China

China's new leaders on a tightrope

2012-09-13Asia Times

This essay written originally for Nomos & Khaos, now in its eight edition, is the report published by the Italian Osservatorio sugli Scenari Strategici e di Sicurezza (OSSS), which presents developments in the interdependencies between economics and strategy on an annual basis.

America bids to remove Myanmar from China's sphere of influence and intervenes in the Spratly Islands dispute.

Whilst not totally out of the blue, the visit to Myanmar by Hillary Clinton, the United States Secretary of State, in November 2011, came as a surprise to many Chinese leaders. Notwithstanding the quasi-democratic election of Myanmar's new president, Thein Sein, supported by the military junta, the country had in fact failed to make much headway on humanitarian issues.

The dissident Nobel Peace Prize winner Aung San Suu Kyi was still under house arrest and a true democratic system, which for 20 years had been the official reason for American hostility towards Myanmar, had not yet been implemented. So why did the United States rush to support a junta which for decades it had heavily berated?

In 1972, with Richard Nixon's Beijing visit, the Chinese had had first-hand experience of such political gyrations. In that period, the Americans had rehabilitated China in order to isolate Vietnam and at the same time strike a formidable blow against the Soviet Union, which would find itself with one more declared adversary on its southern border, and, what is more, an adversary supported by the United States.

Just as in the 1970s when the United States used China to isolate the USSR, now they were going to play the Myanmar card in order to complete the encirclement of China. This was the logical conclusion that the Chinese leaders came to in light of their past political experience.

In reality, this paradigm change was not totally unexpected. At the beginning of his presidency, in 2009, in his dealings with the Chinese, Barack Obama had gone out on a limb, quietly downplaying human rights issues and even offering to sell them sensitive technology.

In return however he needed gradual, even minimal, progress on the yuan exchange rate issue. The Chinese currency was supposed to appreciate in order to breathe life back into an American economy beset by woes. In November 2009, during Obama's visit to Beijing, the American president failed to obtain anything at all, a fact that cast him in a very bad light when he returned to Washington.

This was only the beginning of the story; the real calamity occurred at the Copenhagen climate-change conference in December which was punctuated by a raft of incidents and gaffes culminating in the Chinese minister, Xie Zhengua, shouting at Obama. The president did not react, but from that moment on the all-too-brief honeymoon between the USA and China, which was supposed to pave the way for a de facto Group of Two, could be considered to all intents and purposes over. The final nail in the coffin was when the Chinese dissident Liu Xiao-bo was sentenced to 11 years imprisonment on Christmas Day 2009.

At the beginning of 2010, American policy towards China changed tack radically. The US administration, which for months had held Google back, now gave it free rein, and from that time on the issue of Internet freedom and freedom of information would remain at the center of attention in the media and was to become the main bone of contention between the two great powers.

In the aftermath, Hillary Clinton rubbed more salt in the wound by stating for the first time that the issue of the Spratly Islands - claimed either in toto or partially by China, Vietnam, the Philippines, Malaysia, Indonesia and Brunei - was of international importance as it involved an area of ocean that was crucial for international trade and through which supplies transited from and to northern Asian countries such as Korea and Japan, both of which are United States' allies. The Americans therefore felt they were personally involved in the dispute.

In fact, the repercussions of America's move went even further because every country in the world was affected, at least potentially. It was and is in the interest of the European Union and Japan, Africa and Latin America to be able to sail through the contested waters, and so at any time these countries could become active participants in the dispute. This led China, the largest of the states claiming sovereignty over the Islands, to find itself potentially mired in diplomatic disputes and acute political disagreement.

In this way, even if the Taiwan issue had been destined to find a peaceful and permanent solution, as seemed to be likely back in 2010, China would be left with another gaping wound - and one that would be more complex since the dispute is liable to involve much of the world.

Actually, the Taiwan issue is much more circumscribed as it affects only the United States, long-time allies with the "Kuomintang" (KMT) nationalists and Japan, playing the role of "shadow ally" of the secessionist island. Moreover, both states have been heavily conditioned in their adoption of tangible measures by the fact that they have formally long recognized China's political unity.

So there are robust constraints on the use to which the US can put Taiwan against Beijing. The plain truth is that America cannot openly come out against the idea that sooner or later the island will ask to permanently rejoin the motherland.

In the case of the Spratly Islands, the situation is completely different. Here, there is a vast geographical area openly under dispute and involving countries that are much closer to these islands than continental China. The situation is exacerbated by the fact that, not only is this area amongst the most important global trade routes, it is also infested by pirates.

This situation could rapidly ignite, placing China in a daunting position. If one of the countries nearest to the disputed islands - either Vietnam or the Philippines, both of which are politically speaking in Washington's sphere of influence - decided to occupy an island guarded by the Chinese, China would have no alternative but to defend itself.

At that point, if China triumphed, it would clearly demonstrate that it did indeed constitute a threat and thus, at least according to a certain line of reasoning, must be isolated, first politically and then economically. If it lost, it would show that it was merely a "paper tiger" that could therefore continue being provoked in the certainty that the outcome would be favorable.

Victory or defeat would then trigger a chain reaction within China that could radically disrupt the country's political equilibrium. The political crisis undermining the Qing dynasty's authority broke out in the same way with a conflict which, at the time, the emperor regarded as minor: the "Opium Wars" against the English.

In fact, the Qing decided that the threat posed by the English was marginal and that the real threat came from Russia, which was allied with the Zungari Mongols. It was therefore necessary to focus all the country's resources and attention on the Zungari. Similarly, coming back to current events, defeat in the Spratlys could trigger a crisis that might in turn undermine the stability of the entire Chinese system.

America's political intervention over the Spratlys has also effectively destroyed the agreement reached in 1999 by the then Premier Zhu Rong'i with China's neighbors. China and the ASEAN countries agreed on that occasion to remove any bones of contention regarding the islands, proceeding jointly to develop the maritime area in question.

Though a vague formula, it was however grounded on solid elements as China had recently saved itself and the rest of Asia from the 1997 - 1998 financial crisis, whose effects had been worse than a war. In fact, the economic crisis also overwhelmed the political system in almost all the countries affected, be they large or small. At the end of the crisis, both parliamentary regimes such as Thailand and military dictatorships such as Indonesia had collapsed. Even solid democracies such as Japan and South Korea had been violently shaken by the events.

Though the crisis did not occur with America's blessing, neither was it cursed or condemned by America. It had been triggered by Wall Street speculation. The United States then underlined that the Asian economies which were badly organized and essentially corrupt, had to make way for healthy market forces.

It was almost the end of Asia's dreams of growth. However, at that juncture China had succeeded, with its combination of economic and administrative measures, in putting a stop to the cycle of competitive devaluations which were ravaging Asia like a tsunami.

It had also maintained its own currency and the Hong Kong dollar. Hong Kong was returned to China by Great Britain on 1 July 1997 - pegged to a fixed exchange rate with the American dollar. In this situation Chinese leadership was acknowledged by the other countries in the region which ended up clustering round Beijing, sharing the fruits of its resistance to the speculative tsunami.

Compared to 2009, China's situation had undergone a radical transformation by 2010, though apparently remaining unchanged in terms of its economic fundamentals. In fact Beijing kept the renminbi - dollar exchange rate fixed, stubbornly refusing to revalue it.

China's decision, theoretically only directed towards America, which openly pushed for revaluation, in actual fact also harmed all the other countries, whether Asian or not, whose economies were jeopardized by an exchange rate which was too low.

Specifically, Beijing's exports, which were favored by the exchange rate, gained a competitive edge against all the other developing countries, including China's sensitive neighbors who were directly involved in the Spratlys dispute.

The situation proved that when push comes to shove, China, in reality, is identical to America, in other words ready to act in its own interests, and totally oblivious to other countries' interests. At that point one might as well continue the usual policy, remaining faithful to one's oldest ally.

In fact, this new situation prompted by the renminbi exchange rate demonstrated just how little chance there was of benevolence on the part of China in respect of the disputed islands.

Against such a backdrop, the incident which occurred in September 2010 between a Chinese fishing boat and a Japanese patrol boat became the classic straw that broke the camel's back: the definitive proof that China's goal was only to expand its own power, oblivious to others.

Beijing steadfastly pressed ahead with export expansion, in the process harming other countries' exports and, similarly, it impudently seized control over areas of sea plied by other countries' vessels, refusing to recognize their rights. The result was unanimous convergence on the United States by all those countries affected. Initially at least, China did not notice. In a fever of distraction, hubris and domestic confusion, Beijing continued to believe that, with regard to this issue, there was only a two-way debate between itself and America.

Things started to change towards the end of 2011, at the time Hillary Clinton visited Myanmar. This was also the starting point for a Chinese political paradigm shift; it became even more apparent with the announcement by Obama in Australia in November of America's new strategy.

On that occasion, the American president announced that the number of troops deployed in Darwin, Australia, would increase by 2500, underlining his new idea of Asia's centrality for the United States.

This gesture became all the more important because the United States had announced its intention of reducing military spending and because, during the Arab Spring uprising in the Middle East, in Libya and Syria, America had made no commitment to permanently relocate troops or military facilities.

The subtext couldn't have been clearer: America intended to concentrate its military and strategic efforts on China, not on the Middle East or Russia, America's one-time foe, but on its future foe, Beijing.

America also viewed this as a rallying cry for the Asian countries. They would no longer be abandoned to China's growing regional pre-eminence. America would always provide support and would encourage the members of any great anti-Chinese alliance to band together.

For China this was like a bucket of icy water in its face. Beijing believed that America's woes, caused by the financial crisis, would have prompted the United States to eschew major international issues, that Washington was convinced of its inability to focus resources on Asia, and that in any case, the infinite wars in Iraq and Afghanistan would draw America exclusively towards the Middle East and Central Asia, preventing it from marshalling resources to focus on Beijing.

And neither had Beijing calculated that when given the alternative of choosing between the United States and China, the countries which are geographically close to China would have chosen the US in order to restore balance, for the simple reason that centuries of Chinese hegemony were still fresh in their minds.

Already during the summit between Hu and Obama in Beijing in November 2009, there were those who contended that it was necessary to be more flexible and to take into account the American president's domestic needs.

After Myanmar, this thesis, which had been espoused by a minority, also convinced the majority. Amongst other things, it was the Myanmar visit which inspired State Councilor Dai Bingguo's visit to India in mid-January 2012.

Relations with India

Relations with India have always been a bugbear for China's entire strategic alchemy. In fact, India is the only country with demographic strength that allows it to act as a strategic counterbalance to China's economic and trade policy.

At least theoretically, only India can deploy as many soldiers as the Chinese army, and only India can offer the West the great prospect of a production base and consumer growth that it would lose unless it was able to replace China (in the event that China was afflicted by some major crisis). For decades, India has seen China as its great rival, due to the fact that Beijing manipulates Pakistan in order to curb New Delhi's growth in the region and throughout Asia. Setting out from a very similar starting point to India's, China has been able to grow at enormous speed over the last 30 years, whilst India commenced growth later and its level of expansion has never reached China's.

Against this backdrop of perceived encirclement, in December 2011 Beijing realized that if it were able to blunt India's weapon this would be a great success, to some extent offsetting Myanmar's surrender to the United States. Success in India could also be set alongside the fact that a new form of coexistence with Japan was already starting to take shape.

In fact, the visit by state councilor Dai Bingguo to India on the 50th anniversary of a brief, bloody border war in the Himalayas between the two countries, was an accomplishment that exceeded expectations.

Dai's visit marked the beginning of a radical change and laid the groundwork for improved relations between the two Asian giants, rather than for a form of integration which had been the stuff of fantasy a few years previously, when the term "Chindia" was coined and became a buzzword. To say the least, putting relations between the two countries on a new footing removed the danger that relations might take a dangerous turn for the worse.

Dai spoke about the beginning of a golden period in relations between the two countries, striking the right notes both with his words and with his behavior. On 16 January he wrote in the Indian daily "Hindu": "While working hard to develop itself, China is fully committed to developing long-term friendship and cooperation with India. It is our genuine hope that India will enjoy prosperity and its people, happiness. There does not exist such a thing as China's attempt to 'attack India' or 'suppress India's development.' China will remain committed to the path of peaceful development." [1]

The agreement on the border dispute between the two countries is witness to, and the outcome of this successful visit. Though no final agreement has been signed, the visit represented an important step forward in the process designed to lay down ground-rules for averting the outbreak of fighting in what is the world's longest contested border.

The two countries have put in place a consultation mechanism to settle the LAC (Line of Actual Control), agreeing on political parameters and on guidelines for precisely demarcating their border in future.

The issues addressed are certainly important. Nevertheless, the bones of contention remain, including the LAC.

There are still disputed areas, including vast areas which are not demarcated by barbed wire or in any other way, in which patrols from both countries operate, often monitoring each other. Each side is convinced that they are patrolling on their own national territory.

The problem transcends each sides' official claims in that neither can agree even on who is currently in control of a given area, a very rare state of affairs in disputed territories during peacetime.

Periodically, troops from both sides meet at a local level and accuse the other side of alleged "incursions". This practice bestows on the military a high degree of control over the situation and over progress towards peace. It means that both sides rely on the goodwill and the initiatives taken by local commanders who are able to influence the pace of negotiations at any given time.

Dai and his counterpart, the Indian National Security Adviser Shivshankar Menon, however, managed to reach agreement this time on a mechanism designed to involve the central government in these sporadic local meetings.

In addition to limiting the likelihood of incidents, this novelty ought also to slowly crystallize a final agreement on the Line of Actual Control. In turn, this line could become the realistic basis for demarcating the border between the two countries on the map, thereby bringing the dispute to an end.

This solution however is still a long way off. Demarcating a border could in fact expose both sides to the risk of an outburst of nationalism. An agreement ought to be approved by the Indian parliament, but the nationalist parties could reject it by reason of the fact that it grants China part of "India's sacred territory".

Should this happen, the matter would immediately be taken up by Chinese nationalists who would accuse their government of making excessive concessions to the Indians. A vicious circle, in which each side would become irredeemably hostage to its own public opinion, would very soon take shape.

For the time being, no diplomats from either country are seriously engaged in any attempt to establish a binding timetable for resolving the dispute. On the contrary, it seems destined to become a long-running, protracted disagreement.

Indian public opinion, which is characterized by strong anti-Chinese feeling due to defeat in the war 50 years ago, will have to be prepared to create the right atmosphere to allow for significant headway to be made on both sides.

In this respect, Dai's visit has been a step in the right direction and appears as the precursor for a foreign relations strategy which is much more carefully thought out than in the past.

Sino-Japanese relations and Xi's US visit

On Christmas day, in Beijing, the Chinese leaders met the new Japanese prime minister, Yoshihiko Noda, and received reassurance as to the situation in North Korea where the "beloved leader" Kim Jong-il had just died.

This was certainly not sufficient to restore good relations, which were still affected by tension sparked by the dispute over the Senkaku islands (in Japanese, Diayu dao in Chinese); the islands are claimed by both countries But the visit by Yoshihiko Noda had contributed to defusing the situation as it was in both parties' interests to keep a very close eye on highly volatile North Korea, at the same time pressing ahead with dialogue on economic matters.

In this latter sector the visit achieved two highly significant results. The first one was an exchange rate agreement involving the two countries' currencies, an important step on the path which is supposed to pave the way for the yuan becoming a global reference currency.

The Japanese economy is the world's third largest and China had already signed similar agreements with other countries during the period in which the problem of renminbi - dollar conversion was acutely felt. At this point, amongst other things, the euro area remains the only important economic reality with which China has not yet signed a specific currency agreement.

The two countries also agreed on a revaluation of the dollar, a step which should help the American economy, which is still on shaky ground, by reducing Chinese and Japanese exports to the United States, increasing American exports and encouraging Chinese and Japanese direct investment in the United States.

These two meetings were configured as the basis for the visit to Washington on 14 February of the Chinese vice-president and the man who had already been designated the future leader of China: Xi Jinping. It was expected that Xi would have ushered in a new era of Sino-American relations in view of the fact that relations had continued to worsen after the failure of the Copenhagen Climate-Change Conference in 2009.

Beijing's idea was that the prospect of the creation of a Sino-American G2 could not be revived as it would inevitably alarm most of China's neighbors; they might have expected to run the risk of being crushed in the two giants' embrace.

Out of necessity the new bilateral relations should have included and involved the other Asian countries, primarily the major players such as Japan and India. They should have been strategically, politically and economically bound together with very strong ties. Symbolic concessions such as aid agreements or increased trade are not sufficient. This is precisely the direction in which China's two previous meetings with India and Japan were heading.

Xi's visit to America was also supposed to reassure America and other countries on matters of great concern to them, such as the perceived increase in China's military power, increased defense expenditure, and the slow pace of the political reform process.

Soft power versus hard

In fact there have been signals - unfortunately still faint - and chiefly a speech made by President Hu Jintao on culture [2] - indicating that China intends to move in this new direction, grounding its actions on the Peaceful Development theory.

His speech placed new emphasis on the strategic importance of culture (wenhua) which in order to build a strong country (qiang guo) is objectively closely tied to China's plan to boost its soft power. This new policy should be seen as implying a countervailing reduction in China's emphasis on military might.

Certainly, if the country can be bolstered through expanding its culture-related soft power, and if there is therefore less need to spend large sums on weapons, the plan to dedicate greater resources to culture and less resources to weapons becomes realistic. Greater involvement by the military in culture would also be a contributory factor in attenuating the current emphasis on military might and strategic consequences.

Hu's speech could well become the "theological premise" triggering a radical change in the party mindset. This could be the prerequisite for preventing a new arms race in Asia. In fact Vietnam and the Philippines have been ramping up their military budgets for some time as they both view China as a threat.

A paradigm change in Peking's mindset with regard to regional policies could also enable China to align itself with America's declared reduction in military expenditure without this being perceived as a sign of weakness by public opinion. Instead it could be viewed as a way of strengthening its international position. On 27 January, 2012, Leon Panetta, the US Defense Secretary, announced that the military budget would be slashed by $33 billion.

This prospect, which was merely an eventuality at the outset of 2012, is rapidly evolving and creating a new outlook for the entire Asian continent, thereby laying the groundwork for the solution to even bigger problems.

Europe is almost entirely absent from this picture, totally absorbed as it has been for months by the euro's tormented meanderings and the risk that several European Union countries may default.

Meanwhile, the entire situation in the Far East has started to undergo an upheaval, evolving in tandem with the changed perception of China's new foreign policy paradigm.

The first notable success was Ma Ying-jiu's victory in the Chinese presidential elections in January 2012. It represented the high point of almost a decade of steadfast efforts by Hu Jintao to forge good relations with the KMT (Kuomintang) in the hope that it would later be possible to use these relations as the basis for achieving a peaceful reunification agreement with Taiwan.

If such an agreement is ever concluded, the potential would be enormous, both internally and externally. Hu would become the man who succeeded in reunifying China, an objective which eluded all his predecessors - Mao, Deng and Jiang Zemin. With the power acquired through a success of such magnitude, Hu and his successors could push hard for the important political reforms which are indispensable for the country's future. The agreement would also make it possible to put relations with the USA and Japan, both of which are closely allied to Taiwan, on a much stronger footing.

The first step in this trend, which could come to fruition over the next few years, consisted in re-electing Ma for a second term. This has already happened and this fact demonstrates that China's commercial seduction policy vis-a-vis Taiwan pursued over these last few years, has worked much better than the constant threats of the 90s. In fact Taiwan's trade surplus with China in 2011 amounted to one third of Taiwan's GDP, in other words it is China which finances, almost entirely on its own, much of the island's wealth.

The sole outcome of China's strategy predicated on threats was to usher in a DPP government. This party favors a unilateral declaration of independence from the continent. Instead, the policy based on providing subsidies has caused the two countries to grow much closer. In many ways, Ma's victory demonstrated that reconciliation works better than force in promoting China's interests, both in Taiwan and in the rest of the world. In other words, Ma's victory in the island is one of the contributory factors confirming that China's change of tack after Myanmar's rapprochement with the USA, is the correct policy. [3]

In this context, the above mentioned visit to America in February 2012 by the Chinese Vice President, Xi Jinping, was unable to set bilateral relations between the two powers on a radically new footing. This was partly due to a complex incident with a host of ramifications which occurred at the same time, in fact with such simultaneity that the episode was quite conceivably not a matter of chance. [4]

On 6 February, Wang Lijun, Vice Mayor of Chongqing and right-hand man of Bo Xilai, the controversial, flamboyant head of the party in this metropolis, sought asylum at the US consulate in Chengdu, bringing with him highly sensitive revelations.

According to the narrative that emerged later, amongst other things, these revelations apparently touched on the death in suspicious circumstances of a British citizen, Mr Neil Heywood, a business partner of Mr Bo's wife who officially died of a heart attack caused by alcoholic intoxication. The body had been immediately cremated without an autopsy.

At the time of writing the details of the entire episode, with its vaguely Shakespearean twist, are still very confused even though the political ramifications became clear very rapidly.

Along with Bo, the flag-carrier for a neo-Maoist policy line opposed to the spread of private enterprise and Westernizing reforms, his political faction took a beating.

Thanks in part to this victory, Premier Wen Jiabao was able to announce, on 14 March, the urgent, forthcoming introduction of political reforms which were to have a great impact not only in China but also abroad. If China were indeed capable of inaugurating a serious democratization process, the hostility that many countries harbor towards that country would dwindle significantly. In fact, even after this initial announcement, the entire world hoped that these reforms would be ratified at the next party congress, scheduled for autumn 2012.

Signs of detente

The Wang Lijun episode also established an important principle regarding relations between the two countries. At the beginning of February the United States found itself with an important dossier on Bo and, in all likelihood, on many other Chinese leaders.

If Washington had wished to stir up trouble for the Chinese leadership, it merely had to pass the dossier to the press, but the fact that it did not do so demonstrates that Washington does not necessarily harbor hostile intentions towards Beijing. The secrecy with which the United States handled the whole affair should thus induce China to trust America in future.

The Wang Lijun episode could thus prove to be a blessing in disguise, capable of creating convergence between the Chinese and American positions. Whilst detrimental to the conservative wing of the Communist Party, at the same time, it casts the reformist wing in a good light.

For Beijing, it bears out that America has no real aggressive intentions against China and its leadership.

There are other factors contributing to this steady progress towards mutual trust, above all the transformation underway in attitudes to the Spratlys problem and North Korea. In fact, in April, China modified its stance on the dispute over the islands, announcing firstly that it claimed only the Spratlys and not the surrounding maritime area, and secondly that the dispute had been inherited from the country's nationalist government, which triggered it back to the 1930s.

The purpose of the first point was to circumscribe the issue at the heart of the dispute. As a consequence of China's new policy, those countries which are affected no longer have to be alarmed at Beijing's control over local waters. Furthermore, and this is the second point, this problem was not provoked by the Communist Party. In fact the Communist Party inherited it as part of the overall legacy bequeathed to it by the KMT, which abandoned the country. Indeed, on this issue, the Communist Party has already made generous concessions, as can be seen by comparing maps from different periods.

In this way, we are witness to a complaint against China which sees it in the role of joint defendant with the KMT that still dominates Taiwan. So in the event of reunification, the entire matter could either be ratcheted up, considering that Taiwan will support China's territorial claims, or reassessed, considering that the KMT ties with the USA could enable it to reach a compromise.

However, the timeframe is delayed until the aftermath of Taiwan's reunification with China. In reality, China's effort is thus not geared to solving the dispute, something which could lay Beijing open to domestic criticism; its goal is much more modest: reducing and curbing tension in the area.

The problem of North Korea is much more intricate. The death of Kim Jong-il last December provided China with a great opportunity, which it immediately seized, forcing it however to lay itself open to criticism, whilst trying to move forward on treacherous terrain.

Thanks to the protection and support afforded by China, North Korea has been able to survive the very delicate stage during which power was handed over to the youthful Kim Jong-un. This allowed Beijing to urge Pyongyang to relinquish its two nuclear programs, both uranium and plutonium. This was a non-negotiable condition for reviving the peace talks. In April, however, Pyongyang announced that it wished to press ahead with the launch of the satellite, an action which was seen by America and by North Korea's neighbors, as a threat.

In the event the satellite launch failed, a failure which caused great embarrassment to the North Korean leadership, though it immediately threatened to try again. The threat however came to nothing, partly because there was no certainty that the second launch would not fail too.

This malfunction, coming at such an opportune moment that it smacks of sabotage, does not solve the North Korean problem, but certainly mitigates it, at least until the highly complicated situation in the area becomes clearer.

For Beijing, the North Korean problem is twofold. On the one hand China has to curb Pyongyang's provocations to prevent it exacerbating regional tension. On the other hand, China does not wish to run the risk of exerting so much pressure that it is seen by North Korea as giving orders from the Empire to one of its provinces.

This is what happened with China's one-time allies, Vietnam and Myanmar, leading to strained relations between them and China.

In the case of Myanmar, Beijing had exerted strong pressure for years in order to push the country into adopting reforms. China had probably even arrived at the point of supporting a project for a coup d'etat in 2003 to be launched by General Khin Nyunt against General Than Shwe. However, when Rangoon started to implement reforms, it opened up to the United States in a manner that could certainly represent a risk for China.

Beijing now finds itself having to address an issue which is crucial for China. In other words, it has to decide if it is possible to transform the situation characterized by a form of encirclement which could stifle it, into a scenario which is more inclined to protect it and allow it to expand abroad.

One of China's key requirements, but certainly not the only one, is to forge relations built on trust with the United States, convincing America that its democratization process is sincere and reassuring America that its rapid military expansion process will be scaled back.

At the beginning of April 2012, the Taiwan vice president, Wu Den-yih, set out three preconditions for allowing China and Taiwan to initiate political talks: sincerity and willingness on both sides of the Taiwan Strait, national consensus and support from public opinion.

Wu, who led a delegation of around 60 officials, took part in the Boao Asia Forum this year as the highest level advisor to the Foundation for the Straits Common Market.

On that occasion, Wu emphasized that these three factors were the key to any political talks between the two sides. "Speaking of trust facilitates harmony" said Wu, citing a passage from the "Li Yun Da Tong" chapter in the Riti (Zhou Li) book. He then added that it was his wish that the two sides of the Taiwan Straits be capable of "developing mutual trust and creating harmonious relations".

Wu also stressed the paramount importance of national consensus, suggesting that without it, dialogue would become impossible. Even if all the preconditions are fulfilled, any talks would in any case require appropriate parliamentary supervision as well as constant popular support. "For now it is not possible to identify precise dates for this type of dialogue" he added.

Speaking about the presidential elections held on 14 February, Wu underlined that notwithstanding the KMT's victory, the results show that there are six million electors who do not share that party's ideas.

Any initiative concerning interaction between the two countries ought therefore also to engage with these people or at least respect their different opinions, making every possible effort to reduce the current level of mistrust by the opposition parties. "The time has not yet come to discuss a number of issues concerning the Strait - he added. The so-called '1992 consensus' however establishes common objectives, though allowing for differences of opinion. It forms a basis on which it is possible to build a democratic society".

Wu's prudence clearly shows how unification is not round the corner. At the same time however it also shows how headway is being made at a pace which in future could well accelerate.

It is not at all clear what Hu Jintao will succeed in obtaining from Taiwan before the Communist Party Congress this autumn. It is also conceivable that the Taiwanese will decide to wait till after the congress in order to gain a clearer picture of the new situation taking shape in Beijing as well as the actual reforms and related timetable. Looking beyond the issues which will be addressed at the XVIII Congress, China faces a wide array of challenges in the years to come. Even a proper reform programme and greater trust between China and America would, however, leave a number of particularly delicate issues to be addressed.

China has to find a way out of the Spratlys situation in which it is mired; it must find an agreement with Taiwan to deflate the militarists in Washington and it has to gradually join a network of alliances which would include not only the United States but the entire American security system in Asia. Whilst doing so, it must carefully avoid antagonizing Russia. China needs to perform a very delicate balancing act, running the risk at any time of failing on any one of several fronts. Success would transform China into a veritable political powerhouse.

The other challenge is actually even greater and more delicate, as it is both a political and a cultural challenge. Having experienced the first two global empires, first the British Empire, then the American Empire, the world today is made up of a network of relations which are officially between equals, but in reality conditioned by the power that each of the players wields.

And, amongst other things, it is also a world in which China performed brilliantly for many years on account of its absence, firstly in historical and cultural terms, then solely in cultural terms.

The world is completely different from the one in which China operated for years. The old Chinese conception of the world assigned China an absolutely central role under imperial guidance, also envisaging the Empire's periphery made up of vassal states of varying sizes and levels of independence. The imperial heart however always maintained a level of economic and demographic force which was twice that of the periphery. This was also down to the fact that its Empire did not include the Indian continent, which was separated from China by the natural barrier of the Himalayas and by the Tibetan buffer state.

The seizure of Tibet and then the revolution in communications and transport have now disrupted this world next door. India has become a huge neighbor and what was once the periphery, taken as a whole, has now acquired demographic and economic importance which is one and a half times China's.

Furthermore, whilst until 150 years ago China was outside the world, closed in its own golden autarchy, now it has become part of a greater whole, whilst its imports and exports condition global prices.

The planet which has dealings with Beijing is much bigger than China and is large enough to be able to easily ruin it. Chinese GDP, which is now approximately one third of America's, as should be recalled, at the times of the Opium Wars was almost a third of world GDP, and much larger than the GDP of tiny England which had brought China to its knees.

It is thus crucial to gain an understanding of how China's domestic policies will play out and Premier Wen Jiabao's piece on political reforms remains of paramount importance. The direction in which China will proceed in future is certainly not written in stone. Far from it.

Many things can go wrong if action is taken by reactionary forces at home. China need only return to excessively cautious domestic and international policies to alarm everyone and derail the slight progress made over the last few months. At that point, hawkish voices throughout the world would rise up against China and we would once more witness the wind of a new Cold War sweeping across Beijing.

It is precisely for this reason that China nowadays seems determined to open up both internally and internationally, though, as we have seen, such policy is certainly not without risk and there will inevitably be a price to pay.

Notes:
1. D. Bingguo, A brighter future when China and India work hand in hand (http://www.thehindu.com/news/national/article2804184.ece), The Hindu, 16 January 2012, .
2. See Qiushi, Hu Jintao Qiushi' xuanwen: qiangdiao jianshe shehuizhuyi wenhua qiangguo, 5 January 2012.
3. F. Sisci, "Hu Jintao the real Taiwan election victor" (http://www.atimes.com/atimes/China/ML21Ad02.html), Asia Times, 21 December 2102 and "Ma's re-election rings loudest on the mainland" (http://www.atimes.com/atimes/China/NA19Ad01.htm), Asia Times, 19 January 2012.
4. For a detailed account of the episode, see the following articles: A Chongqing man walks into a consulate ... (http://www.atimes.com/atimes/China/NB14Ad01.html), Asia Times Online, 15 February, 2012; PLA makes moves on political frontline (http://www.atimes.com/atimes/China/NC07Ad02.html) Asia Times Online, 6 March, 2012; and China's Ides of March (http://www.atimes.com/atimes/China/NC20Ad02.html), Asia Times Online, 20 March 2012.  (2012-09-13 Asia Times)

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