【WSJ】 The China Paradox

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The China Paradox
http://online.wsj.com/article/SB10001424052970204683204574357303300725932.html?mod=googlenews_wsj

AUGUST 18, 2009, 9:15 P.M. ET

China's intimidation tactics are a warning to countries everywhere.

By ANDREW SHEARER

Two developments yesterday in Australia underlined the paradox underlying its relationship with China: Australian Foreign Minister Stephen Smith confirmed that a scheduled visit by Vice Minister He Yafei had been cancelled by the Chinese government because of Canberra's decision to grant a visa to exiled Uighur leader Rebiya Kadeer. Also yesterday, the announcement of a 50 billion Australian dollar ($41 billion) liquefied natural gas deal reaffirmed China's economic importance to Australia and China's insatiable need for Australian resources and energy.

The dilemma is this: The closer free nations draw to China, the greater the potential friction with Communist Party interests. Australia's partners in Asia and beyond need to pay attention to the lessons Canberra is learning.

On a superficial level, Beijing is unhappy with what it sees as a series of calculated Australian blows to Chinese interests. First Canberra had the temerity to release a defense blueprint that questioned the intent behind China's rapid naval build-up and committed Australia to strengthening its own maritime capabilities. Then in June came the collapse of state-owned Chinalco's plan to acquire a major stake in Rio Tinto—even though it was eventually blocked not by the Australian government but by legitimate shareholder disquiet. The last straw seems to have been Canberra's decision in July to issue a visa to Ms. Kadeer. Clumsy Chinese diplomats turned her into a cause célèbre in Australia by leaning on organizers in a futile effort to stop her appearances at an international film festival in Melbourne and at the National Press Club.

But the more fundamental reason for Beijing's pique probably lies elsewhere. China relies on Australia for imports of iron ore, the price negotiations for which are increasingly acrimonious. China's political leaders see guaranteed access to low-cost raw materials as vital to sustaining growth and therefore to political legitimacy and their own survival. That makes minerals and energy a vital strategic interest. They are determined to exploit China's buying muscle to avoid paying the going market price. And they clearly aren't beyond a bit of intimidation. Smaller Asian countries such as Singapore and larger European powers like France have paid a price for incurring Beijing's wrath.

China's bullying is having tangible effects in Australia too. Rio Tinto's share price fell 3% when the company was accused in the Chinese media of commercial espionage. Many in Australia's business community are nervous, in some cases cancelling plans to travel to China following the arrest of Stern Hu, a Rio Tinto executive. China-boosters in the media and business community are urging pre-emptive capitulation. On Monday, another major Australian mining company, Fortescue Metals Group, agreed to undercut Rio Tinto's price offer for iron ore in return for $6 billion of cheap Chinese infrastructure funding. The aggressive China Iron & Steel Association lost no time in announcing it would use the price agreed with Fortescue as leverage in negotiations with the world's three largest iron ore producers. Yesterday PetroChina, another state-owned company, agreed to buy around $50 billion Australian dolllars' worth ($41 billion) of liquified natural gas from an Australian project.

It's tempting for Australia and other Asian countries to downplay the seriousness of China's diplomatic actions, to deny that they are connected and to treat them as isolated bilateral incidents. If Beijing's concerns can be resolved quietly behind closed doors, this would no doubt be presented as vindication of Prime Minister Rudd's vaunted China expertise. It would also hand China a domestic political victory.

Such backpedalling would hardly serve the best interest of Australia and the region in the long term. China's assertive mercantilism, anger at straight talk about its military plans and attempts to quell free speech even outside its own borders are all of a piece. They reflect in part China's growing power and preparedness to deploy it where Beijing feels its interests are being jeopardized—irrespective of international norms or the interests of others. But they are also a product of China's domestic institutions. Secrecy, state control and arbitrary abuses of power, whether in the commercial, military or diplomatic realm, highlight not China's strength but the fragility of its political system and the paranoia of its leaders.

Australia needs to hold its ground in the face of Beijing's intimidation tactics. And the region as a whole needs to resist Beijing's efforts to pick off individual countries and to bend the accepted rules to its own purposes. Asia, including China, has thrived for half a century as a result of an open, transparent regional economic and strategic order. There is no reason why China cannot continue to rise within that highly successful framework.

Promoting regional adherence to established rules—whether governing commerce, law, diplomatic conduct or navigation at sea—is the best way for Asia's smaller states to protect their interests and autonomy in an era that will be defined by the simultaneous rise of China and India as great powers. Asia's leading free-market democracies—Japan, India and increasingly Indonesia—have an even greater stake in working together in support of open markets and defense of shared values, including respect for human rights and the right of free speech. Calls for China to play by the rules are also more credible if developed economies avoid double standards by resisting the lure of protectionism, both in traditional or more fashionable "soft" forms.

Asia's democracies should also get together with the United States and Australia to discuss ways in which they can influence China's behavior. U.S. Commerce Secretary Gary Locke led the way when he raised Mr. Hu's treatment with Chinese authorities—not as a favor to Australia, but because the Obama administration recognized the implications of his case for governments and companies doing business with China irrespective of their nationality.

Until Beijing's treatment of its own citizens and other countries alike is guided by transparency, respect and the rule of law, other nations will have little choice but to work together in defense of both their values and their interests.

Mr. Shearer is director of studies and a senior research fellow at Australia's Lowy Institute for International Policy.