The United States is well into what is likely to be 24 months of electoral politics and transition to a new president’s administration. Early indications are that relations with China will be a political football for candidates from both the Democratic and Republican parties, something that has been seen before, in 1980, 1992, 2000 and 2012.

Hillary Clinton, the former secretary of state and Democratic front-runner, has already taken the opportunity to warn Taiwan not to become overly dependent on China’s markets. Republican candidates assert that the Obama administration has been weak in dealing with Beijing’s assertiveness in the South China Sea and with alleged Chinese mercantilism. Distinguishing the 2016 campaign from the previous ones is the competition from Russia and the Middle East for the attention of the many candidates. This time, it is not all about China, although China will not be absent from the debate.

Douglas H. Paal
Paal previously served as vice chairman of JPMorgan Chase International and as unofficial U.S. representative to Taiwan as director of the American Institute in Taiwan.
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Marking the onset of the extended political season, outgoing President Barack Obama, as of press time, was scheduled to host Xi Jinping, the president of China, during a state visit to Washington. This was likely intended to be the last high-level, purely bilateral exchange for the next two years, and as such would anchor relations through the heavy political seas ahead of the 2016 elections in the United States. Going into the summit, expectations were colored by rising concerns over alleged Chinese cyberintrusions into US official and commercial databases, rising Chinese activism in promoting disputed territorial claims and a worsening economic environment for American business in China.

As the Obama administration fades away, it is increasingly less likely to undertake initiatives to shape the overall pattern of US-China relations. Drift is more likely than direction. In this context, American and other observers might be surprised to find that China appears poised to use this interregnum to energize and, for the most part, improve relations with its neighboring states.

Ten good years

With the recent uptick in tensions between China and the Philippines, Japan and Vietnam regarding disputed islands and territorial waters, observers have tended to forget that Beijing had a very successful decade of building influence in Asia prior to 2008.

It started with the Asian financial crisis in Southeast Asia in 1997. After the preceding decade of rapid construction amid mounting debt, first Thailand and then other regional economies found their currencies under severe stress, in a domino-like cascade. The International Monetary Fund provided debt chair offered, as President Soeharto, who would resign four months later, signed the conditionality agreement.

In the midst of the crisis, the administration of President Bill Clinton chose not to provide bilateral relief, arguing that it was constrained by legislation written by US Senator Al D’Amato, known as the “D’Amato Amendment.” Views differed within Washington about whether this was really a constraint or rather a pretext for inaction on a faraway economic problem. At the time, Singapore’s thoughtful trade minister, George Yeo, quoted the old aphorism that “a friend in need is a friend indeed,” implying that the United States was not being a friend to those then in need.

In this context, Beijing importantly refrained from devaluing its currency, the renminbi, as others were forced to do due to their lack of foreign exchange to finance the credit bubble. It also, for the first time, made a modest offer of swap facilities to help central banks through the crisis. China’s good neighborliness in a time of crisis was unanticipated by the markets and came as a relief to stricken governments, and stood in contrast with relative American inaction.

Subsequently, China stepped up diplomatic and economic activity throughout the Asia- Pacific region. Notably, relations between Tokyo and Beijing warmed under the leadership of Hu Jintao, the Chinese premier at that time, after a cooling period marked by his predecessor, Jiang Zemin, who rarely missed an opportunity to complain about Japan. By 2008, Hu’s efforts culminated in a successful state visit to Japan, where he was hosted by China-friendly Prime Minister Yasuo Fukuda.

The quality of the diplomats Beijing assigned to the region was observably high and they were energized. In Indonesia, with the United States under President George W Bush appearing to be obsessed with post-9/11 counterterrorism, Hu Jintao conducted a state visit that President Susilo Bambang Yudhoyono exploited to allow the official use of the Chinese language in Indonesia for the first time since the 1965 purge of the Indonesian Communist Party.

In 2002, China agreed to the Declaration on the Conduct of Parties in the South China Sea, at the behest of the Association of Southeast Asian Nations (Asean), and to begin negotiations on a code of conduct, which has still not been achieved, but which at least seemed feasible in the early 2000s.

Chinese behavior

These illustrative references to China’s decade of productive economic and state diplomacy began to go negative between 2008 and 2009. It was almost as if, in the aftermath of the Beijing-hosted Summer Olympics and the onset of the global financial crisis originating in the United States, China was seized with an excess of self-satisfaction. Specialist libraries groan under the weight of commentaries written at the time about the failure of the Washington model, or “consensus,” and the rise of the “Beijing consensus.” Market liberalization, long preached by American economists and politicians, came to be interpreted as the source of the United States’ difficulties. Regulatory control and less democracy were advocated as a more responsible and effective alternative.

In its relations with its neighbors, the term “Chinese assertiveness” came to the fore. Southeast Asian claimants in the South China Sea complained more loudly during 2008 and 2009 that Beijing was dragging its feet on negotiating a code of conduct. Myanmar resented what its leaders called Chinese highhandedness in dealing with their resources, culminating in Myanmar’s symbolically significant cancellation in 2011 of a project to build a hydroelectric dam at Myitsone, in the north.

What Obama administration officials continue to call Asian “demand signals” for greater American involvement in the region fell on receptive ears in an administration that was extricating the United States from two wars in Iraq and Afghanistan and pursuing greater diplomatic activism in Asia. As a result, Washington finally signed the Treaty of Amity and Cooperation in Southeast Asia in 2009, which permitted participation by the United States in the annual East Asia Summit the Bush administration had been reluctant to join.

At the Asean Regional Forum in Hanoi in 2010, the United States took a big step toward re-engagement with a speech by Secretary of State Hillary Clinton that formally stated American interests in the South China Sea, not in conflicting territorial claims, but in freedom of navigation, peaceful settlement of disputes and adherence to international law and norms. This speech visibly shocked China’s foreign minister, Yang Jiechi, who departed the venue for some time, only to return to lecture the participants about the differences between big countries and small countries, an approach that exacerbated already worsening sentiment among them.

In 2011, observing important political changes within Myanmar, Clinton broke with past policies of isolation and sanctions to visit the leaders and opposition there. This began the anfractuous process of renormalizing relations. By the following year, President Obama himself visited, despite complaints from human rights activists in the United States that it was too soon to go. Obama evidently was persuaded that he could do more to advance human rights, as well as American interests in a more independent Myanmar, by visiting than by staying away.

At about the same time, the Obama administration announced its intent to “rebalance” to Asia. The product of months of internal and quiet external consultation, the rebalance was intended to signal the end of the imbalance of the United States toward Iraq and Afghanistan and shift resources and attention back to Asia, where American interests and prospects are rich. Clinton published an article in Foreign Policy journal in November 2011 titled “America’s Pacific Century.” In it, readers can find an exhaustive catalog of the Obama administration’s efforts to step up engagement in the region. Quickly – and unhelpfully – dubbed the “pivot,” the rebalance signaled America’s intent to draw down military assets elsewhere; it was promising to sustain commitment levels in the Asia-Pacific region, not to build them up wholesale.

The public relations efforts surrounding the rebalance, while welcomed by China’s neighbors, who generally saw this new emphasis on Asia as a classic “balance of power” maneuver to counter Beijing’s rising economic and military clout, quickly became seen within China as an attempt to check or “contain” its rise. Most notably, at the June 2012 Shangri-La Dialogue in Singapore, US Defense Secretary Leon Panetta gave a speech intended to reassure American friends and allies of its commitment to the region’s security, stability and prosperity.

But in referring to the anticipated US Navy presence in the region, he argued that by 2020 America would station 60 percent of its fleet in the Pacific. Many who heard or read the speech concluded that Washington would significantly increase the number of ships stationed there, while Panetta was in fact reflecting on a reduction of the total fleet, but preservation of existing assets in the Pacific, which by 2020 would go from 50 percent at present to 60 percent. This meant, more or less, preserving the status quo with some adjustments, not building up the US Navy’s presence overall. As time passed, attitudes hardened in China and no amount of dissuasion could convince observers there that the United States had any intention but to contain China’s rise. The United States came to be seen (as in the 1950s and 1960s) as attempting to thwart China’s destiny to return to great-power status.

Meanwhile, the situation worsened in Japan’s relations with China. Missteps and misperceptions on both sides led to a significant increase in tensions over their counterclaims to the Senkaku/Diaoyu Islands in the East China Sea. Public attitudes toward each other measurably deteriorated after a 2010 incident involving a Chinese fishing boat captain, whom Japan arrested rather than simply eject from Japanese-claimed waters. They further deteriorated after Tokyo nationalized three of the islands to head off purchase of the privately owned islands by a right-wing political group that intended to make them a base to provoke Beijing. These tensions helped to return a more nationalist-minded Shinzo Abe to the prime minister’s office in Japan.

Similarly, China pressed its claims and stepped up its activities in the South China Sea, using hybrid warfare techniques and deploying paramilitary forces to establish Beijing’s administrative presence in disputed waters. China dispatched a deepwater drilling rig to waters claimed by Vietnam, accompanied by hundreds of maritime administration and fishing vessels for protection. Finally, in the past year, China finished sizeable landfill operations to make rocks and reef into effective islands, on which various facilities are to be built.

Time for reflection

There can be little question that China’s government is determined to assert and protect its claims in the East and South China Seas, even if it is still unprepared to define those claims clearly, as in explaining the implications of the infamous “nine-dashed line” through the South China Sea. National sentiment is running high in China and no leader seems strong or willing enough to channel it in more conciliatory directions.

But it is worth noting that in November 2013, Beijing convened a foreign policy conference about the nations on China’s periphery. A year later, a similar conference, called the Central Foreign Affairs Work Conference, gathered again in Beijing. At both conferences, Xi Jinping is reported to have presented long and important speeches. In sum, they represented an end to the previously prevailing dictum of former paramount leader Deng Xiaoping, taoguang yanghui, variously translated as keeping a low profile in foreign affairs. Xi instead argued for an activist, focused, strategic foreign policy, deploying China’s considerably enhanced assets to achieve its dream of a return to greatness.

It is at this point that it is necessary to try to depart from the literal characterizations of these conferences and their meaning, and use historical imagination to capture the essence of what China’s leaders are stating. By assembling the various elements of current Chinese policy, it is becoming increasingly apparent that Beijing is attempting to correct some of the self-inflicted damage done to its reputation since 2008 and to offset, or counterbalance, the American rebalance to Asia.

Since 2013, Beijing has successively articulated the concepts of “one belt, one road” and the Asian Infrastructure Investment Bank (AIIB). The belt and road are a promise of infrastructure investment and heightened commerce to Central, South and Southeast Asia and beyond. As China rebalances its domestic economy it can deploy what has become excess industrial and infrastructure capacity to neighboring countries, pleasing domestic vested interests and enticing regional partners. If even modestly successful, this will facilitate deeper market integration between China and its neighbors and greater interdependence.

Some might say China is buying its neighbors’ good will, which is probably good enough for Beijing, sitting as it does among 14 neighboring nations that are at best skeptical and wary of the huge Chinese hulk next door. It goes without saying that the United States is very unlikely to compete with resources and assets comparable to what China can muster, even if pronounced levels of commitment fall short in reality by considerable percentages, as they typically do. All the more so, neighbors should restrain their expectations for largesse from Beijing as China struggles with adjusting its domestic economy and managing accumulated debt.

The AIIB, nevertheless, creates a platform for China to leverage private sector and other national resources to accomplish similar purposes of economic integration and interdependence. The conspicuous and selfisolating failure of the United States and Japan to participate in the AIIB is shortsighted and diminishes the ability of these two countries to shape the activities the AIIB undertakes in the region.

In a gesture that conspicuously captured the change in approach to China’s neighbors over the past two years, earlier this year the Communist Party’s International Liaison Department facilitated a visit to Beijing by Myanmar’s democratic opposition leader, Aung San Suu Kyi. Having conspired with Myanmar’s military leaders for a long time, with the effect of isolating Suu Kyi as a political leader, President Xi Jinping gave her a warm personal welcome in her capacity as leader of the opposition National League for Democracy. This symbolized China’s re-energized neighborly diplomacy under its “counterbalance” policy. China is demonstrating that it is serious about competing for influence in Myanmar.

A lesson for America?

After 20 years of the unipolar moment for America in sailing alone in the Asia-Pacific region, competition is returning and America needs to adjust to meet it. One of the littleappreciated geopolitical strengths of outside powers and a weakness of China is that China is surrounded by naturally wary smaller neighbors. As a distinct and inward-focused culture, China has no track record of forming lasting and trusting relationships with its neighbors. History is replete with examples of friction and conflict among them.

As the United States contemplates how to manage an increasingly strong and ambitious China, it would seem natural to strategize in classical balance of power terms. Recent efforts by Obama and his Indian counterpart, Prime Minister Narendra Modi, to identify common strategic interests is an example of this kind of thinking. The deterioration of US-Russian relations under President Vladimir Putin, and his concomitant closeness with Xi Jinping, is a counterexample.

America cannot afford, given this kind of competition, to drag its feet on seemingly small matters such as eliminating leftover legislative sanctions on the former Myanmarese junta. It needs to engage in Central Asia more effectively. It needs to become more creative in seeking to provide avenues for resolving maritime disputes, rather than allowing them to drift into contests of military power. At the same time, the United States must surmount budgetary limits and inappropriate procurement agendas to match its military capacity to the times.

As the United States has entered 24 months of gridlock and debate about overcoming American weakness, China has the luxury and determination to reverse or offset some of the gains Washington made during the Obama administration’s rebalance to Asia. As presidential candidates and their advisers devise clever lines to describe ever-tougher postures toward China, China will be working to undermine the platforms from which Americans intend to pressure Beijing. It would be unwise to discount China’s ability to do so.

This article was originally published in Strategic Review.