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An Insider's Guide to Washington's China War

John Lee

When it comes to U.S.-China policy, Washington is broadly separated into two camps: the “functionalists” and the “strategists.” And as the two countries have met in Washington this week, the internal debate has begun to unfold. U.S. President Barack Obama told his counterparts that Washington and Beijing should be “partners”; Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner wrote a joint op-ed in the Wall Street Journal calling for broad “strategic level discussions.” Make no mistake: The functionalists are winning.

The functionalists tend to be economists and those concerned with the U.S.-China economic relationship. The United States and China are so economically intertwined, the functionalists argue, that they ought to be strategic partners as well. Win-win cooperation — not zero-sum competition — is a very achievable goal. Barriers between the two countries are transactional, and any tensions are usually due to mere misunderstanding. Yes, there are profound disagreements, but fix the practical problems, and many obstacles toward a fruitful partnership will eventually melt away. In fact, they will have to melt away — out of necessity on both sides. As Clinton and Geithner put it, quoting a Chinese proverb, “When you are in a common boat, you need to cross the river peacefully.”

“Strategists,” however, don’t see quite such a rosy picture. For them, the U.S.-China relationship is one of strategic competition — an irreversible rivalry already well under way. Sure, Washington and Beijing ought to improve their interactions and mutual understanding to minimize friction. But any such cooperation is tactical, nothing more. Underlying all bilateral interactions, the strategists believe, is a fundamental clash of interests and values that can be managed but never solved unless the values and interests of either Washington or Beijing change — and that’s highly unlikely.

Amid global recession, at a time when China owns a hefty sum of U.S. Treasury bonds, it’s easy to see why the functionalists have the upper hand. The Chinese economy is ticking at an enviable pace that many hope will spur global (and U.S.) growth back to life. Encouraging economic growth in China has the doubly touted benefit of accelerating the prospects for domestic political reform. China could, over time, become a willing participant in — and even defender of — the  liberal regional order in Asia, the functionalists believe.

But there’s a logic leap here, overlooked to America’s peril. As China grows richer, it is the state-controlled sectors of the economy that are growing more powerful, not the independent private sector — which has been deliberately suppressed. Of the roughly 1,500 companies listed on the Shanghai and Shenzhen Stock Exchanges, less than 50 are genuinely private. As much as 95 percent of Beijing’s $586 billion economic stimulus package, announced last November, will go to state-controlled enterprises. This makes China Inc. more powerful but does not push it closer to political reform. On the contrary, it has offered the Chinese Communist Party better and more resources to entrench its power and position in the country’s economy and society.

The implications go well beyond China’s borders, strategists warn. As Beijing’s power grows, it will be less inclined, not more, to uphold the current regional order in Asia. In a recent study of 100 recent articles by more than two dozen of China’s top strategic thinkers, I found that four of every five articles spoke of circumventing, reducing, or superseding U.S. power and ideas in Asia. China views the liberal order as one designed to preserve American hegemony in the region. Even if Beijing has so far benefited enormously from rising up within the existing order, it might not be so friendly to it once it’s risen far enough.

Washington’s strategists cannot prevent China’s rise, nor do they want to. But they do argue that the country’s strategic ambitions must be constrained, especially in Asia. That will mean enmeshing China in the regional hierarchy that is underwritten by U.S. alliances with Japan, South Korea, Australia, Thailand, the Philippines, Singapore, Indonesia, and increasingly, India. Acutely aware of this existing dynamic, China prefers to deal either with Washington or Asia — never both.

This is why the “G-2” approach to U.S.-China relations is more dangerous than reassuring. Strategists fear that such a top-level dialogue of equals, discussing non-economic issues such as security and regional institutions, would offer Beijing precisely the strategic billing it desires from Washington — with little in return. Already, U.S. allies in Asia — basically the whole region minus Myanmar, North Korea, Cambodia and Laos — fear that U.S. leverage over Beijing will be too easily given away.

As advantageous as functionalists’ win-win U.S.-China cooperation may seem, the hidden loser may well be Asia, where most states see the current U.S.-led power structure as the best guarantee of continued peace and stability. Rushing into a G-2 approach – the kind that Washington functionalists prefer — would jeopardize much of this.

Unfortunately, so long as economic matters dominate, functionalists may well win the day. Others in Washington and throughout Asia can only hope that too much U.S. leverage on China is not whittled away in the meantime.

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