The China Crisis
July 20, 2004
By George Friedman
and Bill Adams


"...the Chinese economy is in serious trouble, and the government
faces an increased potential for unrest over unfulfilled expectations.
China's government has little ideological credibility. It is hard to
generate socialist idealism in the face of the crony capitalism into
which China's Communist Party has fallen. In China, the nation's
leadership is measured in one way: its ability to generate prosperity.
Prosperity is going to be in short supply in China for a while, and
with it, support for the government. But there is one other card that
Beijing can play: patriotism. This is indeed a driving force in China,
and the creation of a crisis over Taiwan - if managed carefully --
could get the government past its economic hurdle. A good patriotic
crisis might just be what the Chinese government needs."

================================================================================

The China Crisis


With the United States involved in a global war against Islamist
jihadists, the last thing it needs at the moment is a crisis with a
regional great power. For the past three years, the tendency of these
great powers -- France and Germany included -- has been to give the
United States a wide berth, confining conflict to rhetoric. But for
the first time since the Sept. 11 attacks, there are signs that a
crisis in relations between the United States and a regional great
power, China, might be developing. The crisis might be prevented, or
perhaps it will not actually rise to the level of a serious
confrontation. But there is a new cloud on the horizon, and it needs
to be taken seriously.
SNIP
Indeed, as U.S. forces are stretched thinner and thinner in the
jihadist war, other major regional powers will be thoughtfully
considering the outcome of China's probe. The United States cannot
afford to be weak, but it lacks the resources to be strong. That
demands extremely creative diplomacy -- also known as the art of the
bluff.

The China Crisis
July 20, 2004
By George Friedman
and Bill Adams


When Rumsfeld came into office, his first focus was the long-term
threat posed by China, and he ordered a complete review of U.S.
strategy toward China.

The China Crisis
July 20, 2004
By George Friedman
and Bill Adams


"...the Chinese economy is in serious trouble, and the government
faces an increased potential for unrest over unfulfilled expectations.
China's government has little ideological credibility. It is hard to
generate socialist idealism in the face of the crony capitalism into
which China's Communist Party has fallen. In China, the nation's
leadership is measured in one way: its ability to generate prosperity.
Prosperity is going to be in short supply in China for a while, and
with it, support for the government. But there is one other card that
Beijing can play: patriotism. This is indeed a driving force in China,
and the creation of a crisis over Taiwan - if managed carefully --
could get the government past its economic hurdle. A good patriotic
crisis might just be what the Chinese government needs."

================================================================================

The China Crisis


With the United States involved in a global war against Islamist
jihadists, the last thing it needs at the moment is a crisis with a
regional great power. For the past three years, the tendency of these
great powers -- France and Germany included -- has been to give the
United States a wide berth, confining conflict to rhetoric. But for
the first time since the Sept. 11 attacks, there are signs that a
crisis in relations between the United States and a regional great
power, China, might be developing. The crisis might be prevented, or
perhaps it will not actually rise to the level of a serious
confrontation. But there is a new cloud on the horizon, and it needs
to be taken seriously.


The primary issue between Beijing and Washington is Taiwan -- which
China, of course, regards as a breakaway province. Recently re-elected
Taiwanese President Chen Shui-bian has embraced the doctrine of
independence. In recent months, he has made several moves in that
direction, including issuing a call for a referendum on whether a new
constitution should be drafted in 2006, for adoption in 2008. For its
part, the United States also appears to have shifted its Taiwan policy
recently: Washington has supported observer status for Taipei at the
World Health Organization, it continues to forge arms deals involving
advanced weapons with the island state, and direct diplomatic channels
remain open between Washington and Taipei.


Beijing regards Chen's move as the prelude to a formal declaration of
independence by Taiwan, and has warned that Chen's course could lead
to war. This kind of rhetoric has been common from China; it is not,
by itself, significant. However, China has never faced a Taiwanese
president like Chen, who appears to be dead serious about leading
Taiwan to independence.


Formally, the United States is committed to a one-China policy, which
means that officially it opposes Taiwanese independence. But viewed
from the Chinese side, there are not insignificant straws in the wind
indicating that Washington might be shifting its policy. For example,
President George W. Bush signed legislation June 14 supporting
Taiwan's efforts to gain observer status in the WHO; a White House
release cited him as saying, "The United States fully supports the
participation of Taiwan in the work of the World Health Organization,
including observer status." This is a trivial matter in any practical
sense. However, until recently the United States had accepted the
principle that, since there is only one China, only Beijing could
represent the nation in international organizations. Arguing for even
observer status at an international organization runs counter to this
policy because it implies that Taiwan has some legal existence as an
independent power.


Now everyone knows that Taiwan is very real and quite independent, but
the United States has not tried to force this issue. Naturally,
Chinese leaders were not at all happy about Washington's recent
decision. Foreign Ministry spokeswoman Zhang Qiyue said, "Taiwan is a
part of China. According to the relevant resolutions from the General
Assembly of the United Nations, Taiwan has no right to become a member
or an observer at the WHO, or to participate in the activities of
WHO." Interestingly, Bush's signing of Senate Bill 2092 came after the
World Health Assembly (WHA), again rejected the island's annual bid to
obtain WHO observer status. This means that the matter will not come
up again until 2005 -- which means that this is now long-term U.S.
policy.


This diplomatic challenge came after a more important, practical
challenge: an $18 billion U.S. arms sale to Taiwan. The deal was
forged some time ago, against strong Chinese protest, but the date is
approaching when the weapons will start to be shipped to Taiwan, and
the transfer is not trivial. Included in the sale are Patriot
anti-missile systems and P-3 anti-submarine aircraft. Taiwan is also
negotiating to buy up to eight diesel electric submarines and several
guided-missile destroyers. The weapons being purchased are designed to
mitigate China's major military options against Taiwan: missile
attacks and a naval blockade by the People's Liberation Army Navy
submarine force.


The moves are not confined to the executive branch. For example, the
U.S.-China Economic and Security Review Commission, a congressional
panel, called June 15 for the Bush administration to "conduct a fresh
assessment of the one-China policy, given the changing realities in
China and Taiwan," with an eye on the "continued viability" of not
recognizing Taiwan as a separate country and whether the United States
needs to improve defense support for Taiwan.
From China's standpoint, it appears that the U.S. policy that has been
in place since the Nixon-Mao entente is shifting. China kicked off
annual war games at Dongshan in July, simulating an invasion of
Taiwan. This followed naval war games involving the French navy last
March 2004, which China called the most comprehensive exercise it had
ever carried out with a foreign power. China clearly did not like what
it saw in Taiwan's presidential campaigns and Chen's ensuing rhetoric,
and began flexing its muscles. The Dongshan war games are not new; on
several occasions, they have presaged or coincided with significant
crises with the United States. In this case -- according to a July 19
article carried by the People's Daily -- they were intended to
demonstrate that "the PLA is capable and confident in settling the
Taiwan issue by military forces" and "declare to the whole world that
it is China's internal affairs to settle the Taiwan issue and will
tolerate no foreign country to poke its nose into the matter."
U.S. National Security Adviser Condoleezza Rice's visit to Beijing on
July 8 -- ostensibly to discuss the North Korean nuclear issue --
turned into an attempt to defuse the Taiwan crisis. The meeting, by
all accounts, did not go well. Chinese leaders hammered home warnings
to Rice that U.S. policy was increasing the chances of conflict. Jiang
Zemin, China's military chief and former (and current unofficial)
leader, appeared particularly agitated about the Taiwan question
during a meeting with Rice at the Zhongnanhai leadership compound,
according to official U.S. background briefings. It was said that
Jiang had given the American delegation the impression that the
leadership in Beijing was still struggling to agree on a strategy for
grappling with Taiwan's president.


This might have been so, but we think that this claim was simply an
attempt to put the best light on the situation. Given what Jiang said
July 16, China's position is that it will recover Taiwan by 2020.
Fifteen years from now seems an awfully long time. From where we sit,
it would seem that the Chinese -- after initially delivering a strong
warning -- were saying that they had no real plans for dealing with
Taiwan. In other words, despite huffing and puffing at Rice, the
Chinese position seemed to be simply rhetorical.


Washington has a different read on the situation.


After deploying seven carrier battle groups simultaneously on a global
exercise (two of which, the USS Kittyhawk and the USS John C. Stennis,
will meet up in the western Pacific), the Defense Department very
carefully released the news -- immediately after Rice's return from
China -- that the U.S. National Defense University had carried out a
crisis simulation drill named Dragon's Thunder on July 12. The
simulation concerned U.S. responses to a Chinese threat to Taiwan.
According to DoD, the exercises were the ninth in a series ordered by
Secretary of Defense Donald Rumsfeld that "specifically examined
responses to an increasing possibility of military action against
Taiwan. The exercise sought to understand the full range of policy
options and associated consequences available to the U.S. to restore
stability to the Taiwan Straits and surrounding region, while avoiding
nuclear confrontation with China." According to the NDU, participants
included officials from Rumsfeld's office, the Pentagon's Joint Staff,
the U.S. Pacific Command, the White House National Security Council,
the National Intelligence Council, the Departments of State and
Commerce and 14 members of Congress.


When Rumsfeld came into office, his first focus was the long-term
threat posed by China, and he ordered a complete review of U.S.
strategy toward China. The Sept. 11 attacks moved these exercises to
the back burner. Suddenly, they appear to be moving to the front
burner again. We are convinced of this because Pentagon officials
cautioned against reading anything into the timing of the strategy
drill or into the simultaneous deployments of seven U.S. aircraft
carrier strike groups. We actually hadn't thought much about the
connection between the two -- until the Pentagon told us not to. In
fact, these little maneuvers are how the Defense Department makes sure
that everyone knows these exercises should be taken very seriously and
that they are, in fact, focused on China.


To sum up: China is playing extensive war games; the United States is
playing extensive war games; Taiwan is launching war games in August.
The question is, what is going on?


One explanation is that this is simply the standard cycle of Sino-U.S.
relations and that Chen's re-election and recent policy moves have
simply intensified the atmosphere. Maybe, but we doubt that Rice
headed to China to put out a fire that wasn't burning. Moreover, even
if it is part of the cycle, there are three reasons we take this more
seriously than we might otherwise.


First, the United States is spread incredibly thin militarily. True,
the Navy is in better shape than the Army, but the Navy might well be
needed in other unanticipated crises. If the Saudi or Pakistani
situation were to swirl out of control, for example, the Navy would
certainly be called on to play a major role. Even if a crisis
surrounding Taiwan is primarily a naval action in American minds,
things could go out of control easily, requiring ground forces. The
U.S. military simply does not have ground forces to throw into a
Taiwan confrontation, nor does it want to lock down a major naval
presence around Taiwan while the war with the jihadists is raging. The
Chinese obviously know this. Therefore the current situation provides
China with an unprecedented opportunity: Even if it can't or won't
invade, the American military posture makes the United States more
vulnerable than it has been since Vietnam. Beijing might be
calculating that the United States will negotiate rather than fight.
Rice went to China to convince the Chinese otherwise -- but the
Chinese are smarter than that. It is hard to imagine a better time to
negotiate with the United States than right now.


Second, the Chinese economy is in serious trouble, and the government
faces an increased potential for unrest over unfulfilled expectations.
China's government has little ideological credibility. It is hard to
generate socialist idealism in the face of the crony capitalism into
which China's Communist Party has fallen. In China, the nation's
leadership is measured in one way: its ability to generate prosperity.
Prosperity is going to be in short supply in China for a while, and
with it, support for the government. But there is one other card that
Beijing can play: patriotism. This is indeed a driving force in China,
and the creation of a crisis over Taiwan - if managed carefully --
could get the government past its economic hurdle. A good patriotic
crisis might just be what the Chinese government needs.


Third, the correlation of forces has moved in favor of China of late.
Several significant military improvements -- particularly concerning
naval forces -- have been achieved: Russia has delivered two
Sovremenny-class destroyers -- the Fuzhou and Hangzhou, which the
Chinese refer to as "aircraft carrier killers." Since the United
States is the only country in the neighborhood with aircraft carriers,
that fact should be taken seriously. Two additional Sovremennys are on
order, and all of them are armed with the SS-N-22 Sunburn anti-ship
missiles -- among the best in the world.


China also has produced a new type of attack submarine that U.S.
defense and intelligence officials say their agencies had not realized
was under construction. The submarine appears to be a hybrid of
Chinese and Russian technology. It was spotted for the first time
several weeks ago and has been designated by the Pentagon as the first
Yuan class of submarine. A photograph of the completed submarine in
the water at China's Wuhan shipyard was posted on a Chinese Internet
site this week and -- according to the Washington Times -- was
confirmed by a defense official as the new Yuan class.


This means two things. First, the Chinese intended for the United
States to know about the new submarine. Second, U.S. intelligence
estimates about China are questionable. The Bush administration has to
be asking this: If the CIA and the Defense Intelligence Agency didn't
know about the Yuan-class submarines until the Chinese posted pictures
on the Internet, what else did they not know about? Just how much
better are the Chinese than U.S. officials think? That was the effect
Beijing wanted to have, and it succeeded.


On the public record, the United States appears to be pushing this
crisis. But that makes absolutely no sense. The last thing the Bush
administration needs now is a raging crisis with China. It would make
the administration appear even less competent in its foreign policy
management than it already does -- at a time when the war is creating
real gaps in U.S. military capability. It is very hard to imagine that
Washington has any reason, strategic or political, to want a crisis
with China. Rice did not go to China to start a fire, but to put one
out.


It follows from this that the administration is picking up
intelligence that China wants a confrontation. Chinese leaders
certainly have a reason to create a crisis, and the current military
situation gives them a real opening that they would be foolish not to
take advantage of. The timing is right. New equipment has not yet been
integrated into Taiwan's arsenal, but China has deployed key weapons.
The United States is not well positioned to support Taiwan
indefinitely, but China can keep this up indefinitely, and has
political reasons to do so.


We do not believe China is in a position to mount an amphibious
assault. Its navy is not ready for such a task, and Taiwan is no
pushover. However, a major crisis in the Taiwan Straits would set the
stage for redefining Beijing-Taipei relations at a time when the
United States has limited resources and an interest in bringing the
crisis to a quick solution. It follows from this that Washington would
try to appear as bellicose as possible with Beijing, trying to
convince leaders there that the United States is ready for anything.
Of course, the United States is not ready for anything, and the
Chinese know it.


No matter how Washington postures, those carriers might be needed at
any time in the Persian Gulf or Arabian Sea -- or even in the
Mediterranean, if something happens in North Africa or Syria. The last
thing the United States wants is to tie down its carriers in the
Taiwan Straits. Which means that the Chinese are setting up a very
tough negotiation. They have not yet defined what they want, but the
United States is going to be hard-pressed to avoid paying the price
for what it cannot afford: another crisis at the other end of Eurasia.


Indeed, as U.S. forces are stretched thinner and thinner in the
jihadist war, other major regional powers will be thoughtfully
considering the outcome of China's probe. The United States cannot
afford to be weak, but it lacks the resources to be strong. That
demands extremely creative diplomacy -- also known as the art of the
bluff.