China and the World – A View

A short while ago Russia and China signed a $400 billion deal for gas. On the one hand this was China’s moment when it signalled a decisive switch to gas from coal to address pollution in the cities, open up pipeline routes to China’s own gas reserves in central and Western China, and a move away from sea routes to land routes. For Russia it was significant diversification of its customer base and signalled a change in its security focus in the wake of the Ukraine crisis.

At the same time China and Russia shared ideas for security in Asia, and both reflect a view that Asia would be less troubled without the Obama Asian tilt. China is reacting firmly to those who would see the USA as helping their causes.

Friction with Vietnam over one of many oil rigs in the South China Sea would suggest that Vietnam has , for now, joined the Philippines and Japan in feeling that the Obama tilt enables them to challenge China. At the regional Asian security summit Prime Minister Abe again gave evidence of his intent that Japan should be seen as defender of Asia.

Simultaneously President Obama makes a major speech on foreign policy, which does not indicate any major shifts and expresses the core belief that the U.S.A. should, and will, lead the world. This is connected to an expressed core belief in Western values and that those liberal democratic values should be the guide for the world. His Defence Secretary seemed to support Abe in Singapore in suggesting China was taking the wrong course.

So we have an apparent schism in the international world. We could be excused for fearing that we are heading to conflict, as I have expressed that concern for several years now. There is plenty of time to find solutions but , for now, the direction is challenging.

What is clear is that global and regional security is very much on the agenda. That China’s emergence in the world has combined with global pressures to change the world order, and there is resistance to that from the U.S.A. and others.

There was a belief that the world would move its centre to Asia . That does not conform to the power of world stock markets, where the U.S.A. still is dominant – approaching 50pc of global values. And the military power of the U.S.A. has no challenger. There is a real move to a much greater diversity of economic power but the core is still in the U.S.A., which has great challenges to reform and remodel, despite riding out the first wave of the financial crisis.

Europe has suffered its own “financial crisis”, but one of bad government debts and over-spending national governments. This has left Germany fighting to maintain a euro that has worked for Germany but may not be sustainable. The Euro was more of a Brussels dream than a well-thought out plan based on the realities of very different fiscal structures and approaches. The collapse of the Soviet Union caused the EU to compete with NATO for European leadership. This led to Europe expanding too fast and the Euro came too quickly for this hugely expanded EU.

Asia divided, Europe lacking coherence, and the U.S.A. asserting its historical power but without some conviction.

There is no doubt that China has moved into a new era when its economy will impact the Asian economy and beyond that. China’s economic expansion and growing inter-dependency is good for us all. But they also want to be self reliant within an inter-dependant world.

At the moment the U.S.A. does not buy into their thinking and feels their trajectory is threatening. But the best opportunity for the U.S.A. and the West to grow out of their crises is Asia.

We may be in a time when some nations engage in showing their teeth, but the reality of the nuclear and cyberspace weapons is that no nation can afford global conflicts. While we fear mistakes causing conflicts to explode, the reality is that leaders will probably back away from the prospects that face could face them in conflict. There is a need to explore options for other outcomes.

As I have said many times the U.S.A. has managed to lose all the benefits of the Kissinger management of China and Russia and apparently feels it can manage both.

I wonder if that is real and the U.S.A. will find it wants to work with China or Russia , or both. The U.S.A. has a lot to gain economically from that route.

I am not sure why we were all surprised that NATO knocking up against Russia’s borders created a Russian reaction. That was presumably the intention. Ukraine is an example of how unresolved issues can surface in dangerous forms. That tendency does not stop just in Eastern Europe.

We are now in era of competing security visions and let us hope they end up harmonised. It is not a surprise that they start with different approaches. But the Chinese have been prepared for this for 20 years so let us not under-estimate their clarity on this. They have thought this through. They want peace to develop their economy but not at any price.

There is some way to go for the U.S.A. and China to find the route to a good outcome. But both have much to gain from finding a way forward to a positive and shared future.

In the meantime the various approaches to Europe and Asia make corporate planning a tough challenge. Where to focus amid all these different plans?

The global economy is going to change big time over the next period but which way will not be clear for a while yet. We have EU-NAFTA and TPPA pulling one way, and BRICS and SCO in the other. And we have ASEAN, APEC, and WTO as a possible middle ground.

That may be a false choice and global trends may still end up winning the day. So corporates may have to have two identities – one for the Western dominated way and one for the Asian way. Africa and Latin America are also going to feel this tension.

Business is already feeling the strain of the pressure to align and it is not comfortable with such choices.

Business may yet influence the military and security outcomes as they cannot want their markets jeopardised by fears.

On top of that are the many countries and peoples who obviously feel uneasy with globalisation and in different forms will resist it. From Islamic Fundamentalism through to UKIP, the Tea Party and the Front National, we can see the resistance of people to globalisation. It is another dimension that major government leaders are going to have to consider.

National coalitions of the political establishments may be a short term way to resist the pressure for change. A Labour Conservative coalition of the centre with new leaders could be the short term outcome in the UK, but such approaches can only work if they take note of the new sense of popular discontent. People are worried about their economic security and the future of their children.

It is economic insecurity that is at the core. Regional and global security will be resolved one way or another but if economic insecurity is not addressed it will be a temporary plateau. This challenge is global.

There are solutions through shared visions but they will not be based upon shared systems. Pursuit of a supreme system has never worked. So focus on regional and global security and definitions of globalisation that engender security and not instability for people will be the agenda. Prime Minister Abe does not offer us a solution to the challenges of our time. We need international statesmen and women to find the route. Xi is one in my opinion, and Merkel is another. We need two or three more.

There is reason to feel positive as the tensions of the time are being talked through, as that is the only way that economic growth can be an outcome. That is a must for us all. Most in the West want growth and balance in the international order.



Categories: Chinese Foreign Policy, Foreign policy

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