Three Myths about China and its Relationship with the US

In this article, the author busts three myths about China and its relationship with the United States. 

By Mikael Santelli-Bensouda, 5th March, 2012

Many things have been written regarding the relationship between China and America, most of which is founded upon a sense of speculation that emerges from a state of fear. The general assumption is as follows: China is acting unilaterally and belligerently to undermine and overtake the US, initially through economic means and later through traditional military means. This is not the case. The China threat perception has been, in recent times, blown out of proportion. This can be verified by examining what’s really going on between these two behemoths.

Myth 1

What we are told: China manipulates its currency at a low rate to provide it’s exported goods with an unfair advantage in the international arena. This leads to the assumption that the Chinese are callously stealing American jobs as part of a long-term strategy to control the entire US economy through debt absorption. Akin to a puppet master, China is positioning itself to both dominate and manipulate the American economy.

What’s really going on: Contrary to popular sentiment, $1.175 trillion of America debt in Chinese hands, does not necessarily leave America in a weak position. By holding such an absurd amount of debt, China too is exposed to an enormous risk. The much-sighted scenario’s regarding this toxic wealth largely unfolds like this: The Chinese recall their investment and the US economy crumbles. This will cause a chain reaction that severly impacts the global economy from which China’s export based economy will be hit hard. However, there is also an alternate, and more likely scenario; The US either refuse to pay the debt or default on the amount, leaving Beijing with a financial whole over $1 trillion dollar. Regardless of how cash rich China is, losing $1.175 trillion is a moral blow to any powerful nation. The most reassuring thing is that neither scenario is likely. Largely, this is because both nations understand the necessity of current state of affairs and there is a pragmatic acceptance that they are equally reliant on the other economically.

Talk of a currency war, especially during the republican candidate election is one of the foremost contentious issues in the relationship. The argument put forward is that the Chinese have pegged the Yuan to the Dollar to keep its value low and consequently manage Chinese exported goods uncompetitively low. Without question, this is true. It is also not illegal nor against ‘the rules’ of the international markets. In fact, the reason there has been so much furore regarding the matter is that this policy facilitates continuous Chinese economic growth in a time of American stagnation, much to Washington’s frustration. A simplistic reading of capitalism suggests that production will move to where is cheapest to maximise gains. This naturally will incur casualties and in America there have been plenty. Intriguingly, however, there is a strong argument to be shared that would question why should China readjust its currency at present? Especially given the historical precedent of Japan who did exactly that, allowed the Yen to float against the Dollar after a period of exceptional growth only to be outclassed by the Dollar and end up in perpetual economic stagnation. Beijing is aware that allowing the Yuan to rise will reduce the competitiveness of their exports and ultimately slow economic growth. This not only has a detrimental affect for China but also the US, who, as already explored, is dependent on Chinese cash to sustain it’s debt-laden hypercapitalist system. It borders on farcical to suggest that the argument boils down to expectations for China to ‘play fair’, after all, nobody really believes that capitalism equates to fairness.

So, given the necessity of economic cooperation, it is no stretch of the imagination to suggest that the two nations are economically symbiotic. They both share (in differing capacities) benefits and risks. Accordingly, greater cooperation and integration has been mooted as a viable option. An increased exchange of foreign direct investment (FDI) and bilateral trade that can form a foundation to increase bilateral economic productivity has been occasionally undermined by incidents that suggest, in fact, China is not the unfair, protectionist player it is so widely claimed to be. The much under publicised case of the UNOCAL incident, wherein a Chinese firm was agonisingly close to acquiring a large US energy company only to be federally overruled at the eleventh hour. The rationale for the move was for the preservation of state interests.

Essentially, this is the same rationale adopted by China and the Chinese Communist Party (CCP). The CCP’s raison d’etre is to ensure continued economic growth in order to sustain the ‘legitimacy’ it fractionally holds in China. This equates to pacification of large sections of the Chinese population (namely the burgeoning middle-classes) through participation in a, politically numbing, consumerist culture. Should the economy falter, it is not only the Chinese bank balance that takes a knock as the very political system is likely to come under intense pressure to reform and largely expected to democratise. The crux of the relationship between China and the US is based on this very fact: the CCP needs continued growth to sustain its fragile monopoly over authority whilst the US needs China to continue to fund its ever extravagant life-style.

Myth 2

What we are told: China is a revisionist player. Beijing has a deep-rooted interest in destabilising the current international system with the desire to supersede American hegemony and establish a new world order with Beijing assuming the helm. This is to be achieved through the establishment of alliance blocs comprising of both ‘rogue nations’ and the developing world.

What’s really going on: It seems illogical to suggest that China would benefit from the demise of the current international system. China, like many other emerging powers, benefits immensely from the systems relative stability. The US is heavily invested in ensuring the prosperity of global markets and undertakes security operations, which includes providing physical protection for energy shipments from the Persian Gulf and combating piracy in the Gulf of Aden. These actions leave Beijing free to pursue its own agenda without the burden of sacrifice and disruption. Restructuring the system would expose Beijing to a number of security and political headaches that, frankly, it is ill equipped to deal with. Additionally, an overhaul would require the CCP to renege on their key guiding principles of international relations. As already examined, China’s political preoccupation is to ensure sustained economic growth and this is evidently achieved under the current paradigm.

Additionally, to consider China as politically expansionist in the international arena (Taiwan and issues pertaining to ‘sovereignty’ should be considered a separate issue) is misguided, as this overlooks the CCP’s preoccupation with consolidating their domestic authority. Questions pertaining to Tibet and Xingjian provide a deep threat to the legitimacy enjoyed by the Chinese political party and cases of social discontent have proven, time and again, that they require immense policy consideration. Thus, this dictates that China is largely unable to divert attention away from its domestic concerns for fear of losing control in the fractious territories and by extension also have the potential inspire nationwide uprisings. In the perspective of Sino-US relations, no political issue is more controversial than Tibet. Constant claims of brutality, censorship and human rights abuses emanating from Washington are perceived from Beijing’s perspective as an attack on the legitimacy of the CCP by externally undermining its authority. This sentiment is exacerbated when American leaders meet with the Dalai Lama, who is considered an existential threat to the Chinese establishment. In America this is seen as a noble defence of human rights but to the Chinese it embodies a rather sinister undertone as it is considered both antagonising and undermining.

By and large, China has attempted to keep a low profile on the international stage. This is in accordance with its key principles, which pedestal mutual issues such as non-interference and respect for sovereignty, for it is these principles, accompanied with the active pursuit of securing state interests, that have directed its international interaction. Recently, China has been much scrutinised for its veto on the Syrian resolution in the UN Security Council (UNSC). As with any political action, it must be analysed within the wider framework of Chinese foreign policy and equally important, not judged alone. If the Chinese choose to exercise their right to veto a resolution based on protecting self-interest or in disagreement with the direction of the plan, it remains their choice. Understanding the motivational factors are a prerequisite for analysis and selective criticism should be avoided at all costs as it serves only to fan the flames of international friction between China, America and the West. Beijing could quite rightly point to the numerous examples of American acts of self-interest in the UNSC in defiance of humanitarian issues (as in the case of the recent veto for the Palestinian state).

Additionally, condemning China for conducting business with nations such as Iran and Venezuela is hypocritical, especially as it hardly encourages international instability. For Washington, the Saudi regime, both wholly repressive and undemocratic, is an acceptable business partner but democratic Venezuela is a rogue nation. China, as previously mentioned, is driven by the need to secure business opportunities and resources to sustain its hyperbolic growth. Accordingly, Beijing will court any suitable partner to secure their needs regardless of political persuasion. Whether it’s the United States, the European Union, Venezuela or Iran the central issue for the Chinese is based on national gains. China is simply pursuing a pragmatic business engagement that differs little from American policies.

Myth 3

What we are told: China is belligerent. The Chinese army is big, scary and will one day attempt Asian, then later world domination.

What’s really going on: Explicitly, China stands to gain little from starting or partaking in any act of conflict. Although the People’s Liberation Army is the largest standing army in the world, its technological capability remains years behind that of the United States. Again, the much sighted increased military budget, a substantial 12%, still pails in significance to the monumental US military budget. As a direct consequence, the parameters of the China threat are not manifest physically but oscillate around challenges to US strategic interests in the Pacific and Central Asia. What is largely missing in the security debate is Beijing’s perspective and the view from the Middle Kingdom is markedly different.

Beijing sees that permanent American military bases surround the Middle Kingdom, whether by sea or land and allies of Washington, dubbed the ‘democratic axis’, further acts to consolidate the feeling of encirclement; Huge military presences in Korea and Japan, bases throughout bordering Central Asian Republics, Vietnam and Australia’s emergence as vocal allies of Washington and a very powerful nuclear alliance across the Himalayas. It is clear that, with the exception of China’s northern border a tangible American presence can be felt in all directions.

Nonetheless, security tensions between China and the US remain relatively low. Only a couple of key areas, including the external influence in Pakistani-Indian affairs and the North Korean question, threaten to raise tensions. But nothing has the potential to boil the blood of the Chinese more than the issue of Taiwan. The generally accepted discourse on the matter is that Taiwan is an independent nation that needs protection from an aggressive behemoth who constantly espouses bellicose statements and threatens on regular occasion to illegally re-conquer the island. Characteristic of the Sino-American relationship, there is more to the story than just the American angle. For Beijing, Taiwan is an essential part of its territory stolen during its ‘century of humiliation’ and forms the final piece of the One Nation Policy. The completion of this policy, whether justified or not, has become almost insurmountable due to one simple fact: Taiwan has a military capability that is on par with European powers, which originates from the US. Arms sales between Washington and Taipei have increased in recent years culminating in the $6.4 billion deal by the Obama administration, which signals that the US are no longer adhering to the arms sales reduction agreements they agreed to in the 1982 Shanghai Communiqué. Make no mistake, in Beijing this is perceived as an act of both aggression and defiance. Nonetheless, due to rising levels of confidence in China, the CCP have begun exerting pressure on matters of integral importance, such as Taiwan, by leaning on the mutually dependent ties between Beijing and Washington.

The current state of affairs between China and the US is far from troublesome. Granted, they disagree on a number of issues from how to engage Syria to the most effect methods to combat climate change, but that does not mean they are on a course for destruction. After all, no relationship is perfect. It is also the case that China is less belligerent than conventionally assumed and that the US bares responsibility for some of the inconsistencies that are present in the relationship. To this end, both China and America are, at present, partners as much rivals and the general impression of the relationship between the two behemoths is highly misconstrued.