The Flight of the Dragon: What Path is China taking? - The Intrepid

Tuesday, October 21, 2008

The Flight of the Dragon: What Path is China taking?

At the Olympics this summer, China declared its superpower status. The games cost the Chinese government $42 billion (U.S.) and every event, venue, and ceremony was designed to demonstrate China’s staggering wealth. Media outlets across the world called the Olympics China’s “coming out party.” What a difference a month makes. Recently, stories of tainted milk, the falling Chinese index markets, and gloomy economic forecasts have dominated headlines. However, despite the global economic crisis, it is likely that the Chinese government will continue to pursue its twin goals: fast paced economic development and its own international reputation.

On Monday October 20th, the Chinese National Bureau of Statistics released data, which indicates that China’s economy grew by 9% during the third economic quarter. This is down 1% from the previous quarter, and lowest rate of economic growth experienced in China since 2003. By comparison, most Western economies barely push 1-2%.

At the beginning of the U.S. housing crisis last year, many economists speculated that China might be insulated from the impending recession. Despite the Chinese government’s vast monetary holdings and the slow but steady growth of the Chinese consumer economy, China still depends on the well-being of the U.S. economy. As American consumers tighten their spending, China is feeling the pinch.

Factories in Southern China have been particularly hard. In Dongguan last week, 6,000 laid off Smart Union employees took to the streets to demand unpaid wages. Smart Union is a large major toy manufacturer with contracts with Disney and Mattel. But, with analysts predicting weak consumer activity this Christmas, many of its factories remain silent.

Although its major markets are contracting, the Chinese government is likely to continued to push for major economic growth at around 8% per year. Evidence of this likely course is already apparent. This weekend, China’s State Council declared that its goals are to promote “stable and rapid economic development.” To make up for potential economic shortfalls, the Chinese government has begun spending money on more infrastructure projects and plans are underway to increase export tax rebates on numerous products, including textiles and machinery. “Our economy remains vigorous,” said Prime Minister Wen Jiabao. “It has the capability to defend itself against international risks.”

However, China relies on its strong economic growth for more than prosperity. Some economists believe that at least 8% economic is necessary to keep urban unemployment rates low. High unemployment urban areas could lead to political backlash. Particularly within China’s already suffering class of migrant workers. These workers already endure harsh conditions, unsanitary and crowded accommodations, and poor wages, if they lose their jobs altogether and take to the streets they might threaten the political and social order in China. This situation is what the Chinese government wants to avoid at all costs.

Even if economic growth slows to 8% a year or less, China will continue to need to import raw materials, particularly oil. In the last few years, China has embarked on an aggressive campaign to secure the resources necessary for its growing economy. In some cases, this campaign has been beneficial to countries and the surrounding region. Chinese companies have funded much of the recent infrastructure upgrades in Thailand and Cambodia. In Sudan, however, China’s oil policies have helped a genocidal regime fill its coffers.

China has relentlessly pursued its economic interests with little regard for international human rights. While the country has benefited economically, this policy has hurt China’s international standing. Above, all else, expect perhaps for economic concerns, the Chinese government wants to increase its international stature.

Having come late to the economic party, China wants to quickly fill any space not occupied by the U.S. to carve out its own foreign policy niche. To accomplish this, the Chinese government has entered in to numerous multilateral agreements over the last few years, including APEC (Asian Pacific Economic Cooperation), ARF (ASEAN Regional), FOCALAE (Forum for East Asian and Latin American Cooperation), EAS (East Asian Summit), and SCO (Shanghai Cooperation Organization), among others. While the U.S. is party to several of these organizations, the EAS and SCO were both developed by China as a way to augment the countries leadership role in the region.

To make its mark and secure resources, the Chinese government has also shown a willingness to deal with and support anti-democratic regimes through “value-free diplomacy.” China currently enjoys favorable trade relations with Libya, Myanmar, and Zimbabwe.

As Kerry Dumbaugh argues in China’s Foreign Policy: What Does it Mean for U.S. Interests, foreign governments are often attracted to the “no strings” nature of Chinese trade and investment. Chinese money is not predicated upon good governance, human rights, or even environmental regulations, which makes it very attractive.

The problem with China’s economy policy is that it continually denies China the international standing that its government leaders desire. But, regardless of the contradictory nature of these policies, China will continue to pursue them. The raw materials that these rogue states provide are necessary for economic growth and stability, just as the Olympics were necessary to feed the Chinese government's sense of superiority.

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