China

Why the Middle Kingdom's popularity is about to take a nosedive.

By Ben Simpfendorfer

China's reputation as a major economic power is growing by the day. Talk of a "G-2" symbolizes the growing importance of the U.S.-China relationship to the global economy. Financial markets are meanwhile captivated by China's speculation on the future of the dollar, while economists hope that a Chinese economic recovery will drag the rest of the world up with it.

Yet China's reputation as a leader of the emerging world is about to take a tumble: The country's exports to emerging markets are surging, and the resulting increase in cheap Chinese goods could create a long-term backlash that will undermine China's patient "charm offensive" for years to come.

Over the last five years alone, the annual value of China's shipments to Africa, Latin America, and the Middle East rose from $38 billion to $192 billion (in fact, China recently overtook the United States as the world's largest exporter to the Middle East). This surge in exports is a rational response to economic problems at home and a collapse in demand in China's traditional markets in Europe and the United States. The global economy has weakened purchasing power in the West, and the competition is less intense -- and the profit margins higher -- in the developing world.

But there is an economic and social cost to this shift in trade patterns. For now, households from Egypt to Brazil are delighted at their newfound ability to purchase ordinary goods once considered unaffordable. A new middle class is rising to meet falling prices for microwave ovens and washing machines. But the cheap imports are hurting local producers, as a flood of "made-in-China" imports shuts down factories across the emerging world.

India's largest commercial body recently noted that nearly two thirds of small- and medium-sized enterprises are suffering from the sudden rise in Chinese capital and consumer goods imports. Meanwhile, manufacturers in the Palestinian city of Hebron claim that the number of textile workers has fallen from 15,000 to 5,000. Textile factories in the Syrian city of Aleppo are closing while factory owners complain about unfair competition from cheap imports. Similar grumblings can be heard in Iran's bazaars.

China faces a dilemma. It needs to protect jobs at home to secure social stability, so it has repeatedly hiked rebates for the value-added tax applied to exports to stem the pace of factory closures. These policies appear to be working. But they could backfire if governments in the emerging world are unable to bear the economic and social costs of a flood of cheap "made-in-China" imports. Indeed, Syria has recently imposed new tariffs on textile imports, while the number of anti-dumping cases filed by India against China has jumped. So far, China has yet to adjust its rebate policy.

If Beijing can manage to strengthen the Chinese currency and economy, production will shift from China to other emerging economies, and Chinese demand for goods produced abroad will increase -- the best-case scenario for everyone. But the rebalancing will take years, if not decades.

China's status as a major economic power is rising as a result of the economic crisis. But its relations with the emerging world are about to provide an important test of its leadership qualities.

Ben Simpfendorfer is chief China economist for the Royal Bank of Scotland and author of The New Silk Road: How a Rising Arab World Is Turning Away from the West and Rediscovering China.

HAZEM BADER/AFP/Getty Images

The battle of ideas behind China's naval agression.

By James Kraska and Brian Wilson

China’s bold and dangerous maneuvers against the USNS Impeccable, a U.S. Navy military survey vessel that was operating about 120 km from the island of Hainan in the East China Sea, is the latest salvo in China's ongoing campaign to upset traditional notions of freedom of navigation in order to deny access to its coastal waters, or littorals, by foreign warships and aircraft. The event marks the first test of the Obama administration regarding China’s efforts to reshape the international law of the sea.

Following the Cold War, the littorals have emerged as the primary maritime battleground for peace and stability. International law, as reflected in the 1982 Law of the Sea Convention, recognizes that all states enjoy the right to conduct military activities throughout the near shore environment -- generally beyond the 12 nautical mile (nm) territorial sea and extending out to 200 nm (one nm = 1.85 km). This coastal zone is the primary operating area for “Seabasing,” amphibious, expeditionary, and littoral operations, and generally encompasses the exclusive economic zone (EEZ) of a coastal state, a special resource zone created by the Law of the Sea. Although coastal states have exclusive rights to exploit natural resources in the zone, they cannot claim a  security interest in the area, agreed Shen Dingli, director of the Center of American Studies at Shanghai’s Fudan University. Regardless, China wants to exert control that extends beyond its economic interests, creating the potential for conflict with the U.S. Navy. Dingli stated, “China considers that international law only allows innocent passage for military vessels [in the EEZ], not activities that could be considered to have a military purpose.”

Chinese sailors getting drenched by fire hoses while harassing a U.S. Navy ship might make a great headline,, but the real fight is going on much more quietly on land. China has recently begun to engage in a resourceful legal warfare, or “lawfare” strategy to deny access to its coastal seas to warships and aircraft of the United States, Japan, and other countries in the region. This strategy, which was set forth in a recent Chinese defense white paper, proposed the“gradual extension of strategic depth for offshore defensive operations,” and for “enhancing [Chinese] capabilities in integrated maritime operations and nuclear counterattacks.”

A 2007 Department of Defense report to Congress on China’s military power explains that Chinese strategists have taken an increasing interest in international law as an instrument to deter adversaries prior to combat. Through an orchestrated program of scholarly articles and symposia, China is working to shape international opinion in favor of a distorted interpretation of the Law of the Sea by shifting scholarly views and national perspectives away from long-accepted norms of freedom of navigation and toward interpretations of increased coastal state sovereign authority. By doing so, China is misreading the law of the sea.

The United States should ensure navigational freedom and littoral access as a cornerstone of world maritime security. The U.S. Navy has spent hundreds of millions on building a new generation of high-tech Littoral Combat Ships and implementing “Seabasing” amphibious warfare tactics to effectively operate in the coastal zone—capability that is undermined by restrictive interpretations of the law. But all this planning will be for naught if China continues to advance on the battlefield of international law. The United States would be on a far stronger footing at diplomatic summits and military-to-military meetings if it joined the 1982 Law of the Sea Convention. To ensure the right of U.S. vessels to enjoy unhindered global mobility, the United States should continue resisting excessive coastal state maritime claims through diplomacy and operational challenges.

James Kraska  is a professor of International Law at the Naval War College, a guest investigator at the Marine Policy Center, Woods Hole Oceanographic Institution, and previously served as the oceans policy adviser for the Director of Strategic Plans & Policy, Joint Chiefs of Staff. Brian Wilson leads a Navy region legal office in Washington, D.C. is an MIT Seminar XXI fellow, and previously served as oceans policy adviser for the Under Secretary of Defense for Policy. The views are those of the authors and do not represent the official policy or position of the Department of Defense.