China’s foreign policy has been hit hard by recent developments, including new U.S. influence on their western border. In December alone China was faced with these new twists in international affairs:

• On December 1, political parties led by China’s two greatest political nemeses in Taiwan, Lee Teng-hui and Chen Shui-bian, enjoyed striking success in Taiwan’s legislative elections. Twelve days later, the U.S. House of Representatives passed the 2002 Defense Authorization Act, promising to sell Taiwan four Kidd-class destroyers and 12 P-3C aircraft to Taiwan, and help Taiwan obtain eight diesel-powered submarines.
• On the same day that the House passed the defense act, President Bush announced that the United States would abandon the 1972 Anti-Ballistic Missile Treaty, which China has consistently declared “a cornerstone of global strategic stability.
• A week later, still engaged in a tense trade dispute with Japan, Chinese leaders watched as a near-flotilla of Japanese ships fired upon and sunk a presumed North Korean ship inside China’s exclusive economic zone.
• As December finally drew to a close, Islamic radicals believed affiliated with Pakistani forces stormed the Indian parliament, setting off a tense military standoff between China’s two nuclear-armed neighbors in South Asia.

What has been China’s response to these numerous provocations and disturbances in its surrounding environs? Contrary to the expectations of pundits declaring China’s “rise” to be inherently destabilizing, Beijing’s policies have proven a model of moderation, strengthening peace and stability in the Asia-Pacific during this critical period.

Dealing with Taiwan: Moderation Instead of Missiles

Beijing’s greatest foreign policy imperative remains the eventual reunification with Taiwan. While Taiwan’s polity remains solidly in support of the political status quo vis-à-vis the mainland, politicians more vocally opposed to closer ties with Beijing have been gaining ground in recent years. In the recent legislative elections the two leading exponents of a stronger “Taiwanese” identity gained substantially.

President Chen Shui-bian’s Democratic Progressive Party (DPP) and its allies, primarily the Taiwan Solidarity Union assembled by former president Lee Teng-hui, raised their share of legislative seats from 66 to 100, bringing Chen’s forces within striking distance of a majority in the 225-seat legislature. Beijing’s response is encouraging and noteworthy.

When Lee Teng-hui first ran for president in 1996 on a platform of greater distance from the mainland, China not only launched a media broadside against Lee, but also sent several missiles splashing into the waters surrounding Taiwan as part of large-scale military exercises aimed at deterring potential Lee supporters. This year, China’s press barely mentioned the election. In his New Year’s address only weeks later, President Jiang Zemin noted that the new WTO membership of both the PRC and Taiwan provided a chance to develop economic and trade relations across the Taiwan Strait.

Chinese Calm in Response to Afghanistan and ABM Withdrawal

In contrast to its sharply critical policy of the U.S. bombing campaign in Kosovo, the PRC has played a quiet but supportive role of the U.S. campaign in Afghanistan through its close diplomatic relations with Pakistan. President Pervez Musharraf has been in regular contact with Chinese officials ever since the September 11 incident. The PRC offered $1.2 million in aid to Pakistan in Musharraf’s September visit, and additional assistance during his visit to Beijing in late December.

China has also served as a go-between for the U.S. and Pakistan. PRC Vice Foreign Minister Wang Yi has traveled to Islamabad twice since September, and after each trip visited with U.S. Embassy officials in Beijing. China’s cooperation with the U.S. is particularly impressive since the U.S. still has sanctions on China for transferring missile technology to Pakistan, even though the U.S. recently lifted proliferation-related sanctions on Pakistan itself.

Finally, when the U.S. withdrew from the ABM treaty on December 13, Chinese leaders offered tepid critiques mixed with constructive, forward-looking responses. A Foreign Ministry spokeswoman stated simply “China is not in favor of missile defense systems.” President Jiang Zemin later reiterated his support for international arms control agreements, promising that “China is willing to work with other countries to make efforts to safeguard world peace and stability.”

Negotiating Trade Deals with Japan

Since September 11, Japan has radically weakened its domestic legislation governing the overseas deployment of its Self Defense Forces, sent ships to support the U.S. bombing campaign in Afghanistan, expanded its defense budget to obtain in-air refueling capacity, and sunk a presumed North Korean vessel in Chinese waters.

While expressing its concern with these developments, Chinese leaders have sought to restore closer bilateral relations after a tense summer filled with recriminations related to the Japanese government’s management of a debate over textbooks that downplayed atrocities committed by the Japanese military during World War II. Most notable has been the two sides’ recent success in negotiating an end to a trade standoff threatening to block Chinese exports to Japan.

Mediating between India and Pakistan

China has proven itself the primary factor in reducing tensions between these two South Asian rivals. As a staunch ally of Pakistan, China has particular influence with President Musharraf. In the aftermath of the terrorist attack on India’s Parliament in December 2001, China has used this influence not at the expense of its rival India but rather to sooth tensions and encourage calm and moderation on both sides.

In their numerous conversations with President Musharraf, Chinese leaders have praised Pakistan’s “adherence to seeking dialogue and peace under the current tension” and through public statements and phone calls have urged both sides to exercise “maximum restraint.” Premier Zhu Rongji is on the first visit to India by a PRC premier in a decade, where he has reiterated recent statements that China’s support for Pakistan does not amount to a commitment to back it in a war with India, nor is this support aimed at antagonizing India. In sum, China’s strategic location and diplomatic leadership has given it a critical role in alleviating tensions in a region of the world the U.S. has chronically neglected.

Explanation: It’s the Economy

Although avoiding conflict on its borders is clearly in China’s national interest, the recent surge in diplomatic leadership and strategic restraint are primarily due to China’s domestic economic imperatives. After fourteen years of difficult–often acrimonious–negotiations, China finally acceded to the World Trade Organization (WTO) on December 11. Overshadowed in the Western press by the U.S. bombing campaign, WTO accession is perceived by both the Chinese people and leaders as a defining moment for the Chinese nation.

Despite the pride that WTO accession engenders, adhering to the rigid trade rules set by the WTO will cause substantial economic dislocation and pain in many economic sectors in China, particularly over the next few years. Workers in state-owned enterprises, agricultural sectors without export potential, and industrial and service sectors vulnerable to foreign competition will be among the hardest hit.

To avoid their traditional, and quite rational, fear of “Nei huan, Wai luan” (internal calamity and external chaos), Chinese leaders seek a stable strategic environment. To manage the upcoming economic challenges, China will need access to export markets abroad, increased foreign investment, a moderate military budget, and diplomatic support.

In addition, China is about to undergo a leadership transition. Having guided the nation back to relative domestic tranquility and generally steady economic growth after the tumultuous 1989-1992 period, President Jiang Zemin and Premier Zhu Rongji are set to step down next year. The leadership transition is still seen as a bit uncertain, particularly the extent of control that incoming president Hu Jintao will initially enjoy. In the midst of this transition period, China can ill afford renewed tensions in any of its strategic relationships.

U.S. Policy Sparking Renewed Fears of Containment

While China’s recent policy stances merit praise from outside observers, the U.S. should remain cognizant of its impact on China’s enduring fears of containment. In contrast to the geographical isolation of the United States, China faces potential adversaries on all sides. U.S. policies in the wake of September 11 appear to surround China. This military expansionism, justified through the war on terror, threatens to turn U.S. fears of the “China threat” into a self-fulfilling prophecy.

Southeast Asia: A Return of U.S. Presence

During the 1990s, the U.S. military was steadily eased out of its long-established positions in Southeast Asia. The Philippines finally succeeded in forcing the U.S. to leave the Clark and Subic bases in 1991. Increasingly concerned about human rights abuses, the Congress then passed legislation forbidding military aid or cooperation with the Indonesian military. Yet in his recent declaration identifying Southeast Asia as the “second front in the war against terrorism,” President Bush has rapidly expanded U.S. military involvement in the region.

President Bush has promised Indonesian leaders economic and military aid totaling more than $700 million to reward them for their cooperation with the U.S. Congress then ignored its own prohibition on aid to Indonesia to support this effort, which President Bush pledges will soon include regular military contact, and an end to the embargo on the sale of “non-lethal” weapons. A similar military aid package has been offered the Philippines, which Congress is now considering increasing ten-fold for 2002.

The U.S. will have expanded numbers of military advisers and Special Forces in the Philippines, complemented by the recent Philippine agreement to allow the U.S. use of Philippine airspace and access to the former U.S. Subic and Clark air and naval bases. This augments the recent Pentagon decision in its Quadrennial Defense Review (QDR) to expand the forces at its bases in Guam and deploy more aircraft carriers in the Indian and Western Pacific Oceans.

These U.S. troops are in the region not simply to fight the “terrorist groups” causing local instability, but to enhance U.S. military control over territory in the South China Sea. This strategic area with vast potential oil reserves sits aside the shipping lanes to the Middle East and offers access to much of Southeast Asia. The expanded U.S. presence and nascent military alliances with Southeast Asian nations exacerbates Chinese anxieties and impedes independent accords among Asian states though such mechanisms as the ASEAN Regional Forum.

South Asia: Expanded Arms Sales to an Unstable Region

Once the dust settles from the current India-Pakistan dispute and the al-Qaeda manhunt in Pakistan subsides, the U.S. appears poised to dramatically expand its arms sales to South Asia. These sales, justified to “keep the military balance,” will introduce more arms into this volatile region, and may well encourage China to build up or sell more arms to Pakistan to further “balance” against India.

Now that President Bush has convinced Congress to lift sanctions on arms sales to Pakistan, it is likely that the U.S. will provide arms as a reward for its critical support in the war in Afghanistan. One Pakistani defense official recently said, “We want the kind of relationship the U.S. has with Egypt in terms of weapons sales.” For starters, this means the Pakistanis would like delivery of the 28 F-16 fighters purchased in the 1980s, but never delivered due to U.S. concerns about their nuclear program.

Once the U.S. opens the arms spigot for Pakistan, India will certainly demand its share of U.S. weaponry. Already U.S. ambassador Robert Blackwill has promised the Indians, “We are at the beginning of a very important arms sales relationship.” If U.S. diplomats do manage to encourage India to stand down in the current dispute with Pakistan, part of the carrot they proffer will likely be expanded arms sales.

For China, South Asia is an area of great strategic importance. The border dispute that led to the 1962 war between China and India remains unresolved. The region also borders the Chinese provinces of Tibet and Xinjiang, where China continues to struggle against separatist movements. Nor are China’s fears fully unrealistic. Recently a Taiwanese magazine disclosed that the U.S., Taiwan, and India have for years jointly run a listening post based in India to monitor the PRC’s military movements in the region.

Central Asia: Oil, Islam, and the U.S. Military Together Again

While China has been restrained in its concerns about the U.S. bombing campaign in Afghanistan, it remains extremely concerned about a permanent U.S. presence on its Western borders. While Pentagon officials earlier dismissed notions that the U.S. coveted bases or land in Central Asia, their recent actions suggest otherwise.

Uzbekistan recently disclosed that it has granted the U.S. access to its airfields, while the U.S. provides training and “non-lethal” equipment to the Uzbeki military. More importantly, Pentagon officials announced that Kyrgyzstan has approved the U.S. request to build a new U.S. air base only 200 miles from the Chinese border and close to oil fields in Uzbekistan.

One clear reason for the U.S. to build permanent military bases in the region is to ensure control of an oil pipeline stretching from Central Asia to the Indian Ocean. Oil executive John Maresca testified to a congressional committee in 1998 that his company, Unocal Oil, was interested in building a pipeline from the Caspian oil fields across Afghanistan as soon as “a recognized government is in place that has the confidence of governments, lenders, and our company.” For China, a permanent U.S. base in potentially unstable Islamic countries on its Western borders controlling the flow of the region’s oil eastward is a veritable nightmare.

Russia: Cooperation with the U.S. Exacerbates Sino-Russian Tensions

Shifting their sight from Central Asia to China’s northern border with Russia offers precious little respite for Chinese strategic planners. China and Russia are still officially joined in their joint opposition to U.S. National Missile Defense plans. Yet Russian President Vladimir Putin is now busy trading his tacit acquiescence in ABM withdrawal for such goodies as a bilateral missile deal, access to Caspian oil, purchases of Russian weapons, military assistance and cooperation, slowed NATO expansion, and more IMF loans.

While Putin is collecting such benefits, Russia continues to modernize its strategic missile capacity to ensure that it can overwhelm any U.S. defenses. As the strategic arsenals and diplomatic distance between Moscow and Beijing grows, their vaunted “strategic partnership” is in grave danger of returning to cold war-era military balancing.

East Asia: China’s Greatest Challenges Close to Home

Home to nearly 100,000 U.S. troops, the world’s second-most well funded military (Japan), one of the largest arms importers (Taiwan), and over 1.6 million troops facing off on the Korean peninsula, China’s East Asian borders remain its greatest security concern. Each one of these situations has deteriorated, due primarily to U.S. policy shifts, after September 11.

U.S. joint development of missile defense systems with Japan and South Korea gravely threaten the strategic status quo in the region. Chinese analysts argue that missile defenses will embolden the U.S. to undertake a more aggressive military policy toward China, particularly on the sensitive issue of Taiwan. Facing a more assertive Japan, a more independent Taiwan, and a less stable Korean peninsula, Chinese leaders can hardly rest easy while the U.S. dramatically expands its military capabilities in East Asia.