China!

The ambivalence of U.S. policy towards China may be perhaps best characterized by the incident of the spy airplane back in 2001. While gathering intelligence off the coast of China, a U.S. Navy EP-3 electronic spy plane, piloted by Lt. Osborn collides in mid-air with a Chinese F-8 and is forced to make an emergency landing at Hainan Island. The Chinese pilot, Wang Wei, is killed in the incident. China charges that the U.S. plane illegally entered Chinese airspace, and detains the 24 U.S. crew members for 11 days. It demands that the U.S. take full responsibility for the incident and issue a full apology. In the end, the United States offers a letter in which it says it is "very sorry" for the loss of the Chinese pilot and "very sorry" that the aircraft landed in China without permission. The damaged U.S. airplane is not returned for three months. Together with the letter of apologies, however, China also gets a U.S. aircraft carrier battlegroup of the Seventh Fleet permanently stationed off the coast of Taiwan.

On the other hand, Chinese ambivalence towards the United States can be perhaps best described by the statement of a Chinese official to a visiting American delegation to Shanghai in 2001: "I surely hope that you and the American economy do well in this global slowdown, because your economic interests and your economic development are critical to the welfare of the people in Shanghai and China.". This remarks comes at a time while China is intent at stealing U.S. military secrets from Martin Lockheed - and it is caught with both hands in the bag doing so.

And then, of course, American and Chinese joint ambivalence towards the rest of the world must be perhaps encapsulated in the philantropic website maintained at http://www.uschina.org/ where both sides are trying to convince the rest of us in English - and for those who do not get it the first time around, in Chinese - that seldom have there been in the history of humanity two great pals like the Bald Eagle and the Red Dragon. Well ... well ...

China's giant leap towards a Western-style, capitalistic economy presents an increasingly urgent set of challenges that must be resolved by the leading elite if they hope to sustain the miraculous economic growth, which has averaged eight percent a year for the past decade. When you consider that the People's Republic of China (PRC) has 1.3 billion people, more than four times the population of the United States, the implications of its radical economic transformation are sobering. In 2004 the Chinese added 1.8 million cars to their roads, bringing the national total to well over 10 million. At recent growth rates, the number could very well double every three to four years. Should car ownership ever match that in the United States (135 million vehicles in 2002), there would be about 600 million cars on China's roads - more than all the cars in the world today. A statistical comparison between the two giants compiled by the World Resource Institute of the United Nations reveals even more staggering figures:

CHINA vs. UNITED STATES

AREA: 3,705,820 square miles vs. 3,717,796 square miles

POPULATION: 1,288,700,000 vs. 291,500,000

DENSITY per square mile: 348 vs. 78

ENERGY CONSUMPTION per person: 880 Kg/oil per year vs. 7,960 Kg/oil per year

MEAT CONSUMPTION per person: 104 lbs. per year vs. 269 lbs. per year

PAPER CONSUMPTION per person: 73 lbs. per year vs. 730 lbs. per year

AVERAGE NUMBER OF PERSON : 1.1 per room vs. 0.5 per room

WATER USE per person : 116,000 gals. per year vs. 484,500 gals. per year

TV SETS per 1,000 persons: 292 vs. 844

VEHICLES per 1000 persons: 16 vs. 774

Since its onset in 1949 the People's Republic has gone through a lot, including a famine where 20 million to 30 million people died in the early 1960s; a cultural revolution that went on into a decade; and a skyrocketing national suicide rate as well. Yet, never in the history of the world have so many people been lifted from poverty so rapidly. President Clinton, in one of his last speeches, said that 200 million people in China were lifted from absolute poverty from 1978 to about 1999. That's equivalent to about two-thirds of the entire population of the United States in twenty years. The economic achievements, therefore, are huge. But so are the problems. The factors of economic instability are many and worry the leadership. In fact, the leading elite justifies some of the repressive political measures precisely because of what they call "the factors of instability." These factors include a financial and banking system that is basically bankrupt, with bad loans out greater than the real net reserves of the entire banking system.

There are perhaps between 80 million to 100-plus million people that are moving from the countryside on a kind of temporary contract labor into the Chinese cities. And yet a large number of urban unemployed are getting put out of business from non-competitive state enterprises. As a result China has got urban unemployed, rural unemployed coming into the cities, unsound financial system, and general resentment against a regime that has, in the past, grotesquely mismanaged things. And then, of course, there is the widespread problem of corruption that permeates every facet of society.

Indeed, corruption is not a Chinese characteristic per se. It has, however, developed in a world where old, antiquated and inefficient laws are not being replaced fast enough to keep up with the speed of present times, and the vacuum has to be somehow filled. Experts think that on one hand the economic opening will bring more outside influences and in a way more chaos to the country which is not a bad thing in some ways. But, conversely, experts agree that the leadership will try to keep a tight control so that, at the end of the day, there may actually very well be more human rights violations than ever before.

There is also an imbalance of wealth between the thirty-five percent of the population that lives in the cities and the sixty-five percent inhabiting the countryside. There is a system of residence controls. If you are lucky enough to be born in a city - and registered as a city dweller - it is easier for you to get into university. You are in the city, you can work at all the large companies and government agencies in the city. If, conversely, you are registered as a rural person there are very severe restrictions on where you can live and work. And this is actually the biggest human rights problem in China today. You have a majority of this population of 1.3 billion that are, by law, second class citizens. Furthermore, there are the other matters of the more than 20 million people who have no social security net whatsoever to assist taking care of their basic needs, as well as the environmental concerns that the new era of industrialization is bringing up. Of the ten worst polluted cities in the whole world according to the World Environmental Agency, eight are in China. And, finally, the PRC accounts for 23 percent of the global population while supply of fresh water is less than 6 percent.

Yet, the social and economic improvements are huge as anyone who saw China in the '70's will confirm. Three decades ago there were no automobiles, no super markets, no highrise buildings. And there were no consumer goods to speak of. It was a Stalinist society, and a very poor Stalinist society at that. So the economic system has totally changed, and the private sector is now the dominant sector of the economy. It didn't exist at all as late as 1979. The political system has changed as well, albeit not nearly as drastically as the economic system. The China of the twenty-first century is a one-party state without a firm ideological foundation, more similar to Mexico under the PRI than Russia under Stalin. It is certainly difficult today to call China a Communist State, and the regime is no longer the party of workers and peasants. Mao Zedong would be unpleasantly surprised at how things got out of hand. But then, even this political transformation is nothing new to the Chinese. In fact, historically China has often gone through periods of consolidation followed by periods of weakening of the central authority. And the inequality of wealth is just a consequence of it all.

No issue is more pivotal and controversial in the U.S.-China relations than the question of Taiwan. On October 1, 1949 after nearly two decades of civil war, Chinese Communist Party leader Mao Zedong declared victory over the U.S.-supported Nationalists (Kuomintang or KMT) led by Chiang Kai-shek. Mao proclaimed the establishment of the People's Republic of China (PRC) and instituted a new communist system modeled after the U.S.S.R. After his defeat Chiang Kai-shek fled to the Chinese island of Taiwan, then called Formosa, along with two million Nationalist refugees. Taiwan is located about 100 miles off China's coast. There he established a "provisional" Nationalist capital in Taipei and declared martial law. The Nationalists claimed to be the sole legitimate government of all of China, and set up the same political bodies on Taiwan which had ruled on the mainland. Under Chiang's authoritarian leadership, the Nationalist government established a successful land reform program during the 1950's which helped transform the country from an agricultural to a commercial and industrial economic powerhouse.

It is difficult for Westerners to understand why the PRC is so adamant about reunification with Taiwan, until an example is brought up by the Chinese. "Think of California as an island off America's West Coast and inhabited by Americans but under a different regime. Wouldn't Washington want to seek reunification ?" The analogy made by Yang Jiechi, Chinese Ambassador to the United States, makes perfect sense. Taiwan is the PRC's unfinished civil war. They fought a civil war with this Nationalist government. They essentially won. The Nationalists escaped out to an island which the Chinese consider an integral part of China. And then, because of American support and other intervening factors, they never finished their civil war. In terms of the military, the PRC is also developing very rapidly. It is acquiring a modern aircraft and modern battleships. Its naval force and air force are developing so fast that China is now at the forefront of Asia's military innovations. Ambivalence exists both in the political relations of China and the U.S. with Taiwan as well as between China and the U.S. over Taiwan. China pursues a policy of "One Country - Two Systems" , a policy that is working well with Hong Kong and Macau after their return to the PRC. The United States pursues a strategy aptly called "Strategic Ambiguity": it recognizes Bejing as the only legitimate government while at all times investing in and supplying weaponry to Taiwan. And Taiwan's strategy is to court the United States while increasing its trade with the PRC, now amounting to over US $40 billion per year.

It is in this complex context of political and economic balances and counter-balances that the Eagle and the Dragon are eyeballing each others. A context certainly not for the faint of heart. And yet, in the geopolitical situation of Asia the United States and China make a very good team. Both are disdainful of absolutist chieftains the likes of North Korea's Kim Il Sung, both want peace and relaxation in the region, both are fervent in their plight against terrorism and both are eager to improve trade and cultural exchange with each others. The Chinese - founders of civilization are now meeting and talking to the Americans - spearheads of contemporary society. Two great countries, two great people.

Will the Eagle and the Dragon find a common ground for peaceful co-existence and mutual understanding?

Stay tuned.

Luigi Frascati

Luigi Frascati is a Real Estate Agent based in Vancouver, British Columbia. He holds a Bachelor Degree in Economics and maintains a weblog entitled the Real Estate Chronicle at http://wwwrealestatechronicle.blogspot.com where you can find the full collection of his articles. Luigi is associated with the Sutton Group, the largest real estate organization in Canada, and is based with Sutton-Centre Realty in Burnaby, BC.

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