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China's external relations

A Note by the Director (Ditchley 2001/05)
 
(A joint conference with the Southern Center for International Studies in Atlanta, Georgia)
 
8-10 June 2001
Over the weekend of 8-10 June we enjoyed the generous hospitality of the Southern Center for International Studies in Atlanta where we met to examine China’s external relations.  At an early stage in the conference there was agreement that engaging with, and assisting, China’s entry into the world order would prove one of the most important challenges of the 21st Century.  We also agreed that China’s foreign policies could not be properly understood without close reference to its domestic reforms.  And although we looked separately at the political, economic and security elements in China’s external policies we concluded they were all so closely inter-connected that it was impossible to assess the significance of one without bearing in mind the others.
At the outset we identified a number of general propositions which applied to anyone attempting to reach a realistic assessment of China’s policies and their likely development.  The view of China from abroad, and from within, differed greatly.  From the outside China appeared to be a rapidly growing power, bound to disturb the regional, and probably, the global balance.  Viewed from inside, China’s position might seem highly precarious.  Problems confronted its leaders on all sides.  These included an apparent encirclement by allies of the US together with the enormous preponderance of US military and economic power;  a range of domestic difficulties which included overpopulation, environmental problems, technical backwardness, a flawed financial system and an attempt to implement deepseated economic reforms while maintaining a policy of democratic centralism.  Throughout our discussions we returned to the difficulty of reconciling this mismatch of perceptions between the main actors involved in China’s future development.
One of our participants set out a wish list of desirable developments in China, as seen by its major western partners.  This comprised:
a        An open market and financial system;
b       An acceptance of the rule of law both internationally and nationally;
c        The observance of human rights in practice;
d       Peaceful handling of the Taiwan issue;
e        Responsible regional behaviour;
f        No proliferation of WMD technologies.
These considerations came up in various forms and in various ways as we examined the different strands of China’s external relations and possible western policy responses.
We asked ourselves how we (mainly the industrialised countries of “the West”) might deal with a re-emerging China, what was the nature of political change in China and to what extent external actors might be able to influence these processes.  Although it was suggested that some might favour a policy of containment and that some, including possibly senior figures in the new US Administration, might be inclined to view China as a potential threat, the majority view was that engagement with China was a more advantageous policy.  Engagement might take place at a number of levels.  Intergovernmental Organisations would play an increasingly important role – China’s forthcoming membership of the World Trade Organisation was described as a watershed.  Direct Intergovernmental Relations were also important, with the relationship with the USA in a category of its own.  The Europeans were seen as having an easier relationship – one participant suggested that this was because both China and Europe could interact as civilisations rather than nation states.  And finally there was an increasing network of relations at non-governmental level whose effects were hard to quantify but whose influence should not be dismissed merely on the grounds that the organisations on the Chinese side were, to a degree, officially sanctioned. 
We were reminded of the importance of symbols in Chinese thinking.  At times an issue might be elevated to a high symbolic level, out of apparent proportion to its real weight, and result in rigidity on the Chinese side.  Such issues as Taiwan and the recent EP3 incident were examples where public opinion had exercised considerable influence on the Chinese leadership.  Many political problems were thought to be the result of incomplete economic reforms.  The leadership was in a transitional phase from a command economy.  This was having a profound effect on both the economic and political structures, and no one was clear exactly where these reforms would lead.  In dealing with the Chinese political leaders we thought that megaphone diplomacy was counter-productive.  But we were reminded by one participant that the Chinese practice of dealing sensibly with specific issues in confidential negotiations, but then playing to the gallery by making aggressive and distorted public statements, was also not conducive to building trust with their partners.  Overall, however, the importance of understanding Chinese culture and the way they think, was emphasised.  This was essential if westerners were to interpret their actions correctly.  Erudite comparisons were made between poker, chess and GO (wei ji) to illustrate this point. 
While there was general agreement that “we” should engage with China in many ways which could include regular visits to China at a high political level, promoting multilateral and bilateral dialogue covering human rights, economic and political reform, as well as a variety of contacts at non-governmental level, we were cautioned that external forces would probably only have a marginal effect on developments in China.    Its internal dynamics would be far more important.  It was also the case that many contacts such as travel, internet etc were not part of a coordinated policy, they were just happening.  But their cumulative effect might be considerable.  We should also not have illusions about the speed of change.  This elicited the comment that one of the unanswerable questions in assessing events in China was our capacity to judge whether the pace of change was slow or fast. Systems and practices in the industrialised countries had evolved over many years and were still evolving.  What timescale should we use to judge the pace of change in China?  We should bear in mind that the situation there now was unrecognisable from what it had been twenty or thirty years ago.  Another participant pointed to the accelerating nature of change in the past decade as a result of the electronic revolution.
Some of us expressed disquiet over the new US Administration’s policy and rhetoric on China.  There was uncertainty about its effects and where it might lead.  Others thought that these concerns were exaggerated.  Those with experience of policy formation in Washington suggested that US policy would take some time to evolve and that we should avoid premature judgements.  There was, however, general endorsement of the view that those governments with major interests in China should devote more resources to studying the country in greater depth and, that, without giving the impression of ganging-up on China, an informed and continuous exchange of views across the Atlantic would be of mutual benefit.  To this was added the rider that Western governments would do well to explain to their own domestic audiences what the issues and priorities were in their dealings with China. If they did not they risked pressure from single issue groups distorting their policies.
In a discussion of security issues we looked in depth at the handling of Taiwan and its effect on China itself as well as on its neighbours and partners.  Taiwan seemed to be the exception to China’s generally defensive strategic disposition.  Taiwan was a major driver for China’s military modernisation plans.  It was also a major potential flashpoint where miscalculation or imprudence could trigger a crisis.  Recent formulations on Taiwan/China by Quian Quichen might indicate some flexibility but had not been followed up.  And in any event China’s room for manoeuvre was restricted by the vehemence of their past rhetoric.  A more hopeful development was the large number of Taiwanese now living and working in the Shanghai area and the thousands of Taiwanese students at Chinese universities.  We concluded that any future settlement of the Taiwan issue would have to be political, including political changes in China itself.  But even if a peaceful solution for Taiwan was found, we thought that Chinese military modernisation plans currently in train would not be abandoned, although they might slow down.  Looking more widely we thought that China’s other strategic relationships in the Asia/Pacific region did not seem particularly satisfactory from China’s point of view.  China’s attempts at proactive policies had frequently not been well executed.  Progress had been made with Russia but overall it appeared to be more an arrangement of convenience than something more lasting.  An effort had been made with India but India’s increasing closeness to the USA was an impediment.  With Japan, relations seemed, if anything, to have deteriorated, to some extent as a result of China’s own miscalculations.
In the light of these factors some suggestions were made about policies the West might adopt as confidence building measures.  One participant called for the USA to invite senior Chinese officers to attend its staff colleges.  This would help the Chinese to understand that the USA did not harbour aggressive intentions towards them.  We asked ourselves whether Europe could do more to engage China on Asian security issues.  Although there had been no consistent effort by China to involve Europe in its security concerns there might be a role for the Europeans to make clear to the Chinese that peace and stability in Asia Pacific, including in particular in relation to Taiwan, were not just a US concern.  This might also help with the USA which sometimes had the impression that when difficult messages had to be conveyed they were left on their own.
We all agreed that economic reform lay at the heart of the fundamental changes that were in train in China and influenced its external policies.  Paradoxically, the communist party, having lost any claim to ideological leadership, was now obliged to maintain its popularity and power by promoting new economic reforms.  The results had been impressive.  High growth had been combined with a 40% internal savings rate, and for the past seven years, a net capital surplus.  But we thought that China would be unable indefinitely to maintain its current growth rate, nor to escape from the normal business cycle.  Growth had also been achieved at a high environmental cost.  We were told that there had already been armed clashes over water supply in some provinces.  The Yellow River had run dry on more than one occasion.  The water table below Beijing had dropped more than 30 metres.  Water might prove to be a major internal security issue as well as a constraint on  development in the years ahead.  In terms of China’s economic relations with the industrialised countries we looked at the role of Foreign Direct Investment.  Although small in relation to total investment it had been disproportionately important in introducing advanced technology and modern business management systems into China.
We were cautioned about the precarious financial structure in China with bank and state Enterprise debt at a high percentage of GDP.  One participant commented that the system was only saved from collapse because the Government was both creditor and debtor.  Notwithstanding this tenuous position, growth continued and, on balance, the country would probably continue its reforms without a major collapse.
Many of us considered that Chinese membership of the WTO (which we thought likely by the end of the year) would give rise to significant challenges for China and for its partners.  On the face of it China would be opening its economic and financial systems to an unprecedented level of external scrutiny.  Some thought that China would seek a way round the rules if they became too onerous – “They will sign and then start negotiating”.  Others pointed out that western governments would become involved in China’s domestic affairs to an unprecedented degree.  Difficult balances would have to be struck between a long term political desire to see reform continue in China and shorter term economic and financial pressures from individual western firms claiming discrimination.  The probability was that China would not soon be able to apply fully all of its WTO obligations and would seek extended derogations.  We were unsure where the balance of advantage would lie.  Although China would be obliged to open its market to competition from Western firms and thereby run the danger of increased unemployment, there was also the possibility of considerable gains.  In 2005 the Multifibre Arrangement would lapse opening the way for China to become the dominant textile and garment exporter on the world market.  Production of integrated circuits and silicon chips was also beginning to migrate to China with potential future security problems for the West.
In discussion of economic developments the suggestion was made that some use might be made of the surplus energy resources and power production in the Siberian area of Russia to meet the needs of North West China – which the leadership planned to develop – and possibly also North and South Korea.  The Russians had proposed a regional energy forum in which such issues could be discussed and collective policies elaborated.  One participant considered that western energy companies had the technology and could put together the necessary financial resources to realise such a project.  The main missing element was the political commitment of the Governments concerned.  To assist with this it might be useful if the EU, US and IBRD could become involved.  If such a project could be realised it might make a major political and economic contribution to the region.  We hoped that this idea might be picked up and studied further since it appeared to have real potential.
We also considered whether the decentralisation inherent in the present economic reforms might make it increasingly difficult for China to implement its macro-economic policies at a national level.  Our conclusion was that this was indeed a price which China might have to pay.  The problem was compounded by the fact that China had no experience of a Federal system of government with division of powers between the centre and the provinces.
In conclusion we returned again to the question of perceptions.  Although the overwhelming balance of opinion had been in favour of engagement with China, the view from China could be very different.  Clinton had strengthened US ties with Japan.  The new US Administration was strengthening its relations with India.  The USA had failed to ratify the Test Ban Treaty, having put great pressure on China to do so.  NMD could seem like an attempt to neutralise China’s strategic capabilities.  The degree of mistrust of the US which these and other actions like the bombing of the Chinese Embassy in Belgrade, the EP3 incident etc had occasioned, could spill over into suspicion of US motives in the WTO and other areas.  And there was little doubt that accession to the WTO would create great tensions between the US and Chinese governments.  Taiwan probably remained the single biggest danger to peace in the area and for China’s relations with the West, but the Chinese leadership had little room for manoeuvre.  If its leaders were “weak” on Taiwan they would be replaced by the people.  Nonetheless in spite of what appeared to be insurmountable difficulties we ended on a cautiously optimistic note.  One experienced observer put the odds at 80/20 in favour of China muddling through on the basis of its track record over the last twenty years.  China, he thought was not a militaristic or expansionist power, and in Quian Quichen they had a world-class statesman.
This is clearly a subject to which Ditchley should return in a few years time to see whether our analysis and policy prescriptions were anywhere near the mark.  My thanks go to the Southern Center and to such a deeply knowledgeable set of participants for such an interesting and enlightening two days in Atlanta.
This report reflects the Director’s personal impressions of the conference.  No participant is in any way committed to its content or expression.
 
PARTICIPANTS
Chairman  :  The Honorable James R Sasser
Former US Ambassador to the People’s Republic of China and Senator for Tennessee
CANADA
The Rt Honourable Kim Campbell PC QC

Council Fellow, Center for Public Leadership, The Kennedy School of Government;  former Prime Minister (1993)
Mr Bruce Jutzi
Director General, North Asia and Pacific Bureau;  Department of Foreign Affairs and International Trade
CHINA
Ms Xiaoping Li
Executive Producer, Focus, a daily current affairs programme on CCTV1
FRANCE
Professor François Godement

Senior Associate and Head, Asia Center, IFRI;  Professor of Chinese contemporary history, National Institute of Oriental Languages and Civilisations, Paris
GERMANY
Ambassador Cornelius Sommer
Director for Asian and Pacific Affairs, Federal Foreign Office
RUSSIA
Dr Alexander Federovsky

Head of section for Pacific Studies, Institute of World Economy and International Relations, Russian Academy of Sciences
TAIWAN
Ms Maggie Tien

Director General, Taipei Economic and Cultural Office, Atlanta
UNITED KINGDOM
Sir John Boyd KCMG

Master, Churchill College, Cambridge;  former Ambassador to Japan
Dr Shaun G Breslin
Principal Research Fellow, Centre for the Study of Globalisation and Regionalisation, and Reader in Politics, University of Warwick
Sir Nigel Broomfield KCMG
Director, The Ditchley Foundation
Mr Stephen Fidler
US Diplomatic Editor, Financial Times
Dr Jingzhong Li
Senior Producer, Chinese Service, BBC World Service
Mr Andrew Seaton
Head of China Hong Kong Department, Foreign and Commonwealth Office
Mr Bruce Tremayne
Managing Director, Pacific Consult Ltd
Professor William Walker 
Professor of International Relations, University of St Andrews
Lord Wilson of Tillyorn Kt GCMG
Chancellor, University of Aberdeen;  former Governor and Commander-in-Chief, Hong Kong
Professor Michael Yahuda
Professor of International Relations, London School of Economics and Political Science
UNITED STATES OF AMERICA
Mr H Brandt Ayres

Editor and Publisher, The Anniston Star
Mr Benjamin Bao
President, National Association of Chinese-Americans, Atlanta Chapter
Mr Pieter P Bottelier
Independent Consultant specialising in international economics and China
Dr Christopher L Brown
Research Director, The Southern Center for International Studies
Dr Mary Brown Bullock
President, Agnes Scott College
Dr Thomas Fingar
Acting Assistant Secretary of State, Bureau of Intelligence and Research, Department of State
Dr C S Kiang
Institute Professor, School of Earth Atmosphere & Science, Georgia Institute of Technology, Science Adviser, Jiangsu Province
Dr David Lai
Department of International Security Studies, Air War College, Maxwell Air Force Base, Alabama
Mr Herbert Levin
Executive Director, America-China Society
Dr Yawei Liu
Associate Director, China Village Election Project, the Carter Center of Emory University
Mr Joseph Moderow
Senior Vice President of Legal and Public Affairs, UPS
Dr Lawrence Christopher Reardon
Associate Professor, Political Science, University of New Hampshire
Dr David Shambaugh
Director, China Policy Program, Elliott School of International Affairs
Dr Susan L Shirk
Professor, International Relations and Political Science, University of California at San Diego;  former Deputy Assistant Secretary of State for China, Bureau of East Asia and Pacific Affairs, Department of State
Mr Horace Sibley
Chairman, The Southern Center for International Studies
Dr Cedric L Suzman
Vice President and Director of Programming, The Southern Center for International Studies
Ambassador Richard L Walker
Professor Emeritus and Ambassador-in-Residence, Richard L Walker Institute of International Studies, University of South Carolina
Mr Malcolm F Welch
President and Chief Operations Officer, IMRAC Corporation
Ms Julia J White
Founder and Vice President, The Southern Center for International studies
Mr Peter C White
Founder of the Southern Center for International Studies