World Policy Journal

Taming the Tiger: Report from the Middle Kingdom

James Chace

This fall, eight years after the Chinese leadership fired on pro-democracy demonstrators in Tiananmen Square, the great plaza was virtually empty except for two huge vases filled with flowers to celebrate the harvest festival of the moon. Inside the Hall of the People, President Jiang Zemin was addressing the Fifteenth Party Congress: Without stability, he warned, nothing could be achieved.

I had returned to mainland China this September for the first time since May 1989.* At that time, I witnessed the outpouring of students and workers in Tiananmen Square demanding an end to corruption and calling for democratic reform. Two weeks later they were brutally crushed. Now the country is booming, and most of the most vocal dissidents are in exile or in prison. Deng's exhortation "To get rich is glorious" seems to echo among the skyscrapers rising seemingly overnight in Shanghai and in the other coastal cities of the special economic zones dedicated to the new capitalism.

With unemployment rising and corruption among the members of the new entrepreneurial class rampant, China's leaders, mindful of the horrors of Mao's Cultural Revolution, are fearful of any disturbance to their plans to assure China's position as a great economic power. To this end, the party congress endorsed the privatization of some 10,000 of the 13,000 medium- and large-scale state enterprises (though it employed the euphemism public ownership in order to preserve its socialist credentials). However, more than two-thirds of these firms are running a deficit, and overall losses increased by nearly 30 percent last year.

Widespread privatization will not be accomplished without strict political control over the1.2 billion Chinese people; not for Jiang Zemin and his newly designated prime minister, ZhuRongji, the Gorbachev model of political reform first and economic reform later. While for thepast decade the regime, under the leadership of the late Deng Xiaoping, encouraged privateentrepreneurship (and China enjoyed an annual growth rate of close to 10 percent), it continued to jail political dissidents and to keep a close watch on foreigners and citizens alike. Even so, by1997 there was no turning back. The Chinese leadership was riding the tiger of economic change,and it would be all but impossible to climb off.

China's Ambitions, China's Fears

Today, China faces no external threats as it strives to become an economicand therefore a political leviathan. In this respect, Chinese leaders are focused on the dynamics of their country's internal transformation. But its leadership, both political and military, is nonetheless obsessed by what it believes to be the desire of the United States to restrain China's development.

The leaders we met with did not talk in terms of containment the language of the Cold War but of control. They are obsessed with what they see as American efforts to shape their destiny through political, economic, and military pressures. The subject of American hegemony came up frequently, and those with whom we spoke echoed the words of the joint statement made by Jiang Zemin and Boris Yeltsin at their summit in April1997, when they pledged to work together to limit American power and influence in the world: No country should seek hegemony, practice power politics, or monopolize internationalrelations.

As an example of American hegemonic intent, Chinesespecialists cited the Clintonadministration's pressure on Beijing not to provide nuclear assistance in the form of arms, technology, and material to Pakistan and Iran. Even though the Chinese are not members of the Missile Technology Control Regime, a high Chinese official in the ministry of trade complained that they are expected to follow the rules of the regime. Despite these protestations, on the eve of Jiang Zemin's state visit to Washington inOctober, the Chinese pledged to stop sending missiles to Iran; this permitted President Clinton to lift an American ban on sales of nuclear technology to China, which will allow American companies like Westinghouse and General Electric to sell the Chinese nuclear power reactors.

Far more troubling to China's leaders were the new guidelines on the U.S-Japanese security pact published this fall in the wake of the crisis that erupted in March 1996, when the Chinese conducted missile tests in the waters off Taiwan. These tests were designed to discourage candidates in the upcoming Taiwanese presidential elections from suggesting that Taiwan ought to abandon its one-China posture. This policy, which recognizes Taiwan as a part of China while leaving for the future the meansby which the province will rejoin the mainland, and which allows for the existence of twosystems, is endorsed by Washington as well as Beijing. It is also the declared policy of Taipei, which considers Taiwan as the remnant of the Republic of China; theoretically, China could beunified under either communist or noncommunist auspices. For the time being, the status quo suits Beijing, and it interprets any hint of a movement toward Taiwanese independence as a hostile act. At the same time, it reserves the right to use force to bring about unification. Washington, on the other hand, insists on Taiwan's right to unite with mainland China should it choose to do so free of military pressure and to this end provides Taiwan with arms of a defensive character. (It should be noted that Beijing did not view the F-16 fighter-bombers President Bush agreed to sell Taiwan in 1992 as defensive weapons.)

When the Chinese lobbed their missiles into the ocean waters near Taiwan, they werereacting to Taiwanese domestic politics that implied a change from the status quo. The United States responded by dispatching two aircraft carriers to the Taiwan Strait as a warning to the mainland Chinese against attempting to intimidate Taiwan. This crisis, and the exercise of U.S. power and purpose it engendered, persuaded Japan to renew its security treaty with the United States on terms favorable to American aims.

The old guidelines called for U.S.-Japan military cooperationonly in the event of a Soviet invasion of Japan and did not require Japan to play any military role in a regional conflict in Asia unless attacked. Under the new guidelines, Japan would bepermitted, for the first time since the Second World War, to engage in military activities outside its borders in a military conflict involving the United States. This is not intended to involve the use of Japanese troops which is banned under the U.S.-drafted Japanese constitution but to enable Japan to provide the United States with minesweepers and to conduct search-and-rescue missions in international waters, and thus lend general support to U.S. forces.Beijing's distrust of Japan, China's largest trading partner and a major foreign investor in China, has also hardened because the Japanese government has not admitted culpability for its aggression against China in the 1930s. In a formal room of a villa that belonged to the Dowager Empress at the turn of the century, and which is now occupied by members of the Chinese leadership, a high Foreign Ministry official pointed out that Germany has demonstrated a far healthier attitude toward its role in the Second World War than Japan.

While admitting that the military presence of the United States is key to the security of East Asia and the Western Pacific, high Chinese officers went on to warn us that Japan is an ambitiouscountry and will eventually pose a challenge to the United States by building a militarycapability of its own. Japan, they said, could once again become the common enemy of Chinaand the United States. Any attempt to contain China would be seen as a direct threat to China's security. More to thepoint, there is little evidence that China harbors any serious desire for expansion. There is adispute over the tiny islands in the South China Sea, the Spratleys and the Paracels. These islandsdo have economic value in their oil reserves, and possession of them would give China astrategic asset in the southern Pacific. Doubtless the smaller nations of southeast Asia theso-called ASEAN countries would be disturbed << The Financial Factor

Among the gleaming towers of Shanghai and the new high-rise developmentin Pudong on the outskirts of the city, concern over whether or not the United States will permitChina to join the World Trade Organization (WTO) is paramount. Washington is eager for Chinato open up its agricultural and financial markets. But the Chinese are reluctant to allow Americanagricultural goods to enter China with reduced tariffs because of their fear of growingunemployment in the countryside and the consequent influx of peasants to the cities.As for China's financial sector, it is still in the early stages of being able to compete with foreignservices; the banking system is primitive, and state insurance companies want to keep thegrowing domestic market to themselves. On the other hand, the United States and the EuropeanUnion insist that China's banking, insurance, and telecommunications markets need to be muchmore open. Moreover, the state's control over distribution, which Washington says is part of the service sector, needs to be overhauled.Nevertheless, the Chinese leadership is trying to qualify for entry into the WTO; at the FifteenthParty Congress, it was announced that the government would slash its average 23 percent tariffrate to 17 percent on more than 4,800 items beginning October 1, a move designed todemonstrate Beijing's desire to open up its economy. Declining imports and high foreign reserves,now totaling $131.6 billion, make this possible.Presumably, the privatization of these enterprises will relieve the banks of the need to providecapital to losing propositions. But without a revised legal system it will be difficult for theChinese to make their privatization policy work well. As Robert Dujarric of the Hudson Institutehas noted, while a communist country in which the state owns the means of production can dowithout tax regulations, contract law, civil courts, and commercial codes, a market economycannot.In Hong Kong, little has changed on the surface since the Chinese takeover this past June.Beijing claims that Hong Kong will be a model for Taiwan when Taiwan rejoinsthemainland. Business as usual, is the slogan, and both Chinese and Western businessintereststhere confirmed that the administration of Tung Chee-hwa, the shipping magnate selected byBeijing to run Hong Kong and known by the initials C.H., is determined to do just that.Chinese rule resulted in the abolition of Hong Kong's democratically elected legislative council;the current council was appointed by C.H. A new council will be elected in May 1998, but undera system that could hardly be called democratic. Of the 60 members of the legislative council,only 20 will be elected directly through proportional representation. Ten seats will be voted inby an election committee and 30 members will be voted in by Hong Kong's business elite asrepresentatives of various functional constituencies (which include such groups as the HongKong Chamber of Commerce, the Manufacturers' Association and the financial services, socialservices, real estate, tourism, health services, education, legal services, and engineering sectors).By 2007, a decision will have been made as to how the legislature is to be composed in thefuture. An official who works very closely with C.H. declared that the people of Hong Kongwant universal suffrage and that the Hong Kong administration was committed to one person/onevote by 2007.C.H.'s immediate aims are to demonstrate to Beijing that Hong Kong will not be used as a basefor subversive activities, particularly by those working for the independence of Tibet and Taiwan.In turn, the mainland Chinese leadership wants to demonstrate for the benefit of Westerninvestors that Hong Kong retains a high degree of autonomy; in addition, it wishes to create amodel for Taiwan when the province, in Beijing's planning, is reunited with the mainland.

An Independent Taiwan?

The most serious potential problem facing the United States in its relationswith mainland China is the growing independence movement in Taiwan. There is a newgeneration in power there, men and women who were not born on the mainland, many of whomhave spent much of their adult life abroad, and who see Taiwan as a separate nation in all butname. The first direct popular elections were held on March 23, 1996, and on May 20, 1996, LeeTeng-hui became the first popularly elected president of the Republic of China (Taiwan). Theruling party, the Kuomintang, the lineal descendent of Chiang Kai-shek's Nationalist Party, boastsa membership of 2.1 million. The Democratic Progressive Party (DPP), the largest oppositionparty, now declares its membership at about 90,000. Whilethe figures seemdisproportionatelyto favor the KMT, the DPP is growing rapidly, and its espousal of independence for Taiwanreverberates within the ruling party.The DPP realizes that running solely on an independence platform will not yield sufficient gainsfor its future; it prefers to challenge the ruling party by claiming that it will do more for thepeople. Moreover, the increasing investment by Taiwanese in mainland China (contractedinvestment as of 1995 was $29.4 billion, or roughly 40 percent of Taiwan's foreign investmentfor that year) requires any government in Taipei to be especially careful in its relations withBeijing.There is a distinct possibility that talks will be initiated between Beijing and Taipei to end theofficial state of hostility that has existed between the renegade province and the mainland since1949. For the Taiwanese government, an official end to hostilities would make it easier forTaiwan to maintain the formula of one China while leaving the question of reunification tosome distant date.Conversely, time is not on Beijing's side which may also explain its hostile military movesagainst Taiwan in the spring of 1996. The sentiment among Taiwanese for an independentTaiwan is more likely to grow than to decrease. If this were to happen, the United States couldbe forced to choose between Beijing and Taipei. Were Washington to support Taiwan'sindependence, relations with Beijing would be shattered. Worse yet, Taipei has, politically, thecapacity to drag the United States into a war with China.One simply cannot rule out military conflict between the United States and mainland China ifWashington continues to stand by the letter of its 1979 declaration establishing a new relationshipwith Taiwan following U.S. recognition of the People's Republic of China. It is the policy ofthe United States, said the declaration, to consider any effort to determine the future of Taiwanby other than peaceful means...a threat to the peace and security of the Western Pacific area andof grave concern to the United States. Beijing, one Taiwanese official suggested, could defusecross-strait tensions by offering a no use of force pledge in return for a commitment onWashington's part not to support Taiwanese independence. This seems an unlikely scenario, atleast in the near term.On the other hand, should the United States abandon a democratic Taiwan in favor ofauthoritarian China, whose continued violation of human rights seriously affects good relationsbetween Washington and Beijing, this would surely be seen as unacceptable by many membersof Congress. As a high-ranking Taiwanese elected official declared, We don't buy Asian values. In democratic Taiwan, human rights, it seems, are universal.On the eve of the twenty-first century, with most experts predicting that China will be secondonly to the United States in economic power by the year 2020, the United States nonetheless islikely to retain its ability to affect the balance of power in East Asia and the Western Pacific. Byacting as the holder of this balance, America can play the role that Great Britain played towardEurope during much of the nineteenth century.One member of our group suggested that America might well come to view China in the waythat Britain viewed the United States as the latter rose to power in the late nineteenth and early twentieth centuries as a competitor, but not (unlike Wilhelmine Germany) as an overt threat toBritish power. This may indeed come true but it is also useful to recall that Britain and theUnited States came close to risking war over a border dispute between Venezuela and British Guiana in 1895. Happily, British prime minister Lord Salisbury finally accepted U.S.-proposedmediation. In an altercation with China, one can only hope that a future American presidentwould be as prudent.

*I spent two weeks in the People's Republic of China and Taiwan in September on a trip sponsored by the National Committee on United States-China Relations. The host in China was the Chinese People's Institute of Foreign Affairs. The core delegation was made up of four other editors of journals devoted to international affairs: Owen Harries of The National Interest, Margaret G. Hermann of the Mershon International Studies Review, James Hoge of Foreign Affairs, and Moises Naim of Foreign Policy, and the author. Other members of the delegation included David M. Lampton, the president of the National Committee on U.S.-ChinaRelations, the program assistant, Nina Chan, and Ralph Cossa, executive director of the PacificForum, Center for Strategic and International Studies. We spoke with, among others, the foreignminister of China, Qian Qichen, high-ranking military officers at the Academy of MilitaryScience, members of the Institute of Foreign Affairs, the vice mayor of Shanghai, and membersof the business communities of Shanghai and Xiamen; in Hong Kong, the chairmen of theDemocratic Party and the Liberal Party, the president of the Provisional Legislative Council, thesecretary for justice, and the chief secretary to the chief administrator of Hong Kong; and inTaiwan, members of the ministry of foreign affairs, the Institute of International Relations, thevice president, and members of the opposition Democratic Progressive Party. Our conversations were off the record.