U.S.-China relations--opportunities, risks, and the Taiwan issue.

Key Points

* China is primarily interested in concentrating on trade and economic development and therefore wants an international environment conducive to continued economic growth.

* Even with recent defense budget increases, China's ability to project power beyond its borders will be extremely limited for a long time to come.

* There is a real risk of conflict between the United States and China over Taiwan, and U.S. policy needs to be aimed at avoiding such a conflict.

Introduction

In many respects there has been a marked improvement in U.S.-China relations since the EP-3 spy plane incident of April 2001. The Bush administration views China as an important partner in the Six-Party Talks with North Korea, and the United States and China share an interest in a nuclear-free Korean Peninsula. The Bush administration also sees China as a strategic partner in the global war on terror. For example, China has recently joined the U.S. Container Security Initiative, and starting this summer, China and the United States will begin periodic senior-level dialogues on global issues of mutual concern. The Pentagon has even expanded its program of military-to-military contacts and exchanges between Chinese and U.S. military academies in a sharp reversal of the policy of four years ago. Economic relations have expanded greatly since China joined the World Trade Organization, and despite occasional trade tensions, most U.S. economists and businesspeople regard economic ties as mutually beneficial and rewarding.

However, some Americans view the rise of China as a long-term economic and security concern. As its military capabilities improve, China is increasingly seen as a threat to Taiwan and other U.S. interests. For example, the Pentagon worries that China may be beginning to acquire the means to project power beyond its immediate borders. Economic anxieties about loss of jobs and competition from China are also increasingly linked to political and security issues. China is seen as competing for economic and political influence in Latin America and elsewhere. Even business mergers can have a security aspect; the recent controversy over the proposed purchase of Unocal by a Chinese company is a case in point. There is, therefore, an interesting paradox in U.S. views of China; relations have never been better, yet the two countries could go to war at any time.

In a sense, both views are correct. China's military power is growing, and there is a very real risk of conflict between the United States and China over Taiwan. On the other hand, there are good reasons to believe that a stronger, more prosperous China may, as the annual Pentagon report states, "choose a pathway of peaceful integration and benign competition." China's 2004 white paper on defense emphasizes economic development, and this focus is reflected in China's relations with other countries. Economic dynamism is very important to Chinese leaders, and they seek an international environment that is conducive to commercial growth. Accordingly, in addition to cooperating on issues of mutual concern with the United States, China has expanded its economic, political, and security cooperation with the Association of South East Asian Nations (ASEAN); developed closer ties with Central Asian states; and improved trade relations with India, the European Union, Brazil, and many other countries. China has increased its involvement in a number of international organizations and in 2004 contributed more personnel to UN peacekeeping operations than Britain, France, Russia, or the United States.

China's military power has grown substantially but needs to be put in a proper context. The country has been modernizing its military for two decades, and its armed forces are now smaller but much better trained and equipped. China continues to buy advanced weapons systems from Russia, including the SU-30MK2 maritime strike aircraft, S-300 SAMs, Kilo-class submarines, and Sovremenny-class destroyers. It is also developing new weapons systems of its own, including tanks, submarines, and a mobile intercontinental ballistic missile (ICBM).

However, it is important to note that China's military modernization program is far from complete. Beijing still has only 20 ICBMs (each armed with a single warhead) capable of hitting the United States, and despite a growing defense budget, China's ability to project conventional military force beyond its borders will remain very limited for the foreseeable future. Chinese military strategy focuses on meeting potential enemies at or just beyond China's borders, and the emphasis is on active defense of Chinese territory, not expansion or projection of military force.

Since China behaves as a satisfied power focused on better economic and political cooperation, it is difficult to envision a credible scenario in which the country's improved military capacity poses a threat to anyone but Taiwan. Beijing regards Taiwan as Chinese territory and has always reserved the right to use force against Taiwan if necessary. That possible use of force is now codified in the Anti-Secession Law of March 2005. How Washington views relations between Taiwan and Beijing is crucial to whether future U.S.-China relations improve or worsen.