The Dragon Dance: U.S.-China Security Cooperation - James M. Acton

Global Ten

The Dragon Dance: U.S.-China Security Cooperation

By: James M. Acton Thursday, November 29, 2012 2

China’s nuclear modernization concerns the United States and its Asian allies, but Washington has largely failed to engage Beijing effectively on nuclear strategy. The failure stems at least in part from China’s view that engagement narrowly focused on nuclear issues is a losing proposition. To make progress in his second term, President Obama should offer a broader vision for strategic cooperation that includes reducing nuclear risks by restraining competition in the conventional realm.

James M. Acton

Senior Associate
Nuclear Policy Program

More from Acton...

• A Discussion With TEPCO About Carnegie's Fukushima Paper

• Beyond Treaties: Immediate Steps to Reduce Nuclear Dangers

• Transparency and Strategic Stability

Subscribe

Over the last ten or fifteen years, the possibility of a conflict with China has become an ever more important focus of U.S. defense planning. With long-running wars in Afghanistan and Iraq, preparing for such a contingency has not always been the highest-profile item on the Pentagon’s agenda. But, the Obama administration’s “pivot” to Asia is clear evidence of where it believes the risk of interstate warfare, defined in terms of both likelihood and consequence, is greatest.
Sino-American military competition primarily plays out in the conventional domain, and escalation to nuclear use in a U.S.-Chinese conflict is thankfully much less likely than it was during the U.S.-Soviet standoff. Yet both Washington and Beijing still plan for a nuclear war—the ultimate in low-probability, high-consequence catastrophes. For this reason more than any other, the administration of Barack Obama, like the George W. Bush administration before it, has sought to manage the risk by engaging China in a strategic dialogue. The administration is virtually certain to continue these efforts in Obama’s second term.
Certainly, the Obama administration is also driven in part by a desire to create political and security conditions that would enable deep reductions in nuclear weapons, eventually leading to their abolition. One of these conditions is the integration of China’s nuclear arsenal into an arms control framework. However, other reasons to engage China on nuclear deterrence command broader political support. China is slowly expanding and modernizing its nuclear forces, sparking concern in both the United States and among Washington’s Asian allies, most notably Japan. These concerns are exacerbated by Beijing’s refusal to provide information about the size and structure of its arsenal. As long as these trends continue, all U.S. administrations—Democratic and Republican—are likely to try to press Beijing to be more transparent and to explain its motivations and intentions for modernization.

The Obama administration’s “pivot” to Asia is clear evidence of where it believes the risk of interstate warfare is greatest.

As part of this modernization, China is in the process of deploying road-mobile missiles and developing submarine-launched ones to replace its older silo-based weapons, thereby significantly enhancing the survivability of its nuclear forces. It is also developing technologies to defeat U.S. ballistic missile defenses in an attempt to ensure that, should these missiles ever be used, their warheads would reach their targets.
China is also slowly expanding its nuclear forces. In 2002, the U.S. Department of Defense estimated that China had twenty intercontinental ballistic missiles (ICBMs) capable of reaching the continental United States,¹ and in 2010, a report placed that number between 30 and 35.² In addition, China is developing the capability to place multiple warheads on a single missile. If Beijing deployed this technology, it could rapidly expand its nuclear forces, but there is no evidence it has yet done so.
So far, U.S. efforts to engage China on nuclear strategy have had limited success. Part of the reason may be that, given the United States’ huge qualitative and quantitative advantages in nuclear forces, China appears to view engagement narrowly focused on nuclear issues as a zero-sum game that it will likely lose. Strategic cooperation might appear more obviously mutually beneficial if it were based on a broader strategy of reducing nuclear risks by restraining competition in the conventional realm. Of course, there is a real possibility that an ambitious U.S. proposal to expand cooperation would be rebuffed by China. But, if Beijing does engage, the United States and China could make real progress toward managing a genuinely existential threat to both of them.

A Decade of Limited Progress

American efforts to engage China—at both the official and nongovernmental levels—have often attempted to separate nuclear deterrence from the rest of the bilateral relationship. The aim has been to discuss it either completely by itself or, occasionally, alongside other “strategic” issues, such as cybersecurity, space weapons, and missile defense. Most obviously, U.S. officials believe—and regularly and publicly exhort Beijing to understand—that greater transparency about China’s nuclear arsenal would, on its own, help stabilize the two states’ nuclear relationship.
This belief has influenced the way Washington has attempted to engage Beijing in private. The Bush administration sought a dialogue with China focused solely on nuclear strategy. Only one round of this dialogue was ever conducted, and that was in April 2008. The Obama administration’s efforts appear to have been somewhat broader but are still tightly focused compared to the full range of issues in the bilateral military relationship. Specifically, the United States and China held two rounds of a “strategic security dialogue” in May 2011 and May 2012. Very little information about the discussions is available, but the meetings seem to have originated with a suggestion made in January 2011 by Secretary of Defense Robert Gates to his counterpart, General Liang Guanglie, that the two states should engage on “nuclear, missile defense, space, and cyber issues.” Whatever its agenda, the absence of information about this dialogue suggests it is at a fairly nascent stage.

Strategic cooperation might appear more obviously mutually beneficial if it were based on a broader strategy of reducing nuclear risks by restraining competition in the conventional realm.

At a marginally more advanced stage is a dialogue between the five nuclear-weapon states recognized by the Nuclear Non-Proliferation Treaty, including both China and the United States. Formally, this dialogue is focused on topics covered by the treaty (disarmament, nonproliferation, and nuclear energy), not bilateral U.S.-Chinese strategic issues. But, China has agreed to lead work on a glossary of nuclear terminology, which could help promote understanding during future bilateral discussions on nuclear deterrence.
In short, a decade’s worth of U.S. efforts to engage China on nuclear deterrence has led to three rounds of intermittent dialogue and a commitment to develop a glossary: hardly impressive progress. Rightly or wrongly, China apparently does not share the U.S. belief that narrowly focused engagement on nuclear issues would be mutually beneficial.
Why China has been reluctant to engage on nuclear issues is a matter for legitimate debate. Virtually all Chinese and many American analysts—particularly those who have studied Chinese documents—believe that Beijing’s policy is driven, to a significant degree, by a perceived threat from the United States. They argue that Beijing is genuinely concerned that, in a deep crisis, the United States might attempt to eliminate China’s nuclear arsenal with a preemptive “first strike” and that greater transparency could further undermine the survivability of its nuclear forces. In 2003, for instance, Chinese analyst Li Bin wrote that:
The survivability of [China’s] current ICBM force . . . relies on ambiguity surrounding numbers. Because China will not confirm or deny reports on the number of its ICBMs, other states cannot have confidence in any estimates. An attacker considering launching a first strike against China would be uncertain of China’s retaliatory capacity. This is how China’s nuclear deterrent works today.³
By contrast, other U.S. analysts believe that China’s opacity and its modernization program are geared toward unilateral gain. They worry Beijing has concluded that a more robust Chinese nuclear arsenal would deter the United States from intervening in a regional conflict, thus undermining U.S. defense commitments in East Asia.
While less discussed, it is also possible that internal considerations, not just external ones, shape Chinese policy significantly. After all, U.S. and Soviet/Russian nuclear weapons decisions—particularly over procurement—were not based solely (or perhaps even mostly) on cold-blooded cost-benefit calculations. They were shaped by bureaucratic and political factors. The administration of John F. Kennedy, for example, increased defense spending, which included the construction of more nuclear weapons, to stimulate the U.S. economy. Meanwhile, according to an authoritative study of Soviet nuclear policy based on interviews with senior decisionmakers conducted just after the collapse of communism, Soviet acquisitions policy was largely driven by the defense-industrial sector’s use of “its political clout to deliver more weapons than the armed services asked for and even to build new weapon systems that the operational military did not want.”⁴ While the specific internal factors at play in China may be rather different, there is little reason to suppose that they are absent.
Whatever the reason for China’s recalcitrance, there are advantages to presenting Beijing with an agenda for strategic cooperation that is more attractive than the one currently on offer. If China’s policy is defensively orientated, it might respond positively to a proposed agenda that is more obviously mutually beneficial. If engagement is currently being stymied by internal factors, a more attractive agenda might motivate it to overcome political or bureaucratic roadblocks. By contrast, Beijing’s refusal to engage with a more attractive offer would provide some evidence that Chinese policy is offensively orientated, which would be a potentially valuable insight—although such evidence, it must be recognized, would hardly be conclusive.

The Inseparability of Nuclear and Conventional Security Dynamics

Conventional weapons that are not usually deemed “strategic” can be inextricably linked to nuclear dynamics. At the most general level, the overall state of the conventional balance can significantly affect nuclear doctrine. Many nuclear-armed states facing a conventionally stronger adversary—including the United States during the Cold War and Russia and Pakistan today—have openly advertised their nuclear weapons as an offset for their weakness.
China has been an exception in this regard because it has pledged not to use nuclear weapons first, although there is a debate within the United States about the credibility of this commitment. In particular, some analysts believe that China would resort to the use of nuclear weapons to avoid defeat in a major conventional war. This debate aside, however, it is possible that if China fails in its current efforts to close the United States’ conventional advantage in the western Pacific, it may openly place a greater emphasis on nuclear weapons. Conversely, if China succeeds in gaining a meaningful conventional advantage, the United States might revert to a much greater role for nuclear weapons in fulfilling defense commitments to its allies.
Beyond these high-level dynamics, there are some much more direct—and pernicious—linkages between conventional and nuclear weapons in the U.S.-Chinese relationship. There is a vigorous conventional competition in the western Pacific, with the United States seeking to retain the ability to project power throughout the region and China seeking to deny it the ability to do so. In turn, Chinese efforts to deter and defeat U.S. power-projection capabilities are leading the United States to develop “strategic conventional” capabilities, which Beijing argues are forcing it to expand and modernize its nuclear forces.
To be concrete, China is developing both anti-satellite weapons and anti-access/area-denial capabilities. By using the former to destroy American communications, guidance, and reconnaissance satellites, China might hope to deny or impede the United States’ ability to project power. Chinese anti-access/area-denial capabilities are designed to hinder U.S. access to the western Pacific and its freedom of movement within the region. The highest-profile Chinese system designed to contribute to these operations is an anti-ship ballistic missile, the DF-21D. Chinese military writings suggest that its primary target would be U.S. aircraft carriers.
Both anti-satellite weapons and anti-access/area-denial capabilities constitute important arguments within the United States for developing long-range, very fast conventional weapons in a program known as Conventional Prompt Global Strike (CPGS). Two commanders of U.S. Strategic Command have, in public testimony before Congress, stated that CPGS weapons could be used to prevent further attacks in the event that China destroys a U.S. satellite. Meanwhile, the 2010 Quadrennial Defense Review lists experimenting “with conventional prompt global strike prototypes” among its efforts to develop long-range strike capabilities to combat anti-access/area-denial threats.
Whether Chinese defense strategists concerned with “counterintervention” (as they term anti-access/area-denial operations) view CPGS as a particular threat is unclear. However, Chinese officials and analysts working on nuclear deterrence issues have expressed deep worries about the effect that CPGS could have on the survivability of China’s nuclear arsenal. In fact, Chinese concerns about the effect of advanced conventional capabilities on the nuclear balance may be more acute than more documented concerns about ballistic missile defense.⁵

Chinese concerns about the effect of advanced conventional capabilities on the nuclear balance may be more acute than more documented concerns about ballistic missile defense.

Moreover, U.S. missile defense deployments in East Asia are driven, at least in part, by Chinese conventional regional ballistic missiles, which include not only the DF-21D but also land-attack weapons that could be used to target U.S. and allied assets in Taiwan, Japan, and Guam. In public, U.S. officials have stressed the threat from North Korea in justifying recent plans to expand missile defenses in the region. Yet, the presence of missile defense assets in Taiwan is clear evidence that missiles from North Korea are not the only ones that the United States seeks to defeat. Indeed, in an oblique reference to a conflict with China, Secretary of Defense Leon Panetta has acknowledged that missile defense is designed to help “forward-deployed U.S. forces.”

Chinese analysts and officials certainly assume this to be the case. Li Bin, for example, has argued that the locations of planned U.S. radar installments provide evidence that Chinese ballistic missiles are targets for American defenses.⁶ However, Chinese concerns are not limited to the impact that these defenses may have on its arsenal of regional missiles. Beijing is also concerned that U.S. defenses could eventually be able to counter intercontinental ballistic missiles armed with nuclear warheads, thus undermining China’s nuclear deterrent. There is little doubt that this concern partly motivates well-connected Chinese analysts’ criticism of U.S. plans to expand missile defenses in East Asia.

The Security Dilemma

These dynamics may be manifestations of a burgeoning “security dilemma.” A security dilemma is created when a state procures weapons for defensive purposes, inducing an adversary, who fears the buildup might be offensively oriented, to do likewise. The adversary’s buildup can, in turn, spark a countervailing reaction in the first state, resulting in an arms race.
Almost by definition, it is impossible for a state with a security dilemma to definitively identify it as such at the time. Washington cannot know for sure that China’s nuclear modernization or lack of transparency is a defensive reaction to a perceived first strike threat from the United States. For that matter, Beijing cannot be certain that U.S. strategic conventional weapons programs, not to mention the pivot, are defensively oriented and geared toward preventing China from using force to change the status quo. But it is clear that the United States and China have a shared interest in creating a process that will allow each to test the other’s intentions. Such cooperation could help mitigate the security dilemma, if indeed there is one.
For its part, Beijing would benefit from calming the U.S. security concerns that are helping to drive American programs that it finds threatening—including CPGS and ballistic missile defense. Because these programs might be catalyzing Chinese modernization efforts and precluding transparency, Washington has an interest in easing Chinese concerns.

It is clear that the United States and China have a shared interest in creating a process that will allow each to test the other’s intentions.

These negative feedback loops are already creating friction in the extremely complex U.S.-China relationship. If left unchecked, they could create a qualitative or quantitative nuclear arms race. The U.S. Congress has already held hearings on—and expressed concern about—China’s nuclear modernization program. If this program continues unabated it could become a powerful domestic argument in the United States for the development of new nuclear warheads (if for no other reason than to symbolize that the United States still takes nuclear deterrence seriously). China’s modernization program is also creating concern that it seeks numerical parity with the United States and Russia, complicating further U.S.-Russian arms control—something that China certainly benefits from, even if it is not a party to any agreement. Both Beijing and Washington have a mutual interest in preventing these outcomes, the latter for reasons of cost if nothing else given the state of the U.S. budget.

Broadening the Agenda

A broadened agenda for U.S.-China strategic cooperation that includes the conventional domain should be viewed by leaders in both states as attractive. The basic principle of turning a perceived zero-sum game into a mutually beneficial one by linking issues is common to all areas of negotiation, from labor relations to nuclear arms control. That said, addressing the whole range of interlinked military issues in the U.S.-Chinese relationship is truly daunting—impossibly so for the time being.
Over the long term, it might be possible—through treaty or restraint—to develop a durable balance of conventional forces so that each state is confident in its ability to protect its vital interests without nuclear weapons. But profound political change will be needed to achieve such an outcome, much like in Europe toward the very end of the Cold War. NATO and the Warsaw Pact were only able to negotiate limits on conventional forces that effectively precluded the possibility of a surprise attack by either party after Moscow had started the process of internal reform that led to a thawing of the Cold War (and, ultimately, the Soviet Union’s demise). Today, realistically speaking, the United State and China should identify more modest steps that could help mitigate some of the most risky interactions between conventional and nuclear weapons.
For example, while the linkage between Chinese anti-access/area-denial capabilities, particularly the DF-21D anti-ship ballistic missile, and the U.S. CPGS program could produce a potentially destabilizing buildup cycle, it could also be leveraged to enable strategic cooperation. The two states could inform one another about the number of weapons they intend to procure and deploy each year for, say, the next five years. A data exchange like this could help mitigate tendencies to base procurement on worst-case intelligence assessments.
Chinese involvement in this kind of transparency arrangement would not be as unprecedented as widely believed. In 1997, for instance, China, Russia, and three Central Asian Republics negotiated an agreement on conventional force limitations near their borders. This extremely long and detailed document (it runs to over 17,000 words in English) contains extensive provisions for data exchange and demonstrates that Beijing will agree to transparency measures if it views them to be in its interests.
Much more ambitiously, the United States and China could enact a ban on the encryption of diagnostic data, known as telemetry, transmitted during tests of agreed-upon long-range high-precision conventional weapons (such as the DF-21D and a U.S. CPGS system) to allow for more accurate capability assessments. Clearly, such a ban would require a substantial degree of trust to be built first and so cannot be a short-term ambition. But, the U.S.-Soviet agreement to ban telemetry encryption as part of the 1991 Strategic Arms Reduction Treaty (START) demonstrates that, over time, confidence building on the necessary scale is possible.
One particular advantage of broadening the scope of strategic cooperation to include conventional forces is that it becomes possible to pair roughly symmetric capabilities. China’s nuclear arsenal is much smaller and less sophisticated than that of the United States, complicating efforts to persuade Beijing that it is in China’s interest to become more transparent. By contrast, while the DF-21D is less sophisticated than any of the systems being developed under the CPGS program, it is at a significantly more advanced stage of development. This rough symmetry makes confidence-building measures involving these capabilities more obviously beneficial to both parties.
Other linkages—such as the connection between Chinese regional ballistic missiles and U.S. regional missile defenses—could also be exploited for strategic cooperation. Crucially, however, a necessary prerequisite to any progress in this direction is an official Sino-American dialogue broad enough to encompass all the relevant strategic interactions. The existing strategic security dialogue, while a step in the right direction, probably does not go far enough. While it appears to include nuclear weapons, missile defense, and space, it leaves out a number of critical pieces of the puzzle in the form of conventional U.S. power-projection capabilities and various Chinese efforts to defeat them.
Analysts and some government officials (particularly in Russia) have recently discussed bringing China into negotiations toward a multilateral arms control treaty. While this is a desirable long-term goal (that discussions among nuclear-armed states at both an official and unofficial level can advance), it is also a premature one. For multilateral arms control to have any chance of success, the dynamics that are driving Chinese modernization must be addressed. To the extent that these dynamics are related to Sino-U.S. strategic competition they must be addressed bilaterally.
Moreover, there are still large quantitative and qualitative gaps between U.S. and Chinese nuclear forces. For example, while China has 30 to 35 missiles, each armed with a single warhead, capable of reaching the United States according to the most recent detailed estimate from Department of Defense, the United States has over 1,000 deployed warheads capable of reaching China. Efforts by the United States in cooperation with Russia are needed to close this gap before China can reasonably participate in the negotiation of a limitations treaty.
The asymmetry between U.S. and Chinese nuclear forces also argues strongly against attempting to import the Cold War arms control framework wholesale into the U.S.-China relationship. While U.S.-Soviet and U.S.-Russian treaties can provide useful ideas, such as the ban on telemetry encryption, the United States needs to take a novel approach to have a reasonable chance of receiving the reassurance it wants about China’s modernization.

Prospects for Success

It would be naïve to believe that expanding the scope or depth of strategic cooperation between the United States and China would be anything other than extremely difficult. While there is a compelling case to be made that expanded cooperation would be mutually beneficial, there is also the potential for significant resistance. Within the United States and among its allies, there would unquestionably be opposition to any form of cooperation that requires the United States to provide China with valuable information about U.S. plans and programs—even though China would be required to provide equally valuable information in return. Indeed, confidence-building measures that connect, for instance, Chinese regional ballistic missiles to U.S. regional missile defenses would probably be harder to “sell” than confidence-building measures purely within the nuclear realm. There is also absolutely no guarantee that Beijing will agree to participate; it might doubt U.S. sincerity, be unable to circumvent domestic obstacles, or, conceivably, view cooperation as fundamentally undesirable.

The potential benefits of trying to start wide-ranging strategic cooperation with China dwarf the downside risks.

That said, the potential benefits of trying to start wide-ranging strategic cooperation with China dwarf the downside risks. Strategic competition between the United States and China is not only expensive but adds friction to the bilateral relationship—a relationship that simultaneously holds more promise and carries more risk than any other. If strategic cooperation does nothing more than curb some pernicious aspects of this competition it would be worthwhile. If it catalyzes a co-evolutionary process in which deep cooperation builds strategic trust and strategic trust enables deeper cooperation, it could usher in a sea change.

¹ Department of Defense, “Annual Report on the Military Power of the People’s Republic of China,” 2002, www.defense.gov/news/Jul2002/d20020712china.pdf, 27.
² Department of Defense, “Military and Security Development Involving the People’s Republic of China,” 2010, www.defense.gov/pubs/pdfs/2010_cmpr_final.pdf, 66. If weapons capable of reaching Alaska are included, the number rose from about 30 in 2002 to between 45 and 65 in 2010.
³ Li Bin, “China and Nuclear Transparency,” in Transparency in Nuclear Warheads and Materials: The Political and Technical Dimensions, edited by Nicholas Zarimpas (Oxford: Oxford University Press for SIPRI, 2003), 55.
⁴ John G. Hines, Ellis M. Mishulovich, and John F. Shull, Soviet Intentions 1965–1985, Volume I, An Analytical Comparison of U.S.–Soviet Assessments During the Cold War (McLean, Va.: BDM Federal, 1995), 24–25, available from www.gwu.edu/~nsarchiv/nukevault/ebb285.
⁵ Lora Saalman, China and the U.S. Nuclear Posture Review, Carnegie Paper (Beijing: Carnegie-Tsinghua Center for Global Policy, 2011), http://carnegieendowment.org/files/china_posture_review.pdf, 9.
⁶ Li Bin, “China and the New U.S. Missile Defense in East Asia,” Proliferation Analysis, Carnegie Endowment for International Peace, September 6, 2012, http://carnegieendowment.org/2012/09/06/china-and-new-u.s.-missile-defense-in-east-asia/drth.

Huawei in America - John Gapper (Financial Times)

Financial Times October 10, 2012 7:23 pm

Too late for America to eliminate Huawei

By John Gapper

©Ingram Pinn

To read the scathing condemnation of Chinese telecoms equipment suppliers fired from Washington this week, you would think we still lived in another world. In that world, telecoms networks were built by national monopolies such as AT&T, France Telecom and British Telecom, and outsiders stayed away.

But we don’t.

More

ON THIS STORY

• US brands Chinese groups security threat
• Huawei’s emergence from shadows backfires
• Lex video Huawei v US
• Lex Huawei – obstacle race
• US companies are urged to shun Huawei

JOHN GAPPER

• Innovation drives America’s reinvention
• Looser listing won’t help start-ups win investors
• John Gapper BAE’s self-inflicted wounds
• Incentives for banks to stray will persist

You know things have come to a pretty pass when US politicians throw their weight behind a French company because the alternative is worse. That would be the effect of barring Huawei and ZTE from the US market on the grounds that they are shifty front organisations for the Chinese government and the People’s Liberation Army.

It would aid Alcatel-Lucent, the troubled 2006 merger of the French company with Lucent, descended from Western Electric of Cleveland, Ohio, which was bought by AT&T in 1881. Things have since moved on and Huawei Technologies and ZTE of Shenzhen in southern China are the new Western Electrics.

The US House of Representatives intelligence committee, with its demand to bar Huawei or ZTE from gaining US contracts or merging with US companies, is living in the past. The time to declare telecoms a strategic, protected industry like defence, was 20 years ago; now is the time to make a deal.

“Huawei and ZTE represent something new: a former third-world country producing first-world technology. The American corporate psyche finds this difficult to handle,” says John Quelch, dean of the China Europe International Business School in Shanghai.

It was obviously tough on the House intelligence committee, which has thrown many accusations at both companies, in particular Huawei, which has grown to share industry leadership with Ericsson of Sweden since it was founded in 1987 by a former PLA officer.

This sounds dodgy, given the PLA’s ambitions in cyber espionage and mass efforts by Chinese hackers to acquire US military and industrial secrets. Former executives of Nortel Networks, the Canadian group that was Huawei’s rival until it went into Chapter 11 bankruptcy protection in 2009, complained of constantly being hacked from China in the 2000s.

“A number of states are engaged in economic espionage and China is the most prolific,” says Mike McConnell, a former head of the US National Security Agency who is vice-chairman of Booz Allen Hamilton, the consultancy. “Research and development costs a lot and it is cheaper to steal it.”

The chief accusation is that, if permitted to build networks for operators such as AT&T and Verizon, Huawei would build traps into the software and hardware. Its friends in the Communist party could then use them to hack databases or to bring the networks down in a war.

It is foolish to ignore the potential security holes in telecoms networks. The NSA has itself been accused of spying on US and foreign internet traffic by monitoring traffic passing over American networks.

But barring Chinese companies does not solve it. Alcatel-Lucent has a venture in China with Shanghai Bell and much of the equipment used by Ericsson and others is made in China. If the party and the PLA wanted to be sneaky they would tamper with these components.

Nor is there direct evidence of malfeasance against Huawei and ZTE in the report, although one section is classified. Meanwhile, the committee alleges that the companies breach patents and enjoy support from China in the form of soft loans.

Both could be true but they are the stuff of trade and intellectual property disputes rather than an intelligence concern. The committee undermines its case by sounding as if it seeks any excuse to exclude Chinese competitors.

The companies have not helped themselves. Huawei is a reclusive outfit that did not publish the names of its directors until a few years ago. Sun Yafang, its chairwoman, is reported to have once worked at the Ministry of State Security and, like other companies, it has an internal Communist party committee whose exact purpose is mysterious.

Yet Huawei is not easily categorised as a state stooge. It is not state-owned (ZTE has closer links with Guangdong province) and was among start-ups that flourished in Shenzhen’s economic zone in the 1990s. It is still private and claims to be wholly employee-owned. “Huawei is an independent, quite arrogant, company,” says Duncan Clark, a Beijing-based consultant.

In some ways, it is a symbol of the very China the west has an interest in encouraging. China’s government declared in 2006 that telecoms was one of seven strategic industries over which state-owned enterprises should retain “absolute control” yet Huawei was built by an entrepreneur who admires Silicon Valley.

Huawei seized 20 per cent of the global market, according to Bernstein Research, by producing equipment at lower prices than western rivals, triggering a wave of consolidation. In the US, where competition has been effectively curbed, Ericsson and Alcatel-Lucent have a duopoly.

The best thing for US consumers would be to admit Huawei and ZTE with safeguards. In the UK, Huawei’s equipment is examined by former staff of GCHQ, the UK intelligence service, before being used by BT. The US and Australia, which has barred Huawei from a planned network, could go further.

The US might require Huawei to list in London or New York to illuminate who owns the company; submit technology to the NSA; and separate its US division like a defence group. It could even demand the dissolution of its Communist party committee. What it cannot do is recreate the past.

Copyright The Financial Times Limited 2012. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

Yuan versus Dollar: the fight of the century

A self-denominated "currency capitalist", Evaldo Albuquerque, who seems to be a Brazilian, has some interesting things to say about this exchange struggle:

Why the Yuan Could Replace the Dollar By 2015
By Evaldo Albuquerque
THE SOVEREIGN INVESTOR, September 3, 2010

Dear Paulo Roberto,

Do you know anyone who speaks “Esperanto?”

If not, don’t worry. I never heard of the language until my recent trip to Brazil. Over the summer, I spent a couple weeks traveling around South America on a research mission.

While I was traveling, I met with the heads of major companies and important government leaders in Latin America. As a currency guy, I wanted to know how these major players in Latin America feel about the U.S. dollar.

Of all the business leaders I met with, Maria Ramos, head of investor relations at Brazilian oil-giant Petrobras, had the most interesting opinion on the dollar.

Instead of answering right away, Ms. Ramos told me a story about Esperanto. It was designed in the 19th century to serve as a universal second language.

“Trying to come up with an alternative to the dollar today is like trying to impose Esperanto as an international language. It doesn’t work like that,” she said.

“The same way English has evolved naturally to become the international language, the dollar has become the world’s reserve currency. The dollar is the currency everyone has access to!”

Of course she’s right.

At the moment, there is no alternative to replace the dollar as a world reserve currency.

But there is something happening right now that can easily change that.

A couple of weeks ago, McDonald’s became the first foreign non-financial company to sell yuan-denominated bonds in Hong Kong. Wal-Mart has already revealed its intention to do the same. In my opinion, it’s one of the greatest developments of our time.

The Only Real Threat to the Dollar's Supremacy

Empires don’t suddenly end. There are always warning signs that can sometimes last for years leading up to an empire’s collapse.

Out-of-control debt levels have historically been a major red flag. This debt can signal an empire’s end.

Look at what happened with the Spanish Empire in the 17th century or the British Empire in the 20th. Excessive debt effectively crumbled both empires. Given its massive deficits, America may soon become another good example.

And there’s a viable threat to the dollar’s supremacy in Asia. It’s the rise of the Asian market and the internationalization of China’s currency, the yuan.

China is Planting the Seeds of a Powerful Reserve Currency

Right now, Chinese leaders are making strides toward effectively capturing the dollar’s place as a reserve currency.

In the past two months, China’s leaders allowed the yuan to trade offshore in Hong Kong. They announced opening their bond market to foreign banks.

The yuan also started trading in the domestic Forex market vs. the Malaysia’s ringgit. Soon the yuan will be trading against other currencies, including the Russian ruble and the Korean won.

Hong Kong's securities regulator also just approved a new fund of yuan-denominated fixed-income products, such as bonds and commercial paper.

Chinese financial officials are also planning to introduce “junk” bonds to provide smaller private companies with new funding channels.

As other companies follow McDonald’s and Wal-Mart’s lead in tapping into China’s bond market, the yuan will play a significant role in global commerce.

Big banks around the globe such as HSBC, BBVA, JPMorgan Chase and Citigroup are all doing road shows in Latin America to encourage the use of the yuan in trade with China.

Do you see the pattern? The development of China’s currency is here to stay.

U.S. Dollar Crisis in the Making

What does that all mean for the U.S. dollar? One word: crisis!

One important reason the U.S. dollar remains the reserve currency is the U.S. bond market. Our bond market is the most-liquid of its kind.

But a well-developed Chinese capital market will provide strong support to the yuan. And the faster this process advances, the faster the dollar will lose status in the international market.

I agree with Ms. Ramos that the U.S. dollar won’t lose its reserve status tomorrow. It may take five years or more.

But China is planting the seeds of a powerful international currency that may become this alternative to the dollar. Without any serious fiscal reform in the U.S., the buck is looking more and more like a disaster waiting to happen.

Personally, I’m not waiting. I have already diversified part of my savings into stronger foreign currencies for my family. You can buy yuan through an exchange-traded fund (NYSE: CYB). Or you can even hold yuan (aka, renminbi) in a WorldCurrency Access Deposit Account at EverBank*. Learn more here.

It’s best to do diversify your currency holdings now while the dollar is still strong to get the most for your money. I’m grabbing all the foreign currency I can at a discount and I urge you to do the same.

Best Regards,
Evaldo Albuquerque
Editor, Exotic FX Alert
Contributor, Currency Capitalist

P.S. I’ll be talking more about the yuan and about exotic currencies at the Offshore Advantage Academy in November. Thought you might be interested in learning more. For event details, click here.

China: second biggest economy in the world

China Passes Japan as Second-Largest Economy
By DAVID BARBOZA
The New York Times, August 15, 2010

SHANGHAI — After three decades of spectacular growth, China passed Japan in the second quarter to become the world’s second-largest economy behind the United States, according to government figures released early Monday.

The milestone, though anticipated for some time, is the most striking evidence yet that China’s ascendance is for real and that the rest of the world will have to reckon with a new economic superpower.

The recognition came early Monday, when Tokyo said that Japan’s economy was valued at about $1.28 trillion in the second quarter, slightly below China’s $1.33 trillion. Japan’s economy grew 0.4 percent in the quarter, Tokyo said, substantially less than forecast. That weakness suggests that China’s economy will race past Japan’s for the full year.

Experts say unseating Japan — and in recent years passing Germany, France and Great Britain — underscores China’s growing clout and bolsters forecasts that China will pass the United States as the world’s biggest economy as early as 2030. America’s gross domestic product was about $14 trillion in 2009.

“This has enormous significance,” said Nicholas R. Lardy, an economist at the Peterson Institute for International Economics. “It reconfirms what’s been happening for the better part of a decade: China has been eclipsing Japan economically. For everyone in China’s region, they’re now the biggest trading partner rather than the U.S. or Japan.”

For Japan, whose economy has been stagnating for more than a decade, the figures reflect a decline in economic and political power. Japan has had the world’s second-largest economy for much of the last four decades, according to the World Bank. And during the 1980s, there was even talk about Japan’s economy some day overtaking that of the United States.

But while Japan’s economy is mature and its population quickly aging, China is in the throes of urbanization and is far from developed, analysts say, meaning it has a much lower standard of living, as well as a lot more room to grow. Just five years ago, China’s gross domestic product was about $2.3 trillion, about half of Japan’s.

This country has roughly the same land mass as the United States, but it is burdened with a fifth of the world’s population and insufficient resources.

Its per capita income is more on a par with those of impoverished nations like Algeria, El Salvador and Albania — which, along with China, are close to $3,600 — than that of the United States, where it is about $46,000.

Yet there is little disputing that under the direction of the Communist Party, China has begun to reshape the way the global economy functions by virtue of its growing dominance of trade, its huge hoard of foreign exchange reserves and United States government debt and its voracious appetite for oil, coal, iron ore and other natural resources.

China is already a major driver of global growth. The country’s leaders have grown more confident on the international stage and have begun to assert greater influence in Asia, Africa and Latin America, with things like special trade agreements and multibillion dollar resource deals.

“They’re exerting a lot of influence on the global economy and becoming dominant in Asia,” said Eswar S. Prasad, a professor of trade policy at Cornell and former head of the International Monetary Fund’s China division. “A lot of other economies in the region are essentially riding on China’s coat tails, and this is remarkable for an economy with a low per capita income.”

In Japan, the mood was one of resignation. Though increasingly eclipsed by Beijing on the world stage, Japan has benefited from a booming China, initially by businesses moving production there to take advantage of lower wages and, as local incomes have risen, by tapping a large and increasingly lucrative market for Japanese goods.

Beijing is also beginning to shape global dialogues on a range of issues, analysts said; for instance, last year it asserted that the dollar must be phased out as the world’s primary reserve currency.

And while the United States and the European Union are struggling to grow in the wake of the worst economic crisis in decades, China has continued to climb up the economic league tables by investing heavily in infrastructure and backing a $586 billion stimulus plan.

This year, although growth has begun to moderate a bit, China’s economy is forecast to expand about 10 percent — continuing a remarkable three-decade streak of double-digit growth.

“This is just the beginning,” said Wang Tao, an economist at UBS in Beijing. “China is still a developing country. So it has a lot of room to grow. And China has the biggest impact on commodity prices — in Russia, India, Australia and Latin America.”

There are huge challenges ahead, though. Economists say that China’s economy is too heavily dependent on exports and investment and that it needs to encourage greater domestic consumption — something China has struggled to do.

The country’s largely state-run banks have recently been criticized for lending far too aggressively in the last year while shifting some loans off their balance sheet to disguise lending and evade rules meant to curtail lending growth.

China is also locked in a fierce debate over its currency policy, with the United States, European Union and others accusing Beijing of keeping the Chinese currency, the renminbi, artificially low to bolster exports — leading to huge trade surpluses for China but major bilateral trade deficits for the United States and the European Union. China says that its currency is not substantially undervalued and that it is moving ahead with currency reform.

Regardless, China’s rapid growth suggests that it will continue to compete fiercely with the United States and Europe for natural resources but also offer big opportunities for companies eager to tap its market.

Although its economy is still only one-third the size of the American economy, China passed the United States last year to become the world’s largest market for passenger vehicles. China also passed Germany last year to become the world’s biggest exporter.

Global companies like Caterpillar, General Electric, General Motors and Siemens — as well as scores of others — are making a more aggressive push into China, in some cases moving research and development centers here.

Some analysts, though, say that while China is eager to assert itself as a financial and economic power — and to push its state companies to “go global” — it is reluctant to play a greater role in the debate over climate change or how to slow the growth of greenhouse gases.

China passed the United States in 2006 to become the world’s largest emitter of greenhouse gases, which scientists link to global warming. But China also has an ambitious program to cut the energy it uses for each unit of economic output by 20 percent by the end of 2010, compared to 2006.

Assessing what China’s newfound clout means, though, is complicated. While the country is still relatively poor per capita, it has an authoritarian government that is capable of taking decisive action — to stimulate the economy, build new projects and invest in specific industries.

That, Mr. Lardy at the Peterson Institute said, gives the country unusual power. “China is already the primary determiner of the price of virtually every major commodity,” he said. “And the Chinese government can be much more decisive in allocating resources in a way that other governments of this level of per capita income cannot.”

Hiroko Tabuchi contributed from Tokyo.

Great game in East Pacific - US vs China at sea

Asia is beginning to stand up to China — with US help
Interview with Gordon Chang
By Venkatesan Vembu
DNA, Daily News Analysis, Saturday, Aug 14, 2010

Mumbai - This week, US aircraft carrier George Washington sailed into the South China Sea for military drills with Vietnam, which has recently been badgered by China over territorial disputes in the South China Sea. The US decision was a symbol of its power projection in east Asia, and a “push back” to Chinese muscle-flexing in the region for months, says Gordon Chang, noted China-watcher and author of The Coming Collapse of China. In an interview with DNA in Hong Kong, Chang points to an emerging grouping of states in east and south-east Asia who “don’t want to be dominated by Beijing” and are “standing up to China”.
India’s move to prospect for oil off Vietnam, in an area that China claims as its own, could create friction with China, but India shouldn’t flinch from defending its interests, he adds.

China and the US are testing the waters in the South China Sea with rival ‘war games’. What’s going on?
It started with the sinking of a South Korean naval vessel in March by North Korea, and China’s unwillingness to have Pyongyang brought to account. It also relates to territorial disputes in the South China Sea, and China’s attempts to restrict sea lanes. Countries in the region are, for the first time, standing up to China. They don’t want to be dominated by Beijing, and have asked the US to exert leadership. The US is doing that.

In a speech in Hanoi in July, US secretary of state Hillary Clinton declared that peaceful settlement of disputes in the South China Sea is in the US’ “national interest”. It was a striking departure in US foreign policy, and China felt ambushed. Foreign minister Yang Jiechi said Clinton’s words were “an attack” on China.

When US president Barack Obama visited China last year, he was seen to be soft on China. Has that changed?
The Obama administration tried to be accommodating to China, but it didn’t work. Starting with that disastrous summit in Beijing in November, 2009, there were a series of hostile events. People in Washington decided they’d had enough. I think Obama still wants to be nice to China, but he finds his policy isn’t working. Various elements in Washington want a change in China policy, and it’s happening — fast!

Is the Obama administration signalling that the US is ‘back in Asia’?
It is, or at least Hillary Clinton is. There are two foreign policies in Washington: the Clinton policy and the Obama policy. Her policy seems to be working, and his is not. But in general, people in Washington are fed up of the arrogant Chinese.

China argues that it’s in fact the US that’s overreaching into China’s neighbourhood and ‘provoking’ it…
The US has been there since the end of World War-II. It has guaranteed freedom of sea lanes, which China is trying to restrict. The US has adopted a very low profile in Asia. It certainly isn’t overreaching.

If that’s the case, what’s China signalling, and to whom?
China is signalling that it won’t back down. You’d think that faced with a united coalition, Beijing would step back and divide the coalition. Instead, the Chinese are becoming more hostile. The reason: there’s been a militarisation of Chinese politics. The People’s Liberation Army had been losing ground in the political system in the last three decades; fewer and fewer generals and admirals were holding posts in top Communist Party organs. But since the middle of this decade, flag officers are gaining ground, and they’ve been pushing

China to adopt tougher positions. That’s created resistance in the region. China’s civilian leadership probably realises that the tack they’re on is wrong, but they can’t change because the generals and the admirals have a big influence. The forces that pushed China into a more assertive direction are preventing the country from adjusting and doing what should be done.

India is bidding for oil assets in Vietnam, and China has warned oil companies against operating in what it claims is disputed territory in the South China Sea. Could this spark tension between India and China?
There could certainly be friction, but if there’s going to be a conflict, it’s going to be in the contested border areas.

But hasn’t the Sino-Indian border tension died down since 2009?
Neither country is willing to admit what’s going on, but the Chinese are becoming much more aggressive in their border patrols of Indian-controlled territories.

India, like many other countries, doesn’t want to have a conflict with China; its response is very mild, and that’s understandable; but Beijing realises this and presses its advantage. Yet, it will eventually overstep, and push India too far.

When India objects to Chinese projects in Pak-occupied Kashmir, China claims they’re commercial interests, not strategic. Can’t India take the same line in Vietnam?
India wants oil and gas, and it really is a commercial project in Vietnam. It hasn’t been using it as a strategic lever on China. But Beijing’s relations with Islamabad are strategic. When China helps Pakistan develop nuclear weapons, it doesn’t have ‘commercial relations’; it has a long-term strategic plan to keep India off-balance.

Critics of your book say that China hasn’t ‘collapsed’ in the time frame you set, and you’ve been proved wrong. How do you respond to that?
We’ve to wait until August, 2011, to say for sure. But right now, it’s hard to be optimistic about China’s economy or its political system. I know many people have a bullish view of China, but you also see a lot of investors — Jim Chanos, Marc Faber — who are figuring out how to short-sell China. They’re not political persons, they have no incentive to upset Beijing. They’re like me: they call them as they see them. People are becoming concerned about the Chinese economy, and there are signs that things won’t turn out the way the optimists read it. I’m deeply sceptical: the closer you look at it, the worse it looks.

What do you expect to happen between now and August, 2011, that hasn’t happened until now?
What we will see in China is a prolonged, sharp economic contraction; for a couple of quarters in end-2008 and early 2009, we did have zero growth in China — and probably even negative growth. What we’ll see is a more prolonged contraction.

The Chinese think they’ve solved their economic problems. They temporarily bridged a difficult period, but they did so at the cost of creating problems that are more difficult to solve. They’re going to pay an enormous price. They can postpone the inevitable, but they’re going to make the final reckoning even worse. A year from now you’re going to see a very different economy in China.

Chinese missile could shift Pacific power balance

Chinese missile could shift Pacific power balance
By Eric Talmadge
Associated Press Writer, Thu Aug 5, 2010

ABOARD THE USS GEORGE WASHINGTON – Nothing projects U.S. global air and sea power more vividly than supercarriers. Bristling with fighter jets that can reach deep into even landlocked trouble zones, America's virtually invincible carrier fleet has long enforced its dominance of the high seas.
China may soon put an end to that.
U.S. naval planners are scrambling to deal with what analysts say is a game-changing weapon being developed by China — an unprecedented carrier-killing missile called the Dong Feng 21D that could be launched from land with enough accuracy to penetrate the defenses of even the most advanced moving aircraft carrier at a distance of more than 1,500 kilometers (900 miles).
___
EDITOR'S NOTE — The USS George Washington supercarrier recently deployed off North Korea in a high-profile show of U.S. sea power. AP Tokyo News Editor Eric Talmadge was aboard the carrier, and filed this report.
___

Analysts say final testing of the missile could come as soon as the end of this year, though questions remain about how fast China will be able to perfect its accuracy to the level needed to threaten a moving carrier at sea.
The weapon, a version of which was displayed last year in a Chinese military parade, could revolutionize China's role in the Pacific balance of power, seriously weakening Washington's ability to intervene in any potential conflict over Taiwan or North Korea. It could also deny U.S. ships safe access to international waters near China's 11,200-mile (18,000-kilometer) -long coastline.
While a nuclear bomb could theoretically sink a carrier, assuming its user was willing to raise the stakes to atomic levels, the conventionally-armed Dong Feng 21D's uniqueness is in its ability to hit a powerfully defended moving target with pin-point precision.
The Chinese Defense Ministry did not immediately respond to the AP's request for a comment.
Funded by annual double-digit increases in the defense budget for almost every year of the past two decades, the Chinese navy has become Asia's largest and has expanded beyond its traditional mission of retaking Taiwan to push its sphere of influence deeper into the Pacific and protect vital maritime trade routes.
"The Navy has long had to fear carrier-killing capabilities," said Patrick Cronin, senior director of the Asia-Pacific Security Program at the nonpartisan, Washington-based Center for a New American Security. "The emerging Chinese antiship missile capability, and in particular the DF 21D, represents the first post-Cold War capability that is both potentially capable of stopping our naval power projection and deliberately designed for that purpose."
Setting the stage for a possible conflict, Beijing has grown increasingly vocal in its demands for the U.S. to stay away from the wide swaths of ocean — covering much of the Yellow, East and South China seas — where it claims exclusivity.
It strongly opposed plans to hold U.S.-South Korean war games in the Yellow Sea off the northeastern Chinese coast, saying the participation of the USS George Washington supercarrier, with its 1,092-foot (333-meter) flight deck and 6,250 personnel, would be a provocation because it put Beijing within striking range of U.S. F-18 warplanes.
The carrier instead took part in maneuvers held farther away in the Sea of Japan.
U.S. officials deny Chinese pressure kept it away, and say they will not be told by Beijing where they can operate.
"We reserve the right to exercise in international waters anywhere in the world," Rear Adm. Daniel Cloyd, who headed the U.S. side of the exercises, said aboard the carrier during the maneuvers, which ended last week.
But the new missile, if able to evade the defenses of a carrier and of the vessels sailing with it, could undermine that policy.
"China can reach out and hit the U.S. well before the U.S. can get close enough to the mainland to hit back," said Toshi Yoshihara, an associate professor at the U.S. Naval War College. He said U.S. ships have only twice been that vulnerable — against Japan in World War II and against Soviet bombers in the Cold War.
Carrier-killing missiles "could have an enduring psychological effect on U.S. policymakers," he e-mailed to The AP. "It underscores more broadly that the U.S. Navy no longer rules the waves as it has since the end of World War II. The stark reality is that sea control cannot be taken for granted anymore."
Yoshihara said the weapon is causing considerable consternation in Washington, though — with attention focused on land wars in Afghanistan and Iraq — its implications haven't been widely discussed in public.
Analysts note that while much has been made of China's efforts to ready a carrier fleet of its own, it would likely take decades to catch U.S. carrier crews' level of expertise, training and experience.
But Beijing does not need to match the U.S. carrier for carrier. The Dong Feng 21D, smarter, and vastly cheaper, could successfully attack a U.S. carrier, or at least deter it from getting too close.
U.S. Defense Secretary Robert Gates warned of the threat in a speech last September at the Air Force Association Convention.
"When considering the military-modernization programs of countries like China, we should be concerned less with their potential ability to challenge the U.S. symmetrically — fighter to fighter or ship to ship — and more with their ability to disrupt our freedom of movement and narrow our strategic options," he said.
Gates said China's investments in cyber and anti-satellite warfare, anti-air and anti-ship weaponry, along with ballistic missiles, "could threaten America's primary way to project power" through its forward air bases and carrier strike groups.
The Pentagon has been worried for years about China getting an anti-ship ballistic missile. The Pentagon considers such a missile an "anti-access," weapon, meaning that it could deny others access to certain areas.
The Air Force's top surveillance and intelligence officer, Lt. Gen. David Deptula, told reporters this week that China's effort to increase anti-access capability is part of a worrisome trend.
He did not single out the DF 21D, but said: "While we might not fight the Chinese, we may end up in situations where we'll certainly be opposing the equipment that they build and sell around the world."
Questions remain over when — and if — China will perfect the technology; hitting a moving carrier is no mean feat, requiring state-of-the-art guidance systems, and some experts believe it will take China a decade or so to field a reliable threat. Others, however, say final tests of the missile could come in the next year or two.
Former Navy commander James Kraska, a professor of international law and sea power at the U.S. Naval War College, recently wrote a controversial article in the magazine Orbis outlining a hypothetical scenario set just five years from now in which a Deng Feng 21D missile with a penetrator warhead sinks the USS George Washington.
That would usher in a "new epoch of international order in which Beijing emerges to displace the United States."
While China's Defense Ministry never comments on new weapons before they become operational, the DF 21D — which would travel at 10 times the speed of sound and carry conventional payloads — has been much discussed by military buffs online.
A pseudonymous article posted on Xinhuanet, website of China's official news agency, imagines the U.S. dispatching the George Washington to aid Taiwan against a Chinese attack.
The Chinese would respond with three salvos of DF 21D, the first of which would pierce the hull, start fires and shut down flight operations, the article says. The second would knock out its engines and be accompanied by air attacks. The third wave, the article says, would "send the George Washington to the bottom of the ocean."
Comments on the article were mostly positive.
___
AP writer Christopher Bodeen in Beijing and National Security Writer Anne Gearan in Washington, D.C., contributed to this report.
Copyright © 2010 Yahoo! Inc. All rights reserved.

409) US-China Maritime Security relations - FPRI

Conference on US-China Maritime Security Relations

Conference Sponsors
Foreign Policy Research Institute www.fpri.org
Reserve Officers Association www.roa.org

Sea Change?
Conflicting Claims, Disparate Agendas and U.S.-China
Maritime Security Relations

Thursday, May 13, 2010
2:00 - 4:45 PM EDT
Reserve Officers Association
One Constitution Avenue NE, Washington, DC

Reservations Required
Free for FPRI and ROA Members, $25 for non-Members

To register contact:
Alan Luxenberg
Tel: (215) 732-3774 x105
Email: lux@fpri.org
Please provide full contact information.

This conference will also be available via Audio Webcast and
by Teleconference
Participation by audio webcast or teleconference is free.

For instructions on how to participate via webcast or
teleconference contact:
Alan Luxenberg
Tel: (215) 732-3774 x105
Email: lux@fpri.org
Please provide full contact information.

FPRI and ROA will convene a symposium to address issues in
U.S.-China and Northeast Asian regional security relations
that arise from China’s growing maritime power , conflicting
claims of maritime and territorial sovereignty in the ocean
areas adjacent to China and the rights of foreign military
craft to operate in the region, including China's claimed
exclusive economic zone. The session will address the
prospects for conflict and accommodation, the merits of the
principal parties' claims, and the significance of these
issues for broader U.S.-China relations. Implications for
Japan's role and Sino-Japanese relations will be addressed
as well.


Agenda
Thursday, May 13, 2010
2:00 - 4:45 PM EDT

Sea Change?
Conflicting Claims, Disparate Agendas and U.S.-China
Maritime Security Relations

Panel I: 2:00 - 3:15 p.m.
Implications of China's Rising Maritime Power and U.S. and
Japanese Responses

Panelists:
Avery Goldstein, David M. Knott Professor of Global Politics
and International Relations and Associate Director of the
Christopher H. Browne Center for International Politics,
University of Pennsylvania; Senior Fellow, FPRI

Lt. Col. James R. Kendall, Foreign Area Officer, USMC

Felix Chang, Senior Fellow, FPRI

Moderator: Jacques deLisle, Director, FPRI Asia Program, and
Stephen A. Cozen Professor of Law and Director of the Center
for East Asian Studies, University of Pennsylvania


Panel II: 3:30 - 4:45 p.m.
Contested Claims: Territorial Sovereignty and Rights of
Operation / Rules of the Road for Military Craft

Panelists:
Jacques deLisle, Director, FPRI Asia Program, and Stephen A.
Cozen Professor of Law and Director of the Center for East
Asian Studies, University of Pennsylvania

Peter Dutton, Associate Professor, U.S. Naval War College
and a founding member of the China Maritime Studies
Institute, US Naval War College

Xinjun Zhang, Associate Professor of Public International
Law at Tsinghua University, Beijing, and Fulbright Scholar
(2009-10), University of Pennsylvania Law School

Moderator: Harvey Sicherman, President, FPRI

----------------------------

About the Panelists

Felix K. Chang, an FPRI Senior Fellow, is a partner at CVP
Ventures, a venture capital firm. He was previously a
consultant in Booz Allen Hamilton’s Organization and
Strategy practice; among his clients were the U.S.
Department of Energy, U.S. Department of Homeland Security,
and other agencies. Earlier, he served as a senior planner
and an intelligence officer in the U.S. Department of
Defense and a business advisor at Mobil Oil Corporation,
where he dealt with strategic planning for upstream and
midstream investments throughout Asia and Africa. His
publications and ongoing research concentrate on military,
economic, and energy security issues in Asia as well as
financial industry trends around the world. He received his
M.B.A. from Duke University and M.A. and B.A. from the
University of Pennsylvania. His FPRI essays can be found
here:
http://www.fpri.org/byauthor.html#chang

Jacques deLisle is Director of FPRI’s Asia Program, the
Stephen A. Cozen Professor of Law and the Director of the
Center for East Asian Studies at the University of
Pennsylvania. His research focuses on Chinese politics and
legal reform, China's approach to international law and
institutions, U.S.-China relations, and the international
status of Taiwan. His articles also have appeared in Orbis
and other foreign affairs journals, law reviews and edited
volumes. He received a J.D. and graduate education in
political science at Harvard and an A.B. from Princeton. His
FPRI essays can be found here:
http://www.fpri.org/byauthor.html#delisle

Peter Dutton, a retired Navy commander and judge advocate,
is associate professor of joint military operations at the
Naval War College and an adjunct professor at Roger Williams
University School of Law. Professor Dutton earned his juris
doctorate from the College of William and Mary and a master
of arts from the Naval War College (with honors). While on
active duty, he served as a naval flight officer, taught at
the Naval Justice School and the Defense Institute of
International Legal Studies, and served as operational law
adviser to Commander, USS John F. Kennedy Battle Group,
during Operation SOUTHERN WATCH. In 2004, Professor Dutton
became the Naval War College’s Howard S. Levie Chair of
Operational Law. He is a founding member of the College’s
China Maritime Studies Institute and writes on issues
related to U.S. and Chinese perspectives on maritime
international law as they relate to security.

Avery Goldstein, an FPRI Senior Fellow, is the David M.
Knott Professor of Global Politics and International
Relations and Associate Director of the Christopher H.
Browne Center for International Politics at the University
of Pennsylvania. He specializes in international relations,
security studies, and Chinese politics. He is currently
conducting research on China’s grand strategy. He is the
Associate Director of Penn’s Christopher H. Browne Center
for International Politics. He received his Ph.D. from the
University of California, Berkeley. His books include Rising
to the Challenge: China’s Grand Strategy and International
Security (Stanford University Press, 2005), Deterrence and
Security in the 21st Century: China, Britain, France, and
the Enduring Legacy of the Nuclear Revolution (Stanford
University Press, 2000), and From Bandwagon to Balance-of-
Power Politics: Structural Constraints and Politics in
China, 1949–1978 (Stanford University Press, 1991). His FPRI
essays can be found here:
http://www.fpri.org/byauthor.html#goldstein

LtCol James R. Kendall is an East Asia Foreign Area Officer
currently preparing to attend the Japanese National
Institute of Defense Studies (NIDS) in Tokyo this summer.
From 2006 until last January, he was a Strategic Analyst
with the Marine Corps’ Strategic Initiatives Group (SIG) at
the Pentagon, conducting service-level analysis of the US
Pacific Command (PACOM) area of responsibility and
Afghanistan. Fluent in Japanese, LtCol Kendall also served
at the Japanese Defense Agency in Tokyo in 2003, aiding the
historic Japanese deployment to Iraq. An artillery officer,
he has undertaken numerous overseas deployments and
assignments since being commissioned in 1991, including two
in Japan, and participated in such operations as RESTORE
HOPE in Somalia in 1994 and IRAQI FREEDOM in Al Anbar
province, Iraq, in 2004 and 2006. LtCol Kendall graduated
from the Virginia Military Institute in1991, and in 2002
received his MA in National Security Affairs from the Naval
Postgraduate School in Monterey, California, where he was a
Distinguished Graduate. His personal awards include the
Meritorious Service Medal, Navy and Marine Corps
Commendation Medal and the Combat Action Ribbon.

Dr. Xinjun Zhang is Associate Professor of Public
International Law at Tsinghua University, Beijing. He
received his doctoral degree from Kyoto University. His
research interests include the Law of the Sea, Non-
proliferation Law and the Law of Treaties. He is a member of
International Law Association (ILA), and active participant
in the `Committee on The Legal Principles relating to
Climate Change|. He is currently a Fulbright Research
Scholar at the University of Pennsylvania Law School. His
FPRI essay on China-Japan maritime sovereignty disputes can
be found here:
http://www.fpri.org/byauthor.html#zhang

326) USA-China: Tension is Overrated - Minxin Pei

The Tension is Overrated
Minxin Pei
International Herald Tribune, February 16, 2010

The state of the U.S.-China relationship exhibits classic symptoms of a bipolar disorder — sudden and dramatic swings between euphoria and depression. Barely three months ago, when President Obama was feted in Beijing, it was euphoria. At the moment, when Beijing hurls insults at Washington almost daily, it is decidedly depression.

The rapid downturn in a relationship that was, until recently, marked by cordiality and tranquility has led many to worry about another extreme: a qualitative deterioration and eventually a full-fledged rivalry.

Such fears are overblown, in the same way that recent talks of a close-knit U.S.-China strategic partnership (a.k.a. G-2) were premature and naïve.

In many ways, the sudden worsening of ties between Beijing and Washington really means that U.S.-China relations are returning to “normalcy.” Because of the deep and unbridgeable differences between the two countries in terms of their political values, conceptions of international order and geopolitical interests, constant frictions, even minor conflicts, should be the rule. Chumminess and absence of tensions, as displayed during Mr. Obama’s first year in office, are actually the exception.

Additionally, the downturn in ties also reflects two important policy adjustments by President Obama. First, a tough stance toward China is part of an overall hardening of his foreign policy. China is not getting special treatment. Second, the Obama administration has specific reasons to be less accommodating to China because of Beijing’s recent assertiveness, such as its uncooperative behavior at the Copenhagen climate change summit, obstructionism on sanctions against Iran, and intensified repression of dissent at home.

Some worry that Beijing will respond to Washington’s policy adjustments with retaliation, thus initiating a vicious cycle.

While it is true that the Chinese government has turned up its blustering several notches, we should learn to tell bark from bite. Other than canceling its military exchange program with the U.S., which is not viewed as productive in any case, China’s retaliations are mostly rhetorical and symbolic. The real test, of course, will be Iran. If Beijing single-handedly blocks sanctions against Tehran at the United Nations Security Council, that would be serious. But Chinese leaders must also know that they will surely face the united wrath of the United States and Europe, a prospect no smart mandarins in China relish.

There are additional grounds for cautious optimism. The two countries are now so economically intertwined that a major disruption in their political relationship could severely damage their respective economic interests, a price neither wants to pay. Economic interdependence also means that neither China nor the U.S. can hurt the other without harming itself. In spite of the heated words in the official Chinese press, it is reassuring to note that Beijing and Washington are merely fighting the same old fights: Taiwan, Tibet and human rights. Both sides are familiar with the ground rules for these disputes and, so far, have observed them.

Some worry that Chinese leaders may have such hubris that they will assert themselves with unusual aggressiveness. On the surface, that sounds plausible. However, Beijing’s rulers are ruthless, but cautious, realists. It is unlikely that they have deluded themselves into believing that they are now strong enough to stare down the U.S. Most importantly, acutely aware of their own domestic frailties, they understand that a costly confrontation with America will endanger their hold on power.

What lies ahead should be familiar to China watchers: After the huffing and puffing is over, Beijing and Washington will start repairing the damage. As for the rest of the world, it had better get used to frequent, but controlled, rows between China and the United States.
=============
Minxin Pei is an adjunct senior associate in the China Program at the Carnegie Endowment for International Peace. He is also Tom and Margot Pritzker ’72 Professor of Government and Roberts Fellow, and the director of the Keck Center for International and Strategic Studies at Claremont McKenna College.