Update on China-Taiwan FTA

Looks like Taiwan and China will be signing an FTA this June according to The Washington Post. I look forward to reading the document, as whatever wording is used to address Beijing and Taipei could possibly be used in a future peace treaty between the two parties.

Besides a warming of relations with Beijing, the FTA will also open doors to similar agreements with other countries, notably Asean members. The United States will want to ink one as well, knowing that Beijing won't protest since it signed one with Taipei first. If I was an American government official, I'd certainly want to get it done within a couple of years to maintain (if not increase) trade and hence American influence in Taiwan. Why do you ask?

Quite simply the China-Taiwan FTA will either maintain or increase Taiwan's dependency on Chinese trade, potentially providing Beijing with additional leverage over the island. The United States may not yet be ready for Taiwan to assume a closer orbit around the mainland, therefore having an FTA with Taipei would at the very least maintain the status quo.

Is that a good policy? Depends on who you ask. However the U.S. government will find it increasingly difficult over time to maintain the status quo, especially considering China's military modernization. The U.S. would be hard pressed to sell F-18s or nuclear submarines to the island, which are fast becoming the most basic armaments in the U.S. military. Economically, China is likely to maintain annual GDP growth over 8% for the next several years and could easily show favoritism to Taiwanese companies in an effort to limit America's options.

I understand that kicking the can is always the preferable policy decision when confronting lose-lose scenarios. However I can't help but wonder if U.S. Taiwan policy will soon face a rather large wall.

Singing in the Strait

While this kid can sing well, I highly doubt that the song will become Taiwan's policy towards China any time soon.

Hu goes to Washington

Chinese President Hu Jintao will be in Washington shortly to discuss a wide range of issues with Obama. Politico has a good piece on the occasion, so I refer you all to it here as opposed to detailing it myself.

I'm looking forward to the statements issued during the time that Hu is in the U.S., as they'll provide some idea of where the PRC stands on things. What will be most interesting in my opinion is the disarmament discussions, as the PRC is rapidly increasing its nuclear arsenal (may have 700 nuclear missiles by 2020, compared to the 1,700 held by the U.S.). Moreover, Hu's comments on the issue will solidify the Chinese position on Iran's nuclear program.

Break out your Chinese green tea and stay tuned!

Bought in China

The Economist in this week's issue discusses what it sees as a transformation in American buying habits. If its predictions are correct, that Americans will consume less and produce more for global markets, Chinese companies will no doubt experience some ripple effects. The Economist points out that currently strong American exporters are more likely to benefit from a lower dollar and increased consumption. So what changes can one predict in regards to Sino-US trade?

Data from the U.S. Census Bureau illustrates the decline in bilateral trade that has taken place up to this point in time. The trade imbalance for 2009 was similar to that in 2006, dropping from a high of $268 billion in 2008 to $226 billion. If the U.S. buys less and the Chinese buy more (assuming the Chinese central bank allows the Yuan to appreciate in value), then the gap could shrink even more.

This partly why some American politicians are calling on the Chinese government to allow their currency to gain in value. If the Yuan grows stronger against the dollar, Chinese exports are more expensive in the U.S., while American goods in China are cheaper. However, if the Yuan's value stagnates, then the American deficit with China will only decrease as a result of lower American consumption of Chinese goods.

There are some academics who think that China will relax its hold on the RMB and allow it to gain in value. While such predictions may pan out, I'm fairly certain that the Chinese will not allow their currency to appreciate as much as American politicians and others in the international community would like. The general consensus is that the RMB is undervalued by 25%. I'll venture to say that the Chinese central bank will allow 5%-10% over the course of the next year. Again, no where near where people would like, but it's a start.

More reading

Below are some more books that I think are worth reading for those of you who would like to gain more insight about the PRC and its foreign relations.

Rising to the Challenge: China's Grand Strategy and International Security by Avery Goldstein

China's Ascent: Power, Security, and the Future of International Politics edited by Robert Ross and Zhu Feng (Includes chapters on how Japan, South Korea, and India each view China's development.)

Axis of Convenience: Moscow, Beijing, and the New Geopolitics by Bobo Lo

Plug for Fletcher

Just couldn't help but advertise this project at my school. Fletcher is full of talented people.

"Democracy" in China, Part III

Few people outside of China have ever read the words of Mao Zedong. From my perspective this only contributes to the ignorance surrounding the CCP's position on Western democracy and continued tensions between the West and the PRC.

As such it is only appropriate to briefly discuss Mao's position on democracy, as his thought still guides the CCP. In his speech on democracy, Mao clearly outlines why the Chinese people could not accept Western democracy. In the fourth and fifth paragraphs, he describes the Chinese people's experience with Western democracy and its ultimate failure because it excluded so many of the Chinese people. Moreover, despite such strong yearning to become modern through Western ideals, the Western powers (Europe, the U.S., Japan, and Russia), were still treating China as a backward state, demanding commercial contracts for railroads and banking. They also still clung to their spheres of influence where Chinese law had no power.

In the fifth paragraph, Mao describes that socialism will abolish classes in society, reflecting the growing disparity between the rich and poor. Now one could argue that such a disparity always existed in China, however socialist philosophy had never entered the Chinese psyche before.

In the paragraph concerning abolishing state power (towards the end), Mao is quite honest stating that anyone who opposes the socialist revolution in China will not be treated kindly. Only those considered "the people" will be treated with benevolence. Recognizing that purging political threats has been a mainstay throughout the Republic of China under Yuan Shikai and Chiang Kai-shek (who hunted the CCP), this position cannot come as a surprise.

To sum up, Mao and the modern day CCP leadership have no taste for Western democracy. Not only is it viewed as corrupt (ironic considering that no government is free of corruption), but also because "democracy" in China is associated with chaos, civil strife, and weakness. The Republic of China was never able to stand on its own two feet and govern the entire territory of China (which in and of itself is a subject of debate). As such Western calls for liberalization in Chinese politics will fall of deaf ears in Beijing for the time being.