European View (2011) 10:95105 DOI 10.

1007/s12290-011-0151-9 ARTICLE

Where is China heading? An analysis of Chinas foreign policy and how it affects the Western world
Martin H. Heinemeyer

Published online: 4 June 2011 Centre for European Studies 2011

Abstract Chinas growing international importance puzzles not only political scientists but also journalists, politicians and others. Apparently, it is possible that an autocratic regime which has opened itself only on the economic level can still survive. The new foreign policy of China affects the liberal democratic Western world in several ways. China, with impressive economic growth, questions the US dollar as a stable reserve currency and increases its military power. It establishes Confucius Institutes to promote its culture and it allocates more development aid than the World Bank. This article looks at these developments from a critical perspective and reveals that Chinas strategy faces serious problems: lack of human rights, religious freedom, demographic renewal and protection of intellectual property. It concludes that the current Chinese reality of authoritarian capitalism is neither holistic nor sustainable and that development in China takes place only with enormous social and economic costs. It argues that although China claims to be a new global actor, it cannot (yet) fulfil this role in a multipolar world order. Keywords Chinas new foreign policy Economic growth Reserve currency Cultural influence Chinas development policy in Africa

M. H. Heinemeyer (&) European Institute for Asian Studies, 67 Rue de la Loi, 1040 Brussels, Belgium e-mail: m.heinemeyer@gmx.net

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Chinas1 foreign policy To observe China changing its foreign policy in recent years is of enormous interest to political scientists and scholars from other fields. Since Deng Xiaopings reforms, China has opened up significantly on the economic side but significantly less on the political side. Thus its new foreign policy affects the liberal democratic Western world in several ways. This article observes key events taking place in China and examines these developments. Reserve currency policy That China maintains the renminbi at an artificially low value in order to seek export advantages is Washingtons main criticism of Beijing. In June 2010 the Chinese did make small adjustments to the currency rates, but it was not enough to satisfy the American administration. In reaction to a response from Washington, China criticised US monetary policy as lax. According to Chinas Vice Minister of Finance, Zhu Guangyao, the printing of new banknotes was irresponsible, risking the creation of speculative bubbles and creating the possibility of negative effects on countries in transition. Establishing Confucius Institutes The Confucius Institutes are a cultural element within the wider frame of foreign policy, comparable to what other countries do: Germany has its Goethe user and the French have the Institut Franc Institutes, the US its Amerikaha ais. By promoting Chinese culture, values and languagesChina recognises around 55 ethnic groups, and nearly 300 individual languages have been counted [10] China has been rapidly increasing its influence in the world. Confucius Institutes have recently been built in South Africa, Rwanda and Kenya, and African cultural elites are trained in China. As part of this strategy, Beijing provides stipends to African students and subsequently gains access to these students and their expertise. China also supervises African personnel it has trained earlier in so-called Sino-African cooperational fora. Development aid in Africa and the competition for raw materials China has targeted Africa as a major source of natural resources. A recent Financial Times article claims that China has lent more money to other developing countries over the past two years than the World Bank [4]. According to the authors, loans of at least $110 billion were signed, in contrast

In this article the term China is used to refer to the area of mainland China.

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to the World Bank with around $100 billion.2 China has intensified its economic interests with Venezuela and Brazil. Both are countries rich in resources. The authors also point out that China offered better conditions than the World Bank, using the China Development Bank and the China ExportImport Bank. What is alarming about this development? First, the World Bank requires political reforms when lending money but China asks very little: access to materials and some guarantees. Second, the development aid has to be seen from the perspective of the competition for raw materials. For instance, the turn to mobile phones requires the rare-earth material neodymium to produce magnets. Second, sensitive military hardware (smart bombs or cruise missiles) and other high-tech products require these rare-earth materials. At the moment there is only one important supplier in the world: China has secured around 97% of the production of this material. Why does China harmonise so well with these African states? One easy explanation is their intercultural compatibility: collectivism, lack of basic rights and no intervention in internal matters. China is equipped with large amounts of state capital and, recently, private capital. And China is filling a vacuum left by the Western world and Russia. The Deng Xiaoping reforms since 1979 (systemic changes in the economy, investments in education, eradication of hunger) have had positive effects on the economy today and are attractive to many African states as an economic role model, promising first steps out of their underdevelopment. How does the Chinese approach differ from that of the West? China does not disguise that it considers its foreign policy a politics of interest (realpolitik), incorporating economic and trade policies as the highest priorities. China is therefore not much interested in the devastating political situation in some African dictatorships. Sino-African policies, because of their national importance, are coordinated by the Department of Foreign and Trade Policies. However, Chinese investments do not lend themselves to sustainability: China brings its own workers and when they finish their projects they dismantle their tents and leave. Little infrastructure is set up. Contacts between Chinese workers and the local population are forbidden. Local African producers lose against cheap products from China, a situation that is likely to continue since it is in Chinas strong interest to remain in African markets (supplying roads and railroads, ports, airports, arms and weapon systems), selling Chinese products and developing them for future African consumers. Chinas behaviour again is smart: in cases where European investors obligated under lawimpose sanctions on African states, China intervenes and uses this vacuum to step inside as a free rider. What also helps is that Africans may regard the Chinese style as a second chance; the first one, provided by the West, having been seen as a failure since the 1960s. Despite massive sums of development aid from the Western world, its transfer of capital has produced only minor progress.
2

The authors of the Financial Times article compiled statistics using data from public sources made available by banks, debtors and the Chinese government.

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Problematic issues in China Lack of human rights Not allowing full liberties and human rights, China falls into the category of an authoritarian regime [8]. Although the death penalty has been abolished for several crimes, China still has very high punishment rates. Furthermore, compulsory changes of residence have been reported. Finally, the case of the Nobel Prize winner Liu Xiaobo clearly shows that the Chinese ruling class has a different opinion on freedom of speech. In the recent cases of unrest in North African countries, China has shown itself hnders of the daily newspaper to be very nervous and cautious. As Till Fa Frankfurter Allgemeine Zeitung points out [7], the leaders of the Communist Party fear a similar development, and President Hu Jintao appealed to his top functionaries to reduce disharmonic factors to a minimum, naming his program social management. He also demanded an improved control of the Chinese Internet which means in practice more censorship and surveillance of opposition groups and activists (Table 1). Religious freedom still under pressure China is quietly allowing more and more religious freedom, as it senses the growing popularity of Buddhism, Taoism, Islam and Christianity. One explanation is that in an increasingly materialistic world, more and more Chinese citizens are in search of spirituality. But China restricts access to the World Wide Web, so Chinese Internet surfers who circumvent the barriers searching for religious or spiritual content risk being detained and imprisoned. Security personnel do not need judicial warrants to arrest dissidents. Britta Schmitz, a researcher working in Beijing, observes that Catholicism and Protestantism still remain minority religions and the heads of the umbrella organisations of these two churches must regularly take part in training sessions on the Communist ideology [15].
Table 1 Indices evaluating China Name of index Freedom in the world [8] Democracy Index [5, 8] Privacy International [13] Press Freedom Index [14] Composite Index of National Capability [17] Score Political rights: 7; civil liberties: 6 (the lowest score possible is 7; thus, the status is not free) 3.14, ranking 136 of 167 countries (the maximum is 10) 1.3 = endemic surveillance society (maximum is 5.0) 84.67. Position 171 of 178 countries (highest score possible is 0.0) 0.198578. Position 1 of 193 countries Year 2010 2010 2007 2010 2007

Compiled by the Economist Intelligence Unit, the Democracy Index is based on 60 indicators grouped in five different categories The Composite Index of National Capability is a statistical measure of national power

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Furthermore, the government may impose fines, terminate contracts of employment, exclude children from public schools. In addition, the Communist Party considers house churches a potential threat to its exclusive claim on authority [15]. Nevertheless, some minor progress has been made through legislation in 2005. Yet Schmitz [15] concludes that one cannot talk of religious freedom as understood in terms of being a human right. Economic strength but danger of inflation From an economic perspective, China is the EUs second biggest trading partner and the EU is Chinas largest [11]. Moreover, foreign direct investment in China is growing steadily and Chinas investment in the EU is increasing. In recent years, China has sustained impressive economic growth3 with astonishing yearly rates of 510% on average. It qualifies now as the second largest economy in the world in terms of overall size. Its domestic market numbers more than 800 million consumers. Paying low wages, China has been termed the workbench of the world, supplying cheap labour and increasingly new product innovations and gaining status as a major manufacturing country. Yet, it still needs to import food for its own population. In addition, China invests heavily in European markets for state bonds, quietly financing Europes debts. Focusing on Portuguese and Spanish state bonds, Chinese investors were able to stabilise European debts and at the same time increase their influence in Europe [1]. After all, China needs stable export markets to sell its products. But this growth cannot go on forever. In the long run, wages are likely to rise in China and the standard of living is steadily increasing, potentially eliminating Chinas competitive advantage. Growing disparities between the rich and poor are triggering social tensions: the Gini coefficient is rising, indicating a more unequal distribution. Finally, inflation is on the horizon because the savings rate is high. Lack of ecology: China still destroys nature and health The Chinese regime still regards economic growth and poverty alleviation as more important than ecologic development. Therefore nature and health are in a critical position: clean drinking water is inaccessible to millions of Chinese. Gigantic dam projects, such as the Three Gorges Dam, required the relocation of over a million people and flooded cultural and archaeological sites. Hydrologists fear that besides erosion and sedimentation there is also the risk of dangerous landslides. As filters are not used, consumers are exposed to toxic heavy metal legacies. Nonetheless, in its five year plans, the Politburo wants to decrease pollutants, energy and water consumption and the emissions of carbon dioxide. Only three years ago, China joined the Kyoto Treaty. Furthermore, bilateral and
3

Jim ONeill, Chair of Goldman Sachs Bank, included China within his BRIC (Brazil, Russia, India and China) scheme, which he developed as early as 2001. See ONeill [12].

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multilateral agreements between the EU and China have been set up.4 China is experiencing a rapid transformation process: though laws were made stricter, the daily increase in cars destroys the plans to reduce noxious substances and instead increases the level of pollution. To cope with the massive energy demands, China builds up nuclear and water power. In the rural areas households still have low incomes so they cannot afford many expenses for health care. In addition, to improve data flow, China invests heavily in its outdated health information technology (HIT) which resembles the European systems of the 1990s. Demography: the future challenge With its one-child policy and no adequate pension scheme, China will face serious problems from about 2020 onwards. The shrinking younger population will have difficulty financing an ageing population, leading to expectations of a dramatic rise in the number of impoverished elderly. This group of people over 70 who have been unable to accumulate sufficient savings to support themselves will be poor or nearly poor, and there is no pension system such as that in Europe. Thus, China faces a decline in its population similar to that predicted for Russia.5 Male babies were preferred under the one-child policy, leading to massive disparities in the number of men and women, which now contribute to social tensions. The surplus of male citizens has created fierce competition in the job and marriage markets. Intellectual property rights are still difficult to enforce The EU has set up a program (IPR2: EUChina Project on the protection of intellectual property rights) which began in 2010 and is promoted throughout China. But most observers doubt that China takes the issue seriously and fear that plagiarism is not being sufficiently reduced. To catch up with the Western car industry, China imitates the behaviour of Japan in the 1970s: for instance, the Japanese automobile industry took pictures of cars from its competitors (US and European producers), copied the design and constantly improved these key technologies (kaizen). Thus, these companies increased their quality and productivity immensely by using lean production. South Korea in the 1980s, with its family centred companies (chaebol), also took this track in a similar way. Now, in a knowledge-based society, supremacy in research and development (R&D) is crucial. The European Commission [6] expects that in the year 2025 India and China could thus account for approximately 20% of the worlds R&D, i.e. more than double their current share.
4

Besides the International Partnership for the Hydrogen Economy (IPHE), the Carbon Sequestration Leadership Forum (CSLF) and the Renewable Energy and Energy Efficiency Partnership (REEEP) were agreed on. The Joint Declaration on Climate Change promotes CCS technology. Compare the study on Russia from the Berlin Institute for Population and Development: Sievert et al. [16].

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Especially dangerous is the practice of product counterfeiting in the sector of medical products, machinery and tools and chemistry. Incorrectly labelled, pirated products are life-threatening. Security issues: territorial and naval disputes (Sendaku/Diaoyu Islands) Sino-Japanese naval disputes have caused serious tensions. Two major players are involved, the second and third largest economies in the world. Both Japan and China officially claim title to the islands. But this conflict may be over-rated since relations between Japan and China are entering a period of Senryaku-teki Gokei Kankei (mutually beneficial relations based on common strategic interests) as Kazuyuki Katayama, Deputy Chief of Mission of the Embassy of Japan to the Kingdom of Belgium, has pointed out.6 Be that as it may, the reality is that Malaysia, Singapore and Vietnam are building up submarine forces in response to Chinas growing threat as a naval power. One may conclude that China is triggering a classic security dilemma. Beijing would neither welcome any US military presence north of the Demilitarised Zone (DMZ) nor any massive inflow of North Koreans into its territory [3]. But other countries in the region rely on free and safe access to and maritime security in the Straits of Malacca and the Lombok and Sunda Straits to the South China Sea, through which around 80% of Chinas oil imports pass. Therefore China has a strategic energy and security interest in keeping these sea routes open.

How should the Western world, especially the European Union, react? First, the EU must insist on human rights as a core value of its foreign policy. The new human rights units in the European External Action Service (EEAS) and the worldwide EU Delegations provide expertise as well as an influential network. Better coordination of European foreign policy is necessary to help strengthen opposition and civil society in China. With the Lisbon Treaty, the EU Parliaments role has been strengthened: it has to approve all third-country treaties and it has gained more weight in European trade policy. Yet, the tasks of the EEAS are not fully clear to its staff and personnel, so a coordinated policy will take some time to develop. From the US perspective, former Secretary of State Henry Kissinger [9] argues for a peaceful community between the United States and China to avoid the construction of antagonistic blocs of the type that evolved during the Cold War between the Soviet Union and the US. In this pacific pact both countries form a framework with a consulting mechanism to prevent self-fulfilling prophecies of military conflict. Kissinger suggests long-term goals and procedures to calibrate common positions in international conferences.
6

In an interview with the author in Brussels on 2 February 2011, Katayama also mentioned that when Prime Minister Abe replaced Koizumi in September 2006, this became a turning point and changed the tone in bilateral relations.

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More cooperation between European and Chinese universities is necessary because these are incubators of independence and free-thinking. Highly trained students may be increasingly involved in the political process, and in the future they will play the decisive role in forming an empowered civil society [11]. One characteristic of China is that the deficits of political rights and democracy are systemic. This is a root cause that will undermine the Communist regime, as happened in Eastern Europe during the 1990s. Yet, political theory predicts that a consolidated democracy can only be established via a bottom-up transformation through the vox populi or a civil society that encourages political pluralism. Image surveys suggest that Chinese attitudes toward the EU are negative. The EU is perceived as weak and old. Public relations campaigns, tailor-made for China, could improve this impression. Past case studies show that containment policies and status quo approaches (when China develops economically, freedom will arrive by itself, the EU does not need to do much) have proved to be ineffective.7 A reason for the confusion is that outside the EU framework, Member States develop their own foreign policy (to accommodate national differences) and so the EU is incapable of communicating a coherent message. Thus, there is a lack of collective leadership at the EU level. Currently, Europe is more concerned with itselfsolving the financial crisis, recapitalising its public budgets, repairing its social systems. The EU needs to improve its recruitment of highly skilled personnel because political intelligence will be the decisive advantage in competition with China. Leadership qualities (such as accountability and optimism) will be the key character trait for ensuring political commitment from its leaders. This is necessary in a complex world with several actors: private companies, civil society actors, cities and sub-national regions, communities and so forth which fill in the political space. Certainly, a wrong strategy would be to condemn and to isolate China. A new narrative may be to welcome the country as an important global player next to the US. Clearly, the EU needs to take over leadership in developing long-term strategies for those countries in transition to democracy: China is one of them. Punitive tariffs on China could be limited to situations in which it ignores and disrespects international rules and habits; the violations that China has committed have hampered global competition in the past. With global population growth and declining resources, distribution conflicts will increase. Here is a chance for the West to promote its model and to distribute its core values in a peaceful wayhighlighting personal liberties, liberalism, a social market economy, private property and democracyas an alternative to the unjust and costly Chinese model of repressive autocracy.

Jean-Pierre Cabestan [2] analyzed these findings in his summary of his presentation European Perceptions of China: A Tentative Analysis, presented at the Tearing Down the Great Wall of Ignorance Conference in Brussels, 19 November 2010.

European View Opportunities: 1. 2.

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3. 4.

Assuming Chinas good will, the Western world, especially Europe, should support its constructive and cooperative role in creating stability in Asia. Stronger integration of China into ASEAN and other international institutions will help tie it to a system of rules, procedures and principles, especially with respect to intellectual property. Proposing multilateralism with China will allow it to learn from the EU about ecologic problem solving. Consumers in China wield enormous purchasing power. Hence European producers ought to take the opportunity to sell in China and to increase their competitiveness. Risks:

1.

2.

3. 4.

5. 6. 7. 8. 9.

10.

11.

12.

The JapanChina confrontation: For Japans foreign policy the main relationship will be with the US, not China; Japan does not share basic values with China. Chinas diplomacy seems to have become more assertive, but its intention is not clear and its future is uncertain. Its role as a growing naval power should be watched. For the EU it is risky not to have a long-term grand strategy. In contrast, the United States has developed one over the years. With the North African revolutions as a reminder of the power of social media (Internet, Facebook, YouTube, Twitter), the question arises whether censorship has become technically difficult or impossible. China needs to boost its domestic consumption, which is currently at a low ebb. The high savings rate in China may lead to rising inflation. Chinas support of North Korea could be a problem. Chinas nuclear assistance to Pakistan is another concern. Easier access to credit could produce a bubble. Rising food prices may lead to social tensions or even uprisings. Indicators for these tensions in the past have been work stoppages, demonstrations, road blocks, marches, strikes, walkouts, sit-ins as well as suicides at the Foxconn Shenzhen companies in 2010, a riot and beating death at Tonghua Iron & Steel Group (2008), protests at Linzhou Iron & Steel Group (2008) and a strike at the Honda Nanhai gearbox plant (2010). Internal migrants that arrive from other regions of China want their wages to catch up with those of local workers who are better paid. For example, farmers from urban areas migrate to the cities, especially to the coastal provinces, looking for jobs and higher income. China has a range of ecological problems, including waste of resources, as well as air and water pollution. Also its infrastructure is cheaply built, creating sustainability problems. China tries to rescue, or China-ise the ideology of Maoism/Marxism, declaring it as a state goal. Yet, philosophers and political scientists criticise communism as an historical failure.

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ASEAN and other regional blocs should address these problems and exert pressure on China. But currently ASEAN member states are failing because of structural weaknesses. In security issues with China, international organisations of which the EU is a memberASEAN, the East Asia Summit (EAS), the Council for Security Cooperation and the ASEAN Regional Forum (ARF)ought to be used more intensely to discuss these matters. Finally, a future option is to use the EEAS, when it is fully operational, for confidence building.

Conclusion On its way from being a developing country to becoming a highly industrialised country, China is still an ambiguous phenomenon. Although it is described as the coming economic superpower, social disparity is quickly growing, triggering possible social tensions. Plenty of citizens still live below the poverty line. China is gradually acquiring competitiveness with other industrialised countries, but from the European perspective, it remains an inscrutable country.

References
rkteStille Asiaten [the markets for state bondsquiet Asians]. 1. Braunberger G (2011). Anleihema FAZ Online. Available at http://www.faz.net/-01mro3. (shortlink). Accessed 6 Jan 2011 2. Cabestan J-P (2010) European perceptions of China: a tentative analysis. Presented at the Conference on European knowledge and perceptions about China: tearing down the great wall of ignorance, venue at the European Economic and Social Committee (EESC), Brussels, 19 Nov 2010. The report from this conference is available online at http://www.madariaga.org/ reports/451-tearing-down-the-great-wall-of-ignorance-between-china-and-the-eu 3. Casarini N (2011) Security developments in East Asia: what implications for the EU? European Union Institute for Security Studies (EUISS). Policy Brief, February 4. Dyer G, Anderlini J, Sender H (2011). Chinas lending hits new heights. Financial Times, 17 January. Available at http://www.ft.com. Accessed 13 March 2011 5. Economist Intelligence Unit (2010) The economist intelligence units index of democracy 2010. A report from the Economist Intelligence Unit. The Economist Group, London. Available at http://graphics.eiu.com/PDF/Democracy_Index_2010_web.pdf. Accessed 18 March 2011, p 7 6. European Commission (2009) The world in 2025: rising Asia and socio-ecological transition. Brussels hnders T (2011). Harmonie und revolution. Frankfurter Allgemeine Zeitung. p 4. 22 Feb 7. Fa 8. Freedom House (2010) Country report: China (2010). Available at http://freedomhouse.org/ template.cfm?page=22&year=2010&country=7801. Accessed 15 March 2011 9. Kissinger H (2011). Ein pazifischer Pakt. Focus Mag 4: 70 10. Languages of China (2009) In: Paul LM (ed) Ethnologue: languages of the world, 16th ed. SIL International, Dallas. Available at http://www.ethnologue.com/show_country.asp?name=CN. Accessed 17 March 2011 11. New Europe (2009) China diary: The clash of cultures, communism, capitalism and business currency. 27 Sep3 Oct, 13 12. ONeill J (2001) Building better global economic BRICs. Goldman Sachs Research, Global Economics Paper 66. London, 30 Nov 13. Privacy International (2007). National privacy ranking 2006European Union and leading surveillance societies. Available at http://www.privacyinternational.org/survey/phr2005/phrtable.pdf. Accessed 15 March 2011. A detailed country report on China PHR2006Peoples Republic of

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China, published on 18 Dec 2007, is available here: https://www.privacyinternational.org/ article/phr2006-peoples-republic-china. Accessed 18 April 2011 Reporters without Borders (2010) Press freedom index 2010, published by Reporters without borders. Available at http://en.rsf.org/press-freedom-index-2010,1034.html. Accessed 15 March 2011 Schmitz B (2010) Christians in Chinaexpansion and limitation of churches. Konrad Adenauer Foundation, Berlin. KAS Int Reports 12:718 Sievert S, Zahkarov S, Klingholz R (2011) The waning world power. The demographic future of Russia and the other Soviet successor states. 12 Apr 2011. Available at http://www. berlin-institut.org/selected-studies/the-waning-world-power.html. Accessed 16 Apr 2011 Singer JD (ed) (1980) The correlates of war, vol. 2: testing some realpolitik models. The Free Press, New York. For newer data on these models compare http://www.correlatesofwar.org/. Accessed 17 April 2011

Martin H. Heinemeyer is a researcher and policy analyst connected with the European Institute for Asian Studies (EIAS), a think tank and policy institute based in Brussels.

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