MACROECONOMICS AN ACE IN THE HOLE
The implications for China’s neighbors are already evident in Beijing’s increasingly bellicose insistence on irredentist territorial claims. There have been escalating
tensions with Japan
over the Senkaku Islands, spats in the South China Sea involving areas claimed by Vietnam, and even a Chinese incursion into an Indian- co n t r ol l e d H i m a la y an region claimed by both Beijing and New Delhi.
Such incidents are often described as competitions for the control of natural resources such as the South China Sea’s oil and natural gas. They are, however, better understood as consequences of the Party’s domestic agenda. And as public relations exercises they have been remarkably successful. Chinese anti-Japanese sentiment is now at fever pitch, with many of China’s strident
netizens support expressing for military action against Japan to recover lost territories, right historical
wrongs, and avenge past humiliations.
US policy makers need to realize that this type of nationalist sentiment is going to be the Party’s ace in the hole once the economy slows. Beijing can therefore be expected to prefer that
international disputes
FX
This means that Washington’s preferred policy of ‘engagement’ will not work. Beijing will be unable to give ground in disputes with
its
doing so will weaken the Party domestically.
neighbors Events
relations when because like last
June’s summit between President Obama and General Secretary Xi Jinping are not going to improve US-China
the
Party’s survival depends on e s c a l a t ing tensions.
Given that dialogue
is
likely to be i neffe ct iv e, the US must focus instead on defending its strategic interests
in
the Pacific. It must continue to strengthen ties with its regional p a r t n e r s,
remain unresolved. Its objective will be to keep the Chinese public distracted by possible foreign threats to China’s national security and economic development.
China, not the US, is fated to be the ‘declining power’ for the remainder of this decade.
particularly of
which are likely to be the main targets
Japan and Taiwan, Chinese
military
adventurism. Most importantly, the US must avoid helping the Party stifle demands for political reforms at home by handing it easy victories abroad.
Mark A. DeWeaver FX TRADER MAGAZINE October - December 2013 15
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