Public Service Europe
October 11, 2011
by John Lee
The defining two events in the so-called "Asian century" are the rise of China and relative decline of American power. China's absolute size means that its presence and capabilities are formidable. As an indispensable economic power, Beijing is rightly offered a seat at every significant forum in the region. It is much more difficult to dictate policy to the Chinese. Yet, even if entering a period of relative decline, the United States enjoys some enduring advantages over China that will help Washington remain the decisive strategic actor in the region.
Moreover, there are reasons why China's economic size will not translate into proportionate strategic leverage in the region. Even as China rises, key Asian powers balance and bandwagon among themselves to ensure that America remains the preeminent strategic actor. There are several reasons why almost all Asian powers want America to remain the pre-eminent power in the region, rather than China or any other Asian power. First, there is the simple reason that China has land and maritime disputes with a number of Asian countries - such as India, Japan, and several states in the South China Sea. In contrast, America does not.
Second, free and open trade - which is the lifeblood of growing prosperity - has depended on American naval power and the hub-and-spokes structure for more than five decades. In contrast, China quite correctly sees this security structure as a ready-made one to inhibit its strategic options. Therefore, even though it has benefitted from it, most countries suspect that it wants to eventually revise and even dismantle such a security structure. Other states fear the revisionist tendencies of China in this context and the implications of a Chinese-led region.
Third, the fact that the US is not geographically based in Asia works to its advantage. As a foreign leader, it requires greater levels of acquiescence from Asian partners to retain its presence in the region - such as basing rights.
If asked to shift its bases – as occurred in the Philippines in 1992 – America will do so peacefully. Even if there was resentment in Washington, the US is in no position to punish Manila. In contrast, a dominant Asian power would not need the same level of regional acquiescence to maintain its military footholds. America has to constantly negotiate the terms of its presence in Asia and is structurally bound to provide public security goods. In contrast, there would be much less incentive for a dominant Asian power such as China to do so.
Even so, there are a number of strategists putting forward the seemingly plausible argument that the importance of China as a trading partner will eventually compel key states to shift their strategic alignment. But these arguments are less convincing on closer inspection. The fact that China is the central hub for trade in Asia can be overplayed. More than half of Chinese trade is processing trade, meaning that parts come in from other places in Asia and are assembled in China before they are shipped out again to non-Asian Organisation for Economic Cooperation and Development countries; where the lion-share of consumption takes place. China's domestic consumer market is about the size of a country like France's. It is large, but not overwhelming.
But it is access to domestic markets, rather than the size of processing trade, that is the true source of leverage. Even now, there is a political consensus within China that access to the Chinese consumer ought to be reserved for indigenous rather than foreign firms - in the most important and lucrative sectors of the economy. Beyond the issue of protectionism, until the country becomes the dominant centre of regional and global consumption, Beijing's capacity to exercise leverage by denying foreign firms and nations access to the domestic Chinese consumer market - is limited.
Yet, because of China's currency policies and its state-led model, which encourages fixed investment at the expense of domestic consumption, it will be decades before the country can hope to reach comparable consumption levels seen in western developed giants. Besides, Beijing can ill-afford to do too much damage to an export sector that generates 150-200 million jobs - in an attempt to twist the arms of strategic competitors.
None of this is to deny that China is already a formidable foreign policy and strategic actor. But its ability to shape strategic outcomes is determined by occasional bluster and intimidation, but most of all by size. Such an inefficient ability to exercise leverage means that the Chinese economy and military would need to reach an enormous size and capability to achieve the aim of "easing" America out of Asia and taking Washington's place as the dominant strategic player.
John Lee is a Hudson Institute Visiting Fellow and an Adjunct Associate Professor and Michael Hintze Fellow for Energy Security at the Centre for International Security Studies, Sydney University. He is the author of Will China Fail? (CIS, 2008).
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