China's Rising Influence in Asia

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China's Rising Influence in Asia No. 231 Strategic Forum April 2008 Institute for National Strategic Studies National Defense University http://www.ndu.edu/inss China’s Rising Influence in Asia: Implications for U.S. Policy by Ellen L. Frost, James J. Przystup, and Phillip C. Saunders the balance of influence. A concerted effort to regional security behavior was mixed, to say the Key Points refocus and enhance U.S. engagement with least. China maintained assertive positions on Asia is sorely needed. This should include its territorial and sovereignty claims and some- The balance of power in East Asia is stable active and high-level participation in regional times used military means to reinforce its posi- and favors the United States, but the balance diplomacy, enhanced cooperation on nontra- tions. In February 1995, China seized Mischief ditional security issues, welcoming a con- of influence is tipping toward Beijing. China’s Reef in the South China Sea, and its military growing weight stems from its size and market structive Chinese regional role, and develop- ment of a comprehensive, government-wide forces conducted military exercises and mis- dynamism, reinforced by newfound military sile tests near Taiwan in July-August 1995 and restraint and skillful diplomacy that have strategy to pursue the full range of American enhanced its ability to translate power into objectives in Asia. March 1996—both provoking critical reactions influence. The shift in the balance of influence, from the region and the United States. if unaddressed, could undermine U.S. interests. China’s Resurgence Beijing’s concerns about the unfold- China’s regional goals include expanding ing “China threat” debate prompted a signifi- Chinese influence, isolating Taiwan politically, Asia’s strategic landscape is shifting. With cant adjustment in its approach to the region.1 marginalizing Japan, maximizing energy secu- colonialism and the Cold War now distant memo- Chinese leaders decided that economic modern- rity, and limiting vulnerability to U.S. pressure ries, regional political alignments are more flex- ization and the maintenance of domestic sta- without stimulating balancing behavior. Beijing ible, open-ended, and constructive than they have bility required constructive relations with the has sought to avoid confrontation with Wash- th ington and to reassure its neighbors of China’s been since the mid-20 century. Region-wide United States and a peaceful environment in benign intentions. Most East Asians now view stability and the adoption of market-oriented eco- Asia. These goals in turn demanded restraint China as a key trading partner and an economic nomic policies have unleashed growth and sparked in the use of military threats and active efforts opportunity rather than a threat. record levels of trade and investment. The peace- to reassure neighboring countries of China’s China’s influence in Asia does face limits. ful management of disputes has become the rule benign intentions. Its booming export industries depend on imports rather than the exception. This policy reorientation included, or was from other Asian countries, and its military Of the various structural changes mark- at least consistent with, more diplomatic engage- power lags far behind that of the United States ing this new landscape, none stands out more ment with other Asian countries, skillful use of and will continue to do so for the foreseeable future. Severe social and environmental prob- than China’s resurgence as the leading power in commercial diplomacy (including trade agree- lems tarnish China’s image. East Asia. China’s combination of a large and ments, foreign aid, and investment), and a more Asian elites regard China’s military buildup growing economy, newfound military restraint, welcoming approach to participation in regional as primarily aimed at Taiwan but harbor a and skillful diplomacy is a recipe for expanded institutions. Beijing now plays a constructive residual wariness about China’s long-term influence. Its growing regional role reflects role in the Asian integration movement and has intentions. East Asian governments are hedging both an increase in underlying power resources embraced interactions with regional organiza- by engaging China bilaterally and multilaterally (fueled primarily by rapid economic growth) tions such as the Association of Southeast Asian while maintaining security ties with the United and improvements in Beijing’s ability to trans- Nations (ASEAN).2 Most East Asian officials and States and encouraging a larger Japanese and late power into influence via effective diplomacy. defense intellectuals now see China as a status- Indian regional role. A perceived U.S. neglect of the region, Until the mid-1990s, China was wary of quo power, at least for the foreseeable future. coupled with American preoccupation with regional organizations, preferring to deal with China’s strengths in the region should the war on terror, is accelerating the shift in other Asian governments on a bilateral basis. Its not be exaggerated, however. Its soft and hard No. 231, April 2008 Strategic Forum 1 power alike lag far behind the United States. has grown tenfold. In 2004, China overtook up the fastest growing product category of traded Much has been made of China’s alleged soft Japan to become the world’s third largest trad- goods, accounting for roughly a quarter of both power, but its behavior and stated intentions ing economy, and in the following year, trade Asian exports and imports as opposed to 16 to 18 reflect adjustment to Southeast Asian norms, reached a ratio of 69 percent of China’s nominal percent 10 years earlier.7 not vice versa.3 Moreover, China’s domestic gross domestic product (GDP). (The equivalent In the 1970s and early 1980s, when China’s political stability remains vulnerable to poten- ratios for Japan and the United States are about economy was relatively autarkic, Japanese com- tial moves by external actors that lie largely 25 percent.) In some coastal provinces, this ratio panies pioneered production networks in Asia by outside of Beijing’s control. These include deci- exceeds 100 percent. In 2007, China’s foreign investing heavily in South Korea and Southeast sions affecting the future of Taiwan, the fate of exchange reserves exceeded $1.5 trillion, and its Asia. China has now moved from the periph- the North Korean regime, the legacy of Japan’s current account surplus surpassed $262 billion.4 ery to the center of these arrangements. Many wartime record, and the outcome of territo- Although the world sees China as a giant Asian exports formerly destined for the United rial disputes in the East and South China Seas. export machine, imports have also soared. Until States or Japan now go to China for further pro- Also relevant to China’s domestic future are 2004, when the Chinese government began cessing before being reexported to global mar- possible U.S. moves to restrict Chinese imports, to take steps to restrain domestic investment kets, especially North America and Europe. Just American and European pressure to revalue growth, rising imports kept pace with rising as individual Asian countries have become more the yuan, and the possibility of a global reces- exports, and China avoided large trade deficits dependent on China, China likewise has become sion. Any combination of such events could stall or surpluses. The Chinese economy is now more dependent on global markets. China’s economic modernization, thwart rising open than the Japanese and Korean econo- High-technology products illustrate the new expectations, and threaten domestic stability. mies were at comparable stages of development. pattern. In 2005, China was not only the third larg- East Asian elites are well aware of Between 2000 and 2005, imports into China est exporter of electronics products and components China’s severe social and environmental prob- nearly tripled, from $225 billion to $660 billion. (up from tenth in 2000) but also the second largest lems, authoritarian political system, and ugly Imports as a ratio of GDP skyrocketed from 4 importer (up from seventh in 2000). Technology- human rights record. They have no intention percent in 1978 to 30 percent in 2005—two and of becoming dominated by China or anyone three times larger than the ratio in the United China’s surging else. They respect American power, even if they States and Japan, respectively.5 Imported parts economy—not its culture, think it is misused. Virtually all of them want and components account for over 50 percent of educational system, or the United States to engage with the region China’s exports and in some manufacturing on a more sustained and high-level basis. It sectors perhaps as much as 75 percent. government—commands is China’s surging economy—not its popular Foreign direct investment (FDI) in China the most respect culture, educational system, or form of gov- has grown even more rapidly than trade, ernment—that commands the most attention playing a crucial role in transferring the cap- intensive exports assembled in China typically and respect. ital, technology, contacts, and management consist of high-tech components imported into skills that have supported China’s economic China from Japan, South Korea, Taiwan, and the China’s Market Power takeoff. Initial foreign investments came pri- Philippines combined with lower-tech components marily from ethnic Chinese living outside of and raw materials imported from the rest of Asia. China’s size and market power convey lever- China. Sources of investment diversified
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