China Tests U.S. Ties

U.S.-China ties test economic and security interests, experts say.
By Michael Lelyveld
2009-03-23
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BOSTON--China has not linked economic and military issues in its relations with the United States, but recent events show how both issues overlap in ties between the two countries, experts say.

Both Chinese and Western reports have drawn attention to Premier Wen Jiabao's critical comments about the U.S. economy on March 13, soon after a confrontation between Chinese vessels and a U.S. surveillance ship in the South China Sea.

"We have made a huge amount of loans to the United States. Of course, we are concerned about the safety of our assets," said Premier Wen Jiabao at a press conference following the National People's Congress annual session in Beijing. "To be honest, I'm a little bit worried."

"I would like to call on the United States to honor its words, stay a credible nation, and ensure the safety of Chinese assets," Wen said.

The unusual statement came five days after a close encounter in the South China Sea between the U.S. Navy surveillance ship Impeccable and five Chinese vessels which surrounded the ship and tried to impede its operations.

According to the Pentagon, the incident took place in international waters, some 120 kilometers (75 miles) from Hainan Island, where China maintains air, naval, and submarine bases.

On March 10, China's Foreign Ministry spokesman Ma Zhaoxu said the U.S. ship was operating "without China's permission" in a "special economic zone" that extends 200 nautical miles (370 kilometers, 230 miles) from shore, the official Xinhua news agency reported.

Claims of control

Other nations do not recognize China's claims of control outside its territorial waters, defined as 12 kilometers under the United Nations Convention on the Law of the Sea. In recent weeks, China has faced a series of frictions over offshore borders with the Philippines, Malaysia, and Japan.

The United States has filed a formal protest with China over the Impeccable incident, while Beijing has lodged a "solemn representation" with Washington.

In the wake of the dispute, reports have cited China's growing assertiveness in both security and economic issues.

The buildup of Chinese naval facilities on Hainan Island "comes alongside a growing diplomatic assertiveness in Beijing, particularly in backing up its claims to extensive maritime territories to the east and south," the Associated Press said on March 10.

On March 16, The New York Times noted that China has also become "more assertive" on the economic front. "Last week, China's prime minister, Wen Jiabao, even reminded Washington that as one of the United States' biggest creditors, China expects the country to safeguard its investments," the paper said.

The sequence of events may raise concerns that China could try to use its economic clout to back up its security policies in disputed offshore areas. But experts told Radio Free Asia that the connection between economic and military issues has yet to be made.

A similar message

"I don't think there's a direct policy link. I think that obviously, coming so close together, they convey a similar message," said David Bachman, professor of Chinese politics and foreign policy at University of Washington in Seattle.

"It should convince each government's leadership that this is a very complex relationship and that there are spillovers from one issue area to another, potentially, and they can be very destabilizing if they're mismanaged," Bachman said.

On the economic side, Bachman believes Wen was responding to comments on Chinese bulletins boards and chat rooms, voicing concerns about heavy investment in U.S. Treasury securities during the economic downturn.

"Premier Wen's statement about his concerns with investments in the United States are more aimed at the Chinese audience," said Bachman. "He's speaking more to them."

China scholar Dwight Perkins, a Harvard research professor of political economy, agreed that Wen's comments were likely a response to domestic criticism.

"You don't have to go to the strategic argument to raise that concern," Perkins told RFA. "There has been a lot of talk at a lower level about whether they're overinvested in the United States."

At the end of January, China held $739.6 billion in U.S. Treasury securities, more than any other foreign country, the Treasury reported. The U.S. debt instruments comprise nearly 38 percent of the $1.95 trillion in foreign exchange reserves that the People's Bank of China reported at the end of last year.

Although some reports suggest that China may now slow down its purchases of U.S. Treasury securities, both Perkins and Bachman say that cutting its investments would be a mistake.

Investments secure

"They don't gain anything in a major way from moving out of U.S. Treasuries. In fact, they lose," said Perkins. Analysts have argued that any large sales would only drive down the value of China's remaining holdings.

China has boosted its stake in U.S. Treasury securities by about 50 percent in the past year because of the security of the investment, although they pay relatively low interest rates.

"Premier Wen understands that if you put money in somewhere else, there's a risk," said Bachman. "I think they'd be hard-pressed to find anything that will be as safe as the U.S. government's money."

On March 13, White House press secretary Robert Gibbs made a similar comment in response to Wen's statement. "There's no safer investment in the world than in the United States," Gibbs told a press briefing.

But Bachman also agrees that several issues in the U.S.-China relationship--ranging from human rights to economics and security--have come up in rapid succession during a period of weeks, inviting questions of possible linkage.

"It's compressed. How much of that is a conscious strategy, how much is just the flow of events is hard to say," Bachman said.

Since the Impeccable incident, China has dispatched a large fisheries patrol ship to the disputed islands known in China as Xisha and in the Philippines as the Paracels.

On March 19, the state-controlled China Daily quoted a fisheries official as saying that more patrol vessels may be sent to the area. On March 12, a Pentagon official said the United States has sent the destroyer USS Chung-Hoon to provide escort for the Impeccable, The Washington Post reported.

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