6.1 China’s View to the Region and Washington-Tokyo’s Concern
China is willing to be a regional leader, though it is prepared to bide its time and let its strength build gradually. If China is willing to lead East Asia, however, it is not clear that its neighbors are willing to follow. Regional states remain uncertain of how to deal with China.
China’s unclear intentions in regard to Taiwan, military building, and territorial disputes in South China Sea have contributed to regional fears that an economically successful China will aspire to local hegemony. However, China’s recent approach to ASEAN and the Southeast Asian governments seemed to fit well with ASEAN supported principles emphasizing dialogue, inclusiveness, and patience, with decisions resting on a gradual process that is comfortable for all concerned parties and that respected the primacy of noninterference in internal affairs and agreement by consensus.57 These priorities fit well with China’s emphasis on the direction of foreign policy -- “peaceful rise.”
China’s efforts to assuage the fears of its neighbors by adopting a foreign policy approach that is active, non-threatening, and generally aligned with the economic and security interests of the region is clearly making headway.58 The substance underlying the positive diplomacy is most notable in the trade realm, where China is rapidly emerging as an engine of regional economic growth and integration that may well challenge Japanese and American dominance in the next three to five years. China’s role as an important source of FDI for the region and player in regional currency schemes is also likely to grow rapidly.59 During the Asian economic crisis, China’s decision not to devalue its currency, the yuan, won it praise from the international community for being a responsible regional leader.60 More recently, China has directly addressed the fears of Southeast Asian countries
57 David Shambaugh, “China Engages Asia: Reshaping the Regional Order,” International Security Vol. 29, No.
3 (2004-2005), pp. 72-74.
58 Evelyn Goh, “China and Southeast Asia,” Foreign Policy in Focus, December 12, 2006.
http://www.fpif.org/fpiftxt/3780.
59 John Ravenhill, “Is China an Economic Threat to Southeast Asia?” Asian Survey Vol. 46, No. 5 (2006), pp.
653-674.
60 Shambaugh, “China Engages Asia: Reshaping the Regional Order,” p. 68.
concerned about competition from China for foreign direct investment and in trade by agreeing to form a China-ASEAN free trade arrangement (FTA). This ASEAN Plus One became the base for the emerging center of regionalism, the APT. China has also specifically encouraged Chinese business to invest in Southeast Asian states. China is attempting to allay regional fears by becoming an engine of regional growth.
In the security realm, China’s diplomacy, while likely rhetorically appealing to regional actors, has yet to make significant inroads in a regional security structure dominated by the US and its bilateral security relationships. Moreover, while China has signed a declaration of conduct governing the South China Sea, how the region moves forward to develop the resources of the Sea will depend significantly on the actual measures that China takes to ensure that ventures are cooperative and equally developed. Still, if anti-American sentiment within the region continues to grow, China may find more room to maneuver as it attempts to develop a regional security architecture that minimizes American influence.
However, China has also displayed considerable diplomatic skill to the security issue. It has addressed the issue of South China Sea outside the ARF, agreeing in November 2002 to an ASEAN-sponsored, non-binding code of conduct for regional states in the Islands.61 This move mitigated regional tensions on the issue without compromising China’s claims. China argues that its economic success can act to buoy the economies of its smaller neighbors rather than undercut them. While it is not clear that this strategy can work, China’s awareness of its neighbors’ concerns, and its willingness to address these problems, says much about its political acumen.62 The basic dynamic of China’s approach has been to identify its regional security outlook more closely with that of other regional actors. For example, in October 2003, China signed on to ASEAN’s 1976 Treaty of Amity and Cooperation, the essence of which is a set of commitments to respect the ideals of sovereignty and non-interference in others’ internal affairs, and to settle disputes peacefully.63
In terms of the community building, nevertheless, the question is how active China should be in promoting its values and priorities that seemed generally in line with the
61 Acharya, op. cit., pp. 155-156.
62 Lyall Breckon, “Former Tigers under the Dragon’s Spell,” Comparative Connections Vol. 3, No. 1 (2002), pp.
2-3. http://www.csis.org/pacfor/ccejournal.html
63 Shambaugh, “China Engages Asia: Reshaping the Regional Order,” p. 88.
called ASEAN way toward regionalism, which considering the ASEAN is the center for any initiatives and efforts on regional community building. Part of the problem was said to be pressures the Chinese leadership was feeling from the US, Japan and the ASEAN itself.
They require China to do more to abide by international norms. The Chinese leaders wanted to be seen as a responsible actor in regional affairs while China pursued its growing economic and other interests in Southeast Asia. Some argue that Beijing sought closer cooperation and partnership with the U.S. in dealing with Southeast Asian development.64 Japan seemed to be placed in a different category. China’s rise in Southeast Asia was undermining Japan’s position in the region and that the two powers were showing signs of rivalry in trying to influence in the APT.
But some assess that China’s rise in East Asia reflects the emergence of a China-centric order and the decline of US influence.65 While acknowledging the advances in Chinese economic and diplomatic relations with the region, ASEAN’s economic ties to the US, Japan, and the European Union in sum “far outweigh” those of China. China’s rapidly growing trade will soon surpass that of the US and ASEAN’s leading trading partner, The U.S., Japan, and other powers are seen as playing catch up in response to recent Chinese initiatives in Southeast Asia and regionalism. These powers’ efforts are encouraged by regional governments that seek to create a “hub and spoke” system of multiple ASEAN Plus One connections in which both Washington and Beijing are important in a regional distribution of power that can promote the interests of China, the US, and ASEAN.
Moreover, China’s current restraint is based on a clear-headed recognition of its own relative weakness in comparison to the US and Japan. China is following the advice of Deng Xiaoping, who instructed Chinese leaders to bide their time. China needs the economic support and political goodwill of the US and Japan, if it is to eventually emerge as a global power. It will not threaten its own development by provoking unnecessary and unwinnable conflicts with its major rivals.66
Despite its less confrontational stance, it is important not to mistake China’s restraint
64 Ibid., p. 68; Harding, “China: Think Again!” op. cit.
65 For further discussions, see Desker, op. cit.; Kang “Getting Asia Wrong: The Need for New Analytical Frameworks,” op. cit; Kang, “Hierarchy, Balancing, and Empirical Puzzles in Asian International Relations,”
op. cit.
66 Peter Van Ness, “Hegemony, Not Anarchy: Why China and Japan Are Not Balancing US Unipolar Power,”
International Relation of the Asia Pacific, Vol. 2, No. 1 (2002), pp. 139-143.
as a fundamental shift in outlook. There are outstanding issues between the US and China that have the potential to fundamentally undermine China’s security.67 Chinese practices show that despite declarations to the contrary, China could seek dominance in Southeast Asia that marginalizes the US and neutralizes Japan, once China consolidated its powerful status in the region. As Harding points out, “the rise of Chinese power…will deter China’s neighbors from threatening its core interests.”68 The challenge for the US policy is to come up with a comprehensive security strategy that deals with China’s challenges on leading community building in the region, US approach on China that continues cooperation while broadening a variety of hedging initiatives to preserve and strengthen the US position in Southeast Asia in the face of China’s rise.
6.2 Japan and China: Competing with the Leading Status in the Region
There are many examples of China and Japan competing for regional influence. China’s FTA discussions with ASEAN prompted Japan to pursue its own ASEAN FTA. The rivalry is particularly obvious in the efforts of both China and Japan to blame each other for causing or exacerbating the Asian crisis. Japan was deeply upset over interpretations of the Asian economic crisis advanced by Western commentators that pinned much of the blame for the crisis on the failures of the Japanese economy while praising China for its constructive role during the crisis and its decision not to devalue the yuan. Japan responded to these criticisms by arguing that China’s undercutting of Southeast Asian goods in world markets laid the foundations for the decline in trade that made the crisis possible. In this way, Japan was trying to counteract China’s regional influence. The Japanese are also deeply concerned about the possibility of China eclipsing Japanese economic power and causing a “hollowing out” of the Japanese economy.69
With Chinese and Japanese leadership, the region has moved forward to develop a range of regionally-based currency arrangements that exclude the US. Brunei, Indonesia, Japan, the Philippines, Thailand and Vietnam are exchanging data on short-term capital flows. The regional economies are attempting to establish an early warning system that would involve monitoring balance of payments, exchange rate regimes, and levels of foreign
67 Marvin Ott, Strategic Forum (US National Defense University) No. 222 (October 2006).
68 Harry Harding, “China: Think Again!”
69 James Brooke, “Tokyo Fear China May Put an End to ‘Made in Japan,’” New York Times, November 20, 2001, p. A3.
borrowing.70 At the same time, the Chiang Mai Initiative, launched in 1999, as contributed to a flurry of bilateral swaps, worth $17 billion dollars. Despite objections by the IMF and the US, in June, 2003, “China and 10 other Asia-Pacific countries, including five ASEAN members, agreed…to establish an Asian Bond Fund worth more than $1 billion” to help
“bail out economies in crisis.” This was followed by a second bond fund initiative announced in December 2004 for an additional $2 billion fund to invest in Asian currency-denominated government bonds.71
Considering Sino-Japanese interactions, mutual economic tie does not mean China has forgotten its grievances against Japan. China reacted strongly to Koizumi’s surprise second visit to the Yasukuni Shrine by postponing a scheduled visit of the Japanese Defense Minister and delaying a visit to Japan by Chinese naval vessels.72 In April 2005, the atmosphere of hostility between China and Japan has sharply increased. Simmering tensions came to a boiling point when a series of sometimes violent anti-Japanese rallies broke out in major Chinese cities, damaging the Japanese Embassy in Beijing and consulates elsewhere.
Conservative politicians and nationalist groups on both sides have exerted considerable pressure for more assertive foreign policies. As a result, there have been no state visits between the two since October 2001. As a result of Koizumi’s controversial visits to the Yasukuni Shrine, President Hu has refused to schedule a summit meeting. As mentioned above, moreover, Sino-Japan relationship is less likely to improve during the Abe Administration.
Ironically, the rivalry between China and Japan also has served as a catalyst for the proliferation of preferential agreements in East Asia. In response to the Japan-Singapore Economic Partnership Agreement (JSEPA) signed in October 2001, China signed a surprise agreement in 2003 with the ten ASEAN countries pledging free trade by 2010. Challenged to do the same and to demonstrate its continued leadership role, Japan began negotiating its own FTA with ASEAN. Moreover, Japan and South Korea have been negotiating a bilateral FTA since December 2003, while a China-South Korea FTA is being jointly studied.73 Furthermore, the two countries’ competition within the multilateral APT system is as the
70 Watanabe, op. cit., pp. 1-3.
71 “Asia Pacific Central Banks to Launch New Fund for Regional Bond.” Japan Economic Newswire, December 16, 2004.
72 Desker, op. cit.; Pryzstup op. cit., p. 3.
73 See Aggarwal and Koo, op. cit.
same as bilateral FTA agreements. Such developments strengthen the sense of an Asia for Asians, and an Asia that does not necessarily involve the US. While Japan has played a leadership role in developing these new currency arrangements, China will likely become an increasingly important force. As China takes steps to make its currency convertible, it may well emerge as the dominant regional currency. According to one analysis, Japan’s banking and debt crisis makes the yen less suitable as a vehicle for wider Asian monetary integration and the US dollar may not retain its dominance in a trade regime dominated by links with China.74
The reality, then, is that China is assuming a leadership role in the regional economy and aggressively pursuing an ASEAN Plus one (China) free trade agreement. However, Japan remains the predominant source of investment, retains a larger trade relationship, and drives the currency negotiations within the region. The US continues to be the region’s most important trading partner, but the stagnant trade suggests that the US may be finding other markets, such as China, more attractive; unless greater attention is paid to contributing to Southeast Asia’s continued economic growth, the US will rapidly lose its stature as the region’s key trading partner. There are signs of Japan-China tension over the future leadership of the region. The renewed US-Japan alliance is not only aimed at dealing with North Korea or global issues in general. They see it as aiming to contain China’s rise and increasing influence. If tensions rise in the China-Japan-US triangle, the region will feel the impacts.
6.3 US-Japan Gap between Regional Security and Economic Cooperation
During the Cold War era, the US provides the fundamental framework of security for the region as a whole. This is carried out through its longstanding alliance with Japan. It has been upgraded since the end of the cold war, but US-Japan alliance is subject to stresses and strains that could weaken the effectiveness of the system as a whole. Accompanying with China’s rise and radical dynamic of regional economic interdependence, Washington’s and Tokyo’s concerns sometimes are more likely to diverge in economic regionalism. In the Asian financial crisis of 1997-1998, many states in the region saw US pressure behind APEC’s very slow to reaction to the crisis. At the November 1997 APEC summit meeting,
74 Watanabe, op. cit., pp. 11-12.
US President Bill Clinton described the Thai and Malaysian currency crises as “a few small glitches in the road.”75 But America’s initial nonchalance appeared to backfire almost immediately, as the crisis spread beyond Thailand and Malaysia. In response, Japan took the lead in September 1997 with a proposal for an Asian Monetary Fund (AMF), to be backed by US$100 billion that it had lined up in commitments in the region. However, the IMF, supported by the US and European countries, resisted any effort to find an “Asian” solution to the crisis. In particular, the US viewed such a fund as undercutting its preferred approach using IMF loans accompanied by strict conditionalities.76 Under growing US pressure, APEC members, who gathered for a summit meeting in Vancouver in November 1997, chose to take only a secondary role, if necessary, to supplement IMF resources on a standby basis without any formal commitment of funds. With the APEC action providing a seal of approval for the US-IMF backed plan, the idea of establishing an AMF was put on hold.
More importantly, Japan concluded its first post-World War II bilateral FTA with Singapore. The resultant JSEPA sparked region-wide interest in FTAs, thus undermining East Asia’s traditional commitment to the WTO. Thus, the increasing interaction between Northeast and Southeast Asian countries also fostered the creation of an APT forum in November 1997 and promoted an East Asian identity, particularly in the context of the failure of the US-led APEC to take any significant initiatives in resolving the financial crisis.77 It is obviously not in line with US policy in bolstering an institutionalizing APEC and opposing any other regional structures without participation of the US.
Alliance difficulties are also evident in the case of security issue. Japan has occupied an ambiguous security position between China and the US. Japan has been a strong American ally; however, it has maintained the illusion that it might not participate in any conflict between the US and China over Taiwan. This political fiction, already challenged by the 1997 revisions of the US-Japan MST, may no longer be sustainable as Japan begins to participate in American efforts to create a nuclear missile defense (NMD) shield.78 The
75 The New York Times (July 5, 1998), p. A1.
76 Jennifer Amyx, “Japan and the Evolution of Regional Financial Arrangements in East Asia,” in Ellis Krauss and T. J. Pempel (eds.) Beyond Bilateralism: US-Japan Relations in the New Asia-Pacific (Stanford, CA:
Stanford University Press, 2003).
77 Aggarwal and Koo, op. cit., pp. 210-216.
78 Qingxin Ken Wang, “Taiwan in Japan’s Relations with China and the United States after the Cold War,”
Pacific Affairs, Vol. 73, No. 3 (2000), p. 367.
public opinion manifests themselves in opposition to the terms by which American forces are located at particular bases (notably Okinawa), but also in opinion polls which register a majority in support of withdrawing the contingent of Self Defense Forces from Iraq.
No doubt, there is less of an immediate problem as the government has decided to pursue the course of strengthening its military capabilities by deepening its alliance with the US.79 Nevertheless, in contrast to the cold war period, Japan no longer enjoys American backing in dealing with Russia and it is doubtful how much active support it would receive from the US in the event of hostilities with China or South Korea over disputed islands or maritime claims. In fact, there is greater evidence of Japanese official support for America’s global strategic concerns than there is of American support for Japan’s own parochial security problems. There is doubt as to how far there would be a willingness to come to American aid in the event of conflict in the Taiwan Strait.
This is not to suggest that the Washington-Tokyo partnership are about to crumble. But the partnership requires careful management if it are to be sustained in the longer term. If it argues that the American strategic presence in the region has continued to provide a sufficient degree of stability to allow the region to prosper and to accommodate China’s rise, then a disruption of the US-Japan alliance would be damaging and the current strains and tensions would be to increase uncertainty would also increase. That would not bode well for the conditions that have facilitated the phenomenal economic growth and currently promote community building of the region.
This is not to suggest that the Washington-Tokyo partnership are about to crumble. But the partnership requires careful management if it are to be sustained in the longer term. If it argues that the American strategic presence in the region has continued to provide a sufficient degree of stability to allow the region to prosper and to accommodate China’s rise, then a disruption of the US-Japan alliance would be damaging and the current strains and tensions would be to increase uncertainty would also increase. That would not bode well for the conditions that have facilitated the phenomenal economic growth and currently promote community building of the region.