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As the U.S. Pivots to Asia, China Sticks to Soft Power

China is playing down U.S. Defense Secretary Leon Panetta’s recent visit to Vietnam, where he announced plans for a ramped-up U.S. military presence in the Asia-Pacific. Yesterday a spokesman at China’s Foreign Ministry called the plans for more U.S. warships “out of keeping with the times,” a blasé reaction to Washington’s new grand strategy. Similarly, Lieutenant General Ren Haiquan of the People’s Liberation Army distanced the PLA from a military faceoff with American forces, saying China would “intensify its vigilance, but not lash back, in response.”

A slightly sharper note was sounded in other comments by Liu Weimin, a foreign ministry spokesman quoted by Voice of America:

“All parties should contribute to maintaining and promoting peace, stability and development in the region,” Liu said. “Deliberately highlighting the military and security agenda, deploying more military forces and strengthening military alliances in the Asia-Pacific region are inappropriate.”

Another commentary in the English-language, government-linked People’s Dail Online seems to be taking direct issue with some points we’ve made at Via Meadia.

some Western media’s opinions, China is strengthening its economic ties with its surrounding countries because it wants to enlarge its sphere of influence, Japan is increasing its investment and support to Myanmar because it wants to make sure that Myanmar will not be pulled over to China’s side, and Indian Prime Minister’s visit in Myanmar is aimed at “competing for international influence with China.”

Regarding the seemingly sharp and in-depth analyses by Western media, it is necessary for us to emphasize two points.

First, the so-called “sphere of influence” is an old phrase that does not fit the current times. China, which insists on a peaceful development road, has completely different diplomatic ideas from past hegemonies, and current small and medium countries also will not give their own destinies to the hands of big countries.

Second, there are indeed competitions among big countries, but as long as these competitions are based on internationally-accepted principles, these competitions are virtuous and will not lead to turbulences. On the contrary, they will promote the regional and even global economic development.

Of course, this non-confrontational attitude isn’t because Beijing likes what it sees in the U.S. Asia pivot; rather China has concluded that it can’t stop new U.S. deployments, and Beijing’s diplomats are smart enough to know that railing against something you can’t affect makes you look petulant and weak. (Perhaps their U.S. counterparts could take this lesson to heart in dealing with the Syrian question.)

But even if more liberal and (in our view) forward-thinking analysts in China are ready to embrace the kind of non-zero sum thinking behind the People’s Daily commentary, other powerful forces in China will not take America’s maneuvering lying down. It will be a long time if ever before China can challenge the U.S. militarily, so look for Beijing’s next move in the sphere of economics. China can attempt to mobilize an army of lobbyists and consultants into a force that could pressure the U.S. government on issues of interest to Beijing. By promoting the well-being and power of friends in governments abroad, Beijing can convince its neighbors to further a pro-China agenda.

There’s no doubt that China sees its economic clout as a reliable form of soft power—and soft power works. For example, in 2009, China overtook the U.S. as Africa’s chief trading partner; now Africa is China’s second largest overseas labor market and fourth largest destination for outward investment, according to China Daily. China’s diplomats now get a much more respective hearing in many African capitals than they used to and the European powers who long thought of Africa as their back yard have had to move over and make room for China.

Military deployments and stronger strategic ties with allies in Asia are a first step in an American grand strategy for the region, but without complementary economic steps (including a renewal of the power of America’s own economy), China’s counter moves will become increasingly effective over time and increase the risks that a healthy competition could become more dangerous and less stable.

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  • J R Yankovic

    “First, the so-called ‘sphere of influence’ is an old phrase that does not fit the current times. China, which insists on a peaceful development road, has completely different diplomatic ideas from past hegemonies, and current small and medium countries also will not give their own destinies to the hands of big countries.”

    Wonderful if they’re telling the truth. And, of course, a Beijing leadership genuinely eager to embrace a South Korea- or Taiwan-style path of political evolution would be much more likely to BELIEVE and act upon statements like these, and not just make them.

  • Luke Lea

    I think the Politburo may be preoccupied with other issues at the moment — not only the unsolved problem of succession, but the slow down in the economy and all that implies.

    I hadn’t realized til yesterday how totally dependent the PRC was on foreign direct invesment. It generates roughly a third of GDP, 20 percent of revenues, and over half of exports. Plus local party bosses, at the municipal level, are dependent on it to meet growth targets, on which their careers depend: new foreign-owned factories generate the revenues that finance the real estate projects (apartment complexes especially) which show up as local GDP. Municipalities compete for this foreign direct investment much as states in this country compete for new Japanese automobile plants. They offer similar incentives: cheap land, tax holidays, whatever it takes.

    I learned all this by reading parts of Foreign Direct Investment and Urban Growth in China by Lei Wang, especially the introduction and the chapters on the growth of the urban real estate sector (iv) and competition for manufacturing (v).

    This book is invaluable. Too bad it costs over $50 used. Google preview and Amazon’s look inside are all I could get.

    We have so much to learn about China.

  • Luke Lea

    I think I erred about foreign direct investment generating one third of China’s GDP. What I should have said is that it represents one third of annual new fixed investment. Since the other two-thirds is largely composed of government infrastructure projects (freeways, high-speed rail, airports, etc) you can see how important foreign direct investment is to the growth of the Chinese economy (whose true rate, btw, is largely unknown: Chinese statistics don’t have error bars, and everybody lies like crazy when the subject is money.

  • Jacksonian Libertarian

    China’s export model economy which is built on manipulating their currency to give their exporters a price advantage, is failing. This makes dependence on economic soft power to counter US Military deployments in Asia, a weakening card to play.

    I think it’s likely that China will go into an economic depression similar to Japan’s now 2 decade old depression, and for the same reason. That reason being excessive holdings of foreign currency reserves which negate further currency manipulations and causes deflation in their own currency. This would make the playing of China’s economic soft power card laughable.

    China now holds a total of $3 Trillion in foreign currency reserves, $1.15 Trillion of which is US Treasuries. The stupid Chinese Communists thought they were cheating the clueless Capitalist Americans and getting all their money, but mercantilism doesn’t work with fiat money. All they really accomplished was to overpay for the foreign currency to begin with, and according to the “Law of Supply and Demand” as the foreign currency supply in their accounts increased it decreased in value costing them even more (if they now try to sell all the Treasuries they will flood the market and they will have to sell them at a deep discount to move them). And last they’ve trapped themselves in an export model economy, whose businesses have become dependent on the price advantage the currency manipulation gives them, take away the advantage and they’re no longer competitive. This means once they stop the manipulation their economy collapses, other countries will take much of their market share, and they are left with a deflationary depression, and lots of foreign currency of vastly reduced value to spend. The spending of which won’t boost their economy and will boost the foreign nations economies in the best way possible, with the return of capital, and a trade surplus boost to GDP.

  • Luke Lea

    Lei Wang’s Foreign Direct Investment and Urban Growth in China also shows how “hot money” from abroad fuels the Chinese real estate market: it is a highly speculative market in which prices are as out of touch with the average resident’s income to the same if not a greater extent than they were in L.A. before the sub-prime mortgage crisis.

    This is not going to end well.

  • Kenny

    “It will be a long time if ever before China can challenge the U.S. militarily,..”

    Bingo, Mr. Mead. You got it.

  • Luke Lea

    Does anybody know the difference between a 17% value added tax (VAT) on Chinese imports and a 17% tariff? I don’t.

    Unlike the VAT tax in Europe, which is used to finance social welfare programs, most of the revenues in China are spent on Party salaries and other expenses which don’t benefit ordinary people.

    again, hat tip to Lei Wang

  • Luke Lea

    Because there is no social insurance in China, workers save close to half their wages for a rainy day, which they deposit in state-owned (and Pary controlled) banks at artificially low interest rates. The banks lend that money (under Party orders) to state owned enterprises (SOE’s) to build freeways, apartment complexes, and other such projects that have small chance of ever paying it back.

    Someday, when workers start to withdraw their savings in large amounts, it won’t be there unless the government decides to print it. Either way the workers will be left high and dry: riots and inflation are most certainly in the cards.

    Talk about a Ponzi scheme.

  • Bob Larkin

    What is a “more respective hearing”?

  • Rick

    Is the ‘People’s Dail Online’ the rag of the Communist Party of Ireland?

  • walter grumpius

    “There’s no doubt that China sees its economic clout as a reliable form of soft power—and soft power works.”

    Economic clout is not “soft power” — just ask Krupp and GM and Mitsubishi back in 1942.

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