When China Rules the World (59 page)

For the most part, Europe’s response to the rise of China has been low-key, fragmented and incoherent. This is because the European Union lacks the power and authority to act as an overarching centre in Europe’s relations with nations such as China. As a result, Europe generally speaks with a weak voice and more often than not with many voices. The European Union is not a unitary state with the capacity to think and act either strategically or coherently, but an amalgam and representative of different interests.
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Europe’s economic relationship with China has grown enormously over the last decade, with a massive increase in imports of cheap Chinese manufactured goods and a very large rise in European exports to China, mainly of relatively high-tech capital goods, especially from Germany. This has resulted in a growing European trade deficit with China as well as a loss of jobs in those industries that compete directly with Chinese imports. Until recently this has aroused very little political debate, certainly nothing like that in the United States. There are several reasons for this. Europe’s trade deficit with China has been much smaller than the US’s, although this is now changing. Political attention is centred not so much on Europe’s deficit but on that of individual countries, and even these have so far attracted relatively little concern. In contrast to the United States, there has been little debate about the exchange rate between the renminbi and the euro, though the appreciation of the euro against the renminbi prior to the global recession led to growing European anxiety and representations to Beijing about the need for a revaluation of their currency. Finally, Europe has been overwhelmingly preoccupied with the effects of the recent enormous enlargement of the EU, not least the large-scale migration of workers from Eastern and Central Europe to Western Europe,
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which has had a much greater impact, and certainly been more politically sensitive, than China.

As a consequence, the levels of concern in Europe about the economic repercussions of China’s rise have been relatively muted; but with increased anxiety about the value of the renminbi and the growing trade deficit, there have been signs that this might change.
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The predominant view in most countries has been that China’s rise has on balance been beneficial because of its negative effect on consumer prices, though in the less developed European countries like Portugal and Greece, together with the new entrants - all of which compete in varying degrees with China - the attitude has been more mixed.
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However, the credit crunch and the onset of a depression has kindled a mood of anxiety in many European countries, perhaps especially France and Italy, about the effects of globalization and the impact of China’s rise.
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The result has been increased economic tension with China, raising the possibility of limited forms of action, such as anti-dumping duties and anti-subsidy tariffs, against Chinese imports.
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While previously China’s economic rise was seen as largely benign, and for the most part beneficial, the mood has become less sanguine amid growing concern about its possible consequences for Europe. A further factor fuelling this anxiety is the fear of investments by Chinese multinationals and by the Chinese Investment Corporation in key European industries.

In the longer run, as Chinese companies progressively move up the technological ladder and develop brands which compete head-on with those from Europe, the number of losers could escalate considerably and fuel a demand for protection against ‘unfair’ competition from China, perhaps culminating in Europe steadily raising protectionist barriers against China, a move which would have profound political repercussions.
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At this stage, however, it is premature to predict what the likely political effects of China’s growing competitive challenge to Europe might be in the future.

The lack of any serious European diplomatic or military presence in East Asia means that, unlike the United States, which remains the key arbiter of security in the region, Europe has no major geopolitical conflicts of interest with China. When it comes to Taiwan, the Korean Peninsula or the US-Japanese alliance, all critical issues of US concern, Europe is no more than a spectator. It has no involvement in the United States’ bilateral alliance system in the region. As a result, Chinese-European relations are unencumbered by such considerations.
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The nearest such issue has been the European embargo on the supply of arms to China, which was introduced after Tiananmen Square and which China has lobbied hard to get lifted. Although the European Union eventually obliged in 2005, it rapidly reversed the decision in response to huge pressure from the United States, which turned the issue into something akin to a vote of confidence in the Atlantic Alliance. Only by making it an article of faith in the West did the US manage to hold the line, suggesting that Europe may, up to a point, be prepared to think for itself when it comes to its relations with China.
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This is not to suggest that in the long run Europe is likely to detach itself from the United States in favour of China - that is virtually inconceivable - but the reaction of key European nations like Germany and France to the American invasion of Iraq showed that much of Europe was no longer prepared slavishly to follow the US. It is reasonable to surmise that relations between the US and Europe are likely to improve significantly during the Obama presidency, though they are unlikely to return to the intimacy of the Cold War period. With the rise of China and the importance of the Middle East, the transatlantic relationship is no longer pivotal for the US in the way that it once was: rather than being a universal relationship in the mould of the Cold War, the nature of cooperation is likely to vary according to the issue involved.
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As the focus of global affairs shifts towards the relationship between the United States and China, there is a possibility that Europe might become a freer spirit than previously, and not necessarily always prepared to do the US’s bidding. But it is important not to exaggerate any such scenario. Europe is far more likely to take the side of the United States than China’s in geopolitical arguments, whether it be Darfur, trade talks or climate change. For a variety of reasons, historical, cultural, ethnic and economic, Europe is likely to remain very closely wedded to the US in the world that is unfolding.

While the domestic debate in the United States might often suggest the contrary, ever since the Mao-Nixon rapprochement of 1972 and the subsequent establishment of full diplomatic relations in 1979, the relationship between China and US has been characterized for almost four decades by stability and continuity.
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Although it has been through many phases - the axis against the Soviet Union, the reform period and modernization, Tiananmen Square and its aftermath, China’s rapid growth and its turn outwards in the late 1990s, the rise of Chinese nationalism, and of course a succession of US presidents from Nixon and Reagan to Carter and Clinton - the relationship has remained on an even keel, with the United States gradually granting China access both to its domestic market and the institutions of the international system, and China in return tempering and dovetailing its actions and behaviour in deference to American attitudes. The rationale that has been used to justify the US position has been through various iterations during the course of these different phases, but there has been no shrinking from the underlying approach. It may not be immediately obvious why the US ruling elite has been so consistently supportive of this position, but the key reason surely lies in its origins. The Mao-Nixon rapprochement was reached in the dark days of the Cold War and represented a huge geopolitical coup for the United States in its contest with the Soviet Union. That created a sense of ongoing loyalty and commitment to the relationship with China that helped to ensure its endurance.

China’s relationship with the United States has remained the fundamental tenet of its foreign policy for some thirty years, being from the outset at the heart of Deng Xiaoping’s strategy for ensuring that China would have a peaceful and relatively trouble-free external environment that would allow it to concentrate its efforts and resources on its economic development.
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After Tiananmen Square, Deng spoke of the need to ‘adhere to the basic line for one hundred years, with no vacillation’,
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testimony to the overriding importance he attached to economic development and, in that context, also to the relationship with the United States.
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It was, furthermore, a demonstration of the extraordinarily long-term perspective which, though alien to other cultures, is strongly characteristic of Chinese strategic thinking. The relationship with the United States has continued to be an article of faith for the Chinese leadership throughout the reform period, largely unanimous and uncontested, engendering over time a highly informed and intimate knowledge of America.
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The contrast between China’s approach towards the United States and that of the Soviet Union’s prior to 1989 could hardly be greater. The USSR saw the West as the enemy; China chose, after 1972, to befriend it. The Soviet Union opted for autarchy and isolation; China, after 1978, sought integration and interdependence. The USSR shunned, and was excluded from, membership of such post-war Western institutions as the IMF, the World Bank and GATT; in contrast, China waited patiently for fifteen years until it was finally admitted as a member of the WTO in 2001. The Soviet Union embarked on military confrontation and a zero-sum relationship with the United States; China pursued rapprochement and cooperation in an effort to create the most favourable conditions for its economic growth. The Soviet Union was obliged to engage in prohibitive levels of military expenditure; China steadily reduced the proportion of GDP spent on its military during the 1980s and 1990s, falling from an average of 6.35 per cent between 1950 and 1980 to 2.3 per cent in the 1980s and 1.4 per cent in the 1990s.
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The strategies of the two countries were, in short, based on diametrically opposed logics.
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The Chinese approach is well illustrated by Deng’s comment: ‘Observe developments soberly, maintain our position, meet challenges calmly, hide our capacities and bide our time, remain free of ambition, never claim leadership.’
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It goes without saying that the relationship between China and the United States during the reform period has been profoundly unequal.
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China needed the US to a far greater extent than the US needed China. The United States possessed the world’s largest market and was the gatekeeper to an international system the design and operation of which it was overwhelmingly responsible for. China was cast in the role of supplicant, or, as China expert Steven I. Levine puts it, the United States acted towards China ‘like a self-appointed Credentials Committee that had the power to accept, reject, or grant probationary membership in the international club to an applicant of uncertain respectability’.
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In the longer term, when China is far stronger, this rather demeaning experience might find expression - and payback - in the Chinese attitude towards the United States; it might be seen by them to have been another, albeit milder, expression of their long-running humiliation.

Compared with China’s huge investment in its relationship with the United States, the American attitude towards China, so far at least, stands in striking contrast. Its relationship with China has been seen by the US as one of only many international relationships, and usually far from the most important. As a result, American attention towards China has been episodic, occasionally rising to near the top of the agenda, but for the most part confined to the middle tier.
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During the first Clinton administration, for example, China barely figured.
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Although George W. Bush made strong noises against China during his first presidential election campaign, describing it as a ‘strategic competitor’, China sank down the Washington pecking order after 9/11 and relations between the two rapidly returned to the status quo ante.
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In line with the differential investment by the two powers in their relationship, China’s impressive knowledge of the United States is not reciprocated in Washington beyond a relatively small coterie.
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Following the collapse of the Soviet Union and the passing of the Cold War, the US was obliged to rethink the rationale for its relationship with China.
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It was not difficult. With its embrace of the market and growing privatization, China was seen, not wrongly, as moving towards capitalism. Furthermore, given China’s double-digit economic growth and its huge population, it was regarded as offering boundless opportunities for US business.
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China became a key element in the American hubris about globalization in the 1990s, an integral part of what was seen as a process of Westernization which would culminate in the inevitable worldwide victory of Western capitalism, with the rest of the world, including China, increasingly coming to resemble the United States. Many assumptions were wrapped up in this hubris, from the triumph of Western lifestyles and cultural habits to the belief that Western-style democracy was of universal and inevitable applicability.
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George W. Bush declared in November 1999: ‘Economic freedom creates habits of liberty. And habits of liberty create expectations of democracy . . . Trade freely with China, and time is on our side.’
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Or as Thomas Friedman wrote: ‘China’s going to have a free press. Globalization will drive it.’
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It was regarded as axiomatic, American author James Mann suggests, that, ‘the Chinese are inevitably becoming like us’.
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This view, which is still widely held, burdens American policy towards China with exaggerated expectations that cannot possibly be fulfilled.
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The idea of globalization which lay at its heart was profoundly flawed.