BIT: China and US Agree to New Talks

The conclusion of the U.S.-China Strategic & Economic Dialogue (S&ED) came with the announcement that the United States and the People’s Republic of China agreed to reinitiate talks regarding a Bilateral Investment Treaty (BIT).  Officials on both sides praised the development.

It makes sense that both sides in the S&ED would emphasize the agreement to begin discussions over a BIT, as most of the S&ED focused on highly contentious issues.  In particular, both sides traded barbs over the other’s cyber policy.  The United States demanded that China cease its commercial and government cyber-espionage activities, while China returned with demands for the United States to end its actions of hacking into university systems in the People’s Republic.  Both sides need to walk away with some type of win – thus, the BIT.

Reengagement on bilateral investment is a positive step in the US-China dynamic, but everyone should not be overly optimistic about where new talks will lead.  Prior discussions on investment floundered and it is quite possible that new talks will as well.  The reason that a formal investment treaty may prove unlikely is that there already exist standard patterns of investment between the two countries.  After a period of decline during the global financial crisis, US investment in China is once again picking up.  The United States also has no BIT with two of its most important trading and investment partners: Canada and the European Union. 

Added to the already existing financial architecture is the fact that BITs are not easily passed by the United States Congress.  Formalizing investment between the United States and a foreign country means that a great many interests in the United States will have to be heard from before Congress will act.  Furthermore, the US Congress remains wary of China’s impact in the realm of human rights, intellectual property, environmental safety, consumer safety, financial transparency, and banking stability.  Similar apprehensions are held by some central leaders on China’s side regarding US regulatory systems, banking and financial requirements, and trade protection laws.  In short, the BIT has a steep hill to climb before becoming real. 

New talks on investment do have one positive impact regardless of the end result of those talks: developing rules regarding US-China economic interaction.  The current bilateral relationship is made difficult by the territorial disputes in the Asia-Pacific, China’s policy regarding the DPRK, its activities in the IOR, and its cyber policy, but the two countries are making strides economically.  US-China trade remains robust with more firms in both countries entering into joint enterprises.  Continuing to institutionalize economic behavior may well have the side effect of easing tensions within the strategic and political realms.

Please note that the views expressed in this piece do not represent the official policy or position of the National Defense University, the Department of Defense, or the U.S. government.

Reform, Cyber, and Bilateral Tension

From 10-11 July, the fifth meeting of the U.S.-China Strategic & Economic Dialogue (S&ED) will take place in Washington, DC.  The meeting serves as the highest bilateral meeting between the leadership of the United States and the People’s Republic.  For more background, read this overview.

Since its inception, the S&ED has been criticized for not achieving much within the bilateral relationship, but that may soon be changing.  Internal pressures in China and a changing international arena affecting the United States may finally lead to some frank, essential discussions between these two major powers.  What sort of issues will likely be a subject of discussion…?

Cyber

Cyber assaults and espionage have long increased tensions between these two countries.  For years, the United States has been the victim of attacks originating in China.  These incursions have predominately focused on private industries in the United States, searching for proprietary information that could give Chinese firms a leg up by gaining access to cutting edge technology without going through the investment of research and development.  US industry has partnered with the US government in order to increase effective countermeasures for cyber incidents and pushed for a stronger stance on cyber topics within the bilateral relationship.  With the US firm Mandiant publicly revealing earlier in 2013 the scope of Chinese hacking on US government offices, the issue of cyber has become a primary topic of concern.

The cyber issue is not solely a topic of concern for the Americans, as the Chinese government has also traced cyber incursions into their systems back to American shores.  However, whereas Chinese cyber forces focus on extracting information by disrupting systems, especially from US corporate entities, American cyber forces focus on gleaming information without causing disruption.  Given the potential cyber capabilities of the United States and superior global position of US information technology firms, the Chinese government understands that US cyber policy could readily become much more invasive and overtly confrontational.  As of right now, there is likely no more contentious topic of conversation between these two countries.

The Asia-Pacific

China’s rise has been accompanied by not only an over interest in becoming the hegemon of the Asia-Pacific, but also with a policy of extending China’s territorial claims in the South and East China Sea.  Viewed by many of its neighbors as aggressive, China’ expansion claims have increased hostilities with Vietnam, Korea, Singapore, Malaysia, Indonesia, the Philippines, and Japan.  Given US strategic alliances with Korea, the Philippines, and Japan, the United States has been dragged into regional tensions.

It is unlikely that discussions over the Asia-Pacific will lead to any new understandings.  China will never be able to exert control over everything it claims, which means that eventually there will have to be conciliation by some party to the disputes.  Yet, that time has not yet arrived.  Additionally, China remains wary of the US rebalance to the Asia-Pacific.  It is likely that both countries will strongly reiterate their positions and move on.

China’s Economic Transformation

Over the past several years, there has been mounting evidence that China needs to initiate wide-ranging economic reform.  The almost magical growth rates of the 1990s are no longer possible, its banking sector is saddled with billions in bad debt, its real estate sector is in many ways toxic, and the country’s overall economic health remains dependent on exports.  Greater financial transparency, industrial and commercial regulation, and stronger domestic consumption are essential for maturing the economy.

The United States has long called on China to initiate this change.  The Americans believe that by doing so, China will become a stronger partner in the global economy and abandon many globally unpopular actions.  Yet, a change of this magnitude is dangerous for the global economy and for China’s political elite.  Economic conversations will likely center on how the United States can help China if it seriously desires to reform.

Opportunities

During the two days of engagement, there will be conversations on topics where the United States and China largely share common interests.  Maritime security is one such example, especially in the Indian Ocean Region, global energy market stability and energy pricing will be another opportunity.  Furthermore, stability in the Middle East, which is all the more important with recent instability in Egypt, is of greater importance to both countries.  With any luck, the United States and China will discuss not only topics where they disagree, but also engage on those issues where they walk in parallel.  Investing in such topics will improve the bilateral relationship while also enhancing stability on a whole host of global issues.

Please note that the views expressed in this piece do not represent the official policy or position of the National Defense University, the Department of Defense, or the U.S. government.

No Candles Today

Every year on the 4th and 5th of June, a grim anniversary becomes the source of political theater.  These dates are the anniversary of the Tiananmen Square crackdown, in which the central leaders of the Chinese Communist Party and the senior leaders of the Beijing Municipal Government ordered the pro-reform protesters to be forcibly removed from Tiananmen Square. 

For much of the world, the 1989 Tiananmen Protests have become almost myth.  Every year during the anniversary of the crackdown, thousands take to social media platforms to talk about “the Tank Man”, the “Goddess of Democracy”, and the pro-democracy message of the protestors.  It is unfortunate that much of what survived that spring in 1989 does so as image or slogan. 

The reality is that these protests started as a tribute to the death of Hu Yoabang, a CCP leader with a reformist bent.  The protest movement that emerged from this initial memorial was never about pushing for Chinese democracy.  It was a reform movement that wanted greater government transparency.

The battle for reform continues today, but instead of protestors concentrating within a national symbol, activists and netizens use the anniversary to highlight the degree by which the Chinese state continues to control information and worries about opposition.  Almost every year some bizarre action is taken in order to block discussion of the Tiananmen protests.  In 2010, foursquare, a social networking website, did not allow people to check in at Tiananmen.  This year, web searches regarding the Shanghai stock exchange are limited because it closed last year on June 6th with a loss of 64.89 (6/4/89).  Also this year, Sino Weibo, the most popular Chinese blogging platform, refuses to allow people to use the candle graphic.  The graphic is generally used in reference to death.

Most regimes around the globe lack the willingness and/or capacity to engage in information control to the same degree as the CCP in the People’s Republic.  However, every regime facing opposition acts to protect its own power and discredit the opposition.  When the opposition cannot be discredited, then isolate them as much as possible.  Perhaps this is the reason Prime Minister Erdogan criticized social media recently – such tools allow the opposition to circumvent the state’s ability to repress. 

The question, though, is this – how far must a regime go before realizing its efforts to repress are a waste of energy?  Is it really worth taking the steps the Chinese state takes in order to limit discussions of Tiananmen Square?  In the end, the population always figures out ways around them – as they did, at least temporarily, this year [link – using the giant inflatable duck from Hong Kong’s harbor in place of tanks].

Please note that the views expressed in this piece do not represent the official policy or position of the National Defense University, the Department of Defense, or the U.S. government.

China’s Soft Power Conundrum

If you read Chinese newspapers, watch CCTV, or go to your local Chinese Cineplex, then it becomes clear that China already sees itself as a major world power, if not THE world power.  The factors backing up this widely-held Chinese belief are numerous – the modernity and scale of its urban areas, its overall economic might, its manufacturing base, and its growing role within international politics. 

Yet, for all the factors that reveal Chinese strength, many outside of China still see China as a relatively weak, if not quickly rising, country.  Its economy is completely dependent on exports, making it subject to international fluctuations, not to mention highlighting the absence of a strong domestic consumer market.  The Chinese military, for all of its modernization, remains untested.  Its political leadership is highly questioned, with many wanting China to take on a larger role internationally while condemning its continuing habit of free-riding on the benefits created by other international players.

Thus, China has embarked on an effort to boost its international prestige by emphasizing its soft power – the cultural, artistic, linguistic, among other features that are “sold” to outsiders to create an image.  In today’s world, the preeminent soft power player is the United States.  Its music, television, film, literature, and art are consumed all over the world and help to project the United States as the strongest nation-state on the planet.  In East Asia, considerable soft power is held by South Korea and Japan, two countries whose music, film, and fashion are widely consumed beyond its borders. 

Contemporary China does not come close to these other countries in soft power.  Its film industry, while massive, does not attract international audiences to any great degree.  Its music has little appeal beyond Chinese borders.  One can easily go on.  In fact, today’s Chinese youths are as likely to be listening to K Pop or J Pop, watching British television, or going to see Korean or American films as they are to consume the equivalent Chinese offerings. 

The question is why, given China’s immense strength in other areas, are international audiences not interested?  Why is China’s soft power weak?  Many analysts have posited reasons, but I am more interested in your thoughts.  Is China simply bad at marketing its offerings?  Or is something lacking in the quality of Chinese soft power? 

It may not be fair (i.e. people thinking that Americans always blow things up based on action movies), but soft power contributes to outsider understandings of a country.  It allows a country to project strength without threatening, outmaneuvering, or opposing others.  So long as China’s soft power is weak, it will prove difficult to convince the world that China is a real player.

 

Please note that the views expressed in this piece do not represent the official policy or position of the National Defense University, the Department of Defense, or the U.S. government.

Who Knew the Correspondent’s Dinner was Valuable?

Every spring, Washington DC is flooded by a mass of celebrities, business leaders, and other VIPs.  They come to the U.S. capital city in order to attend the annual White House Correspondent’s Dinner, an event that generally features a celebrity presenter who gently roasts [there have been presenters who have not been gentle, such as Stephen Colbert in 2006] DC culture.  The President of the United States also traditionally gives a speech in which he pokes fun at himself and DC insider culture. 

The event is a lavish affair with Congressmen, media luminaries, and film and television stars intermixing.  As such, it is regularly cited as an example of the divide that exists between the nation’s capital and the rest of the United States.  Many commentators and analysts regular wonder about the purpose of the event, other than to bring together a collection of VIPs for a party.

Its value to the internal politics of the United States can be debated, but it seems that the annual White House Correspondent’s Dinner is a big hit among the netizens of China.  Whereas many Americans view the dinner as an event reserved for the crème del a crème of American society, the general reaction in China has been that the dinner is a visible example of the United States’ democratic and open culture.  For many Chinese citizens, the prospect of their national leaders giving a humorous speech that is publicly available and also ridicules the very foundations of the country’s political system is too remote to even fathom. 

Thus, it seems that President Obama’s speech at the Correspondent’s Dinner is another Ambassador Locke moment in China [Ambassador Locke became a viral hit on the internet when photos revealed him as carrying his own bag when travelling to take his post in China].  I tend to think that this is merely a case of distinctions in political culture – the United States has a tradition of satire and ridicule in its public life, while China simply does not.  However, it is fascinating to see how China’s legions of netizens use this quintessentially Washington event and give it a Chinese relevance.  What are your thoughts?   

Please note that the views expressed in this piece do not represent the official policy or position of the National Defense University, the Department of Defense, or the U.S. government.

ASEAN Under Threat?

One thing overlooked amidst China’s dramatic territorial claims in the South China Seas is how their actions have impacted the region’s most successful institution: the Association of Southeast Asian Nations (ASEAN).  ASEAN’s reputation varies depending on the audience, but it serves as the region’s preeminent political organization.  Certainly one can argue that ASEAN has not done enough, but it has accomplished some remarkable things in its history – assisting in encouraging Burma to open up to the outside world, push forward the pace of economic integration in Vietnam, helping to create a shared SE Asia economic plan (particularly after the 1997 Asian Financial Crisis), and generally increasing the amount of bilateral and multilateral interaction within SE Asia.  ASEAN may not be the most important international organization in existence, but it has served the region well (especially when comparing it to South Asia’s equivalent – SAARC).

Yet, for all its accomplishments, ASEAN seems more divided today than ever before.  This is partly due to the global economic downturn and the increased national pressures such a global change causes, but an additional reason is China.  Specifically, Chinese foreign policy in relation to the South China Sea became a flashpoint for division among the ASEAN states. 

Thus far, Chinese territorial claims in the South China Sea have put them in conflict with Brunei, Vietnam, the Philippines, and Thailand.  Indonesia and Malaysia have sought a balanced approach between their neighbors and China (but Malaysia has started to sour on China).  Cambodia, Laos, and Burma have traditionally backed the People’s Republic.  The South China Sea dispute was a major topic of discussion during the past ASEAN member meeting, but for the first time the member states were unable to issue a joint communique

China has successfully deployed their military resources and commercial fishing fleets to “acquire” substantial territory in the South China Sea.  The Chinese have coupled their actions at sea with a political offensive designed to breed discord among the ASEAN member states.  Few seem to be talking about this issue, but they should be.  ASEAN is one of the few institutions that could serve as a natural body by which to decide the territorial disputes.  With the organization weakened and sidelined, SE Asian states will pursue other options – like appealing to the United Nations or seeking greater ties to the United States.  In short, a weakened ASEAN makes it more likely that conflict will escalate. 

Analysts and scholars around the world should be examining the health of ASEAN, as it likely serves as the best legitimate means by which to alleviate rising tensions in SE Asia.

Please note that the views expressed in this piece do not represent the official policy or position of the National Defense University, the Department of Defense, or the U.S. government.

What Domestic Workers Tell Us about Asia

This week Hong Kong’s highest court decided unanimously that domestic workers were not entitled to permanent residency status, regardless of any worker’s support network or length of stay.  Most Hong Kong legal residents were relieved by the decision.

The impact of this case will likely be widespread.  From a legal perspective, Hong Kong’s highest court attempted to walk a tightrope – following the traditions of common law still practiced there while simultaneously corresponding with PRC legal guidance and political preferences.  However, the decision against the permanent residence of domestic workers will continue to have legal repercussions.  Domestic workers do enjoy some legal protections – like a minimum wage – but employment laws are a constant threat to their legal status. 

On the political front, the case highlights a trend in Hong Kong whereby permanent residents seek to visibly communicate the distinctions between resident and outsider.  Hong Kong has become a more difficult place to visit for many in the developing world – a process relating to refugee issues and transnational trade (for more information please read Gordon Mathews’ fascinating work on Chungking Mansions – Ghetto at the Center of the World).  Tensions between Hong Kongers and Mainland Chinese are on the rise, as waves of Mainland tourists have challenged residency laws and altered the makeup of communities.

The court decision also signifies a change in what Hong Kong means for the whole of East Asia.  The city has long served as a haven for foreign capital and had attracted hundreds of thousands of foreigners.  This case was thought by some to be a means by which to further the expansion of legal protections for foreigners and help in the development of a truly multi-ethnic Hong Kong.

Overall, this court case highlights a developing problem in Hong Kong – how to continue to be a focal point of international capital, while remaining a distinct polity.  Furthermore, Hong Kong’s struggle in defining itself is part of a larger regional process, as many states seek to find their footing in a rapidly changing East Asia.     

Please note that the views expressed in this piece do not represent the official policy or position of the National Defense University, the Department of Defense, or the U.S. government.

Abu Sayyaf – Threat, Irritant, or Both?

With the Moro Islamic Liberation Front making strides towards a peaceful resolution with the Filipino state, much attention has switched over to Abu Sayyaf, Moro’s more radical offshoot.  Abu Sayyaf, founded by mujahedeen fighters of the Afghan-Soviet war, has long existed as an international boogey man due to its ties and sympathies to Al-Qaeda.  After a long counterinsurgency plan instituted by the Filipino government (and supported by the United States), public opinion is finally starting to come around to a simple realization – Abu Sayyaf is not a terrorist threat comparable to AQ.  Rather, it is a criminal organization with a radical ideology – more like the FARC in Colombia or the Triads in Southeast Asia.

What to do about Abu Sayyaf?

Abu Sayyaf is increasingly isolated within Mindanao and its nearby islands and enjoys extremely limited support from the local Muslim population.  As a result of its decline, the organization has increasingly found itself without access to monetary support.  Criminal actions, primarily in the form of kidnappings, have emerged as one of the group’s primary mechanisms for income. 

With the peace process between the government and Moro progressing (albeit slowly), the problem of insurgency in Mindanao has largely been eliminated.  Consensus among the southern citizens of the Philippines is that they wish to remain a part of the country, so long as they have a greater say in the distribution of tax revenue, the celebration of cultural matters, and greater access to political decision-making. 

Better relations between north and south provide a new opportunity by which to further cripple Abu Sayyaf.  Insurgency programs run by the military should be positioned as a secondary initiative, with the national police and local police forces positioned as the lead.  Police, along with related state agencies, will be able to further push Abu Sayyaf to the fringes of society, inform the population more accurately, and build local information networks that reveal the group’s operations. 

Abu Sayyaf was always of secondary concern when Moro was conducting its campaigns.  It received attention due to its relationship to AQ, but it was never a true threat to the Filipino state.  Continuing to treat Abu Sayyaf as a substantial threat means the military will continue as the lead.  Military operations against the group run the risk of harming the civilian population and once again escalating tensions in the south.  The Philippines government and its international partners need to realize what Abu Sayyaf is – a dangerous irritant that can be effectively dealt with by careful and precise police work. 

Please note that the views expressed in this piece do not represent the official policy or position of the National Defense University, the Department of Defense, or the U.S. government.

Xi Goes and Visits Putin – Oh Uh!

This weekend’s big news will be the results of a two-day meeting between China’s newly installed President, Xi Jinping and President Putin of Russia.  The meeting has Washington, DC all aflutter, with hundreds of analysts and reporters trying to interpret if this meeting is the beginning of a new strategic partnership between the People’s Republic of China and Russia. 

It makes a kind of sense for China and Russia to consider a stronger strategic partnership.  Both countries find themselves on the same side of several international issues – the Syrian civil conflict and Iran sanctions leap to mind – and both have been chaffing against international pressures regarding democratic development and human rights protection.  Finally, both China and Russia remain wary of American global power.

I have no doubt that China and the Russia will improve bilateral ties, for no other reason than China needs access to the ample petroleum deposits resting in Siberia.  Yet, the relationship will never mature as many in China and Russia hope and many more in the United States and Europe fear.  First, China is overt in its immediate interest in Russia – fossil fuel.  China’s economy, spurred by rapid urbanization and infrastructure development, needs access to ample resources.  China prefers to find these energy resources near its boundaries (partially explaining its spread into the South China Seas, seduction of Indonesia, and continued presence in Burma) and to avoid having to provide for the security of a region in order to gain access to resources (i.e. Africa and the Middle East).

China maintains its long-standing policy of openness to all, but committed to none.  With the exception of North Korea, China has no mutual defense treaty with any other country – and it does not wish to pursue such with other countries.  Chinese leaders and analysts think they can rise to supremacy by being clever in diplomacy and throwing its weight around economically.  It may be right, but that means it will invest in the types of strategic alliances that the United States crafts throughout the world. 

Finally, the game remains in East Asia for China.  It flirts with new foreign policy directions (such as the much discussed “March West” policy), but the country’s focus will remain for the foreseeable future in East Asia.  Regional preeminence is a necessary condition for the country’s long-term plans.  Russia, for all its continued importance in global affairs, is not an Asian power.  Vladivostok, Russia’s eastern port city, is a dilapidated mess and its eastern military units (particular the eastern fleet) remain minimal.  Russia is far more interested in Central Asia and the Middle East than in East Asia.  The Russians simply do not have the option of providing substantial assistance to the Chinese.

Going forward, the bilateral meeting between these leaders may lead to greater strategic cooperation.  China and Russia may agree to continue to hold the line regarding Assad’s regime in Syria and ratify some general guidance for mutual cooperation in Central Asia.  Thus, for the United States, the meeting this weekend may be of little immediate impact for strategic positioning.  In the long-term, it is Russian oil pouring into China that may prove to be the most important development.  Access to those deposits will allow the Chinese to continue to be a free rider in the Middle East – using US security structures to serve their own interests.

Please note that the views expressed in this piece do not represent the official policy or position of the National Defense University, the Department of Defense, or the U.S. government.

A Leaner, Meaner Chinese State

It is now official.  Xi Jinping, anointed the leader of the Chinese Communist Party in November, is today the President of the People’s Republic of China.  The vote by the National People’s Congress to make Xi President of the PRC was not a surprise, but the overwhelmingly choreographed National People’s Congress gathering did finalize two decisions that are important – the merging of the ministries devoted to railways and family planning into other ministries.

Railway officials have a long history of obscene and widespread corruption and the CCP had recognized that the continued existence of a separate railway ministry fueled public discontent.  Merging railways into another ministry allows the CCP to shade the problem from the public and address it in the way (and time frame) seen most appropriate by state leaders. 

Family planning is another source of intense public dissatisfaction.  Opposition to the One-Child Policy is ever-growing in the country, especially in light of official abuse against those who are in violation.  Further complicating the issue of family planning is China’s rapidly aging population.  As with other countries in East Asia, China will soon suffer as a smaller youth population will be required to support a larger elderly population.  Folding family planning into another ministry may serve as indication that the One-Child Policy is under review, or at the very least reveal that enforcement of the law may no longer be as rigorous as in past years.

The merging of these two ministries also provides indications into how Xi Jinping will lead China for the next decade.  Since he rose to power in November, observers around the world have been trying to interpret his actions for evidence as to how he will lead.  Xi’s strong ties to the military, his simple public persona, and his apparent support for greater economic liberalization painted a complicated picture of a leader with both conservative and reformist tendencies. 

The National People’s Congress shows that Xi Jinping is intent on furthering liberalization (even at the expense of the country’s behemoth state owned enterprises), will lead by relying on nationalist, not communist, ideology, and finally will change the appearance of corruption within the CCP (not truly changing actions).  What does that all mean?  It means that Xi Jinping will never possess the unified party support his predecessors enjoyed.  Xi Jinping is a leader who correctly identifies that the CCP has a public perception problem and he will do whatever he can to improve the Party’s reputation, but he does not have, nor likely ever will have, the power to truly challenge corruption.  Thus, President Xi will be a reformer – a reformer of the margins.

Please note that the views expressed in this piece do not represent the official policy or position of the National Defense University, the Department of Defense, or the U.S. government.