The Sino-US Relationship

Foreign Policy is running an article about the Sino-US relationship, notably where there are disagreements and the likelihood of them being resolved. I think they did an excellent job listing them and providing explanations.

However, I disagree with them on their last point: that more American trade with China will make it a freer society, therefore Google should stay. Truth be told, I'm in disbelief that such a publication would actually say that (even scarier if they believe it). Increased economic engagement with China will not open their society. If we look back to the reforms first initiated by Deng Xiaoping, he purposely withdrew government and party from the daily lives of the Chinese people because of the mistakes made by Mao during the Cultural Revolution and figured out that the key to a stronger China lay in modernization through economic development driven by demand, not the government. Moreover, as a victim of the persecution under Mao's China, Deng had strong motivations for making sure it never happened again. Economic trade has not liberalized China - the CCP has made the decision to let the market function (to an extent) and is allowing its citizenry to become wealthier. As such, any increased freedom for the Chinese will come as a result of a conscious decision by the CCP or revolution, not economic engagement.

Lessons from Charlie Brown

The relationship between China and the Dalai Lama reminds me of Lucy and Charlie Brown from the Peanuts comic. For those of you unfamiliar with the comic and its stories, in one running gag Lucy holds an American football and tricks Charlie Brown into kicking it several times, only to pull the ball away and having poor Charlie fall on his back.

This comic can easily be applied to China and the Dalai Lama. They've had several dialogues about the status of Tibet, only to have Beijing refuse any change to the status quo. So to drive home the point, China is Lucy, the Dalai Lama is Charlie Brown, and the football is Tibetan autonomy. In the latest development, China has refused to consider greater autonomy (or real autonomy depending on your viewpoint) for Tibet, something that shouldn't have come as a shock to anyone. The international community can pressure China to holding more meetings with the Dalai Lama's representatives, but nothing will come of it - the Chinese government will always cling to its hold on Tibet (much like Lucy and the football).

It makes sense actually. If Beijing were to grant greater autonomy to Tibet, Xinjiang would most likely demand it, along with some powerful provinces of China proper. Consequently any shift by the Chinese government on Tibet could result in a weakening of the central government's control over other parts of the country, something that the CCP wants to avoid at all costs. The Chinese have long memories and it was only 100 years ago that they were on the cusp of warlordism. As such the international community should not expect any shift on the CCP's position on Tibet or any other part of China.

Much ado about nothing something

The American press, along with the BBC, are making a big deal about the recent sales of US arms to Taiwan. Granted it's newsworthy, however, this sale has been in the pipeline since the Bush administration and Chen Shui-bian was president (who is now in jail). Bush delayed doing anything about it because of Chen's push for Taiwan independence and local Taiwanese opposition (read the KMT or Nationalist Party) withheld approval to the purchase. China's response is par for the course and will result in the same old freeze on military-to-military exchanges. Now would be a good time to yawn.

Update (5:22PM)

Looks like China is putting a new spin on the arms sales. Apparently they're going to punish the American companies who are producing the arms being sold to Taiwan. No further details are being provided on the new punishment, but contracts could be modified or canceled. It seems the company that has the most to lose is United Technologies, as they have quite a bit of commercial (read non-military) business in China and are building the Black Hawk helicopters. Boeing probably won't be impacted too much, as they're only delivering a few Harpoon missiles. Should be interesting to see what happens.

Part of me wonders how much of this is for show and how much is real. Beijing has to realize that Taiwan being within the orbit of the U.S. is not the worst scenario (it could declare independence). Granted American involvement in the Taiwan issue has some overtones of imperial intervention, but it's far less than what the British, Russians, or Japanese did to China in the late 19th/early 20th centuries. Moreover, American involvement restrains Taiwan from doing anything that would force China's hand in attacking the island (independence or developing nuclear weapons). Not saying American intervention is right or wrong, but things could be far worse.

Left out in the cold

With the China-Asean FTA Taiwan is in a bind. The goods it sells to China will be 5-15% more expensive now compared to the Asean members and could result in a significant decline in trade if no solution is found. To put it in perspective, Taiwan enjoys a $67 billion trade surplus with China and its exports to the Chinese market constitute 26% of their total. Let me repeat that. 26% of Taiwan's exports go to China.

What options does Taiwan have to counter the China-Asean FTA? Taiwanese companies could lower their prices accordingly, but that is something they probably don't want to do. The other option is for China and Taiwan to sign an FTA of their own (which could happen this year). Not only would this level the playing field for Taiwan in the Chinese market, but it could also open the door for quasi-FTAs with the Asean members themselves. Beijing has quite a few reasons for implementing an FTA with Taiwan, two major ones being that 1) Taiwanese companies employ lots of Chinese workers and 2) failure to establish one could be a PR disaster for China in Taiwan.

I've made the entire grand strategy available so you can flip through it. The assignment was to write it from the perspective of the government in power, with the expectation that it would be an internal document not seen by the public. I included bits of humor and I think you'll be able to spot them. Please be honest and not claim it as your own work. Use of the bibliography is fine obviously.

The Economist weighs in on Japan and China

It feels good when a highly reputable newspaper such as The Economist is in sync with your opinion (or is it the other way around?). As I mentioned earlier this week in Land of Waning Influence?, relations between Beijing and Tokyo may be warming, however, there are still lots of issues that could quickly change the dynamic. In this story Banyan touched on all the points I raised and more or less confirmed what I discussed. Is this blatant self-praise? Absolutely. I'll try to keep it down in the future.

A Chinese-led Greater East Asia Co-Prosperity Sphere?

As promised I've done some research on the China-Asean Free Trade Agreement (FTA) that came into effect on January 1, 2010. As it turns out, there are several reasons why it hasn't received much press.

The Financial Times has an excellent overview of the FTA and its implications for the nations that are party to it. Long story short, it'll lower tariffs in all the countries. The FT highlights some winners of the agreement, notably Indonesia and Vietnam who are large exporters of commodities to China. Essentially their goods will be taxed less when shipped to the PRC which means more business for those industries. However, The Economist accurately points out that tariffs between the Asean states and China have been on a declining trend for the past several years, making the FTA even less spectacular.

This is all well and good for China and the Asean members, however, I don't see it impacting trade with the E.U. or the U.S. all that much. Fact of that matter is that western countries are increasing the tariffs levied on Chinese imports as a result of China's currency manipulation and subsidies to various industries.

So the bottom line for my friend Asia is that the FTA received little attention for the following reasons: 1) tariffs have been on the decline prior to the FTA 2) it's only between a select few states and 3) it doesn't impact the major economies in Europe or the United States.

I'll probably put something up later today about how the FTA impacts Taiwan and how I think the Ma government should respond. I wrote a paper last semester about Taiwan's grand strategy and this FTA provided the bulk of of my discussion on Taiwan's economic priorities. Stay tuned!

2010 Census

Every morning I make the attempt to read as much news as I can. While reading one of my favorite news sources, I stumbled across a link to the U.S. census, which is very slick. How is it related to the blog you ask? It's in Chinese! The other thing that impresses me about it is that one can select from a long list of other languages; truly a reflection of the diversity of the United States.