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Growing challenges to Asian stability

Caught between China and the U.S., regional powers face tough strategic choices

by Brahma Chellaney

NEW DELHI — U.S. President-elect Barack Obama takes office at a time when a fundamental and qualitative reordering of power is under way in the Asia-Pacific, with tectonic shifts challenging strategic stability. The impact of such shifts on U.S. foreign policy is bound to be accentuated by America’s growing challenges, including a deep economic recession at home and the two separate wars being waged overseas.

Such challenges dictate greater U.S.-China cooperation to ensure continued large Chinese capital inflows, and Beijing’s political support on contentious issues ranging from North Korea and Myanmar to Pakistan and Iran. Such calculations, in turn, are certain to have a bearing on America’s dual role in Asia — “as a resident power and as the straddle power across the Asia-Pacific,” to quote Robert Gates, who is to stay on as defense secretary in the Obama administration. According to Gates, the “next U.S. administration seems certain to continue the overlapping, long-standing security partnerships” in Asia but “will also inherit an agenda of worrying issues.”

Asia has come a long way since the creation of two Koreas, two Chinas, two Vietnams and India’s partition. It has risen dramatically as the world’s main creditor and economic locomotive. The ongoing global power shifts indeed are primarily linked to Asia’s phenomenal economic rise, the speed and scale of which has no parallel in world history. How fast Asia has come can be gauged from the 1968 book, “Asian Drama: An Inquiry Into the Poverty of Nations,” by Swedish economist and Nobel laureate Gunnar Myrdal, who bemoaned the manner in which impoverishment, population pressures and resource constraints were weighing down Asia.

With the story of endemic poverty turning into a tale of spreading prosperity, today’s Asian drama is very different. Even so, Asia faces major challenges. It has to cope with entrenched territorial and maritime disputes, sharpening competition over scarce resources, improved military capabilities, increasingly fervent nationalism and the spread of religious extremism.

Diverse transborder trends — from nuclear proliferation and terrorism to illicit refugee flows and human trafficking — add to the challenges. But Asia is also becoming more interdependent through trade, investment, technology and tourism. The economic renaissance has been accompanied by a growing international recognition of Asia’s soft power as symbolized by its arts, fashion and cuisine.

The United States will remain a key player in Asia through its security arrangements and other strategic ties with an array of regional states. Its policies and actions will continue to have an important influence on the strategic calculus of the important Asian actors. However, not since Japan rose to world-power status during the reign of Emperor Meiji in the second half of the 19th century has another non-Western power emerged with such potential to alter the world order as China today. As the latest assessment by the U.S. intelligence community predicts, China stands to more profoundly affect global geopolitics than any other country.

China, according to the National Intelligence Council, is “poised to have more impact on the world over the next 20 years than any other country.” China’s ascent, however, is dividing Asia, not bringing Asian states closer. Economic powerhouse Japan — whose economy is larger than that of China, India and Russia combined — is intent on shoring up its security and ensuring that Beijing does not call the shots in East Asia. Japan is set to reassert itself in world affairs by shedding decades of pacifism anchored in a U.S.-imposed Constitution.

Another key actor in Asian geopolitics, India, is unwilling to cede its leadership role in the Indian Ocean rim region, despite China’s creeping influence in southern Asia through growing transportation, trade, port-building and defense links.

Under Obama, America’s main strategic objectives in the Asia-Pacific are unlikely to change. Indeed, the central U.S. interest in the Asia-Pacific remains what it has been since 1898 when America took the Philippines as spoils of the naval war with Spain — the maintenance of a balance of power.

During the first half of the Cold War, the U.S. chose to maintain the balance by forging security alliances with Japan and South Korea, and also by keeping forward bases in Asia. By the time the Cold War entered its second phase, America’s “ping-pong diplomacy” led to President Richard Nixon’s historic handshake with Mao Zedong in 1972 in an “opening” designed to reinforce the balance by employing a newly assertive, nuclear-armed China to countervail Soviet power in the Asia-Pacific region.

Today, according to the Pentagon’s Quadrennial Defense Review Report, America’s interests center on “maintaining a stable balance” in “the East Asian littoral,” given the likelihood that “a military competitor with a formidable base will emerge in the region” — an allusion to China.

Washington would not want Japan or India to kowtow to a China seeking to supplant the U.S. as the leading force in Asia. But America also would not want to see the rise of a combative India or Japan.

For example, an overt Japan-China conflict in the East China Sea over competing maritime and gas-exploration claims would compel Washington to side with Tokyo or risk wrecking the U.S.-Japanese security relationship, centered on U.S. forward-deployment on Japanese soil. America’s interests in Asia actually lie in hedging its future options and balancing the various powers.

The emergence of China as a global player with rising heft is not only transforming the geopolitical landscape in the Asia-Pacific, but also spurring greater American reliance on Beijing for financial and political support. In fact, China is becoming America’s banker, with Obama’s mammoth stimulus package to help revive the U.S. economy set to reinforce Washington’s dependence on Chinese capital.

The bipartisan support for a massive fiscal stimulus to help prevent the U.S. recession from turning into a depression will result in a larger budget deficit (already crossing $1 trillion) and greater reliance on foreign capital inflows. A creditor-debtor relationship between Washington and Beijing, along with China’s more muscular foreign policy and growing sway over states around its periphery, holds major relevance for America’s traditional allies, principally Japan and Taiwan, and new strategic partners, like India. After all, a banker has greater leverage over a customer than vice versa.

In the years ahead, China may not hesitate to assert the leverage over an increasingly indebted America. But such leverage is likely to stay limited. Although it is America’s largest external creditor — with much of its $2 trillion foreign-exchange reserves invested in U.S. dollar-denominated financial instruments — China is locked in a symbiotic or mutually dependent economic relationship with the U.S. It is as much in China’s interest as in America’s to prop up the value of the dollar because if the dollar sinks, the worth of the Chinese dollar-denominated assets would plummet. Also, despite its overflowing coffers, China does not have much room to diversify the foreign investment of its surpluses and savings. For one, the European capital markets remain shallow for a cash-heavy China, with any big induction of Chinese capital likely to have a destabilizing effect. For another, the global oil-price crash crimps China’s diversification ambitions.

Had oil prices stayed at more than $100 a barrel, the oil-exporting nations — particularly the oil sheikdoms of the Persian Gulf — would have helped bolster the value of the dollar by channeling their high oil earnings into dollar-denominated assets, thus creating space for China to diversify some of its holdings of U.S. debt.

For the same reason, hundreds of billions of dollars of ridiculously cheap Japanese credit continue to slosh around the U.S. financial markets. However, Tokyo has stopped buying U.S. Treasury bills, making Beijing the principal purchaser of such notes. Besides China’s ascent, the political rise of Russia, Japan and India may pick up momentum in the next decade, despite the uncertain demographic future of the first two. China’s rise, however, spotlights the dissimilarities between Asia and Europe. Consider the following:

* While Europe has achieved equilibrium between and among its main powers, the situation in Asia threatens to slide toward overt power disequilibrium.

* In Europe, the largest state and economy — Germany — does not aspire for dominance. Rather, in respect to the other European powers, it has learned and accepted to be one among equals. In Asia, the situation is the reverse. China does not hide its ambition to gain Asian pre-eminence.

* With the exception of Japan, the other Asian economies are at earlier stages of development. That is why most of them are classified as “developing states” or “emerging economies.”

* Again, with the exception of Japan, most Asian states, in contrast to many European nations, are distinguished by wide and growing income disparities, and social inequalities.

* While democracy has become the norm in Europe, that can hardly be said about Asia. In fact, only a small minority of Asian states are truly democratic. The diverse political systems in Asia make it difficult to build common norms and values or an Asian community. Against this background, Obama and his secretary of state-designate, Hillary Rodham Clinton, are likely to continue the work of their predecessors to reinforce America’s existing military relationships in Asia while searching for new allies or partners that can help build an Asian balance of power.

China, too, plays balance-of-power politics in Asia, but its balancing is primarily designed to keep peer rivals like Japan and India bottled up regionally, and to carve out more space for itself vis-a-vis the U.S.

During the Bill Clinton presidency, Washington went out of its way to befriend China, even if such courtship slighted Japan. As Condoleezza Rice put it before joining President George W. Bush’s administration, “Never again should an American president go to Beijing for nine days and refuse to stop in Tokyo or Seoul.” Yet Bush is leaving the White House with a solid China-friendly legacy, best illustrated by the manner he ignored the bloody suppression of last March’s Tibetan uprising and showed up at the Beijing Olympics. Obama is sure to continue the 36-year record of U.S. presidents being China-friendly — a certainty underscored by America’s greater need, in the midst of a financial meltdown, for capital from a foreign power already holding 10 percent of its public debt.

From being allies of convenience in the second half of the Cold War, the U.S. and China have gradually emerged as partners tied by interdependence. But as U.S.-China ties acquire a wider and deeper base in the coming years, the strains in some of America’s existing military or strategic partnerships would become pronounced.

While South Korea’s importance in the U.S.-led hub-and-spoke alliance system will continue to decline, doubts are bound to grow in Japan and Taiwan over the reliability of Washington’s commitment to their security.

In the near term, rising Chinese assertiveness has had the unintended effect of persuading Japan to jettison its doubts about U.S. security commitments and to reinvigorate its military relationship with Washington. In the long run, however, Tokyo is unlikely to remain comfortable with its security dependency on the U.S.

Some recent U.S. actions — including the failure to consult with Tokyo before removing North Korea from the U.S. list of terrorism-sponsoring states and the refusal to sell Japan the next-generation F-22 Raptor fighter jets — are likely to sow further doubts among the Japanese.

Despite a recent $6.46 billion arms package for Taiwan — which prompted Beijing to break off military contacts with the U.S. — Washington has declined to sell Taipei Aegis ships, diesel-powered submarines and UH-60 Black Hawk attack helicopters. But now that China has decided to send ships to the Gulf of Aden in support of the multinational antipiracy operations there, the head of the U.S. Pacific Command hopes that move would be “the springboard for resumption” of military contacts.

The U.S. has worked hard in recent years to co-opt India in a “soft alliance” shorn of treaty obligations. Yet, conflicting Indo-U.S. expectations and interests often surface. Take the controversial nuclear deal, which was driven by American nonproliferation considerations but peddled by Indian neocons and government managers as a far-reaching strategic initiative to help to counter China’s growing might and assertiveness.

Just as India has found itself alone in the fight against transnational terrorism, with U.S. diplomacy more focused on averting Indo-Pakistan conflict than in the dismantlement of the India-directed Pakistani terrorist infrastructure, New Delhi is unlikely to get much comfort on China from American policy. In that light, the Indian ardor in recent years for closer defense ties with the U.S. is likely to gradually give way to reality at a time when India confronts growing Chinese military assertiveness along the disputed Himalayan frontier and an emerging Chinese threat from the oceans.

By contrast, Australia’s growing cozy relationship with distant China, especially under Sinophile Prime Minister Kevin Rudd, meshes well with the likely trajectory of U.S.-China ties. What Canberra pursues today — to balance its relations with Tokyo and Beijing — Washington is likely to begin doing before long.

Despite increasing interdependence, the U.S.-China relationship is likely to remain uneasy, although neither side would seek overt competition or confrontation. Washington is expected to remain more critical of Moscow than of Beijing, including on a subject where China’s record is egregious — human rights.

For the U.S., China’s rising power helps validate American forward military deployments in the Asian theater. It also helps America to keep existing allies and search for new ones. The China factor is coming in handy for Washington to enlarge its strategic footprints in Asia.

Caught between an increasingly assertive China, and an America focused on advancing its economic and political interests in Asia, other Asian powers are likely to face tough security choices in the coming years. The recent landmark Japan-India security agreement signals that major changes in the Asian strategic scene are in the offing.

Brahma Chellaney is a professor of strategic studies at the privately funded Center for Policy Research in New Delhi.