- The Washington Times - Tuesday, April 10, 2001

A stones throw from my bedroom, in the alleys near Beijings Drum Tower, a resident Peoples Liberation Army unit roars out a ritual slogan to greet the first light every morning, sure as a cock crowing. Recently, they sound a little more wolfish, a little more triumphant, aroused by their successful confrontation with America.
The PLA unit is only one of five military residences visible from my balcony. The barracks dont look institutional, and they arent labeled. After Tiananmen, the Chinese leadership sprinkled discrete military and paramilitary units throughout Beijing hopefully ensuring that someone will stay loyal to form a rapid response to any threat to "social stability." The soldiers rise early, announce their presence, and the neighborhood gets on about its business.
Yet I increasingly wonder if Beijings leadership, in the quiet of their compound next to the Forbidden City, is fully conscious. Throughout the EP-3 crisis, there has been an automaton quality to the way that the Chinese leadership painted itself so firmly into their particular corner long delays, ham-handed demands for an apology and concessions, too-clever-by-half attempts to reward and punish, circuitous legal arguments to justify a U.S. crews detention and violation of the EP-3s integrity. Call it the banality of evil, but the leadership seemed to be simply reading a tired script from the embassy bombing without the necessary passion. In a recent state broadcast, a camera wandered from a gray bureaucrat intoning dry legalisms on Chinas presumed control of the South China Sea to bored state TV crews and back again, apparently searching for the story, a far cry from the "MTV for war" coverage two years ago. The leadership feared over-stimulating its citizens this time around because to maintain authoritarian legitimacy they have created a monster hyper-nationalism - and it has come back to haunt them.
Nowhere is this nationalism more focused than in the Chinese military: from the parade of Long March and Dongfeng missiles on the 50th Anniversary, to the state-run papers advocating the use of an electro-magnetic pulse on Taiwan, to the proud announcement of the mastery of neutron warhead technology. The Chinese people are not expected to view these devices as weapons of last resort, but as options. And these options demand infrastructure, Western technology, and a capitalist economy. So for the military, WTO works. Acquiescence with President Jiang Zemin worked, until the EP-3 incident led to a potential Marxists nightmare the military and the people united, challenging the party. Mr. Jiang probably felt he had precious room for error in the EP-3 stand-off. Ambassador Pruehers informal response: "Problem is, its going to start bleeding into other things." Indeed, it already has.
Consider fully what China may lose. Foreign Minister Qian Qichens U.S. mission was to deny the Aegis battle management system to Taiwan. From the administrations perspective there were many reasons to sell Patriot PAC-3 missiles, and possibly, P-3 aircraft as a stopgap to the Chinese medium-range missile threat while holding Aegis in reserve Chinese infiltration in the Taiwanese armed forces among them. But what was the EP-3 carrying? Presumably, a surveillance system with Aegis characteristics. Selling Aegis and other assets to Taiwan may now be considered simply to preserve the balance in the Taiwan Straits. So the Chinese military has won a Phyrric victory at best. At worst, the PLA will not have the means to plausibly threaten Taiwan for a generation.
The Chinese leadership may think of Taiwan as a critical juncture, but a continuously rising standard of living drives the train. If the Chinese leadership does not get its 7 percent annual growth rate, unemployment, worker dissatisfaction, and mutant movements such as Falun Gong may crash the system. The insulation of the Chinese economy from previous Asian economic downturns simply underscores Chinas dependence on the U.S. export market, and continued U.S. investment. In this year of American economic trouble, the Chinese leadership must continue to stimulate domestic consumer spending and pull out the stops of selective foreign industry barriers in an attempt to offset an inevitable and painful decline in export growth. U.S. direct investment cannot falter; its in the 7 percent plan.
A recent American embassy residence function to welcome an incoming U.S. trade delegation had a looking-glass quality (heightened by two congressional delegations visits having just been canceled). The toasts were the traditional China-appreciates-American-interest-in-building-e-commerce. The talk was of the now-inevitable congressional vote on extending Normal Trade Relations (NTR) on June 3. With little guarantee that congressmen and senators will see a political advantage in voting in Chinas favor, Chinas chances to join the World Trade Organization in the near future then become much dimmer. Ironically, for ex-pats surrounded by a city that is papered with the slogan, "New Beijing - Great Olympics," another unconditional face issue with no exit strategy for the Chinese leadership, the idea of the United States denying the Olympics to China didnt even rate.
A friend from the U.S. Commercial Service assured me that NTR would squeak through; Americans dont really care much about foreign affairs, business will lobby the Hill, Motorola will make some contributions to a congressmans district. Perhaps hes right, but he is a long-term ex-pat and American "face" issues are easily overlooked in Beijing. The assumption of American multinational loyalty to China also bears scrutiny.
It may be Ron Browns legacy that there are no trustworthy composite figures on American profits in China. However, sources have suggested that well below 30 percent of U.S. companies China operations are in the black. Ergo, 70 percent are either in China for the reward of the "long-term" (increasingly a euphemism for a China without the counterfeiting, or corruption or the current leadership), or once in, they stay to preserve share prices at home. With current share prices partially reflecting the EP-3 crisis, the temptation for a few corporate bodies may be to look busy lobbying Congress for NTR (with the hand that the Chinese authorities watch) while the other hand looks for quiet exit strategies, removing China assets one piece at a time.
"China is the victim" runs Mr. Jiangs dour proclamation. China may soon wake up to find that he was right.

Ethan Gutmann is a government-relations consultant in Beijing, China.

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