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Conventional Wisdom Overlooks China's Troubles

By Richard Halloran

When President Hu Jintao of China meets with President George W. Bush in Washington on Thursday, he will have behind him a troubled and vulnerable nation that will surely put him in a weakened negotiating posture with the Americans.

The conventional wisdom on China today holds that it has generated an economic miracle that is propelling Beijing into the top ranks of the global arena. While there is much truth in that image, it overlooks widespread political unrest, vast unemployment and under-employment, and a disruptive disparity in the sharing of economic progress.

Moreover, China's reliance on exports to drive its economic engine has left it exposed to external pressures, notably from the United States. Foreign investment has faltered. China has sought to lock up supplies of energy without much success. China's shipping lanes through the Malacca Strait in Southeast Asia are unprotected.

In addition are looming water shortages that affect not only agriculture but the economy and national security, inadequate public health and safety programs, and pollution caused by dumping industrial waste, accidental spills, and harmful smoke billowing from factories everywhere.

The U.S. Pacific Command, which is responsible for deterring or countering potential threats from China, summed up its annual economic assessment of the Asia-Pacific region with perhaps an understatement: "China faces great uncertainty."

The Chinese government has disclosed, through its official Xin Hua news agency, that there were 85,000 incidents of protest in 2005, up from 74,000 in 2004 and 58,000 the year before. A study by the Council on Foreign Relations in New York attributed those outbursts to "land confiscation, pollution, taxation, corruption, and religion," meaning religious persecution.

"Surging social unrest reflects frustration, particularly in the countryside, with the lack of redress available through official channels," the council found. Many protests are peaceful demonstrations but occasionally the police become repressive and in one instance at least, opened fired on the protesters and killed several.

Accurate estimates of unemployment and under-employment, meaning a worker has only one or two days work a week, range between 20 and 40 percent. Some 125 million people, equal to the population of Japan, are in motion every day looking for jobs. While urban Chinese have become better off, people in rural areas are getting poorer.

In a new twist, The New York Times reported earlier this month that shortages of skilled labor had appeared in coastal China where much of Chinese industry is situated. As the nation moves from low-tech to higher tech manufacturing, workers apparently are not being trained fast enough.

In trade, China ran a $202 billion surplus with the United States last year, the highest on record. A disruption of that export surplus, which might inconvenience Americans, could tip China's economy into a tailspin.

China sells little to the United States that Americans couldn't buy for comparable prices and quality from India, Southeast Asia, and Latin America. China, however, could not find a market anywhere near the size of that in America. Privately and candidly, Chinese scholars acknowledge this.

Moreover, foreign investment in companies and plants in China has leveled off. It peaked at $60 billion in 2004, was the same in 2005, and is projected not to rise this year. Some Americans worry that China's holding of $262 billion in U.S. Treasury bills gives Beijing leverage over Washington. That, however, is less than 12 percent of all foreign holdings.

Robert Zoellick, U.S. deputy secretary of state, said in September that U.S. business executives who saw China as a land of opportunity in the 1990's now "worry about Chinese competition, rampant piracy, counterfeiting, and currency manipulation."

Emblematic of China's energy concerns is what Ian Storey, a scholar at the Asia-Pacific Center for Security Studies in Honolulu, calls "China's Malacca Dilemma." China gets 60 percent of its oil imports from the Middle East, mostly shipped through the Malacca or Lombok Straits into the South China Sea.

"Over the past few years," Storey says, "Chinese leaders have come to view the straits, especially the Malacca Strait, as a strategic vulnerability." Beijing fears that its oil tankers "could be interdicted by hostile naval forces," which are unnamed but clearly mean those of the U.S. Navy.

"Any disruption to the free flow of energy resources into China," Storey concludes, "could derail the economic growth on which the Chinese government depends to shore-up its legitimacy and pursue its great power ambitions."

It has long been said that all foreign policy is rooted in domestic politics and economics. In China's case, that is doubly true.

Richard Halloran, a free lance writer in Honolulu, was a military correspondent for The New York Times for ten years. He can be reached at

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