With the US still trying to pressure China, its biggest competitor and its closest trade partner, what could be the true nature of the most controversial relationship of the two superpowers, the old and the rising? Radio VR is discussing it with Dr. Oh Ei Sun, Senior Fellow at the S. Rajaratnam School of International Studies (RSIS) in Malaysia, and Dr. Ron Huisken, Senior Fellow at the Strategic and Defence Studies Centre in the School of International, Political and Strategic Studies in Australia.
Speaking at the opening of the APEC Finance Ministers' Meeting held in Beijing on the 22 of October, Chinese vice-premier Zhang Gaoli said China is willing to work with various economic bodies and take steps towards regional integration and sustainable development. "We are willing to take on a broader horizon and take resolute steps to strengthen reform and innovation for mutual benefit and win-win cooperation," he said.
Two big-bloc trade agreements have emerged in the region — the US-led Trans-Pacific Partnership and the China-led Regional Comprehensive Economic Partnership, each with overlapping but separate sets of members. China is also pushing for an APEC-wide free trade zone by 2025, known as the Free Trade Area of the Asia Pacific, at the APEC leaders' summit next month.
The finance meeting was originally slated to be held in Hong Kong but was then moved to Beijing as HK protests have escalated. US has made itself clear it was supporting the protesters, obviously irritating Beijing weeks before President Obama’s visit there.
In fact US has been sending mixed signals in its relations with China – its closest trade partner and – largest competitor. So what exactly is the US strategy in China?
Dr Oh Ei Sun: I think the US has a very mixed attitude towards China. On the one hand, because the economic situation in the US is still not quite picking up, whereas that in China is still going full steam ahead, of course, the US would like to benefit from some of the economic cooperation with China – in trade and in investment, and so on.
But, on the other hand, I think the US is still very keen on pushing some of its traditional concerns. For example, the concerns on human rights, the concerns with respect to the rise of China and the increasing assertiveness of China in the Asia-Pacific area. So, when you see these two sides of the US playing now against each other, sometimes you have a very confusing message.
Do I get it right that one of the particular concerns of the US is the currency issue?
Dr Oh Ei Sun: Traditionally the US Dollar has been used as the so-called currency of settlement for the international trade. But increasingly in the Asia-Pacific area, especially between China and some Southeast Asian countries, such as Malaysia and Singapore, and various other countries, you see that increasingly the Chinese currency Renminbi is being used as the currency for settlement.
So, in the long run, of course, this is going to diminish the important role played by the US in terms of having a larger say in the international trading system. But, on the other hand, the US now has to really focus on reviving its own economy, because without doing so, it will be very difficult to persuade the rest of the world to continue following its economic leadership.
And how do you think the US might react to that currency threat? Do you think that the current administration is likely to resort to some kind of aggressive action to suppress this trend?
Dr Oh Ei Sun: I think that this has been going on since quite some time. And as far as I could remember, back in 2008 I was giving an interview about the use of the Renminbi as a settlement currency. The US over these years would like not to see that sort of settlement activity prosper. But I think it doesn’t quite help, because individual countries which have large volumes of trade with China, increasingly they are using the Renminbi to settle with China in terms of bilateral trade.
In terms of multilateral trade, for example, some raw materials that go from the southeast Asian countries to China for processing and then, finally, to the US for the final assembly and so on – in that kind of multilateral trade the US Dollar is still very much the currency for settlement.
So, getting back to Mr. Obama’s visit to China, what the expectations in Beijing are? And what the expectations in the region are?
Dr Oh Ei Sun: Well, the expectations in the region would, of course, be that the US and China – these two superpowers in the region – would not play their proxy game in the region by means of using the respective client states in, for example, duking it out in the South China Sea or in the East China Sea and so on, because that obviously destabilizes the region, and thereby is no conducive for economic development.
On the other hand, in terms of both the US and China, I think at this point in time both sides are also looking forward to sort of stress upon those areas where they could cooperate. For example, one very obvious area where they could cooperate with each other would be antiterrorism, because it is not only the recent outburst of this ISIS in the ME. In China, for example, you also see restlessness in the western part of China, in the Xinjiang region and also various acts of terrorism in various parts of China. So, as far as other countries in the region, they share a lot of concerns for the widespread terrorist activities in the region.
Dr Ron Huisken: As this interview suggests, it is perhaps the most consequential bilateral relationship in the world at the present time. It is a very complex one and, I think it is fair to say, an increasingly antagonistic one.
If you look back over the last, say, five or six years, there is no surprise whatsoever that Washington would be supportive of the thrust of the complaints of the Hong Kong protesters. I mean, this is an understanding that Beijing gave when it took Hong Kong back, that it is prodemocracy and so on.
The US cannot do anything other, than be supportive without being interfering. You know, they advise Beijing to talk to the protesters, try to accommodate their concerns and urge them, of course, not to crack down in any hard way, which would make it harder for the US not to respond in a harder way also.
So, I think that the Hong Kong question is indicative of the difficulties, if you like, between the two countries that are so vastly different in their practices of governance, as well as culture and the historical traditions, and so on.
But certainly, when Obama travels to China this time, it already seems a very long time since President Xi went to California to some events there and that famous “casual” summit. It is more than twelve months, but even so, so much has happened and so much has got harder.
And the biggest question, I suspect it to be on Obama’s agenda, is – what he can do to improve the climate between Tokyo and Beijing. I think that relationship has become so icy and so lacking an even normal communication, that it is quite troubling. And because it is a major US ally, the US could not avoid direct involvement in any significant further deterioration of relations between Japan and China.
Like you are saying, the relations have been deteriorating so fast. Where is it going to take the US? As far as I understand, China is prepared for a long confrontation. They don’t seem to be as vulnerable, as the US seems to be. Or is my vision wrong?
Dr Ron Huisken: No, I think it is a very insightful comment and a very correct one. Particularly, with respect to East Asia, of course, that is China’s neighbourhood. They are close to all those scenes of difficulty and confrontation and the US is an ocean away. So, the tools it has available to shape the events as they unfold, are much more indirect, than those available to China.
And as we’ve just seen yet again, whenever the US needs and wants to pay close attention to East Asia, something comes up, typically in the Persian Gulf region, but in the recent times also vis-à-vis Russia and Ukraine, and so on. And that sucks all of its attention away from China, Japan and the Western Pacific. And that’s happened now again partly with Ukraine, partly with the ISIS.
It is hard to measure these things. The US has been the global power for a long time. They can do many things at once. But the fact is that, like any system, they have a handful of people at the very top, who have to make final decisions on the big issues.
And the big question they are wrestling with at the moment concerns how far do we go in assisting the Iraqis, and how do we operate in Syria and so on. If that is sucking up all their time, they are not being as thoughtful, as perhaps they should be about the East Asian affairs.
But is it that they have suddenly or, perhaps, not so suddenly decided to revise their strategy in that part of the world. Several years ago there’s been a lot of speculation that at the times of Kissinger the US was making serious attempts to engage China, and nothing seems to be indicating that China is or has been reluctant to further develop its ties with the US. So, what happened to the US?
Dr Ron Huisken: Again, I think there is a lot of truth in that. And the complicated answer, I think, and maybe more complicated than I can possibly give, but one big factor there is that in the last decade or so China has witnessed the US, which under George Bush back in 2001, before September 11, made it clear that the US was going to develop and manage its relationship with China very carefully, from the point of view that China was a potential adversary of the US.
And then, the US watched 9\11 happen. They watched the US make that horrible bungle over Iraq – political, economic and military bungle. Then, the global financial crisis. So, within less than ten years they are confronting Washington which seems to be prepared to ensure that Beijing’s revival would be not at the cost of US interests.
The US was an entirely different power by the time the Obama administration came in, a much diminished power, not just within economy in a bad shape, but a country that no longer commanded the respect and admiration, and trust over the rest of the word to the degree that it had for so long.
Now, Obama has done a lot to fix that, but he still has an economy which is quite shaky. The US now faces the certainty that China will in the next ten years become the largest single economy in the world and, therefore, more able to do more things than the US even.
So, the assessments in Beijing, I think, just in less than a decade would have switched from – at least we need to be very accommodative of the US, our economic growth depends very much on them, they are a much more powerful state than us, so we don’t want to have any trouble with them; now I think Beijing is thinking – well, if things are important to us, we can push and, if necessary, we can push the Americans away or aside.
So, a very different mindset, I think, prevails in the two capitals, if you can imagine the Obama’s visit in November 2014 and, say, George Bush going to China sometime in the early 2000s.