The China Syndrome

Why the Asian giant could be Obama’s second-term foreign policy headache

The second terms of U.S. presidents tend to be difficult for any number of reasons, but they are often disrupted by a foreign policy crisis. It’s easy to see how that might happen over the next four years with Iran or Syria, and the Obama Administration is surely attentive to these risks. But there is a distinct possibility that the next big foreign policy crisis will take place somewhere else, perhaps thousands of miles away, in Asian waters, over five islets and three barren rocks—all uninhabited except for a few feral goats.

For months, Chinese and Japanese naval forces have been confronting each other in the East China Sea. Both countries claim a set of tiny islands; the Japanese call them the Senkaku Islands, the Chinese the Diaoyu Islands. The dispute involves energy—there are immense natural gas reserves below the seafloor—but above all it involves politics and history.

Asia’s greatest geopolitical problem is that its two great powers—with the two largest economies and militaries—have an unresolved, bitter relationship. China and Japan have never had to occupy the world stage as equals. One has always dominated the other. For most of the past 500 years, China was the region’s hegemon and Japan accepted its role as a distant satellite of the great Chinese empire. That changed in the late 19th century, as Japan became the first Asian country to modernize its economy and society and catch up to the West. After the Meiji Restoration, Japan’s military strength grew, and in 1895 it defeated the Qing dynasty in China. One of the consequences of the war was that Tokyo formally annexed the Senkaku Islands. But their sovereignty has been in dispute for the past 40 years, with China asserting its historic claims and Japan its modern possession.

Over the past two months, both countries have acted in ways that could easily spiral out of control toward conflict. There are almost daily encounters between Japanese and Chinese ships as they patrol these waters. On dry land, riots and protests have taken place in both ­countries—with the populations in each getting more nationalistic. There have been few efforts by either government to defuse the situation and move toward a diplomatic solution. The U.S. is involved too, because it is bound by treaty to go to Japan’s military aid if Japan is attacked, and Washington has confirmed that the Senkaku Islands are covered by this obligation. In other words, if one of these naval encounters goes awry and China and Japan get into a naval conflict, the U.S. could find itself involved in an Asian war.

I realize this sounds far-fetched, but given the extremely bad relations between China and Japan, it is possible that honor, pride, miscalculation and accident could lead us there. And remember, China is in the midst of an enormous leadership change, one that is far more significant than this month’s election in the U.S.

For the past three decades, China has been run on the basis of a strategy laid out by Deng Xiaoping, the Communist Party leader who set China on its current course. Deng’s strategy had three parts. First, he replaced Marxist dogma with economic ­liberalization—with an orientation toward exports. Second, he took a political system that had combined ruthless dictatorship with chaotic power contests and replaced it with an orderly process that selected engineers and other technocrats for fixed terms in office. And finally, he overturned Mao’s revolutionary foreign policy with one that tacitly ­allied China with the U.S.

Currently, all three aspects of the Deng strategy are under stress. ­China’s economic model has run its course and faces new challenges from rising labor costs and a shrinking cohort of young workers. Its political system is widely criticized within the country for corruption and lack of transparency. And its foreign policy is under strain from a nationalistic public, an assertive military and an intellectual elite that believes the world—and the U.S. in particular—is trying to contain China’s natural rise to global power and influence.

China’s next President, Xi ­Jinping, will have to be a different kind of leader. Hu Jintao made only two live state-of-the-nation speeches to his people in his 10 years in office. Xi cannot behave like a Mandarin Emperor. He will have to change China’s economic strategy to ensure that the country keeps thriving. He will have to decide how to open up the political system enough to gain some legitimacy but not so much that the Communist Party loses its monopoly over power. And he will have to manage China’s shifting relations with its neighbors not just in the East China Sea but throughout the ­region—and with the world’s ­superpower—to preserve China’s influence and prevent conflict. It makes President Obama’s challenges look easy by comparison.