Japan Center for International ExchangeVol. 3 No. 6 | December 2008

Getting China Policy Right
Hitoshi Tanaka, Senior Fellow, JCIEThe current international system is in a state offlux, and uncertainties abound about its futureform. For one, the long-term ramifications of the
global financial crisis remain unclear. In a development unprecedented in the post-war era, theworld’s three largest economies (the United States,Japan, and the European Union) have now enteredinto a simultaneous recession. At present, it is impossible to predict with any certainty how longcurrent circumstances will persist. Meanwhile, theUnited States—the world’s preeminent power—
has recently elected a new president. Although
President-elect Barack Obama seems to have presented a strong vision for the United States’ rolein the world, it will be at least six months into thenew year until we know the extent to which the
new administration is able to translate campaign
promises into actual policy.
It is within this unpredictable international context that policymakers here in Japan and overseas
must rethink their respective approaches to ­China.
The successful conclusion of the 2008 BeijingOlympic Games this past August has engendered arenewed confidence in Beijing about China’s international status and influence. Although China has

not been immune to the painful effects of the current financial crisis, most indicators suggest that itshould be able to maintain at least 8 percent economic growth for the next several years. In addition to its continuing role as the primary engine ofglobal economic growth, China has also begun toemerge as a key player in the fields of finance, energy, the environment, and—increasingly—militaryaffairs. The massive scale of China’s expansion andscope of its global influence ensure that the stakes
for the international community are very high.
Continued prosperity and stability in East Asia will
depend on the international community placing arenewed emphasis on getting China policy right.

China Policy in Historical Perspective
In 1978, Deng Xiaoping initiated a policy of reform and opening up that effectively severed thelink between revolutionary ideology and China’sapproach to the outside world. Economic development (“socialist modernization”) became China’s
singular guiding principle, and Chinese leaders
worked steadfastly to ensure a benign internationalenvironment. As part of this process, China sought
to consolidate stable ties with potential economic

has been positive, the pace and scale of China’s
emergence has raised serious questions overseas
about the nature of its future course. For example, there are a number of concerns about China’s
rapidly rising military expenditures: the most recent official budget from the Chinese governmentshows that defense spending increased by a remarkable 17.6 percent in 2008 to US$59 billion. Various
estimates by both foreign governments and independent experts suggest that actual expenditures
may be significantly higher. Furthermore, China’s
widespread military modernization campaign,
low transparency in its military affairs, territorial
disputes with its neighbors, and recent provocative
naval maneuvers (such as the encroachment of a
People’s Liberation Army submarine in Japan’s
exclusive economic zone in late 2004) have done
little to dispel existing concerns. On the contrary,
several countries have even begun to respond to
uncertainty surrounding China’s future strategic
direction by pursuing a “hedging” policy.
The world is still unsure of how exactly to approach the emerging Chinese behemoth. This isparticularly true in the United States and Japan,
arguably the two nations with the most at stake. In
the United States, the Bush administration’s policy
toward China has undergone a quiet evolution
over the course of two terms, backing away fromits originally confrontational approach (e.g. approaching China as a “strategic competitor”) andincreasingly seeking to engage China and facilitate
its emergence in the international community as a“responsible stakeholder.” Nevertheless, it shouldbe mentioned that the US foreign policy community has yet to reach a consensus as to whether thisis a realistic goal and, if so, how best to achieve it.
Meanwhile, in Japan, only three years afteranti-Japanese protests in China brought SinoJapanese relations to one of the lowest points in
60 years (and stoked Japanese nationalism in theprocess), a series of recent bilateral summits havesought to improve ties through an emphasis onbuilding up a “mutually beneficial strategic relationship.” It remains to be clarified, however,
1) what specific policies this general approach
will lead to and 2) whether this shift portends apermanent or merely temporary improvement inbilateral relations.

partners and reengage former adversaries, in particular the United States.
The wholesale shift in US China policy thatemerged during the 1970s—beginning with
President Richard Nixon’s historic 1972 visit to Beijing—was manifest most clearly in­Washington’s acceptance of Beijing’s interpretation of the so-called “one-China policy.” From theperspective of the Chinese leadership, this policy
holds that the government of the People’s Republic of China is the sole legal government of ­China
and that Taiwan is part of its territory. Whilerhetorical tinkering has allowed Washington toavoid a direct statement of support for this policyline, the willingness of US leaders to make sucha substantial concession on the Taiwan issue wasnevertheless remarkable. Ever since, Washington
has upheld a policy of “strategic ambiguity” over
the Taiwan issue, aiming to keep a lid on tensions
across the Taiwan Strait by leaving it ambiguouswhether the US military would intervene in theevent of cross-strait conflict. From Washington’sperspective, this policy serves to maintain thestatus quo by simultaneously discouraging theTaiwanese leadership from unilaterally declaring
independence as well as forestalling hostilities
against Taiwan by the mainland.
Throughout the Cold War, Japan’s policy toward China outside of the economic sphere wasbasically formed within the contours of US-Chinarelations. For example, when relations between
the United States and China were frozen (e.g.
1949–1972), Tokyo opted to keep its distance fromBeijing. However, as rapprochement between Beijing and Washington advanced following the 1972
summit, Sino-Japanese relations also rapidly improved. Concomitant with deepening cooperation between the United States and China throughtheir joint effort to balance the Soviet Union, Chinese leaders by the early 1980s came to view ­Japanfavorably and began to hold it up as a model of how
a non-Western nation could succeed in achieving
economic development.

Current Circumstances
While the general trend in recent years in China’s
relations with its neighbors—including Japan andthe United States—since the end of the Cold WarEAST ASIA INSIGHTS

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Key Policy Objectives
The fundamental objectives of the international
community’s policy toward China should be to see
to it that China becomes an involved and constructive contributor to global peace and prosperity
and to ensure that widespread fears that China will
emerge in a manner disruptive to global stability
are not realized. In other words, the international community should maximize the opportunities for global economic prosperity presented by­China’s vast domestic market and industrial capacity and minimize the risk that its emergence asa global power could have a detrimental impact onregional or global stability. It is important to stateat the outset that no single nation or alliance will
be able to achieve these objectives by itself; rather,getting China policy right will require a coordi­
nated bilateral, regional, and global coalition.
Stability in East Asia will be impossible without a robust relationship between the region’s two
great powers: China and Japan. Keeping the broad
goals delineated above in mind, Japanese leaders
must place priority on achieving a Sino-Japanese“grand bargain” in order to ensure long-term stable and mutually beneficial ties. This grand bargain
must address three key issues: 1) representation ininternational institutions (in particular Japan’squest for a permanent seat on the UN Security
Council and China’s goal of creating “a new international financial order that is fair, just, inclusive,and orderly”* and gives a fair voice to developing
economic powers in the OECD and other Bretton
Woods institutions) and mutual acknowledgementof the positive contributions that both nations canmake to global governance; 2) deeper cooperation
over energy issues and the environment; and 3) expanded dialogue and collaboration over the consolidation of a regional architecture in East Asia.
The first issue—representation in interna­tional
institutions—is inextricably linked to China’s
global role. The international financial crisis presents a prime opportunity for China to demonstratethat it is willing to adopt a role as a responsible

stakeholder and make constructive contributions
to global governance. In the short term, the international community must encourage China toplay an integral role in alleviating the deleterious
effects of the current crisis. In addition to cooperating with global powers via the nascent G20
framework, the Chinese government should also
commission a study group of experts to explore
ways for China to make a contribution to stabilizing the global economy similar to the measures
adopted by Japan in the 1980s to alleviate its trade
surplus and abet economic and financial stability
in the United States. Although the economic circumstances of the 1980s were admittedly different
from those of today, the economies of the UnitedStates, Europe, Japan, and many other advanced
countries are already in dire straits and China
is in a unique position to help. China must takesteps to significantly expand its domestic market
and, together with Japan, do more to recycle its
enormous foreign currency reserves through expanded investment overseas, particularly in theUnited States.
The second part of the grand bargain must be
deeper bilateral cooperation in dealing with environmental challenges. As an environmentally conscious nation and global leader in advanced green
technology, Japan stands to make a major contribution to China’s efforts to improve energy efficiency and mitigate the negative impact of rapid
economic growth on the environment. The effects
of China’s worsening environmental degradation
are felt far beyond its borders, and reversing thistrend is not only a matter of interest to foreignbusinesses wishing to export green technologies
to China; it is also an increasingly serious global
health issue. Such cooperation stands to significantly improve Sino-Japanese relations and mustbe pursued with the utmost haste.
The third aspect of the grand bargain—consolidation of a regional architecture—will be integral
to ensuring long-term peace and prosperity in EastAsia. Although expanded bilateral cooperation between and leadership from Japan and China willbe essential, it is imperative that the two countries
also pursue very close collaboration with the restof the nations in East Asia. For its part, Japan mustalso proactively campaign for the involvement of* Xinhua.net Online, “Is World Ready for a New Int’l Financial System?” translated remarks of Chinese President
Hu Jintao at the G20 Summit in Washington DC, November 16, 2008. http://news.xinhuanet.com/english/2008-11/16/
content_10367985_3.htm (Accessed December 16, 2008)EAST ASIA INSIGHTS

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Conclusion
The international community faces an enormous
number of challenges in the coming years. The
emergence of China as a global economic, political,and military power ranks high on the list of thosechallenges. At the same time, China’s rise also provides the world with a number of opportunities. It
is incumbent upon the international community
to ensure that China not only pursues its national
interests peacefully within the current system but
also plays an active and constructive role in reforming and bolstering the effectiveness of existing international institutions. Continued stability
and prosperity in East Asia, and by extension theworld, hinge on getting China policy right.

the United States. The US presence in East Asia issuch that any architecture tasked with addressing
security issues in the region without the active participation and support of Washington is certain to
be of limited utility. The basic ingredients of a newarchitecture should be three-fold: 1) to institutionalize regular trilateral security dialogue among
China, Japan, and the United States in order to improve transparency and deepen mutual trust; 2) towork toward the consolidation of a region-wide
economic partnership agreement to bring greater
prosperity; and 3) to establish an East Asia Security
Forum to engage states in jointly tackling nontraditional security issues in the region such as infectious disease, maritime piracy, human trafficking,and energy security and the environment.**Hitoshi Tanaka is a senior fellow at JCIE. He­previously served as Japan’s deputy minister for foreign affairs.

** For more information on the East Asia Security Forumproposal, see the April 2007 (Vol. 2, No. 2) issue of EastAsia Insights: “East Asia Community Building: Toward an‘East Asia Security Forum.’”

East Asia Insights
East Asia Insights is an occasional newsletter focusing on East Asia community building
from a Japanese perspective.
Published by: Tadashi Yamamoto, President, JCIE
Please direct any comments or questions to eainsights@jcie.or.jp.
Japan Center for International Exchange
www.jcie.or.jp

EAST ASIA INSIGHTS

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4© 2008 Japan Center for International ExchangeVol. 3 No. 6 | December 2008