at one barbecue after another.

What’s going on? Isn’t Hu the leader of a dictatorship that oppresses religious freedom, suppresses democratic aspirations and throws dissident journalists in jail? Isn’t Bush the representative of a sister democracy, an ally in five wars since World War II, a major trading partner? These side-by-side visits were powerfully symbolic of the changes that are taking place in Asia. China’s rise is mirrored by a decline in American influence. This is the theme of Joshua Kurlantzick’s informative new book, Charm Offensive: How China’s Soft Power is Transforming the World.

“China hasn’t started any wars lately,” deadpanned Financial Times columnist Gideon Rachman. That is a reasonable observation to make for a country that has made hepin jueqi – “peaceful rise” – the public theme of its economic and diplomatic strategy for dealing with Asian neighbors, and, indeed, the world. Aside from the occasional veiled threat directed at Taiwan, warning Taipei not to declare formal independence, Beijing has deliberately played down border disputes with neighbors.

Only a few years ago, China was planting provocative bases on tiny atolls claimed by both China and the Philippines in the Spratly island group in the South China Sea. A few years earlier China had actually clashed with Vietnam over sovereignty claims to islands in the Paracel group. Today the once heated Paracel/Spratly island issue is quiescent. It is governed by a “code of conduct” among the eight nations that have claims to various islands to kick the issue resolutely into distant future.

Another important element of China’s Charm Offensive is its use of foreign aid. If there is to be a new foreign ministry building or presidential palace somewhere in Asia, the South Pacific or Africa, chances are it will be a gift of China. A billboard in front of East Timor’s future foreign ministry in the capital Dili loudly proclaims as much in bold letters.

Offering no-strings-attached financial and other economic assistance to Southeast Asia and Africa is a critical part of China’s new foreign policy. This has been dubbed the “Beijing Consensus” as opposed to the “Washington Consensus” of the US and the international agencies that are basically controlled by the US that links aid to preconditions such as good governance, the rule of law, respect for human rights and open markets. Little surprise that autocratic regimes welcome China’s soft power.

The US can still exert considerable soft power when disaster strikes. The prompt assistance extended to Indonesia in the wake of the deadly tsunami in late 2005 was widely appreciated in that Muslim country and won America buckets of good will. Aside from money, the US still has assets, like hospital ships and helicopter carriers, that China lacks. China’s contributions to ameliorating the effects of the disaster were, by comparison, minuscule, but one can be sure that the next time disaster strikes China will be far more generous.

China is opening dozens of state-sponsored Confucian Institutes around the world (even in the US) to teach the Chinese language and writing and remind people of its millennia-old culture. They are patterned after the British Council or the Goethe Institute of Germany. Beijing organized an 11-nation performance of the “Voyage of Chinese Culture to Africa” celebrating the 600th anniversary of the voyages of Admiral Zheng He. He touched on many foreign shores – without the Chinese pointedly note – occupying any of them.

By contrast, writes Kurlantzick, “Washington eviscerated US public diplomacy, the government-funded programs designed to influence public opinion abroad . . . Libraries and US government-sponsored tours by artists and musicians has brought jazz, Pop art and many other trends to foreign audiences. Now, Washington was destroying those success stories.”

This underscores a major theme of Charm Offensive: that China’s soft power successes have been accompanied by a steady decline in America’s soft power and diplomatic initiatives throughout the region. Mao Zedong never left China except to visit Moscow once. China’s current leaders are veritable globe trotters, visiting neighboring countries and regional forums. It sometimes seems as if no country is too small for their attention. Former president Jiang Zemin even made a state visit to Iceland.

Meanwhile, American leaders have been stiffing important regional conferences. In 2005 Condoleezza Rice became the first top American diplomat to skip a meeting of the Asia Regional Forum, an important regional security bloc. The meetings had been attended by all previous US secretaries of state since its inception. Rice’s absence was widely noted and commented on in Asia.

President Bush just cancelled what would have been his first summit with leaders of the ten members of the Association of Southeast Asian Nations (ASEAN) meeting in September in Singapore. He said the timing was not convenient, and, of course, one could say that Bush has two wars to run, and September is a critical time for one of them.

Asian leaders complain that when Bush does visit Asia, principally the meetings of the Asia-Pacific Economic Cooperation forum (APEC), he spends almost all of his time talking about terrorism instead of the things that his Asian hosts would like to talk about. “Cancelling a meeting here or there may not seem like a big deal, but the slights are piling up,” wrote Walter Lohman, a former vice president of the US-ASEAN Business Council.

In real life, of course, people do not get along on charm along, As China continues to prosper and grow more powerful it will inevitably throw its weight around in ways that other countries won’t find charming at all. A recent example is the allegation, denied in Beijing, that China recently muscled the World Bank in removing specific references to the number of premature deaths in the country linked to pollution. The report, The Costs of Pollution in China was still a pretty strong indictment.

Another element of China’s future power projection that Kurlantzick basically ignores is its massive and growing stash of dollar reserves. That is probably because, up to very recently, Beijing has been content to quietly accumulate these reserves and is only now deciding how it might deploy this vast wealth to further its interests.

So far China has amassed some $1.3 trillion in foreign currency reserves, mostly dollars. About $400 billion is invested in US Treasury Bonds, second only to Japan. This enormous potential purchasing power has been handed to China on a platter by American consumers and by a government unwilling to seriously pressure Beijing over its undervalued currency.

Beijing took the first step in late June when it injected $200 billion into a new agency, administered by the Ministry of Finance, that will buy assets abroad. So what distinguishes this move is not just the size of the pile but the fact that it will be deployed by an organ of the state. China will use currency reserves to advance its interests in much the same way that Russia, under President Vladimir Putin, is using state institutions to employ its vast natural gas reserves.

Having been burned two years ago when the China National Overseas Oil Co (CNOOC) scuttled its generous bid to buy the American oil company Unocal, Beijing will probably seek to avoid future confrontations by wielding its financial power through front companies, such as the Blackstone group, into which the new agency poured $3 billion just before Blackstone launched its Initial Public Offering.

In the long-run, a state-run agency with such enormous reserves will likely try to advance broad national objectives rather than just earn a better return on capital. The results may not be so charming.


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