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America and China:
Two Middle Kingdoms in Search of a Stable
Strategic Relationship
Speech by the Honorable Alan W. Steelman
former Member of U.S. Congress, Texas
The International Professional League
And The Dallas Council of World Affairs
September 30, 1996
America and China:
Two Middle Kingdoms in Search of a Stable Strategic Relationship
History and
National Self-Perception
For most of the 4,000 years of recorded Chinese
history, China has viewed itself as the “Middle Kingdom,” believing that
it occupies a special place in the universe. According to this view, “God
is in his heavens, the Chinese occupy a kingdom in the middle, and
residing below in a lesser kingdom are the ‘barbarians’” – meaning all
other peoples. Viewing the world through China's eyes is fundamental to
the relationship the U.S. will develop with the world's most populous
country as it re-enters the mainstream of world affairs.
China’s Loss of
Face
China suffered a tremendous loss of face when it had
to concede territory to several European powers during the 19th
century. The memory of this has not receded. The British brought opium
as a good to trade for Chinese silk and teas and in the process created a
widespread drug dependency which reached even as far as the Imperial Court
in Beijing. China wasn’t strong enough to repel the opium invasion and
ended up giving Hong Kong to the British as a means of getting them off
the mainland. They also gave Macau to Portugal and made several
territorial concessions to the French, Belgians, and Germans in Shanghai
and further up the coast.
In this century, Manchuria was taking by the Japanese
in the 1930’s. The Chinese then suffered millions of casualties to the
Japanese during WWII. During the Mao period, it was repeatedly affronted
by its erstwhile Soviet allies, who considered it the junior partner in
the relationship. Finally, after enjoying a long-term strategic
relationship with the United States during the 1970’s and 1980’s, it feels
now it was cast aside after its usefulness as a counterweight to the
Soviet Union expired.
150 years of “turning the other cheek” has left China
resolved to reclaim its respect and lost honor. When Macau returns to
China at the end of this decade, the final chapter of Western dominance
will have concluded. For the first time in 400 years, every inch of Asian
soil will be controlled and managed by Asians.
America as
Missionary
Like China, America too has believed for all its 200+
years that it occupies a special place in the Universe. It feels that it
has been especially blessed by God and in return has been given the task
of carrying out a special mission. This mission is two fold. First, to
serve as a beacon to the rest of the world. And second to convert other
nations to the concept that each human being has certain inalienable
rights, vested at birth. These rights are entitle to protection by the
role of law under a stable system of government run by officials who are
democratically chosen. In the 20th century, it was this view
which inspired President Woodrow Wilson in his campaign for the League of
Nations. It inspired the war effort during WWII, and it provided the
intellectual rationale for the U.S. intervention in both Korea and
Vietnam.
This concept of “special place” helps us understand
the attitude and behavior of both China and the United States. It also
helps explain the tension and mutual distrust as we both try to come to
terms with each other to lay the foundation for a new strategic
relationship.
How It Drives the
Behavior of Both China and the United States
Lecturing China on human rights and threatening
economic sanctions to ensure compliance is a direct outgrowth of this idea
of a “special mission”. Former Secretary of State, Henry Kissinger, in
his book, Diplomacy identifies that two separate and distinct
strains of thought which are most characteristic of U.S. foreign policy
debate. One is the real politik school of thought, where the principal
motive in making strategic choices is choosing that which serves the
interest of the United States; intervention is then justified only in
those cases where there is direct threat to U.S. interests. This view
takes no heed of other factors such as humanitarian concerns. The
“America has a special mission, we own the high ground” school of thought
advocates a special American role in the world: peacekeeper, arbiter of
disputes between other countries, and apostle for human rights. Debates
in the U.S. Congress invariable revolve around these two adversarial
points of view.
While the realpolitik school has a substantial
following in any given dispute, the “special mission” point of view
usually prevails because it is decidedly the more dominant strain in
American thinking on its rold in the world.
Asians, Including
the Chinese, Want a Continued American Presence in the Region
This willingness on the part of America to take up
the “cause of freedom” is not without its admirers even within Asia. Yet
increasingly Asian leaders are beginning to lecture back on topics like
the decline in Western values and the negative effect many Asians feel
that American music, films and other form of entertainment are having on
traditional Asian values.
Lee Kuan Yew, the former Prime Minister of Singapore,
arguable the most admired leader in Asia, and a key adviser to the Chinese
government argues for a continuing role for the U.S. in Asia and says that
“America is the only major power in recorded history to have used its
influence and resources for mostly benign purposes.” Many Asians feel
that this stands in favorable contrast to their experience with not only
their former European colonizers, but with Japan as well. In a recent
book by Mao Tseteng’s personal physician of 22 years, entitled My Life
With Mao, Mao is said to have had an affectionate view toward the
United States and felt like Lee Kuan Yew that China had little to fear
from the United States unless it was directly provoked. Even within the
Chinese leadership today, there is a view that a continued presence on the
part of the U.S. is desirable in order to serve as a counterbalance to a
resurgent Japan and the rapid growth of Korea as a power.
Containment or
Engagement?
Most discussion on U.S./China policy today revolves
around whether America should seek to “contain” China’s growing influence
or whether America should “engage” China and thereby become a facilitator
of China’s reintegration back into world affairs.
Since the end of World War II and up to the end of
the Vietnam War, 1945 to 1974, American foreign policy in Asia was
preoccupied with containing the spread of Communism to other parts of the
region, helping to rebuild Japan and assist in its reintegration back into
the family of nations, assisting South Korea, and forging friendships and
alliances with the nations of Southeast Asia. Containing Communism in
Asia largely meant containing China as it was lending support to many of
the indigenous Communist=led insurrections in the region. This
“containment” policy came to and end in the period leading up to and
following the visit of President Nixon to Beijing in 1971.
Our policy toward China following President Nixon’s
trip to Beijing in 1971 shifted to cultivation friendlier relations as a
way to contain the Soviet Union. Even thought both were Communist and
were on the surface allies, there were serious fractures in the
relationship. This enabled the U.S. to drive a wedge between the two
thereby giving the Soviet Untion a potential threat on its own doorstep.
Since that time the U.S. has not had a coherent policy and finds itself in
a reactive posture lurching from event to event and crisi to crisis as
seen in recent years with the recent Taiwan elections, the dispute over
intellectual property and other issues like the World Trade Organization
membership for China and Human Rights.
China’s rapid economic growth, its importance as a
market and its determination to retake its rightful role in the exclusive
club of world powers make it imperative that the U.S. think through and
formulate a coherent strategy in relations toward China and indeed the
entire Asia-Pacific region.
An Integrated
Approach Towards Both Asia and China Is the Most Important Foreign Policy
Challenge Facing the U.S. Today
The emergence of Asian and more particularly China
and the need for a carefully crafted U.S. approach to the region to guide
its actions for the future is the single most important foreign policy
challenge facing the U.S. today. This challenge exists in the face of a
national mindset where most Americans still consider Europe to be the
region of the world which should receive the most attention. Center stage
has shifted, and the Asia Pacific region, particularly China, demands more
attention if we are to capture the opportunity and avoid the peril of
further neglect.
Why It Matters
Relations with China have to be seen within the
context of Asia as a region. It is a holistic approach requiring a policy
process which must take into account several problem areas. It is a
process with both economic and military dimensions. Because of the
globalization of trade it may be the first time when U.S. policy makers
must weave a complex set of economic and military choices into one
integrated and coherent approach to the region. It is also, arguably, the
first time in our history when the economic dimensions of the policy
choices we must make outweigh those of a military and diplomatic nature.
This presents no small talk given the split
responsibilities which exist between the State Department, the National
Security Adviser, the Commerce Department and the U.S. Trade
Representatives office. The economic issues include Most Favored Nation
trading status, World Trade Organization membership for China, handling
the increasingly large trade deficit with China, and respect for
intellectual property.
Because the economic issues have such far reaching
implications for the U.S. economy, it is important that busyness and labor
play a far larger joint role that they have in formulating American
foreign policy to date. The military challenges include the dispute
between China and several Southeast Asian nations over the Spratly
Islands, the dispute between China and Japan over the Diaoyu Islands, and
the continuing question of Taiwan’s status.
An Economic Marker
Equal to the Size of the U.S. and Europe combined
The size and dimension of the region in both
geographic and economic terms is awesome. Of the more than five billion
people who live on the planet, more than half reside in Asia. Over 20% of
the world’s population lives in China alone. 1.2 billion people live on a
land mass roughly equal to that of the United States. There are 8
provinces in China which have more population than the largest European
country. Guandong Province with 65 million people larger than France;
Hebie Province with 63 million people is larger than England; Sichuan
Province with 110 million is larger than Germany and is 70% the size of
Japan.
Within five years, it is estimated that Asia’s
combined GNP will be double that of Europe. Asia will represent one third
of the entire world economy. Over 500 million Asians will be middle class
within the next 5 years. That’s a marker roughly equal to the U.S. and
Europe combined. With India included, there are 3 billion people in the
region- half of them are under 25. In the 21st century, Asia
will be both our biggest market, and it certain industries, our biggest
competitor.
A Deep
Understanding of Regional Realities Should Drive the Design of U.S. Policy
A the U.S. starts the process of confronting the
complex set of challenges facing it in formulating this new policy, the
discussion should take place with a far more complete understanding of the
realities which Asia and China present today:
- There are two Chinese nations, not one: In
addition to Mainland China, there is another Chinese nation: the
Overseas Chinese numbering approximately 55 million. They live in
Taiwan, Hong Kong, the Philippines, Thailand, Malaysia, Singapore,
Indonesia, Australia, Canada, the United States, Europe and in many
other parts of the world. It is estimated that the GDP of this Overseas
Chinese nation is the third largest of the world and today exceeds that
of Mainland China. The Overseas Chinese Network is a very important
factor in how China develops and how it interacts with the rest of the
world. The Chinese government depends on certain members of this
network for ongoing counsel and advice. Much of the capital, technology
and management talent fuelling China’s rapid growth is coming from the
Overseas Chinese.
- Different value systems with respect to
traditional U.S. “rights”:
The Asian way is family first, harmony in relationships, discipline,
conformity, and a preference for persuasion rather than confrontation.
The Western way, if not the American way, is civil liberties, free
speech, diverse lifestyles, open debated and a willingness to confront
opposing views.
- Primacy of economic issues: Deng Xiaoping
in introducing the reforms which led to the market economy which
characterizes China today, said, “to get rich is glorious.” A prominent
Hong Kong businessman said recently: “Hong Kong people care about one
thing, making money. Democracy? We never heard this word before
Governor Chris Patten arrived.”
- Importance of alliances: The Darwinian
“survival of the fittest” concept which dominates Western economic
thinking is alien to the Chinese and Asian way of thinking. The large
Chinese family conglomerates which dominate the economies of Taiwan,
Hong Kong, Thailand, the Philippines, and Indonesia have been built on a
bedrock of alliances, joint-ventures, and relationships with each other
and with large American and European multi-national corporations.
- Asia is energy destitute: Except for
Indonesia, Malaysia, and China, all the countries of Asia are net
importers of oil. The rapid growth of the region and the voracious
appetite for oil to fuel this growth is forming the conditions for
military conflict as a means of taking the necessary energy supplies.
- Importance of the Confucian model: A strong
authority figure in the family, the company, and at the head of the
government is considered essential to maintaining order, stability, and
the perpetuation of the enterprise. Filian piety, where age and
experience are venerated, is another important Confucian principle.
Open challenges to this authority aren’t tolerated. While Confucian
teaching were discarded during the Cultural Revolution as old and
outmoded, the teachings of the sage are so ingrained in Chinese
tradition as to be almost a part of the genetic code.
- Market economy/authoritarian state: While
China still officially considers itself to be a Communist system, it is
in fact no longer Communist. The market economy is booming and double
digit growth rates have been the norm since the late 1980’s. Deng
Xiaoping said “it doesn’t matter whether the cat is black or white as
long as it catches mice.” He was referring to the need for China to
embark on a long overdue set of economic reforms and saw no need to go
through the wrenching and potentially bloody exercise of having the
government officially renounce its Communist label.
- Existing strong basis for U.S./China positive
relationship: There are several factors which can provide the
foundation for a stable if not strong friendship: The attractiveness of
each other’s economic markets; the moderating influence of the Overseas
Chinese who have considerable influence on both sides; and the desire
among all Asian countries including China for the U.S. to help maintain
a balance of power in the region.
The Table is Set
With a Full Range of Socio/Economic/ Political Issues
Taiwan: In spite of the recent Chinese missile
testing exercises in the Taiwan Straits, Taiwan investment on the mainland
continues to grow rapidly. Estimates of mainland investment in China run
as high as $40 billion. Trade between Taiwan and the mainland now exceeds
trade between Taiwan and the U.S. While China is willing to show some
patience on the issue of reunification, it considers this to be a
non-negotiable item over the long term. Opinion in Taiwan is divided.
There is a significant percentage of the population who favor eventual
reunification under the right conditions. How China manages the
transition in Hong Kong is a key factor in the eyes of Taiwan. If China
honors the “one country, two systems” agreement over the next 5-10 year
period, the likelihood of a China/Taiwan agreement on unification
improves.
Human Rights: The differences in relative
importance given this concept between the U.S. and China over treatment of
its citizens vis à vis other considerations such as economic development
present an area of ongoing potential conflict.
Nuclear Proliferations: Sales by China to
Pakistan and Iran of ring magnets allegedly for the use in production of
weapons grade nuclear fuel is a cause for concern. Beijing has since
promised to stop technology transfers to unmonitored facilities.
Market Access/Intellectual Property Rights:
Market access for U.S. software, books and movies are contentious issues
as is the need for protection against software piracy.
Hong Kong Post-1997: The agreement is that
China will respect a “one country, two systems” arrangement for 50 years.
This is a key issue and will be watched very carefully in Taiwan to see if
a similar agreement might provide an opportunity for reunification with
the Mainland. China “bashers” will have a field day if the transition
isn’t carefully managed within the parameters of the agreement. China
fully understands the importance of managing the transition and the
post-handover period well. Hong Kong will become the international
gateway to China, its showcase city, and will be its biggest earner of
foreign exchange. China is working closely with its Hong Kong advisers
even now to meet each situation with a “quick response” mid-course
correction if it feels it has mishandled a situation. The big question
isn’t the will and desire to honor the “one country, two systems
agreement” it has made with Hong Kong, but rather its level of skill in
taking over the only true “laissez-faire” economy in the world and
navigating the many challenges it will face it doing so.
Trade and Economic
Co-operation Is the Key Building Block
All these issues are contentious. They will require
ongoing consultation and patience on both sides in order to properly
manage. The core building block for the relationship to go forward is
trade and economic co-operation. Government has a big role to play,
because only it can formally negotiate and make binding agreements.
Nevertheless, the business community and individual companies, large and
small, need to step forward and become more active in helping develop the
region’s policy. Organizations like the American Chamber of Commerce have
very active, agile chapters in all the Asian countries. Along with the
Hong Kong Trade Development Council they exemplify groups seeking to
influence the relationship between America and China as well as the entire
region.
An example of how business investment can influence
the overall political and diplomatic picture is the current relationship
between China and Taiwan. They key element in the relationship, the one
which keeps them talking and thinking constructively, is the enormous
investment already made on the mainland by Taiwan investors (as much as
$40 billion by some estimates). The Chinese government recognizes that
Taiwan is an enormously valuable source of capital, technology, and
management skill.
Guiding Principles
for Business Investment:
Alliances/Joint Ventures: There is an art to a
successful alliance with an overseas partner. The significance of the
right partner to the long term viability of an overseas venture cannot be
overemphasized.
Importance of the Overseas Chinese: The
resources of the Overseas Chinese network in making intelligent choices
about investments can be a very important element in a company’s
international strategy. They are good sources of advice as well as good
potential partners.
“Guanxi”: Translates roughly as relationships
or connections. Having the best business proposal, or highest return
doesn’t always carry the day. Establishing good long-term relationships
is the best foundation for success in Asia.
The economically active: Many companies look
at the population of Asia and China and ask, “How can we miss”? The answer
is we can miss, and plenty have. 1.2 billion sets of teeth in China
doesn’t automatically translate into being able to sell that many
toothbrushes. There are about 150 million in China today who fall into
the category of “economically active”. This means not only possessing the
consumer purchasing power, but also being within reach of distribution
channels.
Long term view: Many American companies,
particularly those whose shares are publicly listed, have an investment
test which says, “revenue before expense”. This means profits need to
flow in the short term in order to justify the investment. China
investment to date is starting to pay off for many companies who invested
there in the middle 80’s. They were willing to take a longer term view
than they normally do.
The Pacific Rim
Century
While many glibly speak of the 21st
century as the Asian Century, a more careful analysis better supports the
case for it being a Pacific Rim Century. The size and scope of the
region, its close ties to North America, the need for continued U.S.
involvement in the region and the economic interdependence among nations
east and west along the Pacific Rim make it essential that all parties
forge a strategic relationship with each other which promotes peace,
stability, and continued growth.
Alan Steelman is a Senior Principal in a large
international management consulting firm. After serving in the United
States Congress representing the Fifth District of Texas (Dallas), he
lived in Singapore for eight years. There he served as Group President of
the Asia Pacific region for an international consulting firm. Today Mr.
Steelman divides his time between the U.S. and Asia and serves on the
Advisory Board of several Asian companies.
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