Why Asia’s Maritime Disputes Are Not Just About China

Posted on August 20, 2012


When it comes to feuds in the Pacific over islands and what lies beneath, it’s not simply a case of China against everyone else.

Anti China protestor and former Philippine policeman Abner Afuang burns a Chinese flag in front of the Department of Foreign Affairs on July 27, 2012 in Manila, Philippines

Much of the international coverage and commentary about the disputes over islands in East Asian waters has concentrated on the battle in the South China Sea for territory and resources. And much of that has been framed as a morality play in which China is the villain, most other Asian nations are victims, and the U.S. is a Solomonic figure.

On Aug. 10 the Wall Street Journal, referring to Beijing, published an editorial titled “The Bully of the South China Sea.” In another article, Robert Manning of the Washington-based Atlantic Council wrote:  ”It is one thing if, in a rules-based world, China seeks a larger role in shaping the rules, commensurate with increased economic and political weight. It is quite another if the message is simply about power.”

Even Kishore Mahbubani, dean ofSingapore‘s Lee Kuan Yew School of Public Policy and an unabashed booster of the global rise of Asia and in particular China, has been critical of Beijing. In a syndicated column Mahbubani said that “China has begun to make serious mistakes” in its dealings with its neighbors.

To be sure, China has upped the ante in the South China Sea stakes and angered, in particular, some members of the Association of Southeast Nations (ASEAN). Beijing has established the Sansha municipality and garrison on an island in the Paracels, which China as well as Vietnam and Taiwan claim.

It has engaged in a tense naval stand-off with the Philippines over a reef called Scarborough Shoal.

It has invited foreign companies to tender for oil and gas in disputed waters.

The reasons that pundits give for Beijing’s bellicosity range from its appetite for the natural resources of the South China Sea to its desire to look tough amid an uncertain leadership transition and to stir some nationalist fervor at home (witness the violent anti-Japanese protests on the mainland during the weekend) to its irritation at what it thinks is Washington’s interference in its backyard. At a regional conference two years ago, in remarks now often cited as a sign of China’s unilateral ambitions in the South China Sea, Foreign Minister Yang Jiechi infamously declared the body of water to be a “core national interest,” adding: “China is a big country and other countries are small countries, and that is just a fact.”

It is, but there are other, wider truths.

When it comes to feuds in the Pacific over islands and what lies beneath, it’s not simply a case of China against everyone else.

Depending on the dispute, it’s also South Korea vs. Japan, Japan vs. Taiwan, Taiwan vs. Vietnam, Vietnam vs. Cambodia, and numerous other permutations—for many of the same reasons supposedly behind China’s actions. Resource grab. Patriotic posturing. Historical baggage (mostly to do with Japan’s brutal occupation of most of East Asia before and through World War II).

Referring to the South China Sea, former ASEAN secretary-general Rodolfo Severino, who now heads Singapore’s Institute of Southeast Asian Studies, wrote recently that, “All claimants feel their footholds are essential to what they consider their national interests … This clash of national interests … makes it most difficult even to appear to be making compromises on national integrity or maritime regimes and, thus, almost impossible to resolve [the] disputes.”

Washington says it wants to help keep the peace and to ensure that sea lanes remain free (about a third of the world’s maritime trade passes through these waters). In recent weeks the U.S. has been vocal about what it thinks about the disputes. The State Department said that Beijing’s Sansha maneuvers “run counter to collaborative diplomatic efforts to resolve differences and risk further escalating tensions in the region.”

When U.S. Defense Secretary Leon Panetta recently met in Washington with his counterpart from Japan, he called again for a “code of conduct” to be set up, especially between China and ASEAN. Such a code, Washington has stated repeatedly, could govern what to do when an incident like Scarborough Shoal occurs. Said Panetta: “The United States will do whatever we can to work with Japan and others to ensure that is the approach we take.” The next day the Foreign Ministry in Beijing ordered in the U.S. embassy’s deputy chief of mission, Robert Wang, and essentially told Washington to butt out.

From Beijing’s perspective, the U.S. is taking sides. Besides its traditional allies in the region—Japan, South Korea, the Philippines—Washington has been especially supportive of one of China’s historical rivals, Vietnam, over the South China Sea. While Washington portrays itself as an honest broker, the more cynical reckon the U.S. is adopting the thinking: the enemy of my enemy is my friend —which is how Beijing probably sees it. As Severino writes, “The Chinese fear that those who try to prevent or resent their country’s rise might use the South China Sea to contain it.”

Also, while most East Asian governments welcome the U.S. diplomatic and military “pivot” to the region, neither do they want China further antagonized. During the recent ASEAN foreign ministers’ meeting in Phnom Penh, chair Cambodia “vetoed” the Washington-backed code of conduct for ASEAN as a whole to deal with China over the South China Sea (as opposed to the bilateral, one-on-one negotiations Beijing wants, which give it more leverage).

Many international commentators vilified Phnom Penh for kowtowing to Beijing. But if so, it has good reason: China is Cambodia’s biggest investor and donor; Phnom Penh would have miscalculated by acting against the wishes of its No. 1 patron. That’s just realpolitik. “Perfect neutrality is impossible when some of [ASEAN’s] members are formal allies with one power, or receive large amounts of high-profile aid from another,” writes Simon Tay, chairman of the Singapore Institute of International Affairs and author of Asia Alone, a book about the geopolitics of the region.

Here are another couple of truths. First, another ASEAN chair might have acted the same too. Even though its economy is softening, China remains the main driver of economic growth in East Asia. Second, not every ASEAN member has a dog in the South China Sea fight. Why risk enraging the dragon for Vietnam and the Philippines and, to a lesser extent, Malaysia and Brunei?

Amid East Asia’s island fever, there’s big and small, strong and weak, rich and poor, and enlightened and unenlightened self-interest. But not as innocent as good vs. evil.

>> Implementing the East China Sea peace initiative
>> A guide to East Asia’s Maritime Disputes
>> South China Sea Disputes: Is This How War Starts?
>> War’s Legacy Plagues Japan and Its Neighbors


South China Sea Dispute Spreads to San Francisco

How could allegations of discriminatory practices against a bank in the U.S. have anything to do with the territorial dispute in the South China Sea? Never underestimate clever activists:

[Two Asian-American organizations have accused ICBC of “not hiring, making loans or investing with Asian Americans, Latinos or Blacks,” as well as the bank’s “direct and indirect financing of China’s military actions in the South China Sea.”

The organizations said ICBC’s practice violates the Federal Reserve’s Community Reinvestment Act requirements and the anti-discrimination requirements in the Dodd-Frank Reform Bill.

According to the paper, they will be meeting with the Federal Reserve in September to request an immediate investigation and to bar, for five years, ICBC from acquiring any additional banks in the US. (Global Times)

Wow, interesting. Asian-Americans going after a Chinese bank for discriminating against racial minorities, including other Asians? Definitely a legal dispute worth my time, I’d say.

But wait, that’s not really what’s going on here. You might have noticed that these allegations include the financing of China military actions in the South China Sea. Huh? What does that have to do with racial discrimination?

The answer, of course, that it doesn’t. This entire kerfuffle, which I suspect is entirely bollocks, stems from the South China Sea dispute between China and the Philippines (and almost everyone else in Asia at this point).

No, really. I’m not making this stuff up. The two groups who ginned up this whole thing are the The US Pinoys for Good Governance (US4PGG) and the National Asian American Coalition (NAAC) and reported by the Asian Journal, which calls itself “The Filipino-American Community Newspaper.”

The Asian Journal‘s coverage of this “protest” is inflammatory, as you’d expect. It goes back at least a year, too. Here are a couple of representative bits:

Faith Bautista [President of the National Asian American Coalition] stated: “The Philippine government lacks the military force and the economic resources to defeat China. But, we can learn from past successful guerilla warfare, best demonstrated by the North Vietnamese who outlasted both the French and U.S. governments.

“We will be using a jiu-jitsu effort. Our organization will seek to delay, if not fully stop the Chinese government’s acquisition of all banking companies in the United States. (July 14, 2011)

Rodel Rodis, the California Chair of USP4GG and a leader of the California protest, said, “We have the resources to topple the Chinese Government’s largest bank and we will do so unless ICBC and the Chinese Government make clear that they want a peaceful resolution in the South China Sea.” (August 10, 2012)

These folks certainly are motivated, but in the end, I can’t say I’m a fan of what they’re doing. Going after ICBC is a clever move, seeing as how they (and the Philippines) don’t have a hell of a lot of leverage. Gotta love that asymmetric warfare, Ho Chi Minh kind of thing.

But mucking about with the U.S. banking regulatory process is a bit much. They’re going to meet with (and waste the time of) Ben Bernanke? Come on.

As to the charge that ICBC finances military action, give me a break. All the SOE banks here indirectly finance government activity, but that doesn’t persuade me that the U.S. should shut its doors to all Chinese banks. Moreover, who do these guys think finances U.S. weapons sales around the globe? The World Bank?

The South China Sea dispute sucks, I get that. And the Philippines has very limited options. But these Asian-American groups are not making me feel very sympathetic with this brand of activism. We’ve already got nationalist lunatics running around planting flags in soggy clumps of coral. This doesn’t help the dialogue.

Stan Abrams

China to continue economic cooperation with U.S.

China has expressed its intention, at home and abroad, to continue the Strategic and Economic Dialogue with the United States and strengthen collaboration in economic policy coordination and responses to global issues.

The stance of cooperation with the United States is highly likely to continue in the next administration.

The fourth round of the U.S.-China Strategic and Economic Dialogue was held in Beijing on May 3 and 4.

The Chinese government took certain preliminary steps to ensure the smooth running of the dialogue.

On May 2, the renminbi-dollar exchange reference rate, which is announced every morning, was set at its highest level since the reform of exchange system started in July 2005.

Together with the widening of the renminbi-dollar exchange rate fluctuation band that was implemented in mid-April, the move is seen as partly intended to soothe U.S. demands for acceleration in the pace of the exchange system reform.

Chinese human rights activist Chen Guangcheng sought asylum in the U.S. Embassy in Beijing shortly before the Strategic and Economic Dialogue.

The Chinese government did not put off the talks, citing the incident as a reason, although it strongly demanded an apology and assurances to prevent a recurrence.

It is assumed that China partly was politically motivated not to spoil its relations with the United States in the run-up to a change in its political leadership.

According to Chinese media reports, China is beginning to diversify its foreign assets and it already owned Japanese government bonds worth around $231.2 billion as of the end of 2011.

However, it is estimated that a large majority of China’s foreign assets are still dollar-based, including some $1.17 trillion worth of U.S. bonds as of the end of March 2012.

For that reason, it is assumed that it was vital, from the standpoint of protecting asset value, that the Strategic and Economic Dialogue go ahead as scheduled and that the importance of U.S.-China cooperation be promoted at home and abroad.

The agenda of the fourth round of the Strategic and Economic Dialogue included a variety of items, such as the strengthening of the functions of the International Monetary Fund, worldwide security issues and the reinforcement of environmental cooperation.

As for the promotion of sustainable and balanced economic growth alone, a wide range of issues were debated and a number of agreements were reached.

Of the agreements reached concerning sustainable growth, the following three are of particular note.

The first is the coordination of macroeconomic policy.

The United States will work to reduce its fiscal deficit and increase its gross savings rate, while increasing investments and exports, and China will focus on increasing domestic demand, particularly consumption.

If the agreements are limited to these measures, they may be interpreted as a reaffirmation of bilateral economic policy coordination since the first round of the U.S.-China Strategic and Economic Dialogue in 2009.

However, the “Economic Track of the Fourth Meeting of the U.S.-China Strategic and Economic Dialogue” shows that the Chinese side made more commitments, which include the promotion of structural tax relief and the geographical expansion of a trial switch from a business tax on sales to a value-added tax after tax credit on purchases.

The document also mentions efforts to reduce import duties on some consumer goods by the end of 2012.

These are concrete measures that are expected to lead to the development of the service industry as well as expanded consumption.

It can be said that the promotion of cooperation with the United States in terms of economic management has begun to fit with the aims of the Chinese government.

Second, there has been advancement in the strengthening of bilateral economic ties and a softening of points of conflict.

The agreement to speed up negotiations on a bilateral investment agreement is a prime example of the former.

As an example of the latter, the U.S. side showed a clear intention to welcome the widening of the renminbi-dollar exchange rate fluctuation band, while it is based on the assumption that Chinese authorities will continue with the exchange system reform.

The document also emphasized efforts to promote exports of consumer-use high-tech products to China apparently as a result of compromise to mitigate points of conflict.

The United States hopes to prevent the diversion of technology to military purposes and expand its exports to China, while China is anxious to increase imports of high-tech products to enhance its own industries.

With a matching of the intentions of the two sides, it may be understood that the promotion of exports of consumer-use high-tech products was included, rather than whether restrictions on high-tech exports to China are to be relaxed.

The third point is collaboration and cooperation in tackling global issues.

Attention was paid to China’s reaction to the Trans-Pacific Strategic Economic Partnership Agreement (TPP), in which the United States is playing a leading role, as part of efforts to promote economic deregulation.

Discussions in this area, however, only went so far as agreeing to strengthen the exchange of information, such as on the China-ASEAN free trade agreement.

Still, it is worth noting that promoting U.S.-China cooperation in shale gas development and environmental conservation, as well as the “encouragement of responsible production” by the two countries, was included in the list of achievements of the Strategic and Economic Dialogue.

The United States and China are thought to have abundant resources of shale gas. While it is expected to be a promising source of energy in the future, concerns have been expressed about its environmental impact.

The fact that the world’s two largest energy consumers, China and the United States, have agreed to accelerate shale gas production, while paying careful attention to environmental aspects, is an important development that has the potential to lead to a long-term, stable supply of global energy.

The Hu Jintao administration has held strategic and economic dialogues with the Barack Obama administration once a year involving key ministers.

The prevailing view in China is that these dialogues have contributed to greater collaboration with the United States.

Allowing China to respond appropriately to U.S. demands, and occasionally refusing them, the talks have been praised as being a stabilizing force that has softened U.S.-China conflict.

Noting that the United States will hold a presidential election and that China will bring in a new leadership this year, official reports have stated that the new leadership will respect the consensus obtained during the latest round of talks and the agreements signed.

As long as these arguments are not entirely refuted, it appears that China will continue dialogue with the United States and maintain policy coordination in economic and other fields under the post-Hu administration.

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Junya Sano

Posted in: Economy, Politics