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Part 1: Dragon seizes market share
By Macabe Keliher

BEIJING - When China signed a free-trade agreement with the Association of Southeast Asian Nations (ASEAN) in 2002, it was viewed as a threat not only to US economic interests, but also to the political balance in the region. Even though Chinese foreign minister Tang Jiaxuan had told US Secretary of State Colin Powell that China had no desire to "push the US out of Asia", the United States quickly countered with the Enterprise of ASEAN Initiative, a plan to offer bilateral free-trade agreements to Southeast Asian countries.

"Once agreements between ASEAN members and the US are completed, they will be worth more than the deals with China," US Trade Representative Robert Zoellick was quoted as saying at the ASEAN summit last October in Bali.

While Zoellick's remarks have been understood as taunting, if not just snobbish, they do characterize a fear of what many governments and China watchers see as the ominous rise of China, both economically and politically. In the past few years, China has emerged from its hole of non-intervention and cast off its hermit rags to become directly involved in multilateral economic and security organizations, significantly increasing its political clout in the region. At times this has dovetailed with the United States and its interests, but at other times it has come at the expense of the world superpower.

While such a trend toward economic, political and strategic reassertion is most rationally viewed as a natural development for a country the size of China with an economy growing at such phenomenal rates (9.1 percent in 2003), it is also argued by some that something more sinister is in the works - namely that China is consciously seeking not only to undermine US interests in the region but also to redefine the roles of global hegemony completely.

China's political and economic involvement in the region has grown tremendously over the past few years. China accounts for more than half of the total Asian trade today (in 1999 it accounted for only 11 percent), and it bought almost half of the region's exports last year (in 1990 it bought only 6.8 percent). In 2002, China ratified the agreement aiming to turn all of China and Southeast Asia into a free-trade zone, which, according to Chinese Premier Wen Jiabao, will have a total population of more than 2 billion and a collective gross domestic product (GDP) of US$3 trillion by 2010 when the agreement goes into full effect.

Already Wen has said he hopes to reach two-way China-ASEAN trade of $100 billion by 2005 - it was $57 billion in 2001, when the deal was made, challenging US two-way trade with ASEAN of a similar amount. It is thus no surprise today to find Beijing full of talk about "regional economic integration".

Low-interest loans, big aid packages
Cash is also helping China's cause in those countries from which it does not import. Vietnam, for instance, which counts China as its second-largest trading partner but ran a trade deficit over $1.5 billion last year with China, received a low-interest loan from Beijing of $126 million in March. Likewise, Cambodia, which runs a $243.67 million trade deficit with China, got its debt of $200 million canceled and received a low-interest loan of $125 million in 2002. Last year it received a military aid package of $2.4 million. Myanmar and Indonesia have also received hundred-million-dollar aid packages.

Such economic and financial prowess and muscle have led directly to a larger political role, mainly through China's involvement in multilateral organizations such as ASEAN, Asia-Pacific Economic Cooperation (APEC), and a host of other security groups such as the Shanghai Cooperation Organization. In November 2002, for example, China signed four agreements with ASEAN, including security, and economic and agricultural cooperation agreements, and in 2003 became the first non-ASEAN country to accede to ASEAN's Treaty of Amity and Cooperation, confirming China's commitment to the group - a move unprecedented for a country with a long reputation of non-involvement.

"With its level of economic growth, China can no long longer afford to be a hermit," says Jonathan Anderson, China economist at UBS in Hong Kong. "China is parlaying its economic importance into political weight."

This benign engagement and direct economic participation are not common for China, and in fact did not begin until about 2000. The hosting of the APEC summit in Shanghai in 2001, and the attention Chinese President Hu Jintao's speech garnered at the APEC summit in Bangkok last October, were the most obvious signs of what George Washington University China Policy Program director David Shambaugh says is "China rapidly returning to its traditional role as the central actor in Asia".

The Chinese Foreign Ministry's official line on this about-face on active engagement is that "the 1997 financial crisis brought us together". Pushing beyond that, one official close to the foreign minister says it was around that time that China "began advocating all countries involved should put aside disputes and develop the region". China did at that time move from being suspicious of multilateral organizations to participating in and even forming them. After observing regional multilateral groups for a few years after the Asian financial crisis, China decided that they were not US-controlled - in fact, Beijing discovered that ASEAN states' security ideas were compatible with China's own "New Security Concept" laid out in 1997. By 1999-2000 China was involved and participating in the region's multilateral organizations.

Concurrent with these developments were intense internal debates in Beijing about the decline of the United States and China's role in the region. Chinese leader Deng Xiaoping had laid out an economic plan that needed the environment of peace and stability for Chinese prosperity, but also folded into this view was the decline of the US and its influences. After the North Atlantic Treaty Organization (NATO) bombing of the Chinese Embassy in Belgrade in May 1999 during the Kosovo campaign, it became clear that the United States was not on its way out and that China could not just wait on the sidelines and jump in as the US fell and opportunity knocked on Beijing's door. "It was concluded," says Shambaugh of George Washington University, "that in order to have a peaceful environment conducive to domestic development, China needed to be more proactive in shaping its regional environment."

China's grand strategy - Asian tributary states
Whether China has dropped the illusion of the US in decline remains in debate, in both Washington and Beijing. "China is driven by a grand strategy, in which it is continually looking for ways to undermine the US," says Ross H Munro, director of Asian studies at the Center for Security Studies in Washington, DC. Munro believes that China's rise as an economic and political power is a calculated effort to "create a modern version of the [ancient] Tributary State System - unchallenged Chinese domination of all of East Asia".

Economically, it is true, China is gaining at the expense of the United States. China has replaced the US as the largest export market for much of Asia. For example, almost all of the export growth in Taiwan, the Philippines, Japan, South Korea, Malaysia and Australia last year came from Chinese demand. "The US is still a much bigger market for Asia, but in 10 years China will be close," says Anderson at UBS.

Chinese opposition to the US in Asia has appeared militarily in recent years, to be sure. The spy-plane incident in the South China Sea in April 2001 and a naval challenge to the USS Kitty Hawk in international waters in the Yellow Sea are examples. And the missile buildup and military exercises on the coast opposite Taiwan do not present the view of a benevolent China. In fact, editorials and commentators in China frequently espouse such anti-US views, especially within the military. The Liberation Army Daily, for example, ran an article in early 2002 stating that "hegemonism and power politics will still be the source of turbulence and instability in the world" and saying, "Establishing a new international order will be the focus of international relations."

US Pacific Rim allies such as Taiwan and the Philippines also view China's recent cozying-up with a bit of suspicion. While the rest of Asia was praising China for reaching expedient deals on border disputes and free-trade agreements at recent ASEAN summits, Philippine diplomats warned about the sincerity of the deals, and Philippine President Gloria Macapagal-Arroyo cautioned about China's economic force while welcoming the US-proposed free-trade agreement. Similarly, many Taiwanese have long mistrusted China's moves and stated intention - many term it aggression - to annex or "reclaim" the island, and they have recently made an international issue of the 500 ballistic missiles Beijing has aimed at Taiwan.

Japan also remains cautious. "If China's objective is economic prosperity then it is no problem to Japan. But if this is a means to military hegemony, then there is a problem," says Tomohide Murai, chairman of the program of international relations at the National Defense Academy in Tokyo.

Economic clout makes political clout inevitable
Anderson at UBS sees China's growing political clout as inevitable, as its economy expands and it takes on larger responsibilities. But he says it is by no means a strategic or antagonizing role. "As China's influence in the region rises, other players naturally see a relative decline in their own political standing there," Anderson says.

The region has in fact welcomed China's new position, accepting it as a gradual adjustment of roles. For example, former Malaysian prime minister Mahathir Mohamad spoke favorably of China in an address at the World Chinese Entrepreneurs Convention last autumn in Malaysia. And a poll last December among Thais showed that 76 percent viewed China as their closest friend and ally, whereas only 9 percent saw the US as their closest ally and friend - an almost complete reversal from years past when China was seen as a provocateur and a threat.

With the US and its China watchers on edge about China's rise, such disparaging views among the Eastern and Western hemispheres may amount to what M D Nalapat, who holds the United Nations Educational, Scientific, and Cultural Organization (UNESCO) Peace Chair, likens to "two trains heading directly towards each other".

"There will be a conflict between the US and China. The only question is whether it will be a hot one or a cold one," Nalapat predicts - a battle not between cultures but over real interests.

Yes, China is becoming an economic engine and leveraging its political power; it is entering the comity of nations and behaving responsibly, not only in its own interests. But Beijing is also exercising its new-found power. China aims to increase its economic and political market share, as does any country in the modern world.

"There is no grand strategy, only realism," says Wu Yu-shan, professor of political science at National Taiwan University. "If the US comes into conflict with China as a rising power in this part of the world, it will be over its own national interests."

(Copyright 2004 Asia Times Online Co, Ltd. All rights reserved. Please contact for information on our sales and syndication policies.)
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