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History Table of Contents
1997 Summer Conference
 
Summer Conference 1997
Canada and the Asia-Pacific Promise: Hope, Hype and Reality
Keynote Address

Ross Munro,
Co-author of The Coming Conflict with China

    I want to compliment you on the title of this conference. With Hope, Hype and Reality, you cover all the angles.

You couldn't have anticipated that the Asian economic miracle would be in a bit of trouble; that the Thai economy would, as it did in the past few weeks, collapse. And that's not too strong a word to use for Thailand this evening.

We've also seen a serious slump in several other Southeast Asian economies. We've had, as Patrick Boyer mentioned, that nasty coup in Cambodia, which I'm going to address later in my remarks.

And we've had stock market crashes in half a dozen Asian countries. An equal number have experienced significant and substantial currency devaluations in the past year.

Even in China, that economic juggernaut, the economic growth rate in 1997 is going to be down again for the fifth consecutive year.

We're not going to shed any tears. It's down to nine percent. For the first time in five years, the Chinese economy will experience single digit growth. And there are signs China will face a real economic shakeout in the next six to 18 months.

This evening I will be talking mainly about China. And not only because it is the focus of my research and writing, it's also appropriate at a conference on Asia to start the conversation off by discussing China because China once again looms over all the rest of Asia in a way that it hasn't for centuries.

Indeed, in a strategic sense, every country in Asia can be usefully defined in terms of its relationship with China. In fact, that is one of the few things that all Asian countries have in common.

I'm sure I won't be the last person to mention this, but we all have to be careful over the next few days of making sweeping generalizations about "Asia."

Asian countries share geography. They (also) share a huge neighbour: China. But, together they form a region that is much more varied politically, culturally and economically than the sub-Sahara in Africa or Western Europe.

I was thinking the same thing a few weeks ago about Canada, when I was watching in Colorado a relay of the CBC election night coverage. Seeing the patchwork map showing how Canadians had voted very differently region by region, there didn't seem to be much commonality that night about Canada, either.

There is a serious point here, though, about Canada and Asia. How do you define Canada in the context of our relationship with Asia? Let's not be captured by the Ottawa myth that our international relations are all under the umbrella of that particular city.

The heart and soul of Canada's relations with Asia are mainly person to person, family to family and business to business.

I suspect that about 80 percent of those interactions, if you put aside trade and commodities, start or finish within 10 miles of Highway 401 in Ontario, or on the lower mainland of British Columbia.

The strong status bias in this country, particularly among the intelligentsia, may cause us to overlook the fact that government is at the margins of most of our relations with Asia. This status bias also leads Canadians — particularly the Canadian media — to place far too much importance on inter-governmental organizations involving Asia.

Let us not spend too much time this weekend talking about ASEAN and APEC. They are not as cohesive as organizations in Europe. They may be useful as talk shops, but they really haven't been tested in a crisis. To the extent they have been tested recently, they haven't done so well. ASEAN was effectively mute about the coup in Cambodia that Patrick Boyer mentioned — ultimately quite ineffective.

Before I get to China, I'd like to make a couple of observations about the economic problems rippling through most nations in Asia right now and which have still not caught the attention of the general public in the United States and Canada.

We may well be looking at the end of the first stage of the Asian economic miracle.

Excluding China, the small tigers probably aren't going to see 10 percent annual economic growth, or 20 to 40 percent export growth any time soon.

Many countries in Asia, however — if they get their act together — can still achieve growth rates much higher than the mature economies of countries like the United States and Canada.

More important, for any business people in the audience, is that the economic troubles in Asia right now are not entirely bad news. Not by a long shot.

Look, for instance, at Japan which has been having economic problems now for several years. Japan is now coming to grips with the fact that its protectionist, mercantilist and government-guided policies no longer work. Japan realizes it has no alternative, except to reform its system.

As one analyst recently put it, parts of the Japanese economy are "collapsing into liberalization."

Already foreign investment in Japan's service sector and its financial services sector is increasing, because smart money abroad is convinced that Japan this time really is on the road to reform.

There may also be some great new opportunities for U.S. and Canadian business opening up in Southeast Asia.

In the past few weeks, I've consulted with two large U.S. corporations that see the slowdown and the coming shakeout in Asia as a huge opportunity, not as a problem. That's because the last 20 years of economic boom has left Asia with a lot of fat, inefficient local corporations. They made enormous money in deal-making, not in being efficient or in having a viable long-term strategy.

Now, with the economic crunch we [are] entering an area of divestment, outsourcing, restructuring and the building of new alliances, all of which open up new opportunities for lean and mean North American companies.

But what caused this economic slowdown in the first place?

In some ways, it has been a classic case of over-confidence and over-heating, over-investment in manufacturing and, above all, in country after country, over-investment in property development.

So we have gluts in manufacturing capacity all over Asia and we have a huge glut in real estate. Stock markets are crashing, banks are going under, currencies are being devalued in several countries in Southeast Asia.

But you know what is the immediate and precipitating factor causing these economic crises that we're witnessing in Southeast Asia and to a certain extent elsewhere in Asia?

It was actually the collapse of export growth. In one country after another in Southeast Asia annual export growth has declined in less than two years from a range of 10 to 30 per cent annual export growth down to zero to three per cent. And again I stress that's in less than two years, on average less than 18 months.

Now, what was the cause? Everyone agrees on the answer. The answer is China.

The Chinese economic juggernaut is starting to overwhelm Asia. The figures for the first half of this year tell the story. Chinese exports increased by 26 percent in the first six months of 1997, while exports by Southeast Asian countries and some other Asian countries were totally stagnant.

This brings me to the main theme that I want to stress tonight. China looms over Asia as never before, or at least not in recent centuries. The growth in Chinese power — economic, political, military — is breathtaking in its magnitude and in its speed.

The Chinese leadership is determined to dominate Asia and suddenly it is already half way there.

When I wrote this book a little more than a year ago with Richard Bernstein, The Coming Conflict with China, we thought we were going to be way out on a limb somewhere with our predictions about China's lunge for hegemony in Asia and the fact that this put it on a collision course with the United States.

We're no longer way out on limb. We're in the mainstream. In fact, I believe that we understated the case when we wrote that book. [The idea] that China would be half way to its new goal of achieving domination in Asia would have been inconceivable just a decade ago.

In 1987, only the first building blocks were in place.

The first one was Deng Xiaoping's courageous act of effectively dismantling the agricultural communes in 1979. That, as most of you know, led to an enormous surge in rural productivity; not just in farming, but also in rural industry, which is by the way the most overlooked aspect of the Chinese economic miracle.

Then, during the mid-and-late 1980s, companies in Hong Kong and Taiwan began pouring in capital, managerial skills and their know-how in accessing Western markets to set up manufacturing facilities in the southeast corner of China. And that set off the first stage of new industrial growth.

Both involved a degree of luck. China was very lucky. Mao's communes were only 25 years old. Peasants still remembered how to farm. It wasn't like the Soviet Union, where agriculture has not recovered yet and may never recover from 70 years of communism.

In the case of Hong Kong and Taiwan, Deng was ready to open up the gates to Hong Kong and Taiwan industry precisely at that moment when Hong Kong and Taiwan industry was pricing itself out of export markets because of land costs and labour costs.

Indeed, a tremendous degree of good fortune for China.

But, what really changed the world view of the Chinese leadership and transformed China into a contender for domination of Asia was really the collapse of the Soviet Union in 1989-1991.

With the collapse of the Soviet Union, the main threat to Chinese security vanished virtually overnight. The Chinese looked around and there were no other challengers.

If you were playing a board game of international relations, you would look first to Russia as a counterbalance to Chinese power. We know what has happened there. Then, you would look to India. But, India is still recovering from 40 years of bad economic planning and from having chosen the wrong side in the Cold War. So, India is weak.

Japan, the third power that could challenge or check China, is still hobbled by the peace constitution imposed by the United States and with a population loathe to have their country be assertive in the world.

So, combining lack of enemies with this economic takeoff, China's relative power overnight multiplied many fold. And suddenly, China was more secure than it had been in centuries. This took place in only a few years. It was only in the early 1990s that the Chinese leadership came to grip with these new realities.

Now, what was the response of the Chinese leadership to the fact that China had no real enemies, had no real threats to face in the world? The response of the Chinese leadership was to launch what is now the world's largest and most rapid military buildup.

Now, why was that?

Well, the first explanation; the minor explanation is that they could afford it for the first time, because when you have 12 per cent economic growth there's a great deal you can do in terms of buying armaments.

The main reason was that the Chinese leadership had realized by 1993 that they could achieve the goal that every great dynasty in China sought: The domination of Asia.

I know that some of you are going to be unconvinced by this analysis. After all, the key slogan of Chinese foreign and military policy, as some of you know, is "We shall never seek hegemony."

In other words, we will never seek to dominate our neighbours. "We're good guys."

But, if you deconstruct Chinese foreign policy and you look at their announced and official goals, they amount to a program for the domination of Asia.

You can decide if you want to trust the reassuring slogan. Or, if you want to pay attention to the specific things that the Chinese leadership has announced it is seeking.

First, control of Taiwan. And with that, by the way, goes a tremendous strategic advantage. If they seize Taiwan, they control the sea lanes entering the South China Sea and the sea lanes from the south to Japan.

And believe me, while the Chinese try to portray Taiwan as a one dimensional issue, as simply the reunification of the Motherland, it is far from that. And young political and military leaders in China see Taiwan first and foremost as a strategic target.

And never forget that, because this is one of the greatest achievements of political propaganda this century — that the Chinese people's hearts beat as one, so they can be reunified with their compatriots on the island. It's a military target, ladies and gentlemen.

Second announced goal: They want control of the South China Sea. Some of you have seen that claim line: China says the South China Sea is a Chinese lake and we want to control everything right down to offshore Indonesia.

If China were to achieve those first two goals alone, it would tip the balance of power in Asia dramatically overnight. But, they go much further than that.

By the way, sometimes I say China as shorthand. I want you to remember I'm talking about the Chinese leadership.

I want you to read my book, obviously. You will see this is not an anti-Chinese book.

This was written by two men who have devoted much of their adult lives to studying China, living in China, trying to understand China. You don't do that about a country you dislike. We are both Sinophiles. It just so happens we're damned afraid of the Chinese leadership.

So, those are the first two goals.

The third goal — and I'm really compressing a bunch of statements from the Chinese leadership — the third announced goal of China is the permanent subjugation of Japan.

They want Japan to be permanently barred from ever having the rights of a normal nation to decide on what its security needs are and to fulfill those. They want it limited by all time, whether it's by the peace constitution, or by an international treaty to impose on Japan forever a small defensive force.

And China's determined to make it the one sort of nation on earth that has this [condition] imposed on it. We can get to this in the question period about [whether] it is anti-Japanese emotions from World War II, or is it just a good manoeuver by the Chinese? You can imagine what my answer will be.

The fourth and final announced goal, [as] a foreign ministry spokesman was saying this spring, and as the Foreign Minister said a couple of years ago, they want an end to the U.S. military presence in Asia.

If China just achieves two or three of those four goals, China dominates Asia.

When I pointed this out to my counterparts in Beijing and Shanghai, I said what you're talking about is the domination of Asia.

They said, "No, no, you don't understand. We Chinese are not like you Westerners. We are not aggressive. We're not going to do terrible things to our neighbours like you did."

Basically, what the Chinese position comes down to is: Trust us. We don't want any counterbalancing powers in Asia, but you can trust us.

What I find absolutely striking is how the Chinese leadership is now ruthlessly and single-mindedly pursuing its goal of domination of Asia without any reference really any more to ideology or even in a sense to ethics.

I think I should mention right away the best example: Cambodia.

For years the Chinese supported the Royalist Prince Sihanouk and his son. And they also supported the Khmer Rouge for many years, but have been edging away from them. I give them credit for that. And they had been backing those forces, while at the same time denouncing one of the two Prime Ministers, Hun Sen, as a Vietnamese puppet and there was constant propaganda about what a horrible person he is.

By the way, the Chinese were right. Hun Sen is a horrible person. He's a former Khmer Rouge. His biggest financial backer is a reputed drug baron and really is, as the British say, a nasty piece of work.

When Hun Sen launched that successful coup in Phnom Penh a few weeks ago, the Chinese leadership in just a few hours did a total flip and came out as the first foreign supporters of Hun Sen.

As a result, today in Cambodia, in political and strategic terms, China is now the key outside influence. This comes after China has successfully cowed its traditional enemy Vietnam into sort of a fearful neutrality. It also comes after China's earlier success in Burma, where once again it was the first country in to support that odious junta that consolidated power in 1988-89.

And China now can correctly view Burma as a satellite of China. Burma is now firmly inside the Chinese sphere of influence.

And now we're seeing again, because this is an authoritarian country with a very clear set of long-term strategic goals, it moves fast and ruthlessly.

So, this week it continues. It does not stop.

This week there are Chinese financial officials in Thailand trying to get deeply involved in the financial bailout of Thailand.

This again is to further Chinese interests to, in effect, establish leverage in Bangkok, which will go even further than the Chinese business community did in Bangkok over the past five years in guaranteeing to China that Thailand would stay, at minimum, neutral on any issue concerning China and now more and more leaning in China's favour.

There is a real possibility that Thailand, which I expected for many years to be a neutral party between the United States and China, will be in the Chinese sphere of influence before too long. And this really astounds me that this is happing so rapidly.

Some of these examples I give you [show] there really is a pariahs and bankrupts strategy the Chinese have basically put together regarding building influence in Asia.

Pariahs, countries like the junta in Burma, Hun Sen in Cambodia — even abroad outside of Asia — China's always been the first to support the military thugs in Nigeria and certainly supports Iran. Those are the pariahs.

As far as the bankrupts are concerned, we've got a country, Thailand, which China's moving in on.

Also, it's very interesting — you'll be hearing from Emily Lau — that [the family of] C. H. Tung, one of the people she so rightly criticizes and opposes, was bailed out by the Peoples Republic of China financially a few years ago and they owe Beijing big time.

Some of you may have been following the crisis in the United States on the campaign funding in which the name Riady keeps popping up. Well, the PRC also bailed out the Riady family in Indonesia at a crucial moment and the Riadys owe Beijing big time.

Chinese influence in South Asia and Central Asia is growing, as well.

India finds itself outflanked. China now has strong military relationships with Burma on the east and Pakistan on the west. In fact, India feels so far behind China in terms of economic and military power that it has effectively accepted all of the territorial gains that the Chinese made in the Sino-Indian war of 1962 and they're now drawing back their troops on both sides because India cannot possibly challenge that situation.

In Central Asia, Kazakhstan, one of the newly-independent Central Asian republics spun off with the dissolution of the Soviet Union, Russia still has some political and military power. [But] there's a real vacuum because of Russia's overall weakness.

China has moved in there with a multi-billion dollar oil deal and is building influence there. They're going to spend billions on a pipeline to Kazakhstan and it will be treated the way the Americans treated the Panama Canal. That's a strategic Chinese asset, even though it's outside of China.

Now, where's Munro going with this?

This is no call to arms. I'm not even calling for containment of China.

China is going to grow more and more powerful. We're going to see more and more events like this. It would be foolhardy to try and stop this process.

The issue for us tonight, the issue for the United States, which it hasn't really come to grips with yet; the issue for Japan, which it hasn't come to grips with and, in a sense as a bystander, it's an issue for Canada, as well, is whether China will succeed in its goal of completely dominating Asia in the decades to come.

This issue isn't going to be settled on China's southern, or western, or northern border. It's going to be settled on the eastern edge of Asia.

I'm talking about Japan, the Korean peninsula and Taiwan. And that is where the United States and China really rub against each other and that's what makes this whole thing very interesting, as in the Chinese curse: "May you live in interesting times."

The United States and China are on a collision course. Both countries; the Chinese leadership recognizes it, we document that very clearly in our book. The strategic thinkers in the United States recognize that. Bill Clinton would prefer not to recognize that.

The United States for more than a century, which is very unusual of the United States, has had a consistent strategic policy towards Asia. And that policy has been to prevent the domination of Asia by any single power.

You might say this means the United States wants to dominate Asia. But, that is not the bottom line for the United States in Asia. It's more modest than that. The United States does not necessarily want to dominate Asia, it wants to prevent other countries from dominating Asia.

So, what we're talking about is a balance of power. The United States is committed to a balance of power.

Now, if the United States and its allies fail to maintain a balance of power in Asia it's not just a problem for the United States it's a problem for countries like Canada.

This may be a little hard to connect to, but if the United States cannot maintain a balance of power in Asia it comes home to us.

If China dominates all of Asia, China dictates the terms on which we trade with Asia. When I say we this time I mean Canada, the United States and other Western countries.

If you want a preview of what an Asia dominated by China might look like, we're already starting to see the beginning of that movie in Hong Kong.

The Rule of law is in decay. Chinese-nominated officials and legislators have already violated the Basic Law; the constitution; which was ratified by China itself.

Criminal syndicates are now getting carte blanche, according to report after report, criminal syndicates working hand in hand with pro-Beijing forces in Hong Kong, and where business more and more is becoming a matter of so-called red chips, of insider dealing and where the level playing field and the open market that we saw in the past is fading.

Where's the struggle going to be resolved?

Let's look very quickly at the three key countries.

The first one is not really a country, it's a peninsula: The Korean Peninsula.

The Chinese made it very clear to me that they see Korea as a great strategic contest, where they are determined to be the key broker in the reunification process. They don't say so publicly or officially, but they know full well their old friend the Communist regime is finished.

They don't know exactly how it's going to fall, nor do we. But they know the North is finished and they're now positioning themselves both in the North and in the South to be the key broker in the reunification process and part of that, in turn, is aimed at forcing U.S. troops out of the peninsula as soon as possible.

In Taiwan, I've already told you that the Chinese see that as a strategic target.

The reason Taiwan is the most combustible of places on the eastern rim is that those pesky Taiwanese have really messed things up by going democratic. It's a much more difficult situation now that Taiwan has become a full-fledged and genuine democracy.

The PRC, Beijing, recognized that democracy was the enemy in Hong Kong and has gone a long way to squelching democracy. They could not squelch democracy in Taiwan. Those folks in Taiwan, they now want a say in their future, which is clashing completely, of course, with the official Chinese position, which is that Taiwan is part of China; the people of Taiwan have no right to speak about their future, unless it's to agree to some kind of reunification.

I think about three to five percent of the people in Taiwan favour reunification.

This, of course, makes things a lot more difficult for the United States. Twenty years ago, 30 years ago people thought, well, autocrats in Taipei will make a deal with the autocrats in Beijing and it will become one country. Well, that's off.

Taiwan is now a democracy and the United States is much more committed to Taiwan than it ever was before. [When] you add that to the fact there is a legal commitment in the Taiwan Relations Act — and certainly a strategic interest to the United States in maintaining an autonomous Taiwan that helps to counterbalance Chinese power — we are on a collision course within the collision course on Taiwan.

I've just returned from Japan. The Japanese people love to worry. And, boy, are they worried about China.

This has taken place only in the last two or three years. In 1994-95, most of the Japanese people wanted a weakening of the U.S.-Japan alliance. They looked positively on China.

Today, because of all the Chinese military adventures in the Taiwan area and in the South China Sea, because of China's anti-Japanese propaganda, the Japanese people have turned against China. They see China, according to all the polls, as the key threat to their country. They also support the alliance [with the U.S.] more than they have for 30 years.

The Cold War is over. This was a Cold War alliance, yet the Japanese people today are stronger in their support of the alliance than they have been in a long time.

But, I don't want to overstate the case. There is still a tremendous ambiguity and reluctance regarding the legitimate use, the defensive use, of military power among the Japanese people. And this is going to be resolved in the years to come.

Basically, Japan has two choices and one or the other is going to occur within 10 years.

Either Japan is going to accept Chinese domination, or Japan is going to move into an equal strategic alliance with the United States. That means Japan will build up its military, will take more and more responsibility for crises that may occur in Korea and the Taiwan area.

And if they do not choose No. 2, they're going to get No. 1 whether they choose it or not.

But this will probably be resolved in a few hours. I'm not being facetious.

This will probably be resolved one way or another in a future crisis when the Chinese, as they inevitably will, take some assertive step vis-a-vis Taiwan, because Taiwan is of more strategic value to Japan than it is even to the United States.

If Japan is not willing to work with the United States to protect the status quo in Taiwan, then the U.S.-Japan alliance will fragment overnight. But if the Japanese leadership says we are sending our warships into Taiwan waters because this is crucial to our interests, then you will see the kind of alliance that I hope to see

Look, there is nothing unnatural about a strong China. A strong China is normal; it is back. As the Chinese intellectuals say, we've just had a couple of bad centuries.

There is nothing unnatural about a strong China. What is unnatural in Asia today, what destabilizes Asia today is a weak Japan. Japan must take its place, because the United States alone cannot counterbalance rising Chinese power.

Look at the arithmetic. Eventually, the United States is going to lose.

Only if countries, like Japan and, and there will be other countries, like Indonesia, follow suit, will there be a successful balance of power.

I know many of you are uncomfortable with my vocabulary, let alone my ideas. And I suspect that many of you belong to what I like to call the Rodney King school of international relations.

Do you remember Rodney King? He was that guy who was beaten by the police and when the police were not guilty there was this enormous riot in Los Angeles. And Rodney King got on TV and he said, "Can't we just all get along?"

I'm sure down deep some of you are in that school: Why can't we all just get along?

The short answer is we can't.

The history of the world, the history of the international system is one of competition and conflict. They are constants.

The best we can hope for is what they created in the Congress of Vienna: a balance of power that can last decades or even centuries. There's still contention, there's still manoeuver. But a balance of power is what we all should be looking for.

This is not just for the narrow interest of the United States. It's for the interest of Asia, because it creates stability.

It's ultimately even for the interests of China, because China, unless it's given limits, unless it's shown "you can go this far, but no further," is going to be constantly in an aggressive mode and the hard-liners in Beijing are going to prevail.

If we draw a line and say we are committed to this balance of power, the U.S., Japan, other countries in Southeast Asia, Taiwan say here is the balance of power, we can have stability and this is in China's interest, as well.

Certainly, it's in the interest of smaller countries like Canada. We have a huge stake in a balance of power. By the way, according to the best scholars, there are only three international systems that have been known in the history of man, or variants of them. [They are] domination, balance of power, chaos.

I choose balance of power.

I don't want to see all of Asia dominated by China.

My analysis so far has been based on an assumption — now I make the confession — that many of you will not share.

I'm assuming that China's one party dictatorship is going to survive for many, many years. It's going to evolve, it's going to change, but it's going to remain a one party dictatorship.

A lot of people are married to another scenario: That China is going to progressively develop economically and as it becomes a more developed state and a more pluralistic state, then democracy will slowly, but surely, develop there and China will be integrated into the world international system.

It's called the mellowing out scenario.

I don't buy it.

Unfortunately, it's the assumption that drives this U.S. policy called engagement. There is this belief that both President Clinton and Vice-President Gore have articulated in recent months. There is, in effect, an iron law that at a certain level of economic development, voila, democracy!

I think Nazi Germany was pretty bourgeois.

Singapore has been developing pretty steadily for the past 20 years without any political liberalization. It's now ahead of European countries, but there's no significant progress towards liberalization.

What if there is an iron law?

I will even grant you the fact that there may be an iron law; [that] at some level of development you're going to get democracy. It's still not relevant. What's the timetable? Two years, five years, 50 years, 100 years?

It is not relevant to a strategist for a corporation, for the U.S. government, or for Canada.

We just don't know what the timetable is. Certainly we can't be reassured by what's been happening over the past five years, when China's been developing at 10 to 15 percent economically every year and yet there's been a regression in terms of political freedoms and democracy in that country.

Do you know today there is not a single political dissident who's publicly active in China. Not a single one, excluding, of course, the brave people in Hong Kong. Not a single one. They've rounded them all up or sent them out of the country.

By the way, Wei Jing-sheng is going to be released before the Summit between President Clinton and Chinese Premier Jiang Zemin. Everyone will say, gee, aren't those Chinese guys nice. They're starting to mellow.

They're just throwing a bone to the American dog. It will be a cynical gesture. They will say they're releasing him for health reasons.

There is a second scenario that a lot people have that would oppose my argument that a one party dictatorship will persists for some time in China. And that is the economic collapse and political chaos scenario.

There is indeed a slowdown in the economy coming, that's for sure. But, I think the Chinese leadership has demonstrated very clearly — in 1989 in Tiananmen Square and later — its willingness to use violence to put down political dissent.

Not only did it demonstrate that at Tiananmen Square, it has since then been building up the People's Armed Police, who are specifically trained to put down political dissent and labour unrest. I think it's now something like 600,000 troops, most of them demobilized army personnel who have that job.

And I think that, combined with the popular fear of chaos among many ordinary Chinese people, is going to continue to help that nasty, authoritarian regime in Beijing continue.

You'll notice that I have not used the word Communist. It is not a Communist regime.

Those of you on the left who had some sort of residual sympathy figuring this is a regime evolving out of communism to something slightly better, forget it.

The China [of] today resembles a lot of right-wing dictatorships. It has more in common with right-wing dictatorships than a Communist system.

The one thing you've got is a so-called Communist party. It is certainly a one party dictatorship. It really is in many ways right wing, and there's a whiff of fascism in the air.

Look at the ingredients. One party dictatorship. A key role for military and security forces. An expansionist military and foreign policy. An increasingly nationalistic ideology.

Do you know that Jiang Zemin in a speech released the other day, [but] actually made several months ago, was called on to define the Communist Party. He defined the Communist Party this way: "The highest embodiment of Chinese patriotism." That doesn't sound leftist to me; that sounds awfully rightist or even fascist. In other words, you're a traitor if you oppose the dictatorship of the so-called Communist Party.

Another characteristic is the intertwining now of the economical and political elites. I urge you to watch how China continues to move in this direction at the Party Congress this autumn. They are coming up with ways of creating chaebols — these huge conglomerates that dominate the South Korean economy. They are putting together, in effect, chaebols out of these state corporations. They're going to semi-privatize them, they're going to marketize them, but they will be controlled by former officials; politically reliable people who will work very closely with the government. This is really something to watch.

There was an old phrase used in Italy. The corporatist state under Mussolini. That may also give you a flavour of what's happening in China today.

Finally, there may be people who are disappointed that I haven't stressed the struggle for human rights in China.

A few of you know that I was forced to leave China in December 1977, a few weeks after I wrote a series of five articles on human rights for The Globe and Mail.

I personally feel very strongly about human rights. You may be asking yourself why am I not stressing it more if I care so much about it myself?

There are several explanations. One is that I think — and forgive me for saying this — that human rights is now an issue secondary to China's drive for domination in Asia. I say that because I lived in Maoist China and saw what Maoist totalitarianism meant in terms of human rights.

I was back in China the summer of 1996 and I thought about the difference that I was seeing. This is a nasty one-party dictatorship, yes. But, there has been a profound transformation in the lives of the Chinese people. They are much freer in a non-political sense than they have been for a long, long time.

They can choose a job, quit a job. They can move. They can start a business. They can do whatever they want with their free time. They're not forced to attend horrible political study meetings. They're not spied upon for bourgeois tendencies by their neighbours.

You can even see it in the body language on the streets. The people have physically changed. They're so much freer.

Is this an apology for this regime? I think by now from what you've heard me say about the Chinese regime you know it's not. But, we've got to keep this in perspective.

I find it ironic that when I wrote articles about human rights in China that were clearly negative about human rights in China under Mao, or Mao's immediate successors, the Canadian intelligentsia were absolutely silent, or they were actually hostile to what I was saying and suggested I had no sensitivity for the different cultural values of the Chinese; the Chinese didn't value freedom the way we did.

That was nonsense. We know that wasn't true. But, these same people on the left in Canada who were apologizing for Maoist totalitarianism are now in the vanguard of the human rights movement. I think part of it is that the left, or liberals in Canada, are just absolutely alienated by China because it's sort of a vulgar, capitalist society now.

It may be a lot freer, but it's vulgar and capitalist. It was much better to see those people marching in lock step with their blue uniforms on. The left loved that. And now they're outraged by human rights violations.

Are those human rights violations real? You bet! They're very real.

There are vicious things still going on in Chinese prisons. I am not apologizing for the system. They are destroying the fabric of Hong Kong. I don't apologize for that. But you've got to put it in perspective.

Another reason I downplay the human rights issue is that efforts to promote human rights by linking human rights to trade and by the sanctions that Patrick talked about have all ended in disaster. They have all ended in victories for the Chinese regime.

Bill Clinton was the worst of them all. He postured and paraded as the great upholder of human rights and pledged to link trade and human rights; then did a 180 degree turn. This is characteristic of this man.

He really undermined the whole human rights effort. So, the campaign to link human rights to trade is a shambles today. And we cannot go back and repair that damage.

Finally, for me there's an intellectual problem. The campaign for human rights often reflects a myth. I call it, the 'we can change China' myth. It goes right back to the United Church of Canada missionaries in China 100 years ago, who really felt that they could change China.

And the human rights movement later on felt that if we just pressed the right buttons we could force China to change for the best internally, domestically.

I think it's really quite vain of us, particularly in a small country like Canada, but vain and arrogant of large a country like the United States, that it feels it can manipulate things, so that we can actually change the political culture in China.

I think we should focus on those of China's external behaviours that affect our interest. By that I mean what are the sources of the Beijing's strength today?

They are first the military and security apparatus that I talked about. Second, it is this Chinese nationalism that they are harnessing and is manifested in such things as the military intimidation they tried against Taiwan. They're trying to wrap themselves in the flag and trying to get the population behind them in China's expansionist moves.

We should resist that. And when we resist that we are undermining the regime.

And on the trade front the other source of their power is this increasingly mercantilistic, protectionist, statist economy that they are running where they are choking off imports into China and subsidizing exports.

We shouldn't stand for that. We should demand equal trade or much fairer trade between China and the United States, China and Canada. And that, too, would undermine the regime.

By focusing on these external behaviours, which are consistent with our concrete national interests in Canada and the United States, we do, I think, have the best chance of undermining this expansionist and increasingly dangerous regime in Beijing.

Questions

I have three questions.

The first is about your comment about the military buildup by the Chinese. Surely one thing they learned was that much of their technology that was used in the Gulf War was pretty useless against American technology of the microchip. How are the Chinese going to respond to the immense juggernaut of technology which the Americans are using to make absolutely fantastic armaments?

Two, is the third goal of the Chinese realistic; the permanent subjugation of Japan, particularly since the Americans will see that as a challenge to their own policy. Is it really realistic for the Chinese to be able to work some of diplomatic kind of regime so that Japan has some sort of second class status?

Third, you talked about a variety of Chinese territorial ambitions, but you didn't talk at all about the north. From what I'm reading, there are all kinds of Chinese business and immigration going into that area in Vladivostok, etc. In fact, the Russians may be concerned that the Chinese may, simply by power of numbers, overtake East Siberia?

I'm fascinated by what's going on in the Russian far east. Of course, this is still a relatively an empty quarter of Russia and on the southern side of the Russian far east border there are about 100 million Chinese in what we used to call Manchuria in northeast China.

One specialist in that area looked at the situation recently and, he said, the domination of the Russian far east by China is not a matter of politics, it's going to be just a matter of physics.

Chinese are just tumbling over into that area as labourers, as traders; they are meeting a labour shortage there. At the same time, the Russian elite in Vladivostok and Khabarousk are becoming increasingly restive at rule by Moscow and they're withholding taxes. They are moving in an autonomous direction and we could have a real interesting situation on our hands there in the years to come. It could surprise us all and be the crisis in East Asia, not Taiwan or Hong Kong, but the Russian far east.

As far as the subjugation of Japan is concerned, yes it's realistic in the sense that it's now 52 years since World War II and Japan is still hobbled by this Constitution. The Japanese people are still ambiguous at best about how they resist Chinese domination. We can, I think, look forward to a real struggle in that area.

You know the Chinese regime loves to constantly remind the Japanese about the very real atrocities committed by the Japanese troops in World War II on Chinese territory.

But if the Chinese regime were really committed to historical truths and finding who is responsible for injustices in recent history, it would start, of course, by fixing blame for the 30 million people who died because of the actions of Chairman Mao and the Communist Party. No, it much prefers to point fingers at the Japanese.

I would predict that in the final analysis Japan and the United States will build an alliance which will stabilize Asia, but it's going to be very close.

On the military buildup, you were basically saying, what about the U.S. lead in military technology being enormous. You're right it's enormous, but my major concern there is American hubris. The Americans came out of the Gulf War thinking they had military technology that would win them any war in the future.

How soon they forget Vietnam, where a backward foe — but politically determined, imaginative, innovative — was able to defeat the United States, despite their best technology and a fortune in money and blood.

I think the United States should be humble when it looks at China. Just because it (the U.S.) has a lead that is insufficient.

China is absolutely brilliant in using its limited military resources. For instance, they, in effect, had a partial and defacto blockade of Taiwan for a few days just by lobbing some rather out of date missiles at Taiwan's air and sea lanes. Another example: They used very old fashioned patrol boats to send Chinese sailors disguised as fisherman to take over a reef from the Filipinos — Mischief Reef in the South China Sea.

They are incredibly impressive at using their limited military technology.

This gulf worries me because it makes the Americans complacent. These people who talk in very narrow terms about military technology, miss a lot of what warfare is all about.

In my limited knowledge of Chinese history, I feel that China's always been more sinned against, than sinning, in the aggression department. How cohesive is China to become an Imperialistic power, or is the past history of warlords gone forever?

The contention is often made that China has historically been a non-aggressive power. There is, indeed, some truth to that when East Asia was a closed system; in effect, there were no countervailing Colonial powers or other outside powers involved in that area.

But, when China is united and strong it doesn't need to invade its neighbours. It tried once to invade Japan, but it failed. But, the Japanese Emperor often, for many centuries, would send tribute to China. And this was not just a symbolic or trivial act. The Japanese Emperor and other lesser leaders in the region would send tribute to China and they, in fact, were called tributary states; in effect, saying, we will do nothing against your interests, we accept your hegemony, we accept your domination.

I am convinced that the Chinese leadership, almost instinctively, is moving back towards that kind of system. They're not going to invade Japan, ever. They may find ways to try to humiliate Japan militarily, but they're not going to invade the home island. In that sense, they're non-aggressive.

But they're going to try to get their naval ships to the east of Japan. They're going to try to control Japan's sea lanes, which gives them power even greater than a power to invade. And that's the way they're operating.

Again, I just admire the Chinese sense of strategy, so much. They really are much better at these things than we are. They don't have to be aggressive in the Western sense to throttle Japan; to bring Japan or Taiwan to their knees some days, if they feel that's necessary.

Cohesiveness of China? Of course there are tendencies for China to go in different directions.

But, I would argue the Chinese regime today can call on a cohesive, centralized, centrally-controlled military and security apparatus to keep China together and I see no cracks in that foundation. So, yes I think there will be internal problems in China. But, I think for some time to come the regime is going to be able to keep those under control. There certainly has been no change in the theme of one-party dictatorship, of not allowing any breaches or any dilution of one-party dictatorship.

The Chinese ethnic dominates the business communities in Indonesia, the Phillippines, Malaysia, perhaps. In those countries there's been a real antipathy towards them and that has been exploited from time to time by Dr. Mahathir and President Suharto. Generally they have been successful and the countries they are in have prospered as a result. With a renascent China and growing Chinese hegemony, are they going to be seen as a Fifth Column, or are they going to be seen as a means by which these countries can exploit the hegemony to their advantage. For me this is a very practical question and I'm interested in your answer.

This issue of the overseas Chinese presence in Southeast Asian nations, of course, was a volatile issue in the 1950s and '60s, particularly as those nations were in the process of nation building at the same time that China was supporting, directly or indirectly, materially or morally, Communist movements in those countries. And it was a very volatile period. Up to half a million ethnic Chinese were slaughtered in Indonesia alone in the mid-60s, when there was a rebellion there and an alleged Communist Chinese takeover attempt.

Today, this is the issue that dares not speak its name. Mahathir, the leader in Malaysia — clearly to me, but I can't prove it, I can't document it — I infer from his actions is terrified of this potential problem that they will be seen as a Fifth Column and there will be a renewed racial tension between the Chinese and the locals.

I think it will vary from country to country. The most interesting country to watch will be Indonesia, where a small Chinese minority has huge economic power. But Indonesia will probably be a key country in a new balance of power in Asia, aligned with Australia and the United States — if the United States gets its act together. Right now its been mismanaging U.S.-Indonesia relations very badly.

Underneath the surface this is a huge issue. I did mention, in my remarks, Thailand. Every country is slightly different. Thailand is different in the sense that the Chinese business elite in Bangkok has been influencing Thai policy towards China in China's favour. That's not an adequate answer, but partly its not adequate answer because were at the early stages of a new shuffling of the deck in Southeast Asia as far as the ethnic Chinese are concerned.

What's your assessment, in particular, of the leadership issue in the upcoming Party Congress and you view of what the possible outcomes would be? In your book, you describe Deng Xiaoping as relatively moderate in foreign policy goals. You describe with the waning of his influence in 1994 [how] the hardliners were able to take an increasingly assertive, aggressive and anti-U.S. position.

When I was in Hong Kong a few weeks ago, I heard it expressed from Hong Kong academics that it's really Deng Xiaoping that Hong Kong has to credit for devising the one country, two systems resolution. Essentially, do you see the current leadership consistent in their foreign policy attitudes? How firm is Jiang Zemin's hold on power? Does he have any serious rivalry?

I don't claim to be an expert on Chinese domestic politics day-to-day, or month-to-month, but it looks pretty clear that Jiang Zemin himself will be confirmed as a, weak, No.1. And that bothers me tremendously. He's a weak No.1 because he owes a lot and is influenced a lot by military forces, other hardliners in the leadership. He has only limited manoeuvring room.

I'm quite a fan of Deng Xiaoping. I'm not suggesting he was a closet democratic or anything. He was a nasty autocrat, but the fact was that he was a pragmatist above all who didn't have any real axes to grind. And by that I mean he wanted to maintain a practical and live and let live relationship with the United States. Sure, he may have dreamed in his slumbers about China dominating Asia, but he wasn't really obsessed by that.

The thing that we forget about Deng is that Mao rehabilitated him way back in the early 1970s, because Mao desperately needed Deng to control the military.

When Deng started to fade, because of his health in early 1993-94, and could no longer play a strong and assertive role in Chinese politics, the hardliners in the military once again asserted themselves and they, along with the political leadership, were the ones who put together this whole new policy which is a long-term strategy to dominate Asia and a policy that recognizes the United States was a long term enemy because it was the only country that would stand in the way of domination of Asia by China.

I'd like to revisit a couple of the central elements of your argument with a view to asking the question of whether or not you might recast your conclusion something along the lines that China is trying to restore its influence, rather than seeking to dominate much of Asia? I'll tell you why I reach that conclusion. I don't think China has the capacity to impose its will regionally. It has a large army, which would have to walk to anywhere it would like to occupy. It has no airlift capability, no ability to project its power into the sea, other than as you said, lobbing a few missiles. So, capacity limited.

I don't see this kind of recklessness in the Chinese leadership that you do. There is an ambivalence; I think there is a sense of wanting to right a historical wrong. But to dominate, I think is, perhaps, overstating it.

The three examples you gave where we might see China brushing up against the world; Japan, which you described as weak and hobbled, Taiwan, which you expressed as being vulnerable, and Korea. It is true, they are not aggressive powers capable of threatening China. But, they are all very hard nuts to crack; extremely capable of defending themselves — even with recourse to that trip wire that would bring the whole Pentagon down on anyone who threatened them.

If you take all of that, in combination with managing China over the next 15 or 20 years in terms of ethnic fissures, religious strife, rising minorities, the generational change in leadership, etc. — all of which it seems to me is going to cause a tremendous focus inwards to the exclusion of any reckless adventurism abroad — would lead me to the conclusion that to describe China as a threat is, in fact, really more threat-conjuring along the lines that we've seen with, for example, The Coming War With Japan; a popular book in 1991, and other attempts in the wake of the end of the Cold War that thought to demonize North Korea, Iran, briefly Iraq, and now it's China. I fully expect in five or six years we'll be inundated with analysis to the effect that India is the power to watch.

I think you're over the top on China and I wonder if you'd reconsider some of your more outlandish remarks?

Let me first respond to something you said at the end about, well, is this sort of like the flavour of the month. Gee, wasn't it just 10 years ago we were talking about Japan taking over all the economies of the world, or 20 years ago wasn't it OPEC that was going to control all of us.

I thought — and my co-author thought — also very deeply about this subject. The fact is that we're talking about apples and oranges here. The OPEC and Japanese "threats" were profoundly different than the Chinese. They were unidimensional economic threats without any significant military, or as it turned out, political components. And they were both based, ultimately, on attempts by Japan and OPEC, respectively, to fix markets.

OPEC tried to create a monopoly situation in oil; tried to artificially push up the price of oil and, ultimately, failed, because you cannot fix markets in an international capitalist system for very long.

Japan was able to use mercantilist devices, squeezing off imports, cherry-picking technology, subsidizing exports, to create these huge trade imbalances in its favour. But, these ended in the Japanese bubble, creating an economic crisis in Japan that still isn't resolved.

China, on the other hand, is a multi-dimensional power; it is a power that, in effect, is really coming back to normal. China is at least the naturally pre-eminent — not dominant, necessarily — but at least pre-eminent power in Asia. It has geography, it has population, it has an economy that's growing at an incredible rate.

This is different. This is not a little scaremongering — the flavour of the month. We are witnessing a huge change in the balance of power in the world and China is moving, again as I said, faster than I had ever expected it to. And it is not a question of military hardware capability, it is also a question of political will and political tactics.

What if, for instance, in March 1996, [U.S. President] Clinton hadn't been pressured by Congressmen and the Pentagon to send those aircraft carriers to the waters near Taiwan. The Chinese were on the verge of taking some islands and they were threatening to lob missiles right into remote parts of Taiwan to destroy Taiwan will. If Clinton, who is an extremely unreliable President, an inconsistent President and an unprincipled President, had not taken the right steps and there had been a political collapse in Taiwan, this would have reverberated throughout East Asia. And China with its admittedly second-rate military would have gained tremendously overnight.

What China's doing all the time is probing, pushing; probing here, probing there; using its limited power in brilliant ways. And it does not take a military equal to that of the United States to prevail, particularly when you have a confused U.S. policy.

This is a good time to point out — even though you didn't make it explicit, it certainly was implicit in your argument that, of course, China is also far behind the United States economically.

I leave you with one bit of data. In 1938, as Japan was gearing up to try to dominate the entire Western Pacific, East Asia — it was already in China — with a plan to dominate all of East Asia. Japan's GNP in 1938 was less than 10 per cent that of the United States. Keep that in mind, too. You can't do this by arithmetic.

China has a set of strategic goals. It is pursuing those every way it can. And, again, I think the United States and Japan on paper can technically handle the Chinese challenge very easily. But, there's political confusion, lack of clarity and lack of political will in both and Washington and Tokyo and that's why I'm worried.

Where do you see us heading 10, 20, 30 years from now in this possible collision course that you've described?

After China basically learned a lesson in March 1996 in the waters off Taiwan, China has pulled back on its military adventurism — even though that failure in waters near Taiwan has spurred China to a whole round of military purchases. They purchased many destroyers from Russia with U.S. trade surplus dollars. And they're equipped with missiles specifically designed by the Soviet Union's best weapons technicians to sink American aircraft carriers. In other words, the next time there is a crisis it will be a little more difficult. My best guess is that there will be a new round of Chinese military adventurism and that will serve as a wake up call for Japan, because Japan is the key. If Japan doesn't want to resist Chinese domination, then the United States is not going to be able to do it alone.

My biggest problem is with Washington; in effect, the decadence right now in the political culture in Washington.

Let me tell you why I'm worried.

When I was doing research for this book, I asked the best friend I have in the China policy-making apparatus, "What is our strategy towards China?"

He said, "Ross, you don't understand. We have no strategy. When we get together it's about how we handle the media side of it, it's how we handle the turf battles — is this a defence issue? Is this a State Department issue?

There is no strategy.

Another story scares the hell out of me. There's an acquaintance of mine who was in key foreign policy making position in the first term of the Clinton Administration. And he left in disgust almost at the end of the first term. And he said that in nearly every decision-making meeting that he participated in on foreign and military policy, the question that always hovered over the room was, "How will this affect Bill's standing in the polls?"

That's political decadence.

I think it's a temporary thing. If there's anything that characterizes the United States, it is its resilience. I'm am optimist. I think things will get better, but put ideology aside — whether you identify with Democrats or Republicans — this man [Clinton] has really undermined the political culture of the United States.

There's a lot of talk about Canada's future in the Asia Pacific. The Canadian government constantly makes reference to Canada's youth and how much of our future lies in this big dynamic area known as the Asia Pacific sphere. What opportunities, if any, do you see for Canada? And what opportunities do you see for Canadians to discourage instability if that will ensure growth and prosperity for a region in which much of our future lies? Should we jump on the U.S. foreign policy bandwagon?

I think you should think of yourself as an individual, as a professional, as a person who can join a NGO and make a contribution, or join a corporation and do business in Asia. As I tried to articulate in my talk, Canada as a nation state has a very limited role to play.

As far as Canadian policy towards Asia is concerned, I think we can probably continue being a free rider — as we have for most of the history of the 20th century; a free rider in the sense that we benefit tremendously from America's implicit commitment to our security. They would never allow landings on our soil by a hostile power.

We benefit from America's commitment to maintaining a balance of power Asia and Europe. It means we won't have a hostile hegemony in either of those areas.

But, more precisely I would urge Canadian policymakers to stop obsessing over China itself and start developing stronger ties with that democracy called Japan. We should be very supportive of Japan in every way we can, because it is the key to a future balance of power in many ways in Asia.

We should also stop treating Taiwan so shabbily and give it due respect for its achievement in becoming a democracy and a relatively open economy. I'm not talking about diplomatic recognition, I'm just talking about lack of shabby treatment.

I'm concerned about your prescriptions. You use the words demand; America must demand in the area of trade, we must insist, American must prevent, etc. They're all very assertive words and, as you know, China's paranoia about the power of the United States encouraged the Peking Daily last year to describe Australia, because we'd entered into a defense arrangement with the United States, as "The bottom jaw of the American bite on China."

You seem to be feeding that paranoia with your prescription. That seems to be at odds with what you've been saying about American relations with Indonesia, where you were critical about the way America's been treating some of our neighbours.?Are you really prescribing that kind of confrontation and will that feed the sort of paranoia that's enabled the Chinese to justify a large defence buildup?

I think the context of that language, as you suggested, was the trade issue. I think the trade issue is where the United States should move and should move decisively. I don't have the latest Canada-China data, so I want to stay away from commenting on Canada-China trade relations, but the fact is that China is very rapidly putting together a highly mercantilist economic policy. One aspect of that is putting higher and higher barriers against imports from other countries, while it continues to pump out exports.

I mentioned that 26 per cent increase in Chinese exports this year. That was also the figure for Chinese exports to the United States. During that same period, U.S. exports to China went down, even though the economy is growing at 10 per cent.?Today, the United States is faced with an unfavourable trade ratio of six to one; that is for every dollar's worth of exports the United States sends to China, China sends six dollars worth of exports to the United States.

The fact is that here the United States is faced with, in effect, an undeclared trade war by China against the United States. I believe the United States should move very aggressively in this area to change that ratio. I don't know what the ratio currently is with Japan, but last year the unfavourable trade ratio the United States had with Japan was only 1.5 to 1. Japan still had a huge surplus with us, but the United States is now exporting an enormous amount to Japan. China is deep into mercantilism and we should be very aggressive in opposing that. So, I'm saying, yes, I want to be confrontational on trade.

The problem is that China now has a $120 billion foreign exchange reserve and you can look at the trade numbers and you can attribute the vast majority of that to simply the trade surplus that China has built up with the United States alone. And that foreign exchange is being used to purchase weapons to sink American aircraft carriers. We've got to be really tough on this issue. And it's also being used to buy influence this week in Thailand. I'm very alarmed by this.

There is not a military hardware danger, per se, from China. We've got some breathing space there, particularly if it came to a U.S.-China conventional confrontation.

The issue to be addressed right away is this trade deficit.