15 July 2005 - NATO Parliamentary Assembly Delegation Visits China

The delegation arrived in China with two principal objectives:

• to generate information for a report the Committee on the economic implications of an emerging China.  The first draft of that report has been posted at the NATO PA’s website at  http://www.nato-pa.int/Default.asp?SHORTCUT=674 and will be revised this autumn, based, in part, on the findings of the mission;
• to initiate a dialogue with those shaping this China's profound economic and social transformation; and, to identify new issues for further study.

Several key themes emerged over the course of the week. Firstly, Chinese authorities strongly asserted that with an economy that is increasingly integrated in the global chain of production, and given persistent domestic development challenges, they are compelled to adopt a foreign policy premised on securing international stability and order through multilateral channels.

Government officials told the delegation that China seeks cooperative and friendly relations with the West and with all of its neighbors.  The Vice Chairman of the Foreign Affairs Committee, Wang Yingfan, spoke positively of the informal dialogue that is just beginning between China and NATO, while Mr. Mr. Zhang Yesui, the Vice Foreign Minister acknowledged that NATO had contributed to regional stability in Afghanistan and Central Asian region. He also said that his country welcomes NATO's peacekeeping missions and stands ready for further exchanges on major security issues.  Mr. Yingfan echoed this, noting as well that China now supports the provisional government in Iraq even though it opposed the war.

Over the course of the week, the delegation also addressed more contentious matters, including: Taiwan, human rights and democracy related issues, China’s surging appetite for energy, and an array of trade and monetary matters. 

The Taiwanese question was taken up at several junctures.  Officials were at pains to stress that nobody in China wants current tensions over Taiwan’s status to spark a military conflagration. Yet, they also indicated that no Chinese leader would ever be forgiven were he or she to concede to a fully sovereign Taiwan.  In that sense, there appears to be a bottom line at which point the Chinese government would "pay the price for our integrity--including the resort to non-peaceful means" as Wang Yingfan said.  China's leaders apparently hope to avoid getting to that point. In conversations with the delegation, authorities stressed that China and Taiwan enjoy close commercial ties and that some 300,000 Taiwanese have easily integrated themselves into the urban life of Shanghai.

On matters pertaining to democracy, non-Chinese speakers told the delegation that the state has clearly accorded the Chinese people far greater liberties than they had ever enjoyed under Communist rule. The country's economic take-off would not have been possible without this fundamental shift. Yet, there are clearly demarcated “red lines”.  The most apparent of these is that challenges to the Communist Party's political hegemony will not be brooked. The party itself is in the midst of important change, with membership soaring to some 70 million people. The CPC is reaching out to new social groups like China's emerging business elite, many of whom are joining the party purely for practical economic reasons.  The dilemma for the party, however, is that this recruitment drive will bring greater diversity within its ranks at a time when society itself is growing more plural. Speakers at East China Normal University suggested that this growing "pluralization" is indeed welcome and observed that pushing too hard for the rapid adoption of western democratic norms could prove counterproductive.

Chinese-Japanese relations were also broached at several points. The old framework for this relationship is no longer valid; whereas China long depended on Japan, today the Japanese economy is increasingly tied to developments in China. This does not sit well in Tokyo, according to one professor who addressed the delegation. Chinese authorities and the public are also furious that Japanese officials continue to honor the war dead at the Yasukuni Shrine, where the remains of many convicted war criminals, including Hideki Tojo, lie.  This has sparked public outrage and riots in China, suggesting how sensitive matters related to Japan's occupation of China remain. The delegation learned that a panel of Japanese and Chinese historians could help settle the issue through careful consideration of the facts, and in so doing might help keep history out of the hands of those tempted to misuse it. One speaker suggested that the problem is perhaps exacerbated by the very different rituals of remembrance embraced by each society. But even given those differences, the speaker felt that the Japanese would be well advised to honor their war dead in a shrine without the highly divisive presence of war criminals.

On the energy front, officials seemed to downplay widely discussed energy bottlenecks. But the view of non-government speakers was that meeting China's energy needs has become a core challenge for a leadership that once understood oil and gas supplies as nearly limitless. The sudden sense of limitations is strongly conditioning China's international posture. One academic, however, challenged the widely held view in the United States that China aspires to develop a blue water navy capable of checking the American navy's implicit capacity to choke off China's energy supplies. China, he said, simply lacks the resources and technology to do so. He did admit, however, that China was moving from a "brown water" fleet dedicated to coastal defense to a "yellow water" fleet capable of operating in the South China Sea.

In Beijing and Shanghai, the delegation witnessed for itself the consequences of exploding demand for automobiles: gridlock and smog.  These are of great concern to both central and municipal authorities, and the government is signaling its determination to help tackle the problem of global warming--an issue that China's President Hu Jintao raised at the July G-8 Meeting

Finally, on the trade and monetary fronts, one World Bank economist told the delegation that China has essentially become the world's assembly platform. It is highly productive and has an abundant, low cost and hard working labour force. There are an astounding 200 million itinerant laborers in China who have by their mobility and flexibility exercised enormous discipline over labour markets, although wages are ineluctably rising in some coastal regions including Shanghai.  At the same time, China's accession to the World Trade Organization is imposing new obligations on China to meet international commercial standards, while obliging the rest of the world to accept Chinese imports.  Problems on both fronts were acknowledged.  One university economist also suggested that China's exports will never be sufficient to raise all of China's population out of poverty, and that is why internal market development and higher domestic demand are also essential. . At the same time, officials from the Central Bank denied that the Renminbi's link to the dollar was the source of China's ever-larger trade surpluses and gave no indication that they are prepared to revalue the currency over the short term. The Chinese remain concerned that to move quickly on this would destabilize its not all-together sturdy financial architecture. An American official in Beijing, though, told the delegation that the US government continues to push for a revaluation and made no comment on a question about the consequence for the US economy of reduced Chinese lending to the US.  

It became very clear over the course of the week that China has become "systemically important". It is increasingly a price maker in world commodity and goods markets. Its booming trade surplus, rapidly expanding GDP, rising investment levels and the capacity of its markets to pull people out of poverty all suggest that China's relative economic and diplomatic weight will only increase over time. It is not democratic yet it is growing more plural. There is a clear potential for it to evolve into a more open and liberal society.  It is precisely for this reason that the Economics and Security Committee will continue to track events in China over the coming year.