<html><body>Will China be a Coherent Strategic Actor in Asia? March 14, 2005 Unedited transcript prepared from a tape recording <TABLE cellSpacing=1 cellPadding=1 width="100%" border=0> <TBODY> <TR> <TD>12:45 p.m. </TD> <TD> <DIV class=BodyText>Registration</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD>1:00</TD> <TD>Presenter:</TD> <TD>David Shambaugh, Brookings Institution and George Washington University</TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD>Discussant:</TD> <TD> <DIV class=BodyText>Ashley J. Tellis, Carnegie Endowment for International Peace</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Moderators:</DIV></TD> <TD> <DIV class=BodyText>Dan Blumenthal, AEI</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Phil Saunders, NDU</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD>2:30</TD> <TD> <DIV class=BodyText> </DIV></TD> <TD>Adjournment</TD></TR></TBODY></TABLE> Proceedings: MR. BLUMENTHAL:  My name is Dan Blumenthal, and I'm a Resident Fellow at the American Enterprise Institute.  And we're delighted to have such a great turnout today for our kickoff of the Joint National Defense University-American Enterprise Institute seminar series entitled "China and Asia." And the first order of business, I'd like to welcome Steve Flanagan, the Director of the Institute for National Strategic Studies at the National Defense University, to say a few welcoming remarks.  So over to you, Steve. MR. FLANAGAN:  Thank you very much, Dan.  I thank all of you for joining us today.  This is a critically important subject at a critically important time, of course, as the news media reports even over the weekend of the National People's Congress remind us. Just to explain a bit.  We are delighted to enter into this partnership with AEI in pursuing this series.  As some of you may know, National Defense University has had an active program of research on Chinese military affairs and security issues over the past 15 years, and we also have a role to play in the official military to military contact between the U.S. and the PRC and also with the government of Taiwan. But we felt it was important to really do justice to assessing this topic of China's rise in the east Asia and on a more global stage to do this in a much integrated fashion and bringing together some of the analytic tools that are not particularly strong at the National Defense University and within our Institute, in particular the elements of China's economic and trade policies and other aspects of its approach to the East Asian relationship. So we felt it was a perfect partnership when our adjunct research fellow, Ellen Frost, brought us together with Claude Barfield here at AEI, a recognition that there was a great deal of synergy and complementarity in our interests and that we could make a much more productive and fuller exposition of this topic in partnership. So we're delighted that first Claude and now Dan Blumenthal in joining, and we certainly appreciate the support that Chris DeMuth and others here at AEI have provided to get this series off the ground.  And we look forward to the continued dialogue. It's an effort that I think we all need to understand more clearly, and we hope that this series will shed a lot of light and not quite as much heat, as sometimes is shed on this topic, as we go forward and understand what China's rise does mean for us in the United States, but also of other countries in East Asia and the rest of the world. So, Dan, I look forward to the discussions, and we're delighted that David Shambaugh, who could join us today, is to kick this off, and in particular to my colleague, Dr. Phil Saunders and Ellen Frost, as I said who have been our anchors in getting off the ground.  So, Dan, I turn it back to you. MR. BLUMENTHAL:  Thank you very much, Steve.  And Steve mentioned Chris DeMuth, our President, who has a scheduling conflict but is very, very eager to get this kicked off; this very, very important topic; this very important effort to get policy making and opinion making focused on-- [Tape gap.] MR. BLUMENTHAL:  So we're delighted, as Steve said, to have two distinguished speakers, Dr. David Shambaugh of George Washington University, a prolific China expert, and Dr. Ashley Tellis, who recently left the Bush Administration, where he was a Asia Strategist, to join the Carnegie Endowment for International Peace. And they have the challenging, very challenging task before them of answering the question of "Will China be a Coherent Actor in Asia?"  It's particularly challenging, as Steve Flanagan just mentioned, because the political and economic situation in Asia is so fluid and it's changing so rapidly that just when the conventional wisdom has it one way in terms of China strategy, events seem to intervene to point to counteracting trends, and Steve Flanagan mentioned China's enactment of anti-succession law and some other activities with respect to Australia in the past week or so, what's been going on with the U.S. and Japan, and so forth. So anyway, so the point here is that events seem to often times intervene, and we have both Dr. Shambaugh and Dr. Tellis here to explain the underlying dynamics of China's behavior, both its acts of persuasion and other means of statecraft in crafting a China strategy. I'd like to turn it over to Dr. Phil Saunders before we get started, to say a few words.  He's done most of the heavy lifting in putting this together.  And he's going to just quickly frame the entire series that this is just the beginning of the series China and Asia, and he'll give a quick frame to the series.  So, Phil, if I could turn it over to you.  Thank you. MR. SAUNDERS:  We've been traveling a lot in the region over the last year, and one of the striking things is the economic impact that China is having on Asia.  And as a political scientist, I've been struck for quite awhile about the difficulty of understanding the relationships between economics and security. Political scientists see it one way.  Economists see the world in a very different way.  And sometimes never the twain shall meet. But on this issue, understanding China's growing power and influence in Asia, it's critical to try to get a perspective on that.  So that's one of our principal tasks in this series is to explicate the ways in which economics and security interact with each other. And we're going to do that--we're starting by addressing China's strategy.  We will be looking at the Chinese economy, both its strengths and potential weaknesses over the next couple next sessions. And from there, we will branch out to look at the impact that China is having on Asia in various dimensions.  How different countries in Asia are dealing with China.  What are their strategies.  What are the tools of influence that China is developing and using in the region.  Issues such as regional--trends toward regional economic integration.  And always, we're going to try to get at this question of what's the relationship between economics and security and how is that going to change over the next decade. This is a topic that deserves a lot of public attention, and it deserves the sustained attention of experts who are both political scientists and economists.  So we hope this series will serve that goal.  And let me stop there. MR. BLUMENTHAL:  Okay.  And now if we can begin with the presentation by Dr. David Shambaugh, which will then be followed by Dr. Ashley Tellis.  Thank you, David.  Over to you. DR. SHAMBAUGH:  Create some space up here.  Well, thank you, Dan and Phil, for your introduction and let's start by saying that, agreeing with you, this is really an important issue for American foreign policy, as well as for the countries around China in the Asian Pacific region, and the two of you and Steve and Ellen and Claude all I think deserve a great deal of credit for putting this series together.  And I'm really quite honored and I'm pleased to be here to kick off the first of these sessions.  Don't worry about that. So, really, this is a subject that has received rather episodic--and I don't mean this is a pejorative way--journalistic attention, rather than sustained and scholarly attention.  It's only in the last year or so that really any attention, even in the pages of the New York Times, about China's role in the region has begun to appear. And this is a subject I think--and I would agree with you--that's been really rather underappreciated in this city, in the U.S. government, and in the policy community.  But, like EU-China relations, one is beginning to get the sense that the U.S. government is beginning to wake up to the fact that China has relations with countries other than the United States. And that, in fact, China's relationship with the European Union, and China's relationship around its periphery and in all of Asia, and here I think it's very important for us in this series to realize that this is not just an engagement between China and East Asia, but very much Central and South Asia as well--quite literally all the way around China's periphery. But I think that we're in this city beginning to wake up, if that's the right word, and take notice that China's engagement of its periphery is, in fact, producing a fundamental transformation, in my view, in the Asian regional order, a regional order that has been dominated now for half a century by the United States and its allies.  So this is of great significance to, I would argue, world affairs, not just Asian regional affairs. In the last few months, in this process of waking up and taking notice, one hears the phrase in Foggy Bottom, and in U.S. embassies in the region, that "China is eating our lunch in Asia."  I have heard this phrase several times. The degree to which this is true I think is, in fact, questionable, and it deserves our attention and our analysis.  But clearly, there are some important shifts going on I believe in the region.  And this was rather succinctly summarized to me not so long ago by a friend and a senior diplomat in a Southeast Asian country, when he said, "David, the United States may still hold the balance of power in Asia, but it has already lost--past tense--the balance of influence in the region to China."  Unquote. Now, again, whether that's true or not, it's a testable assertion.  But it does suggest, particularly coming from Southeast Asia that there is something of significance afoot here of major consequence to the United States and indeed to the Asian region. Now whether this loss of influence--soft power, if you will--is, you know, unique to Asia or whether it's a subset of declining American influence globally--and I would argue that one must think of this on a global basis--declining American influence in Europe and in the Middle East, in particular, and even to a certain extent in Latin America, or whether this declining American influence has its own unique Asian characteristics, again we can investigate.  I would argue it's probably a bit of both. But the question to me is not necessarily the sort of title for this seminar this afternoon is China a Strategic Actor in Asia.  After all, what country is a coherent strategic actor anywhere, including surely not the United States. So that's not the right question to my mind. The issue to examine and understand in my view are the different component parts of China's regional engagement and to see if, in fact, these parts add up to some sort of coherent whole.  My own sense is that they are--and it's going to be very interesting to see as we move through these sessions--but my own sense is that these are reinforcing and complementary elements in China's peripheral engagement rather than the product of some kind of grand plan or master strategy, you know, launched by--in the Jung Nang Hai [ph] in Beijing. Now to the extent that China has a grand strategy, and I'm very mindful of the fact that my discussant today has published a book by that title, "China's Grand Strategy," a very good book, my sense is that if China does have one, that it would be based on five principal elements in this order: First, to maintain territorial unity and sovereignty. Secondly, to maintain the Chinese communist party in political power, domestically, of course. Third, to build, as all Chinese governments have since the 1870s in the self strengthening movement of Li Hongzhang and Zuo Zongtang, to build wealth and power, fu chang [ph]. Fourth, to use foreign policy to serve these first three goals.  So foreign policy is a means to an end or to these first three ends. And finally, derivatively, China's relations with its periphery, I would argue, is a subcomponent of the fourth one--foreign policy. So how can China's relations with its region help build wealth and power, maintain the party in power, and secure China's territorial integrity and sovereignty.  Those are the--if China has a grand strategy, I would argue those are at least some of the component parts. So let's now get into the issue of China's regional behavior and strategy.  Now, you have in your packets distributed to you an article that I've just--and I mean just--I hadn't even seen it my self--published in International--the pages of International Security.  It literally just came out. So, and it goes into rather considerable length about the sorts of things that I'm going to try and summarize for you today.  I don't have the time orally to do this subject in a substantial justice in terms of depth, but what I would like to do is highlight for you--take it home; read it at home; don't read it now; read it, you know, I don't want to tell you where to read it.  Maybe on an airplane or somewhere when you have some spare time. But what I'd like to try and do is to summarize three principal elements of this article. First, what are the parameters of China's regional engagement?  Secondly, what does it mean for the United States?  And third, what are the implications for the evolving Asian regional order? Now this--let's start with the first one.  The parameters of China's regional engagement, which is a term I very consciously use as opposed to China's rise, because I think China's rise leads us into certain paradigms, realist paradigms, and a certain set of assumptions, and even a certain set of conclusions that is only one prism through which to look at the issue.  To me, the issue is China's engagement with its periphery. Now, one sees this engagement in virtually all policy spheres.  Economic to be sure.  Diplomatic.  Military security, and multilateral institutional.  Four principal policy spheres. And in the diplomatic and the multilateral institutional, one has to I think credit Chinese diplomats with having pursued a very adept, nuanced set of policies towards its periphery in the last few years. And after all, this engagement of the periphery, one can argue, is a really rather recent phenomenon.  It dates really to 1998, I would argue.  Some elements appeared in '97 in the context of the so-called new security concept, which was unveiled first in that year by Chen Tse Chun [ph] and Tche Ha Tien [ph], during visits to Southeast Asia. But it's really from '98 onwards that one sees China beginning to really engage its periphery.  That's a rather recent phenomenon. So as a result of this engagement, and I would argue very successful diplomacy, the region sees China much differently than it previously saw China.  It increasingly sees China as a good neighbor, as a constructive partner, as a careful listener, and as a non-threatening regional power.  Those are the four ways I would characterize the perceptions generally speaking of China.  There are a couple of exceptions to this rule, which I'll talk about in a second, but I think overall that characterizes the view today. It doesn't mean those views--perceptions--can't change.  They could, but this is a particularly striking perspective when if one thinks back just a few years ago, to the '90s and the post '96 period, post Taiwan Strait crisis period, when, I don't know if it was the predominant, but at least a pervasive view was of a China that potentially could become domineering regional hegemone, and a powerful military threat. And indeed, if you look at even the pre '97 period, there was some evidence to suggest--to underlie that set of perceptions.  After all, in the post war period, post World War II, that is, China has not exactly been a status quo power in Asia.  It has been a revisionist power in Asia for much of that half century.  China, I have to remind you, for many years supported regional insurgencies against established governments, supported so-called fifth columns of overseas Chinese throughout the region, tried to export its own ideology throughout the region, and had border disputes, if not conflicts, with virtually every one of its neighbors. Now that legacy is in the back of the minds of many Asian countries, particularly Southeast Asian, but not exclusively Southeast Asian countries. Consider, too, that just a little bit over a decade ago, China did not even have formal diplomatic relations with South Korea, Indonesia, and  Singapore.  Its relations with Vietnam and India were very strained, indeed militarized, and the borders were militarized. And China itself was--I think it's fair to say--ostracized in the world after 1989, certainly in the western world.  I should qualify that--in the western world.  But after the collapse of the Soviet Union and East European Communist Party States was, I think, a profoundly traumatized leadership at least in China. So this is not so long ago.  To my students, it is.  But for those of us who are slightly older, it's not so long ago.  So one has to sort of keep this baggage or this background in mind when one looks at China's contemporary policy towards an engagement of its periphery. Today, it's fair to say or at least it can be argued--and I am amongst those who argue it--that China is a status quo power in Asia and is not a revisionist power in the region any longer.  It's no longer exporting ideology and weapons.  It's now exporting consumer durables and goodwill. All of its land boundaries disputes, save one, with India, have now been demarcated and agreed between China and its neighbors.  The border regions have been demilitarized in all those cases.  And even in the case of India, there is movement now towards final resolution, final status resolution--negotiations--and resolution on that border--and a number of confidence building measures have been put in place on the Sino-Indian border as well. You may ask what about maritime disputes.  Yes, China does have maritime disputes in the South China Sea and the East China Sea.  But at least in the case of the South China Sea, two significant developments ameliorate those disputes, one being the agreement of a code of conduct, of behavior, in the South China Sea that China and ASEAN agreed to I think three years ago. But more importantly, or as importantly, China's accession to the Treaty of Amity and Cooperation--you may ask many people in this city what is the ASEAN Treaty of Amity Cooperation.  They don't know in this city.  But it's a very important--it's a bedrock treaty of ASEAN.  It is core to, in 1967, to the establishment of ASEAN.  And China was the first foreign country to accede to the Treaty of Amity and Cooperation, which commits China and all member states to enforcing principles of non-aggression and non-interference, as well as a number of conflict resolution mechanisms. So through these two agreements, China has, I think, said pretty clearly that it will not resolve or resort to the use of coercion or force over maritime disputes. Also, as recently as seven years ago, China was calling for the abrogation of all alliances in the region, and indeed worldwide.  Today, or even six years ago, they stopped such calls.  Have they changed their mind about the role of alliances in the region?  Probably not.  Maybe so.  But, at any rate, those calls fell on deaf ears in the region, and I think it came as quite a surprise to China when many regional countries, particularly American allies, at least some of them, said to Beijing that they had no intention of abrogating their alliances to the United States, A, and, B, found these alliances as conducive to stability and security throughout the region. And that message, as I say, I think came as a bit of surprise to Beijing, but they have muted those expressions subsequently, and perhaps maybe change their own minds.  And they have told both President Bush, former Secretary of State Powell and other American officials that China welcomes an American role in Asia.  It does not seek to push the United States out of Asia.  These are the terms they use. They haven't actually come out and said that they support the American alliance structure in Asia.  That is a--they haven't said that, although I think the Bush Administration has taken these other statements to mean that, and that may be mistaken. But, nonetheless, China has moved to try and assuage American views about this issue of alliances.  So that's changed. Also, if you look back just six, seven years ago, China was outside of all regional organizations and was not very participatory in them.  I'll come back to that. So, if you look at these sort of indicators, there has been a sea change in China's approach to its periphery, and there has been I think a perceptual sea change in the periphery or the region's approach and views of China. Now, having said that, to be sure, one does have to note that there are latent fears--if that's the right word for it--concerns about the potential of a more coercive hegemonic China.  One still does hear concerns about the so-called China threat in some places in the region.  Where?  Obviously, Taiwan, needless to say.  But also, at least in my travels, in Tokyo, Hanoi, and New Delhi.  A very more minor extent in Singapore. But I would argue that even in these places, other than Taiwan, perhaps Tokyo, that view is now a distinct minority view, and that the majority view is that China is much more benign than malign.  But one has to--you know, one cannot conclude that China's charm offensive has won everybody over.  It has produced, I think, a rather substantial shift, but there are still concerns and those concerns can change, depending on China's behavior. Now it's also clear that some countries in the region, notably Japan and Singapore, in my view, are adopting hedging strategies towards their own security, but towards China or a potential overbearing hegemonic China.  And that is in their own self interests. But again, I think that the predominant characteristic of China's neighbors' own policies, regional policies is more one of what one might call semi-bandwagoning with Beijing than hedging against Beijing. So again, that's a kind of--it's a mixed picture, but it's a question of on balance which one is the dominant trend.  I would argue that it's the semi-bandwagoning rather than the hedging that is the dominant trend. In fact, if you look, you know, at most countries' regional policies towards China, the real hedging strategy, in my view, amongst many of them is to enmesh China in as many regional organizations as possible, to develop economic and political ties with China as a deeply as possible, to build sub-state, that is to say some governmental relations with China as extensively as possible, and to enhance security confidence building measures with China to the greatest extent possible.  That's the kind of hedging I see most Asian countries taking towards China, not hedging vis a vis an American protective umbrella. This has been Asia's strategy towards China of recent years, and, in fact, in the case of ASEAN, it goes back even earlier. So that's the way they want to hedge and protect themselves against the possibility of potential regional Chinese hegemony. Okay.  Let's look now at the component parts of China's peripheral engagement.  Four elements that I'm going to summarize.  The details--or at least in this article, there is more detail. First, engaging regional multilateral organizations.  It must be said first of all that many analysts, myself included, for many years argued that Asia was not ripe for regionalism; that is to say, regional institutionalism, if one defines regionalism as institutional organizations; that the region was just too diverse in terms of political systems, too diverse economically, too diverse ethnically, too diverse in their security interests and relationships, and that under such conditions of diversity, there wasn't coherence to form, you know, agreed regional organizations in any sphere.  And I'm not just talking here about the security realm.  And to be sure, Asia's got a long, long way to go before it reaches certainly the levels of the European Union or even the Americas.  But the process has begun, and unmistakably. And it has begun in recent years in a very Asian way, if you will, the ASEAN way:  a bottom up process, which is anchored on consensus building, track two diplomacy, or track one and a half diplomacy, in which issues are discussed and consensus is forged so that it will then percolate up to the governmental level and ministers or heads of state can agree.  It's a normative approach, I would argue, above all.  It's not based on hard power.  It's based on soft power. And China--this is still--it's very early.  You know, one can't say that we have Asian regionalism today.  We don't.  But it's begun in my view, and it's growing in various permutations.  The ASEA plus, you know, fill in the blank mechanisms.  The Shanghai Cooperation Organization, and others I would point you to. Now China has gone through a sort of--three-stage, I would argue, kind of learning process vis a vis regional multilateral organizations, starting in the late '90s. The first stage was one of suspicion, it's fair to say, of suspicion that these organizations were tools of the United States to be used in a containment or neo containment approach to China, and hence they didn't want any part of them. But then, around about '99, I would argue, China began to send observers to and sign up as members of many of these organizations, both track one and track two, including the ARF.  And they learned once they started sending representatives to these meetings that lo and behold they were not tools of the United States to be used in the containment of China.  In fact, the United States was frequently absent at such meetings, because we don't take track two diplomacy very seriously in our government.  Whereas, it is extremely serious to Asians.  If we do, we send a third Secretary from the political section of some local embassy to sit on the periphery of such a meeting. So the Chinese got in, and they realized that the Americans not only weren't present, they were certainly--these organizations were not American tools, and that made them warm up to them and begin to participate more fully.  And we're now into from I'd say 2002 onwards a third phase of increasing Chinese confidence about its own role in forging regional cooperation on a wide range of functional issues through regional institutions.  And we're beginning to see in a number of areas a much more assertive Chinese behavior in regional institutions.  And you know, one has to ask is this unique to Asia?  No, I think it parallels China's broader confidence and engagement of global institutions.  It may be a bit of a stretch, but I think China has embraced liberal institutionalism, with a capital L and a capital I in a major way.  They have gotten religion on this. And through such participation in liberal international institutions share with many other countries, particularly in the European Union, a view about the nature of inter-state relations, how they should be handled, and about global governance and about international law, and about the United Nations.  These are issues that generally don't receive a whole lot of attention in this country. But I'm arguing here there's a convergence between Beijing's views of these issues--global governance, international law, international institutions, particularly the U.N.--and those of the European Union, but other countries as well. So this convergence has been important both globally, but within Asia and particularly between ASEAN and China.  I would even argue between Japan and China.  So China has become very engaged in regional institutions. The second key area of China's regional engagement is bilaterally with all of its neighbors.  And here one only needs to look at the travels of China's senior officials and how frequently they have summits and major meetings at the head of state or premier level with their opposite numbers around their periphery.  It's staggering.  Where they find the time to do all that, plus go to the European Union and the United States and the Latin America and Africa, I don't know. But the intensity of this sort of bilateral political engagement--it doesn't mean that they only talk about politics--they talk very much about economics in these meetings--is really rather staggering. Secondly, if you look at China's embassies in Asia and the activity of China's diplomats throughout the region, it, too, is very impressive.  Long gone are the days when Chinese diplomats, you know, wear Mao suits and hide behind the walls of their embassies and don't go out and engage their local communities.  Quite to the contrary.  They are, to put words of the same Singaporean diplomat, everywhere in the region.  They're talking to local business groups.  They're talking to the local media.  They're talking to local Chinese communities.  They're engaging their societies in which they live or work, I should say. So Chinese diplomats, both at the, you know, national level, but also in the region, are very active.  And if you look at the two other kind of areas of bilateral engagement; one party-to-party ties.  This is not something that Americans tend to pay a lot of attention to--the relationship between political parties and those in other countries.  But the Chinese have along paid substantial attention to party-to-party relationships, and it's the international department of the Chinese Communist Party that manages this. Long ago, the international--in the early '80s--the International Department began to engage parties other than socialist and communist parties worldwide.  That started with Europe, the social democratic parties, and spread to other parts of the globe.  They are deeply engaged, the International Department of the CCP, around their periphery.  One example of that was last September when the International Department hosted the Third International Conference of Asian political parties in Beijing.  I bet you read about it in the pages of the New York Times.  No, you didn't.  It wasn't in the pages of the New York Times.  A non-issue to the American media.  Three hundred and fifty delegates from 81 parties and 35 countries, including seven heads of state came to Beijing for this meeting and agreed a document at the end of it. So that's a sort of subset of sort of non-state, but semi-state maybe interaction. Then at the non-state level also very important bilaterally.  If you look at just two areas--examples I'll give you:  students and tourists.  Training students from foreign countries in one's universities has been a traditional form of soft power and influence--at least so it's argued.  The United States has excelled at that in the post-war period.  European countries have also paid a lot of attention to it.  China is also now beginning to pay attention to this, not in enormous numbers, but growing. Last year, academic year, there were 77,000 plus foreign students in Chinese institutions of higher education, of which 80 percent came from the Asian region, of which 50 percent came from one country alone, South Korea.  Okay.  And they're studying more than Chinese and engineering.  They're getting advanced degrees in humanities and the social sciences as well. What impact is this going to have over time?  I don't know.  But at least these people who will return to their native lands--they will not stay behind in China to get jobs as they do in this country--they will return.  They will at least at a minimum be sensitized to Chinese perspectives, Chinese culture, Chinese history, Chinese politics, Chinese economy, and perhaps even Chinese food. That may have some residual effect as they rise up through their own systems on how they view China down the road.  And moreover, they will be interacting with their former classmates, because these kids are in China's premier elite institutions, who are training China's future elites.  So you're going to have what's known in political science as epistemic communities of emerging elites who will know each other from college days, university days, and interact subsequently. I got 15 more minutes  I know.  I started at 1:15 p.m.  Okay.  Right. Economic ties.  This is probably the most noteworthy dimension of all.  And here the statistics speak for themselves.  I won't recite them.  We don't, in fact, have year end 2004 statistics yet, but suffice to say a couple things.  One is that about half of China's total global trade is now intra-regional, within Asia.  This year, '04, it could be as much as $600 billion or more.  It was roughly $500 billion in '03. Foreign direct investment into China, 70 percent of it originates within the Asian Pacific region.  China's also beginning, though, to invest itself outwards, ODI, into the Asia Pacific region, albeit not in large quantities.  But it's beginning, and China is also now beginning to give aid and development assistance to a number of countries around its periphery. What about security?  And this is an enormous subject:  economic dimensions.  You're going to have other sessions in this series that will look at this in greater depth. What about the security dimension?  Here I would disaggregate it into three kind of sub-categories:  unilateral, bilateral, and multilateral engagement by China of its periphery. Now the first one is not engagement.  It's, in fact, the most worrying element and that is the modernization of the Chinese military and the rather substantial build up of China's military assets opposite Taiwan.  I need not elaborate that.  We're all fairly familiar with that.  And that is troubling to China's other neighbors; certainly troubling to Taiwan.  But it's also troubling to the region. But I would make the point that the build up opposite Taiwan is a rather specific allocation of resources.  One does not see--or I do not see--a broader pattern of acquisition of power projection capabilities that would give the Chinese military the ability to project its power further into the Asia Pacific region--Western Pacific, Southeast Asia, or elsewhere. One does not see China building aircraft carrier battle groups.  One does not see China building long-range bombers.  One does not see China acquiring blue water surface combatants in any numbers.  One does not see China building or acquiring large numbers of airborne command and control aircraft that would give it a multiplier effect in the air.  One does not see much over the water training.  One does not see China acquiring military bases abroad in the region.  And one does not see, in the writings of Chinese military doctrinal experts, much evidence of a power projection doctrine. So I would distinguish between a Taiwan-focused of the Chinese military, and it is very Taiwan focused from a broader power projection kind of focus.  It doesn't mean that they can't build towards a power projection focus over time.  But at the moment, I don't see that. Nonetheless, moving to the bilateral and the multilateral, China is very concerned about the perceptions of its military modernization abroad and within the region.  That, too, is a rather recent development.  China had dismissed such concerns previously as those who had ulterior motives. Now China realizes that there is a PR dimension to its military modernization and has engaged many of its neighbors in bilateral security dialogues and a series of military to military exchanges, not just naval port calls, but the training of regional military officers in Chinese military institutions and vice versa and a series of exchanges of delegations back and forth.  That's at the bilateral level. At the multilateral level, China is very involved, increasingly involved, in the ARF.  I would note of particular importance the Chinese Initiative for the Security Policy Conference, the SPC, that was launched last November through the ARF.  I would note, too, increasing Chinese military transparency, albeit far from a level one would like, but increasingly near the levels of other Asian militaries.  Not there yet completely at the level of, say, Japan, but if you compare the Chinese white papers compared to those of Thailand, Taiwan, the Philippines, even Australia, you will find comparability I would argue with the last white paper. Then you have a series of so-called strategic partnerships and the so-called new security concept.  This suggests to me, this sort of convergence, as I argue, of Chinese views of regional security and Asian views, at least Southeast Asian views of regional security. So the Chinese are trying to reassure and assuage concerns on their periphery about their military modernization program through such bilateral, multilateral efforts.  And, to a certain extent, it's working.  At least, it's my sense is it's working. Okay.  Let me see.  So that's in broad brush terms what China is doing on its periphery.  I was asked to address what does this mean for the United States?  So let me maybe very briefly, if I can do so. It suggests two--well, there are two questions that arise to my mind about the importance of or the consequences and implications of China's peripheral engagement for the United States.  The first is does China's increase in regional power and influence come at the expense of America's regional power and influence.  As China's regional power and influence grows, does it mean, ergo, that America's declines relatively?  That's the first question. The second question, more meaningful question, in my view, is whether--or the extent to which American and Chinese national interests and policies in the Asian region converge or diverge on a range of regional challenges.  Because at the end of the day even if one accepts a relative balance of power between the two countries is changing, the crucial issue to me is whether the two countries can find common ground on meeting and addressing at least a wide range of regional issues and to work together constructively and cooperatively to address these regional issues.  That's the real issue to me. On the first question, I don't subscribe to the realist view of the world that international relations is in a state of anarchy; that all countries seek power maximization; or that there is a set of zero sum relationships amongst powers.  I certainly don't subscribe to the school of so-called offensive realism, most associated with University of Chicago professor John Mearsheimer, that all powers seek regional and global hegemony; that the struggle for such power is zero sum; and that the rising power must inevitably clash with the predominant and established power.  And, therefore, for the established dominant power, the policy prescription should be one to preempt such a clash through preemptive engagement of a potential peer competitor.  I do not subscribe to that view, either. Thus, I do see--or I don't really see--I'm sorry--on the realist kind of view that China's rise in influence and power correlates directly with America's influence and power in the region.  There is room for both of us in the Asia Pacific region, and I don't see that our interest in policies and power are necessarily going to bump up against each other, which brings me to the second, more important question, and that is to what extent can we cooperate in the region. In the article that you have in your packet, I have a table of 35, no less than 35, regional issues, which I won't bore you with, 'cause that would take a long time.  And I find, you know, first of all that this is a very complex region in which not a single issue in the region does not involve the United States and China.  We are, whether we like it or not, living in the same neighborhood and engaged with every regional issue. Secondly not surprisingly, we do not see eye to eye on every regional issue.  That would be unnatural. But third that on the big issues, with two exceptions--the defense of Taiwan and the security role of Japan in the region--I find that on the major issues that the United States and Chinese interests and policies converge rather substantially.  Again, I refer you to the table. So where does this leave us for the overall evolving system in Asia? First the engagement by China of its periphery is a significant development, but it's not the only thing going on out there, nor--it's very important to note--can we say that the region is becoming Sinocentric again.  We are not seeing, not seeing, the emergence of some sort of new 21st century form of the tribute system in my view.  China's engagement and rising influence and power important, yes.  But, and I'll finish--but four things. First, the U.S. hub and spokes alliance architecture in the region is still the dominant security architecture in the region.  But it's not sufficient in and of itself to dominate the region, because many countries are outside of this architecture, China included.  But it is conducive to regional stability and security and has been for at least since 1975, and it benefits the whole region, including China.  So that's a major feature of the regional order. Second--or third if you include China's own emergence--is the emergence of this multilateral institutional architecture that is growing and the shared norms that underlie this architecture, shared norms rooted in the ASEAN view of--[Tape gap.] [TAPE FLIP.] DR. SHAMBAUGH:  Maybe there will become an Asian version of the OSCE.  I don't know.  We're not there yet, but the trend line is in that direction. Third, the U.S. and China, as I argue, enjoy substantial cooperation regionally, and that is of major, major importance.  And I think that it' growing rather than decreasing now, and Colin Powell calls it the best relationship ever.  Again, one can question whether that's the case, but certainly since 1989 that is the case and one does see the two countries having shared interests and common policies on a number of issues. And the final feature of the region has to do with growing interdependence--economic, technological, social, sub-state--interdependence among all societies in the region.  But China is increasingly kind of the center of this, I would argue growing web, of interdependence.  The article elaborates that in greater length than I have time to do today.  But it's not insignificant.  You know, if one only looks at GDPs and the number of missiles in a military's inventory, you're missing a lot of what's going on in Asia today.  What's going on in Asia today, as I say is at the sub-state level. So, in conclusion, all Asian nations and the United States have to react to China's regional policy and new engagement.  It need not be feared or opposed, I would argue, although some may hedge against it.  Many will bandwagon with it. But the point I'd like to close on is that integrating into the regional order has been a longstanding goal of virtually all Asian countries.  It has been a longstanding goal of the United States.  And that now that it's finally occurring along these dimensions that I've tried to at least note, it should be welcomed, not opposed by the United States. China is now at the regional table in a constructive way as a status quo power.  The challenge ahead is to lock in China into that position and to get China to help play its own responsible role in addressing not just regional but global challenges.  Okay.  Sorry.  I went a little bit longer than we want to. [Applause.] MR. BLUMENTHAL:  Thank you very much, David.  And we'll turn it over to Ashley Tellis for his discussant role.  Yeah, why don't you go ahead? DR. TELLIS:  Well, let me start by thanking Dan and Phillip for inviting me to comment on this paper that I actually had the pleasure to read in its entirety before David made his presentation.  It's a very comprehensive and it's an extremely balanced paper.  It's probably the single best source that I have seen describing China's initiatives in the last decade with respect to Chinese engagement of Asia.  And if one wanted to know everything about the subject without having to read too much, this is clearly the--and I'm not saying this just as a matter of form.  It is truly a very good survey of what China has done in a variety of issue areas with respect to engaging the countries on the periphery. What I want to do today is actually not comment on the paper in its detail, because it's extremely rich and there are many, many facets, most of which I actually agree with.  But to kind of step back and ask three questions that might help put David's basic thesis into a certain perspective.  And I suspect it's when we engage at the level of this perspective that we might actually sharpen the differences between David and my own view--my own views of what China is about. The organizers of this meeting asked me to be both provocative and brief, so I will offer my remarks in very bold strokes with the intent of keeping you awake for the rest of the session.  Speak for about 10 to 12 minutes and then leave the floor open to questions. There are three questions that I think we need to think about when we look at China and Asia.  The first is how is China engaging Asia, along what dimensions, and in what forms.  And I think on this question, David's paper does yeoman's service.  It's really superb. There is a second question which is why is China engaging Asia in the multifaceted ways that David describes.  And there is a third question, which is what are the strategic implications for the United States of China's continued success in this engagement with Asia. I'm not going to try and rehash the first question because I think you just have to read the paper and you'll get the story.  I do want to engage questions two and three, though.  First, to start off by giving you my take on why China is engaging Asia in the way that David describes and then to say something by way of implications for the United States. I would argue that the Chinese effort to engage Asia in the cooperative broad-minded institutionalist way that David describes is first a development that we've seen primarily from the second half of the 1990s onwards, and it's a strategic development which owes, to some degree of calculation, of course, states are complex entities.  Nobody has a clear cut grand strategy, except the United States, of course, which actually publishes it in a document every year.  But most states have a certain sense of where their interests lie.  And between the bureaucratic processes within states, they somehow muddle along, optimize as they can and end up pursuing courses of action that in my judgment actually have a certain fidelity with their interests and with the goals that they seek to pursue in the international environment. And so the fact that China since the mid 1990s onwards actually has put in a considerable amount of resources, bureaucratic, institutional, in engaging the countries in the Asian periphery is to my mind not an accident.  It's one more step in the further evolution of China's rise to great power status, and it represents another facet of China's effort to engage the international system while minimizing costs to itself. And let me flesh this out in three ways.  I think there are three distinct objectives that underline China's efforts to reengage Asia in the way that David described. The first is that China seeks to gain all the economic benefits that derive from economic interdependence, because they promise accelerated accumulation of comprehensive national power.  The Chinese have recognized that, in a sense, the liberal economic strategy for growth actually works.  Trade and specialization leads to expansion of the global production possibility frontier, and that's good for all the actors in the arena. And so, from China's point of view, if the objective is the accumulation of comprehensive national power, then being part of a system or a web of economic interdependence in the Asian Pacific region actually advances the grand strategic objective of becoming a great power sooner rather than later. The second objective, I would argue that underlies China's reengagement or concerted engagement of Asia, is to prevent the rise of balancing coalitions that could arise potentially to China's growth.  The Chinese have had 500 years of the modern history of the nation state to reflect upon.  They have had realist histories that have been written over the last 500 years to think about.  And they have reached the conclusion that, in effect, China's growth as an economic power leads to a certain disequilibrium in the Asia Pacific environment, and that, if not addressed, if not modulated, could over time lead to the creation of balancing coalitions, which could lock China into security competition, which, in turn, could weaken China's preferences for rapid economic growth. And so part of the reengagement strategy clearly has a political dimension, which is to reach out to countries and reassure them about China's grand strategic objectives in order to prevent the rise of balancing coalitions over time about China. And I would argue that there is third objective as well, which is silent and recessed in China's current strategy, but is likely to manifest itself more and more prominently over time, and we can quibble and argue about what these time lines are. But there is a third element and here is the element of provocation that I want to put on the table.  I would argue that the third objective in Chinese reengagement is to pave the way for China to gradually and peacefully supplant the United States as the principal provider of security in Asia. Let me say a few things by way of these three objectives.  The reengagement that David describes at great length and I think with great fidelity to the facts is a rational strategy for a China that is between the times; that is a China that is not yet a great power, but has great power capabilities within its grasp. It's a strategy that is prudent.  It's a strategy that reflects that Beijing has recognized that it has to be careful, both respect to how it articulates the objectives that it seeks to pursue and its national interests.  And it needs to be careful about the kinds of instruments that it requires to service those objectives. And so the kind of reengagement and the kind of military modernization that David describes appears to me to be a prudent strategy and in some sense actually a conservative strategy on the part of Beijing, which is quite appropriate for Beijing's circumstances. There are two issues.  There are two forks in the road here.  One is what does the Chinese conviction about keeping Taiwan as part of the Chinese political system no matter what the cost mean for the success of the strategy.  This is a very serious issue that has both near and long-term consequences. In effect, what I'm insinuating is that there is some tension between the Chinese objective of creating a peaceful economic environment in the near term in order to promote the grand strategic objective of national accumulation of power and the near-term imperatives that may push China into a conflict over Taiwan which could disrupt this grand strategic objective. There is a second issue, and the second issue is when we think of China's interests and its strategies, we need to be very careful not to confuse what I think of as interim goals and interim instruments with final goals and final instruments.  And the interim is essentially China's instruments and China's strategies today, and the word final is essentially the kinds of goals and instruments that China would have once it passed the point of becoming a true great power. My biggest disagreement with David and his paper is that I think he jumps too quickly from what is a good description of China's near-term goals and accurate descriptions of China's near-term capabilities to inferences that in a sense are more permanent about China's interests and China's behavior, which in my judgment may not survive the long term; certainly may not survive the point after which China acquires the great power capabilities that we all acknowledge it is seeking. There are many dimensions to this debate, of course, and I just want to flag three or four things for David to consider.  I agree entirely that when we look at these interim goals and instruments that David describes at length, there is no evidence that China today is acquiring power projection capabilities or power projection doctrine. However, I would ask whether a continental power like China that essentially abuts all the major peripheral areas of Asia that are of interest to it actually needs a power projection capability at least in the near term. When one looks more closely at the patterns of Chinese military modernization, one actually finds it is carefully exploiting its continental location to be able to apply power at various points along its periphery without the need for any power projection capabilities in the classic sense that we associate with the United States.  And so in some sense, geography is favorable to China.  And Chinese military planners I think have prudently concluded that if you have to change outcomes on nuclear free, you don't need to do it through carrier battle groups.  But you can do it through the acquisition of fourth generation and fifth generation fighter forces, modernizing logistics, modernizing command and control, et cetera, et cetera, et cetera. The defense white paper in 2004 also introduces interesting concepts like command of the sea and command of the air, which I see as being interesting building blocks that could be used by a state down the line if it wants to superimpose a power projection profile. I don't know whether this is the direction the Chinese will go, but I'm saying that China's geography and the kinds of investments that it's making effectively put it in a position where it can influence outcomes on its periphery without the need to acquire power projection capabilities.  And, therefore. the inference that David draws may not exactly follow.  I am personally not yet convinced that China's affirmation of Asian norms and its participation in Asian institutions actually reflects a substantive commitment to liberal institutionalism as a form of doing business.  At the very least to me, the jury is still out that the same evidence that David cites is compatible with the purely instrumental approach to institutions, which is I use these institutions in order to secure relative gains, pacify the neighborhood, while still keeping all my options open with respect to whatever my grand strategic objectives over time may be. And so I think the evidence to me is not conclusive that the Chinese have, in fact, made the kind of conversion that David argues.  I think there is some evidence in addition that China still considers America's Asian alliances as potential restraints on its freedom of action in Asia.  And you see this very clearly with respect to Taiwan, for example, and the discourse of the last few weeks reminding Australia that its [inaudible] entanglements could cause problems with China, et cetera, are more evidence in this regard. When one flips the coin and looks at the regional response to China, my own view is that the region today is much more cautious and much more concerned about hedging than I think David gives them credit for.  But in classical Asian fashion, all the Asian states don't want to name names, because naming makes enemies.  And so everyone prefers to hedge in the Asian fashion of a great deal of symbolism, a great deal of the exercise of symbols of rhetoric, of good language.  But everyone in a sense knows who the dragon in the neighborhood is, and everyone knows the importance of keeping their power dry and keeping options open. I agree with David entirely that the worst thing that could happen to any of the Asian states today is that they be forced to choose between China and the United States.  But that does not foreclose the prospect that at some point there may be situations where they are forced to choose and the consequences of how they might react in those circumstances would certainly be interesting to look at. There's a second large set of comments that I would like to make briefly.  First, it seems to me that China's choices, both respect to its goals and instruments are interesting precisely because they are capable of further evolution, and evolution in directions that actually become competitive with our interests. And I'll put my own prejudices here clearly on the table.  I believe that if China succeeds in its quest to acquire true great power capabilities, truly because of the kind that you imagine great powers to be, that it would not want to create some sort of a Sinocentric regional order.  All great powers do this.  I don't see China as being exceptional.  This does not imply that China would necessarily be hegemonistic in the classic sense that the Chinese complain about, but it would still seek acquire the privileges, to acquire all the prerogatives that essentially accrue to great powers in their immediate peripheries. And so I could imagine down the line a Sinocentric regional order in the Asia Pacific which involves the requirement that the regional states be deferential to Beijing, recognize and incorporate Chinese interests in their own strategic calculus vis a vis China and others, and that a certain premium is put on the regional states actually maintaining relatively weak links with the United States, because in that kind of a world, one could imagine China looking at the United States and seeing it primarily as a balancer that allows various peripheral countries to challenge Chinese interests because of their connections with the U.S. These are not unreasonable goals for China to pursue given the fact, by our assumption, it becomes a great power at some point in time and the fact that if it behaved in this particular way, it would essentially be mirroring the kinds of behaviors that most great powers have reflected in history. In fact, I would be surprised that a China that became a true great power did not act this way.  This would be truly exceptional, not only in the 500-year experience of the European nation states, but even if one goes way back in western political history, which is the only history that I'm familiar with. Let me say a few things by way of conclusion with respect to what are the implications, what do I see as the strategic implications of the United States.  This is a very complex and involved question and obviously one can't kind of take it apart at any length.  But I want to make five quick points for your consideration. First, David dismisses the history of previous rising powers I think a tad too easily.  I think there is enough there that should at least give us reason for pause, and unless one can make a very persuasive argument for Chinese exceptionalism--and I do not see this exceptionalism, as he does, as being derived from Chinese history--I would argue that the rise and fall of previous great powers has things to tell us with respect to anticipating Chinese behavior in Asia. In fact, it's my view that Beijing thinks that the rise and fall of previous great powers has something to tell Beijing.  And the whole history of China's peaceful rise doctrine was intimately linked with the Communist Party's efforts to understand how do we get out of the great power trap that linked previous great powers. The second point that I will make and this is very important for the United States, the Bush Administration seems to believe that in some sense the strategic neglect of Asia is tolerable because balances of power are always automatic.  They automatically fall.  And so if the Chinese really start getting too big for their boots at some point in time, we really won't have any problems.  We'll just waltz into the region and all the regional states will be happy to, in a sense, do our bidding and create the coalition. My argument would be balancing is never easy, nor is it automatic.  And so from a U.S. point of view, we need to engage in hedging strategies of our own.  And the best hedging strategy we can engage in at the moment are two-fold.  Engage China while we can in every dimension, in every possible way, even as we continue to engage both existing alliance partners and prospective alliance partners.  Just as China keeps its powder dry, I would urge the U.S. to keep its own powder dry, too. The third point that I would urge for consideration is that as China increases in capacity, Beijing will have resources to engage in alliance making and alliance breaking of its own.  The great thing about powers that are in a sense increasing in economic capacity is that they have resources with which to play the great power game, too.  And so being able to buy people off, to get them to defect from U.S.-led coalitions, to get them to undermine U.S. interests in the region will again become part and parcel of great power politics in this part of the world.  We should not be surprised if it happens. The fourth issue, which I think is very interesting and I don't have a point of view on this is the whole issue of economic interdependence and how economic interdependence constraints both the choices of the regional states, Chinese choices vis a vis the regional states and U.S. choices vis a vis the region.  I mean this is an area that I think needs a lot more research.  It's something I just flag because again it affects the assumption that balances of power will be automatic in the case of a crisis.  I just flagged that out. The fifth point that I will make is, you know, what should the U.S. do in this moment of--when we find ourselves between the times.  My single point solution early on was engage China across the board because it's a good insurance policy.  Engage your partners, both those formal and prospective across the board as well. Let met add one more point.  I think what we need to do is to, for our own sake, widen the gap between our own power and that of Chinese power.  And we can widen that gap primarily in my judgment through internal balancing.  Let's get our economic house in order.  Let's focus on what is required to be done in terms of budget and trade deficits.  Let's focus on the quality of capital formation in the United States and the quality of education.  If we widen the gap through internal balancing between China and the United States, we may find ourselves in the wonderful position where we don't have to worry about the rise of China as a great power, and that I think is the perfect outcome from a purely  U.S. point of view to find ourselves in.  Thank you. [Applause.] MR. BLUMENTHAL:  Well, thank you very much, both Dr. Shambaugh and Dr. Tellis for excellent presentations, quite sharp distinctions.  Have time for just a few questions.  So I want to open it up.  I will pass on the prerogative, moderator's prerogative to ask the first question because of time constraints.  The rules of the game are identify yourself, your affiliation, and keep it to a question on the topic rather than a comment.  So we have time for a few, and the first hand has gone up over here. MR. BERZIK:  Yeah.  Good afternoon.  My name is Sebastian Berzik [ph].  I'm with the European Institute for Asian Studies in Brussels.  Well, my question is what is the role of the European Union in the developments we discussed here today?  Could you elaborate on that, both please?  Thank you. DR. SHAMBAUGH:  Well, this is my other favorite subject.  Indeed, the last time I was here at AEI, a couple weeks ago, we were talking about the European Union and China. It's important I think to link these two issues; that is to say China and Asia and China and Europe because these are two of the three key legs of--if not four I suppose--of Chinese foreign policy; the United States and Russia being the other two.  But what's the role of the European Union?  You're here doing research on that subject I know, but you know the European Union is deeply involved in Asian and in China on a soft power basis, I would argue.  We had a whole session on that here last time.  Economically very involved.  Very involved in capacity building in China. I would just note one convergence between the European Union and some Asian countries.  They share a concern about internal Chinese stability and the ability of the Chinese state, at all levels, not just the central state, to meet a series of internal governance challenges. And the EU is pouring millions of euros into state capacity building in a whole range of subjects in China.  This is not a session on the EU.  But the point is that Japan also has done for a long time and I think we might see increasingly some ASEAN contributions to that. So there is a shared sense here between Asia and Europe that a stable China means a stable Asia.  Okay.  The United States doesn't look through that prism at all.  We look only through the hard power prism of a rising China.  Whereas, other Asian countries and European countries tend to look through the prism of China as a transitional society, moving from state socialism to more varied mixtures, economically and politically; and to help China successfully manage those transitions.  That's the Asian view.  That's the European view. I think the United States has got to start walking on two legs with respect to this issue and start thinking beyond hard power and rising China and begin to look a bit more at soft power instruments, not just vis a vis China, but vis a vis the whole region, as well as internal capacity building, not just in China, but Indonesia and other parts of the region.  So that's one way I would respond to your question. DR. TELLIS:  I have a somewhat different take on that.  I think it's absolutely important that the EU contribute by supporting the building of state capacities.  I think that's extremely important.  But I see the U.S. as having no alternative but to think of hard power questions, in part because we have an alliance system in the Asia Pacific which involves guarantees, sovereign guarantees, that we may one day be called upon to make good. And so we can't be oblivious in a sense to things that are happening in this regard.  And as far as the EU is concerned, the most pressing issue for us today I would argue is dealing with the whole future of the arms embargo and what that implies. And the prospect that the alteration of the current embargo leading to the growth of Chinese military capacity would one, create real problems for our alliance obligations, and, two, I think has the potential to put us on a course where European interests and American interests actually become competitive and difficult. MR. BLUMENTHAL:  Yes.  There's a question back there. MR. KOMORI:  My name is Yoshi Komori [ph], and I'm with the Japanese newspaper Sankei Shibun.  I'm a bit intrigued by professor Shambaugh's observation about Japan--observation to the effect that the majority in Japan perceives China as a benign, non-threatening status quo power, because I'm intrigued because for one thing the government of Japan has recently come up with a series of unprecedented statements of protest and concern over China's military activities, and secondly the Japanese government and a good part of the public expressed concern and protest again over what they perceived as China's unilateral somewhat hegemonic pursuit over--for acquisition of the natural resources in the part of the East China Sea that had been disputed by both countries. MR. BLUMENTHAL:  Okay.  Can--what is-- MR. KOMORI:  Maybe can you educate me on as to what I might be missing. DR. SHAMBAUGH:  Yeah.  I think you misunderstood entirely what I said on this particular subject.  Maybe I was speaking too quickly.  But I said with two exceptions--Japan and Taiwan--the general regional view of China is more benign than malign.  But I very carefully said Japan and Taiwan.  So I hope that in the pages of Sankei, you actually get that correct.  I did not and for the reasons you just elaborated.  It's not the case in Japan that there is a more benign view of China.  Quite to the contrary, for the reasons you just elaborated.  So I hope you--you misunderstood me. MR. BLUMENTHAL:  Question all the way in the back. MR          :  [Off mike] years for China.  Why I throw this question because before the 2008 Beijing Olympic, and the Beijing 2008 Olympic is something that the Chinese dream, which has brought China from making a military exercise or invading Taiwan.  So I want to ask how do these speakers think about what will be the biggest issue in the coming three years and say which will happen, with strict the role. MR. BLUMENTHAL:  Okay.  Phil, do you want to take that? DR. SHAMBAUGH:  It's not a question about the topic that spoke of today.  This is a journalistic question about what's coming in the next few years, and I don't myself want to respond to it. MR. BLUMENTHAL:  [Off mike].  We have a question right here. MS. DAYUNDAY:  Thank you.  My name is Misub de Korian Arist Dayunday [ph]. Both of you did not mention Korean Peninsula issues.  I'd like to ask Korea's future that's near our future, future fortune in the context of China's influence rising in the Asia; whereas, the United States influence in Asia is getting shrinking.  So would you explain what is the future of Korea? DR. SHAMBAUGH:  Well, there was only so much time and even though I took more time than I was supposed to, you're quite right to note that China's relationship with both Koreas is really a critical part of its overall peripheral engagement.  I would simply refer you to the article in your packet, where there is a very long description about China and South Korean relations and engagement.  And I don't think it makes sense to take time to repeat what's already written there. But on the North Korean side, I would just say that China's view of the North Korean issue goes well beyond nuclear weapons, and it doesn't start with nuclear weapons.  Nuclear weapons are an important element of China's approach to North Korea.  But it is by far not the only element. Of greater importance to China is regime stability, opening of North Korea to the region and the world, and avoiding a meltdown and a failed state in North Korea.  Those are China's priorities.  So it's not to say that nuclear weapons is not unimportant, but it's not the only issue for Beijing in my view, but-- MR. BLUMENTHAL:  Question over here. MR. BROWN:  Thank you.  Chris Brown [ph] from the Hudson Institute  I just had a quick question about the role Russia and particularly Russian resources will play especially from the example of the pipeline debate between China, Japan, Russia, and all that. MR. BLUMENTHAL:  That's the next session.  We'll have to wait 'til the next session when we discuss energy competition, which will be our next session  A little plug for our next session in April.  So let's keep the questions to this particular topic about China's Asia strategy. MR. GORDON:  I'm Bernard Gordon, University of New Hampshire.  I first want to compliment both speakers.  It was as perfect an illustration of the major divergent views on China as I've heard in recent times. The question for both of you is this.  I think both, and particularly David Shambaugh, have identified the mid-'90s as the time in which China began to engage with the rest of East Asia or Southeast Asia, particularly, and I think Mr. Tellis probably accepts that similar view.  The question is this:  how much do either of you or both of you regard that as a self motivating event in comparison with the view that says it was the U.S. by virtue of its alleged ignoring of the consequences of the Asian economic crisis in '97-'98.  How much of the issue was a function of the U.S. indolence allegedly and how much was a China-inspired momentum of its own. DR. SHAMBAUGH:  Well, good question, Bernie.  And again, there's a whole section of this article that addresses the question you just asked, which is essentially--if I could rephrase it--what led to the China's engagement of its periphery?  It didn't just drop from the sky, you know, by osmosis overnight.  And I argue in there there were five principal stimulants to China's engagement. The first was that Asia did not ostracize China after Tiananmen in 1989 like the West did.  The second was China's responsible behavior during the Asian financial crisis, unlike the IMF or the perception at least to the IMF and the United States.  Third was the so-called peace and development debate in the aftermath of the Belgrade bombing.  Now you may ask what does Kosovo have to do with China's relationship with its region? A lot.  And because they launched a year plus long internal debate amongst the Chinese security experts about whether this theory of peace and development was still the, you know, trend of the times as Deng Xiaoping had told us.  And they concluded that, yes, it was, but that China had to be much more proactive in shaping the environment around it to be conducive to internal development.  So the peace side of the equation, if you were, China decided coming out of that debate to be more proactive rather than reactive in its neighborhood. And then the fourth--I can't remember all five--but there are two others I can refer to you.  Oh, the call to eliminate alliances, which I did mention, fell on deaf ears, and so that sort of took them aback. Oh, and finally, the kind of learning curve through which China passed on regional organizations that I also tagged briefly.  So it wasn't a single factor that led to China's regional engagement, and it certainly wasn't, you know, just the American preoccupation elsewhere that did it, although I don't know maybe Ashley may have a different take on this. DR. TELLIS:  I agree with that.  I think U.S. distraction in some sense was contributing but I don't see it as being an efficient cause.  Even if you pass it as counterfactual that the U.S. was continually engaged throughout the late '90s right up to the present day, I would argue that there would be good reasons for China to follow the policy that it does currently, because autonomously it makes sense within its own strategy and so our distraction might have provided in a sense a structural opening for this to become more prominent, but it was by no means in my judgment driven by U.S. distraction.  There were good reason for China and all the five that David points to are reasons I agree with completely. MR. BLUMENTHAL:  This will have to be the last question. MR. POMPER:  Miles Pomper [ph] from Arms Control Today.  It was briefly mentioned that China was seen to be using arms transfers, and I guess missile sales and so on, less as a regional tool of influence interfering in other countries in that way and the lesser extent.  I'm just wondering if you could elaborate a little bit more on that, both Dr. Shambaugh and Dr. Tellis, and I don't know if Mr. Saunders wants to get into this as well.  But-- DR. SHAMBAUGH:  Well, first of all, China--since the end of the Iran-Iraq War, China has been a minimal military supplier on a global basis.  The last figures I'm aware of China sold I think about $400 billion--sorry--$400 million--excuse me--plus of weapons worldwide in '03 I think it was, of which about 50 percent went to Burma or Myanmar, and Bangladesh.  I mean so you could say the two largest--and Pakistan. So the three big recipients of all $400 million worth of weapons are on China's periphery, but, you know, come on.  These are weapons that China and nobody else wants to buy, to be candid about it.  An I don't see China using this instrument on its periphery, except with the Pakistani military.  That is something of a distinction.  You know, this is not a tool in their toolbox of regional diplomacy actually, which is interesting, come to think of it, because, you know, any power trying to build influence uses arms sales as a means to do so. And in the Myanmar case, it's true, but Myanmar has no other option, and Bangladesh, you know, I'm not sure they really have another option either. MR. SAUNDERS:  One quick addition.  That's certainly basically true and China doesn't have a lot to offer unless you want cheap low-tech 1970s vintage arms.  But one qualification is we just got back from the Philippines and Indonesia, and it was--we were certainly told that China was using the possibility of transfers of defense industry technology and co-production deals as a new element of its diplomacy with both countries.  So, if not classical arms sales, the possibility of technology sharing is a new dimension. MR. BLUMENTHAL:  Ashley, you might want to comment on having been in India for a few years something that I think the Indians are concerned about in terms of building facilities in Pakistan and along the Straits of Mallaca. DR. TELLIS:  A couple of things.  China's behavior with respect to WMD transfers has certainly evolved a great deal since the '80s.  And to the extent that China continues to be a proliferator of WMD-related technologies, the principal recipient is still Pakistan.  And that is a very special relationship, so one needs to be careful about how one extrapolates from that. Secondly, and this is the point that I tried to make earlier on in the paper, China is looking at its security environment as a continental power, and so the substitute for power projection has often been the quest to acquire access to [inaudible], and the two big investments which are intriguing is first the investment they're making in Gowadar, which is the port in West Pakistan, very close to the Iranian border--literally building the port from scratch.  And you have to ask yourself, you know, what is the commercial and the military consequences of a Chinese facility or a Chinese-funded facility there. The second is there a range of small installations in Burma, along the Burmese--along the Aracon [ph] Coast.  And again you have to ask yourself, you know, what is the strategic logic for these investments. Now when you tie this to China's own energy demands, the presumption that they will one day be operating in the Indian Ocean for oil security, et cetera, et cetera, these things begin to fall in place. But again, it goes to the point of they have alternatives to classical power projection and at least at the moment seem to be making these investments as a substitute. MR. BLUMENTHAL:  Well we're going to have to end this here.  And I just want to say two things.  First, I'd like to thank our speakers for a delightful and inspiring discussion. [Applause.] MR. BLUMENTHAL:  Secondly, I'd like to say that we're going to try to do this but once a month on different topics, so look for an announcement--not with these speakers--don't worry--with others. And the third is that you can actually watch a--on the AEI web site there is a--what are those things called--a telecast--a video of the event that you can watch in its entirety. So thank you very much.</body></html>