Monday, February 15, 2010

Chinese Officials Threaten Economic War on U.S.

Defense News


Chinese Officials Threaten Economic War on U.S.

But Specialists Pooh-pooh Comments

By Wendell Minnick

TAIPEI — Chinese military officials are openly advocating the use of punitive economic measures against the United States should Taiwan arms deals continue, although some observers say the comments do not reflect official government policy.

The threats were published Feb. 8 in Outlook Weekly, a Chinese-language magazine published by the official, state-run Xinhua news agency. Members of the National Defense University and Academy of Military Sciences made comments advocating economic warfare against the United States.

Maj. Gen. Luo Yuan and Maj. Gen. Zhu Chenghu, along with Senior Col. Ke Chun­qiao, said China should dump U.S. Treasury bonds, now amounting to roughly $800 billion, to punish Washington for the Jan. 29 release of a $6.4 billion arms deal to Taiwan.

“Our retaliation should not be restricted to merely military matters, and we should adopt a strategic package of counterpunches covering politics, military affairs, diplomacy and economics to treat both the symptoms and root cause of this disease,” said Luo, a researcher at the Academy of Military Sciences.

The comments follow threats by Chinese military and government officials to sanction U.S. companies after the recent release of arms to Taiwan. The deal included Black Hawk helicopters, Patriot missiles and Navy minesweepers.

Zhu, who serves as dean of the National Defense University and advocates economic warfare, had been in hot water over past comments. In July 2005, Zhu remarked China would use nuclear weapons if the United States attacked China during a conflict over Taiwan. He later emphasized they were his personal views and not those of Beijing.

The remarks made in Outlook are not being taken too seriously by some Western observers because the military does not have a say in foreign and economic policy.

“I don’t believe that the PLA [People’s Liberation Army] has any influence on Chinese decisions about U.S. Treasury holdings,” said Bonnie Glaser, senior fellow at the Washington-based Center for Strategic and International Studies.

“Moreover, China’s debt holdings aren’t a source of leverage over America’s economy.” If China dumped U.S. bonds, it would mean Beijing was willing to sacrifice its own economic prosperity to make a political point, she said. “China’s investment in U.S. treasuries is simply another example of how interdependent the U.S. and Chinese economies are.” 

Government’s Frustration 

A Chinese academic who spoke on condition of anonymity said that, at a minimum, the comments reflect the Chinese government’s frustration and anger over arms sales.

“Too oftentimes, American policymakers tend to take for granted Chinese ‘acquiescence’ on U.S. arms sales to Taiwan, and that is something that has become increasingly counterproductive, if not dangerous, as the shifting balance of power, perceived or real, between China and the U.S. has unsettled the ‘equilibrium’ of the game,” the academic said.

However, not everyone in China’s academic community feels the comments reflect the government’s position.

“Don’t take them too seriously. I have to say that their views are very ‘emotional’ and ‘radical,’” said Zhu Feng, deputy director at the Center for International and Strategic Studies at Peking University. “It’s insane, inflammatory, totally pointless and clueless.” Zhu said the comments illustrate the importance of maintaining strong military-to­military relations with the United States.

“Their misperception does not come from their spontaneous or born-to-have resentment to the U.S., but from their lack of solid understanding of the world in general and the U.S. in particular,” Zhu said.

The objective of the Outlook article appears to be twofold. First, to demonstrate to internal audiences in the military “the degree of displeasure the PLA feels about the arms sales and its search for ways in which to punish the U.S., especially down the road if even more significant arms sales, such as with the F-16, were to take place,” said Tai Ming Cheung, author of the book “Fortifying China.”

Second, the remarks by military academics are a “speculative effort by the PLA” to see if it can influence international financial markets over the Taiwan issue in hopes Wall Street will pressure the White House to kill future arms deals.

“A type of indirect economic warfare approach, but done at a low, measured level,” Cheung said.

Even though the remarks can be dismissed, there appears to be an increasing trend out of Beijing to use economic power to influence U.S. foreign policy decisions.

“It is interesting that Chinese military officers have been willing to make public comments in an officially sanctioned media outlet about the use of economic instruments to serve strategic ends,” Cheung said.

“This marks an evolution in how the Chinese military are using the media to signal their displeasure. In the past, unnamed Chinese military officials would make comments in the pro-Chinese Hong Kong media. For example, during the cross-strait military tensions in 1995-1996, bellicose remarks by anonymous PLA officials negatively impacted the Taipei stock market, and PLA studies have pointed positively to this type of indirect economic warfare,” Cheung said.

However, Glaser said a phase of allowing its citizens, including the PLA, “to vent their anger against the U.S.” could be ending. “I expect the window of allowing Chinese citizens to rail against the U.S. arms sale is about to end,” she said. “It doesn’t serve China’s interests to whip up too much nationalistic sentiment against the United States.”