**[Testimony to USCC: China in Asia]{.underline}**

**[Dan Blumenthal]{.underline}**

**[July 22, 2005]{.underline}**

I am honored to have the opportunity to appear before this distinguished
commission on this important topic -- The impact of China's economic
growth on North and Southeast Asia.

*Specifically: How will China's economic growth serve as an economic
catalyst for the rest of the region; how will provide China with
enhanced leverage? How is Chinese military power affecting the postures
of other countries? How does the China-Taiwan relationship affect
China's relationship with the region*?

I think the questions posed go to heart of Chinese grand strategy: the
harnessing of its resources and energies to achieve its national
aspirations.

And those aspirations are becoming clear: that is to emerge over time as
the dominant power in Asia.

China is going about this as one would expect from an emerging power --
but one that has learned lessons from past emerging powers.

There are three elements to China's strategy:

First, is to build-up what it calls "comprehensive national power;"

Second is to reassure the region that it in fact does not have
revisionist or aggressive aspirations;

Third, by necessity, is to displace the United States as the preeminent
power, hopefully, in their minds, peacefully.

*Much of what China is doing in Asia can be seen in the context of these
three goals.*

**[I. Comprehensive National Power]{.underline}**

The goal here is to develop all elements of CNP in unison. Economic
growth is critical, but at the same time so is military power and so is
building political leverage through economic growth.

For Chinese strategists a critical piece of comprehensive national power
is "peaceful reunification of the motherland" or holding together the
multiethnic empire and bringing other territories "lost" during the
"century of humiliation" back into the fold.

Here is where Taiwan becomes such a high priority for China. The breakup
of the Chinese empire -- in China's terms - has weakened it. To gain
great power status it must reverse this and acquire Taiwan.

Much of China military strategy, at least in the short term, is meant to
intimidate, coerce, or use force to compel Taiwan to come into the fold.
On the other hand Beijing is quite deliberately creating an economic
interdependency that it hopes will convince Taiwan's public to join the
"motherland" again on the other hand,

Economic growth part of comprehensive national power and keeping
relations with the United States and other export markets stable is thus
a necessity, at least for now.

The need for growth explains the tremendous amount of economic
engagement China has developed with the region, and the institutions,
the ASEAN-FTA, bilateral FTAs through which that engagement occurs.

On balance Asian nations have benefited from trade with China.

They have found a reliable buyer for their natural resources and many
Southeast Asian nations enjoy a sizeable trade surplus with Beijing.

Of course some sectors have done better than others: there is
apprehension as to the consequences of allowing cheap Chinese
agricultural products unrestricted access. One quick example:

*After Thailand redrew its agreement with China on fruits and
vegetables, for example, Chinese garlic was selling for the equivalent
of 15 cents, whereas Thai garlic was \$1.35.*

Growth is one driver of Chinese engagement.

But there is no doubt that China sees its economic relationships in Asia
in strategic terms as well -- as a means to influence governments
politically.

Taiwan is the most glaring example of this -- Taiwan's exports to China
account for 24.5% of its it total now. And there are hundreds of
thousands of Taiwanese businessmen living in China.

And, China tries to use them to affect Taiwanese politics. *As Phil
Saunders at NDU points out* -- China encouraged Taiwanese businessmen to
fly to Taiwan in the 2004 presidential elections to vote for the more
pro-China pan Blue candidate.

But other countries feel the pressure as well:

I will give one quick example -- Australian-Chinese trade has increased
dramatically, more than quadrupling in the past decade, making China
both the second most popular source of Australian imports and second
most popular destination of Aus. exports. Not coincidentally China has
attempted to apply political pressure to change Canberra's attitude
toward the alliance with the United States.

In March of this year**,** He Yafei, a senior Chinese diplomat and
Director-general of North American and Oceania Affairs, demanded of his
Australian counterparts that they "re-look" the over 50 year old ANZUS
treaty and make sure it does not apply to Taiwan.

Even Japan -- where relations have soured and are quite competitive --
China hopes over time to reverse the effects of an enhanced relationship
with the U.S. by continuing a strong economic relationship with Japan
Inc. *Here it has to be more targeted -- focusing on industries such as
automobile that want to enhance market share in China.*

And, China is clearly targeting for economic aid and exchange countries
that it defines as strategically important for reasons of energy
security, for example. Burma, Cambodia and Thailand are particularly
important as they sit astride key sea lanes.

Beijing does not trust the U.S. Navy to ensure safe passage of its oil
imports from the Gulf -- so it is trying to mitigate its
vulnerabilities.

Burma could provide China with an overland alternative through the
chokepoint of the Malacca Straits. Thus Burma has been the recipient of
over \$1.6 billion in military assistance from the PRC

Cambodia is also an important example of this -- China has cancelled
Cambodia's debt, donated military facilities,

Much of this is in pursuit securing Cambodia's cooperation in
transforming the Mekong into a major transportation artery for oil from
or shipped through Thailand

Thailand is also targeted as part of China's energy security strategy.
Beijing and Thailand plan to construct an Energy Land Bridge linking the
Andaman Sea with the Gulf of Thailand south of the Isthmus of Kra, and
reduce the PRC's dependence on American-patrolled SLOCs.

*In this case, the grease that got the wheels turning was Chinese
financial assistance in the wake of the AFC in 1997 and 98. In short,
both demonstrate both the scope of Chinese objectives and the
persistence with which it is pursuing them.*

**[II. Reassuring the Region]{.underline}**

David Shambaugh of George Washington has written eloquently about
Chinese new found fondness for multilateralism in Asia.

China, he writes, is increasingly involved in regional organizations and
dialogues particularly ASEAN plus 1 and plus 3 the ARF and the Shanghai
Cooperation Forum.

*Here is a Chinese official on the Chinese attitude toward regional fora
-- "Taking ASEAN plus 3 and the SCO as two focal points, China will make
efforts to set up regional cooperation and push for the establishment of
a regional cooperation conforming to the characteristic of regional
diversity*..."

China is pushing for a Free Trade Area in East Asia, and an East Asia
Community, political, security and economic dimensions. China has a
particular fondness for institutions that are for Asia only and exclude
the U.S. -- but more on that later.

While China continues its ambitious military modernization program --
according to latest Pentagon reporting it could be spending up to 90
billion dollars on defense \-- making it the third largest spender in
the world \-- it is at the same time working to reassure the region that
its intentions are peaceful, that its military is solely focused on
"preventing Taiwan independence" and that Taiwan is the problem.

Again Shambaugh --

Besides its active participation to ASEAN and EAC, Beijing is also
conducting security dialogues with Australia, Thailand, Mongolia,
engaging in mil-to-mil or defense sales with Cambodia, the Philippines
and putting much energy into the ARF.

In my view, China has not all of a sudden adopted a European allergy to
hard power and the use of force, it is meant to reassure, until China is
more confident of its hard power.

[**III. Gradually Displacing the United States**.]{.underline}

This is where the other two pillars of the strategy come together.
Simply put, if China grows strong enough, and if it successfully
reassures the region successfully thus preventing balancing coalition
does form, it may not to directly confront the U.S. with force.

To be successful in this endeavor China must also break and fray
Washington's alliances.

Here we should also pay special attention to the *nature* of China's
military build-up and military relationships.

As the recent DoD report has pointed out, the focal point of China's
military build-up, ballistic and cruise missiles, as well as destroyers
and submarines are mobile and can be deployed for purposes other than
Taiwan.

*The basis of regional security for decades has been U.S. defense
commitments to Japan, to Taiwan, to Australia, Philippines and South
Korea Thailand.*

The introduction by China of ballistic missiles, submarines, and fourth
generation aircraft -- what is called anti-access capabilities - is
meant to call into question the credibility of the U.S. commitments to
its allies and friends.

This is compounded by a growing and more credible intercontinental
ballistic missile and nuclear threat. The idea is to put doubts in the
minds of allies about the U.S. will and ability to continue to provide
the region with security.

In China's view, a level of military capability which it is not far from
attaining, combined with successful leadership in regional fora that
excludes the Unites States -- ASEAN, the East Asia Community \-- will
persuade nations to accommodate themselves to Chinese pre-dominance and
force them to re-think their partnerships and alliances with the U.S.

There is another way to break alliances -- and here I turn to the Korean
peninsula.

Whatever the short-term outcome, the long-term goal for China is to get
South Korea to question the need or value of the alliance with
Washington. The hope in China, I think, is that once the ROK-U.S.
alliance diminishes, then Japan is left isolated, as the only Asian
country home to substantial U.S. troops.

**[Conclusions]{.underline}**

Now the question is how well is this strategy working. And here I must
say it is mixed.

The Taiwan issue in particular poses a conundrum from China -- how can
you on the one hand convey the message of a peaceful rise but on the
other very publicly threaten Taiwan and build-up your military
capabilities?

There are some examples of irritation by Asian nations with Chinese
pressure on the Taiwan issue. Singapore was quite angered by Chinese
bullying when now Prime Minister Lee Hsien Loong visited Taiwan in July
2004.

*Even the South Koreans got their backs up when parliamentarians were
told not to go to the Taiwan presidential inauguration in 2004.*

Nations of the region do not want a conflict between the U.S. and China
over Taiwan but they do not want the U.S. to cede Taiwan either -- they
would view that as a real blow, they would really question the value of
U.S. commitments.

And, I would add that it has not gone unnoticed by nations of the region
-- Japan, in particular but others as well, \-- that the same weaponry
that China is deploying opposite Taiwan can be used to make good Chinese
territorial and resource claims in the sea of Japan and in the South
China sea.

*Remember it was only about decade ago that China forcefully took
Mischief Reef -- territory claimed by Manila as well as China.*

*Remember as well that the relationship developed only when South East
Asia secured China's agreement to meet two conditions: stop pushing SEA
to drop US alliances, and refrain from politically mobilizing overseas
Chinese. There still exists a fundamental distrust that hasn't been
displaced by economic exchange.*

So what are these countries doing? Well clearly Japan is balancing --
the adjustment to its defense posture I would argue is more about China
than North Korea.

A Vietnamese Prime Minister was just in town for the first time since
the war to discuss among other things defense and intelligence
cooperation.

The U.S. --Singapore defense relationship has been upgraded with the
recent signing of the Strategic Framework Agreement, and the US Navy now
pays more than one hundred ship visits there each year.

The U.S. Australia relationship has been upgraded and there will now be
a trilateral dialogue among the foreign ministers of Washington, Tokyo
and Canberra.

The India security relationship which you will here more about later is
upgraded.

The bottom line is that nations of the region are reacting, and are
quite certain that the military build-up is not just about Taiwan.

If you look at statistics provided by Strategic Asia -- you see that
military expenditures by India, South Korea, Australia, Indonesia have
all gone up in actual dollar amounts,

And in particular South Korea, Singapore, Australia and Japan are all
undertaking significant military modernization programs -- most with the
intention of interoperating with the U.S.

Containment is a loaded term, but there is actually a good deal of
containing already going on, although nobody, including the U.S.G.,
wants to admit it.

Let me add a final point that gets into policy prescriptions. There is
much talk about Chinese advantages on "soft power" they are not as
bullying as the United States, many students now study in China and so
forth, and this is all true.

But, I would like to direct the commissioner's attention to something
else \-- the Journal of Democracy recently published a fascinating study
of democracy in Asia done by the East Asian Barometer Survey Project.

And they interviewed publics in new democracies and older democracies --
South Korea Japan Mongolia the Philippines and Taiwan and Thailand.

I will distill in down to this -- vast majorities in all of these
countries preferred democracy to any other system and wanted it to work
in their countries. It was mixed especially in the younger ones to
whether they thought it would sustain. But they unquestionably wanted it
to.

Now, is China going to help these countries with democratic
consolidation? Their corruption problems and so forth. Their deep
national aspiration. The answer is

of course no.

Only America can lead the way on this issue. And, if we engage along
this dimension believe the notion that China has a soft power advantage
will disappear quite quickly.

The bottom line is to be clear with the Chinese that we are not going
anywhere, that are presence has been the sin qua non for peace,
prosperity and democratization in the region.

And, there should not be a China exception to the President's assertive
promotion of democracy. I believe that only if China becomes one will
the U.S. and China be able to work out a peaceful accommodation in Asia.
If you listen to many Chinese people the idea is not so far fetched.

Thank you.