Oct. 8, 2015
21st Century China Opinion
Pressing sovereignty counterproductive 

From the Source (Foreign Policy)
"The United States is poised to send naval ships and aircraft to the South China Sea in a challenge to Beijing's territorial claims to its rapidly-built artificial islands, U.S. officials told Foreign Policy. The move toward a somewhat more muscular stance follows talks between Chinese President Xi Jinping and U.S. President Barack Obama in Washington last month, which fell far short of a breakthrough over how territorial disputes should be settled in the strategic South China Sea."   

Our Take
The Xi-Obama summit, although not as fractious as many of us had anticipated, is unlikely to change the increasingly competitive nature of Sino-American relations. One of the most dangerous elements is Xi's elevation of China's sovereignty claims to the South China Sea as effectively, if not formally, a core national interest. Pressing its sovereignty claims by, for example, building runways on the reclaimed land of tiny islets, means increased tension with many Southeast Asian nations and the U.S.

I keep arguing to Chinese colleagues that elevating the priority on sovereignty could actually harm China's national security. But Xi seems to be willing to pay the price in order to rally the nationalist public around the flag, and around him as the leader, especially at a time when economic troubles at home could lead to popular unrest. His only concession on the South China Sea at the summit was a vague statement that China was not pursuing the "militarization" of the islands. Privately, Xi may have told Obama more about what kinds of planes, missiles, ships, etc. he will allow the People's Liberation Army to place on these artificial islands.

We'll have to watch and see if Xi is wise enough to exercise restraint in asserting China's maritime claims by limiting the military installations on the islands. Another important indicator to watch is whether China accepts the decision of the UN Convention on the Law of the Sea tribunal about whether it has jurisdiction to rule on the Philippines-China dispute, which should be handed down by the end of the year.

What will the TPP mean for China? 

From the Source (ChinaFile)
"The U.S., Japan and 10 other Pacific Rim nations on Monday reached final agreement on the largest regional trade accord in history, teeing up what could be the toughest fight President (Barack) Obama will face in his final year in office: securing approval from Congress. The conclusion of the Trans-Pacific Partnership (TPP), after years of negotiations and a series of sleepless nights here, was merely 'an important first step,' conceded Michael B. Froman, the U.S. trade representative, as he and other weary officials announced their accord."   

Our Take
What does TPP mean for China? Until about three years ago, China routinely denounced the TPP, holding that it was part of an effort to contain China. However, China has more recently dropped its blanket opposition, and taken a more nuanced "wait and see" attitude. On a number of occasions, Chinese spokesmen have indicated that although they were not ready to meet the demanding requirements of a potential TPP agreement today, they might be ready and willing to join in a few years. Nevertheless, the actual conclusion of a TPP agreement--assuming it is in fact ratified by the main parties--will confront China with a series of new challenges and opportunities: 

First, the TPP shows the U.S. and Japan exercising leadership, stepping out ahead of the global community in their willingness to negotiate a new set of rules and obligations. This dynamism presents challenges to China. It creates the possibility that the future rules for the global economy will be written under predominant U.S. influence, in the same way that the current rules have been. That makes China extremely uncomfortable, and it also pressures China to come up with alternatives that will be attractive to its neighbors while also serving its own interests.

Second, the TPP shifts economic balances and alliances within Asia. The TPP greatly increases the likelihood that Japanese Prime Minister Abe will carry through on Japanese economic reforms, therefore making economic revival there more likely. The TPP will pull Vietnam (especially) and other signatories economically closer to the U.S., and thus reduce Chinese economic preponderance. Given that South Korea is likely to quickly join in any completed TPP agreement, these shifts can have a long-run economic impact on China.

Third, TPP increases the pressures within China for more decisive economic reforms. China launched the Shanghai Free Trade Zone (FTZ) two years ago, partly in order to pilot measures of external liberalization that would be useful in a new round of reform. The possibility that TPP would be agreed to was a consideration, and part of the impetus for the Shanghai FTZ. However, the FTZ has so far under-performed expectations. Now, the TPP will present Zone officials with a clear benchmark of world "best practice." It will give advocates of economic reform within China a new argument to support more substantial opening measures after a bad year.

The TPP challenges China to up its game in economic opening, regulation, and economic diplomacy. If China chooses, TPP can be the catalyst for a new round of global engagement that China sorely needs.

Note: This piece originally appeared on the ChinaFile website

Field Notes from China:
Selections from the Chinese-language Media
TPP: What's the Chinese view? 

Summary: The following two Field Notes take a look at what the official Chinese press is saying in reaction to Monday's announcement that an agreement had been reached on the Trans-Pacific Partnership (TPP). China's tune has changed on the agreement over the past few years as it becomes clearer that some sort of deal would be reached. If (and this is a big if) TPP can make it through the U.S. Congress, China's next big challenge will be whether or not it seeks to shape global trade from the inside existing agreements (i.e. seeking to join TPP) or if it will seek to create parallel institutions and agreements.  

Excerpt from the story: "China sees the TPP as one of the key free trade agreements for the Asia-Pacific region and is open to any mechanism that follows rules of the World Trade Organization and can boost the economic integration of the Asia-Pacific, said its Ministry of Commerce on Tuesday. 

China hopes the TPP pact and other free trade arrangements in the region can boost each other and contribute to the Asia-Pacific's trade, investment and economic growth, said the ministry. 

China has not ruled out joining the TPP at a proper time. The deal might bring certain impact to China's export in the short term. However, within the context of the globalization, no multilateral trade mechanism could exclude exterior countries and regions from international trade system in the long run. 

Some experts have pointed out the the TPP will have a limited impact on China."

Source: Xinhua
Will the TPP collapse the Chinese economy?

Excerpt from the story: "Is the TPP really targeting China? U.S. President Barack Obama said on Monday: 'We can't let countries like China write the rules of the global economy. We should write those rules, opening new markets to American products while setting high standards for protecting workers and preserving our environment.'

This is not the first time that Obama expressed such views. This seems to prove that the U.S.-led TPP is aimed at China. Objectively speaking, some TPP partners want to use the agreement as leverage against China. But it's not surprising that geopolitical considerations mingle with economic relations. The question is to what extent these TPP partners can achieve their goal. It is generally believed that a free trade agreement can bring extra trade volume to partner countries while adversely affecting non-partner countries. The TPP is likely to have an impact on China in a short term, but its importance may be overblown. The TPP is only a regional agreement. Each of the 12 countries has a different development level. Although the U.S. said the pact will have new members, the TPP will have limited vitality without the participation of the world's second largest economy."

Source: Global Times
China Talk: Interviews, Lectures and Events
The politics and strategy of the TPP?

21st Century China Program Assistant Director Jude Blanchette recently sat down with David Loevinger, managing director of Emerging Markets Sovereign Research at TCW Group to discuss Monday's Trans-Pacific Partnership (TPP) announcement. For decades, Loevinger has been working in the U.S. government on U.S.-China trade and economic issues. Click here to launch the audio. 

Questions? 21china@ucsd.edu

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