The Global Pivot to China

Only halfway through 2014 and it is clear the year will be remembered for a number of seismic shifts occurring in the Asia Pacific region. Because Asia in the early 21st century is, as Europe was in the early 20th, the center of world power and potential, the implications for the wider global order are considerable.

The center of the Asia Pacific Region is China. The “pivot to Asia,” whether in its original American form, or its many reiterations, is in fact a “pivot to China.”

During his Asian “pivot” tour to Japan, South Korea, Malaysia and the Philippines in April, US President Barack Obama kept insisting that his policies – whether the Transpacific Partnership, from which China is currently excluded; mega-regional trade pact; or the 10-year defense pact with the Philippines – were not meant to contain or control China. He seems to protest too much!

In the meantime, Japan, which has a fair number of current and historical issues with China, including a tense dispute over the Diaoyu/Senkaku Islands in the East China Sea, is proposing under Prime Minister Shinzo Abe to “reinterpret” the pacifist constitution so as to allow Tokyo greater maneuverability in boosting collective defense: another “pivot to China.”

Russia is making its own “pivot to Asia,” after the recent Ukraine kerfuffle, as highlighted by the May meeting between Russian President Vladimir Putin and Chinese President Xi Jinping, in Shanghai culminating in a 30-year energy agreement. This apparent Sino-Russian “rapprochement” – complete with a joint naval exercise - reversed a frigid relationship arising from the 1960 Sino-Soviet split, only marginally improved in the 1990s, of tense distance between Beijing and Moscow.

To the South, China is engaged in hostilities with Vietnam in the South-China Sea, as it was and almost certainly will be again with the Philippines, as well as having disputes with Brunei and Malaysia. That Hanoi looks to Washington for support in its confrontation with Beijing is perhaps one of the more flagrant paradoxes of history. All ASEAN member countries are torn between economic benefits of a rising China and security assurances from a seemingly retreating America.

The landslide election of Narendra Modi has electrified India and observers throughout the world. Can this “strongman,” as The Economist dubs him, “unleash India”? The Republic of India and the People’s Republic of China, respectively established in 1947 and 1949, are geographically close, but not are not congenial neighbors, politically or emotionally.

There was a war between the two in 1962, the bitterness of which is ingrained in the collective Indian memory. There are territorial issues – as recently as May 2013 the Chinese People’s Liberation Army made a deep incursion into the Ladakh region in India causing widespread resentment and alarm. Perhaps most ominously there is a potential major confrontation between India and China over water, as China controls the flows from the Tibetan plateau, sources of which are vital to India and surrounding countries. Modi’s “pivot to China” could either take the form of “doing a Nixon,” as some Chinese commentators have suggested – referring to US President Richard Nixon’s historic visit to Beijing in 1972 thereby laying foundations for renewed Sino-American relations – or, as he seems inclined, beefing up the relationship between Tokyo and Delhi as a means to enhance both economic and security partnership: a sort of Indo-Japanese entente cordiale.

Ties between China and the Korean peninsula are bizarre. Seoul and Beijing are major trading partners. South Korean investments and technology represent a critical component in China’s economic development and performance, and because of territorial and historical legacy disputes with Tokyo, Seoul is bolstering ties with Beijing. Pyongyang, however, continues to depend on financial, political and military support from Beijing.

While Beijing has expressed frustration in its alliance with Pyongyang, any break is unlikely as China does not fancy the idea of a united Korea, allied to the US, with troops stationed along the frontier at the Yalu River. The Korean peninsula is likely to remain a bubbling cauldron.

Closer to home for China are Hong Kong and Taiwan. Since July 1997 Hong Kong has been a “Special Administrative Region” under the so-called “one-country-two-systems” regime. While Hong Kong has a degree of autonomy and retains the rule of law, it has become highly dependent economically on China, including in tourism, which has, in turn, spurred a considerable degree of anti-mainland China sentiment. Hong Kongers chafe at the Chinese leash, and demonstrators demand democracy.

The test may come in 2017 when, as earlier promised by Beijing, Hong Kongers expect universal suffrage in the election of their chief executive. The incumbent, pro-Beijing tycoon C.Y. Leung, is deeply unpopular, arising from the perception that he is catering to the Hong Kong elite and Beijing, while ignoring the concerns of the Hong Kong citizenry.

Similarly China has been a huge boon to the Taiwanese economy; some 10 percent or more of the Taiwanese population, 2.5 million in all, live, work and make money in mainland China; Taiwanese companies, including Foxconn and others, account for a large proportion of China’s exports; mainland Chinese visitors are a bonanza to the local tourism industry.

While Taiwan’s own economy flounders and would be floundering even more were it not for China, a significant number of Taiwanese ferociously wish to preserve their identity and autonomy – as illustrated in recent massive demonstrations in Taipei, including occupation of parliament, staged in protest at the proposed China-Taiwan cross-strait agreement on trade in services Taiwanese President Ma Ying-jeou, who campaigned on a platform of closer, more dynamic relations with Beijing, is a lame duck.

At home, or so official Beijing policy upholds, there are strong separatist movements, not only in Tibet, but arguably far more alarming for Beijing in the western Xinjiang Uyghur Autonomous Region. Whereas Tibetan pro-independence separatists engage mainly in self-immolation, Muslim Uyghur nationalists have resorted to terrorist acts that have left scores of people dead or injured. Chinese authorities can’t help but worry about Xinjiang’s ties with global networks of Islamic organizations.

The Sino-centricity of this age is not limited to China’s neighborhood. Economies in the Middle East, Africa and Latin America have become highly dependent on the Chinese locomotive, whether in terms of exports, especially commodities, including energy; investments; and development assistance. China’s multi-billion dollar investment in a Pan-East African railway eventually linking Kenya, Uganda, Rwanda, Burundi and South Sudan is one of many examples.

A Chinese economic crisis or hard-landing would have deleterious consequences for many economies. As the saying now goes: If China sneezes, the world will catch pneumonia.

This also applies to the industrialized economies. Japan, the European Union and the United States all, in different but significant ways, have “pivoted” their economies towards China. China is Japan’s biggest trading partner. Germany exports more to China than it does to the United States.

Chinese firms are saving failing French companies – consider recent Chinese investments in Peugeot and Club Med. The United States depends on China to finance its debt at the macroeconomic level, and American universities relish all the massive fees they collect from Chinese students at a more micro level.

This is the world stage in the early 21st century. The United States, long accustomed to the limelight, must now share it with China. Does China have a script? Indeed is China one actor or are there several actors within China seeking to write the scripts? Today, no questions are more burning than these.

Jean-Pierre Lehmann is emeritus professor, IMD; founder, The Evian Group; visiting professor at Hong Kong University and at NIIT University. This was written for YaleGlobal, the internet publication of the ale School for the Study of Globalization.