CHINA SECURES VENEZULAN OIL AND GOLD DEALS, AS PRESIDENT VISITS LATIN AMERICA

Venezuelan President Nicolas Maduro (R) shakes hands with China's President Xi Jinping during a signing-of-agreements ceremony, in Caracas on July 21, 2014. (AFP Photo / Leo Ramirez)

Venezuelan President Nicolas Maduro (R) shakes hands with China’s President Xi Jinping during a signing-of-agreements ceremony, in Caracas on July 21, 2014. (AFP Photo / Leo Ramirez)

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by RT

Chinese President Xi Jinping has signed a row of oil and mineral deals with Venezuela. The Chinese leader is on a four-country tour of Latin America aimed to increasing influence in the region.

The 38 economic agreements are related to the production and development of Venezuelan oil and agriculture, as well as social and cultural expansion, says the BBC. The deals provides a credit line of $4 billion in return for Venezuelan oil and oil products, as well as allocating $691 million to explore Venezuela’s gold and copper reserves, and an agreement to develop the countries’ third jointly-owned satellite.

China is the second-largest market for Venezuelan oil after the United States.

The underlying purpose of the visit has been to secure more natural resources from Latin America to fuel China’s long term economic expansion, BBC cites analysts. The Venezuela negotiations were preceded by visits to Brazil and Argentina.

At the BRICS summit in Brazil the Chinese leader, along with the other emerging powers Brazil, Russia, India and South Africa, launched a $100 billion BRICS Development Bank and a reserve currency pool worth over another $100 billion. Both will counter the influence of Western-based lending institutions and the dollar.

The next stop was Argentina where President Xi Jinping agreed an $11 billion currency swap and extended much-needed investment to President Cristina Kirchner. Argentina’s economy has been locked out of the international capital markets since defaulting on its debt in 2001, and is staring down the possibility of another default.

After Venezuela the Chinese leader arrived in Cuba on Tuesday where he is meeting President Raul Castro on the last stop of his four-country visit to Latin America.

Xi Jinping hopes to expand political and economic ties in the other communist nation. The island has had close political ties with China for decades, and was granted generous trade credits in the past.

Chinese trade with Latin America has grown rapidly reaching $261.6 billion in 2013. It is now the second-largest trading partner in Argentina and Cuba, and has been Brazil’s largest since 2009. To compare, in 1990 China was ranked 17th on the list of Latin American export destinations.

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CHINA SENDS SPY SHIP OFF HAWAII DURING U.S.-LED DRILLS

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By Phil Stewart

WASHINGTON (Reuters) – China has sent a spy ship to international waters off of Hawaii during a giant U.S.-led naval exercise involving 22 countries, even as Beijing participates in the drills for the first time this year, the U.S. Navy said on Sunday.

The Navy played down any U.S. intelligence risk associated with the proximity of the Chinese surveillance vessel and noted that China also sent a similar ship to monitor the last Rim of the Pacific (RIMPAC) exercise two years ago.

“We’ve taken all necessary precautions to protect our critical information,” said Captain Darryn James, chief spokesman of the U.S. Pacific Fleet.

“We expect this ship will remain outside of U.S. territorial seas and not operate in a manner that disrupts the ongoing Rim of the Pacific maritime exercise.”

There was no immediate comment from Beijing.

U.S. officials hope China’s participation in RIMPAC helps avert misunderstandings on the high seas but analysts long cautioned the maneuvers may ultimately help Beijing strengthen its growing naval capability by observing the forces of the United States and its allies.

Still, the United States also conducts surveillance operations in international waters and airspace and the Navy did not voice protest over the appearance of the Chinese vessel, described as a Chinese Navy auxiliary general intelligence ship.

Even though the vessel was inside America’s 200-nautical mile exclusive economic zone, it was operating within international law, James said.

Still, James said he was unaware of any participant doing something similar since the drills began in 1971.

“To my knowledge, this is the first time a nation has ever sent a surveillance ship near Hawaii while also having invited ships participating in the RIMPAC exercise,” James said.

The Chinese ships participating in the drills are the missile destroyer Haikou, the missile frigate Yueyang, the supply ship Qiandaohu and the hospital ship Peace Ark.

Chinese forces include two helicopters, a commando unit and a diving unit, a total 1,100 personnel.

The exercises come at a time when tensions are high between Beijing and U.S. allies such as Japan and the Philippines over China’s pressing of territorial claims in the South and East China Seas. They also come after a dispute with Vietnam that led to one of the worst breakdowns in ties since they fought a brief war in 1979.

CHINESE LEADER WOOS LATIN AMERICA WITH DEALS

CHINAChina’s President Xi Jinping (L) is welcomed by his Brazilian counterpart Dilma Rousseff at Planalto Palace on July 17, 2014 in Brasilia (AFP Photo/Nelson Almeida)

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By Laurent Thomet

Brasilia (Brazil) (AFP) – China’s president pressed a charm offensive with Latin America on Thursday, signing deals with Brazil, meeting regional leaders and proposing a $20 billion infrastructure fund that highlights Beijing’s growing interests in the region.

President Xi Jinping was greeted with a military honor guard in Brasilia by President Dilma Rousseff before overseeing the signing of a raft of agreements during a state visit.

Xi then met behind-closed doors with a dozen Latin American and Caribbean leaders, including Cuba’s communist President Raul Castro.

After the summit, Rousseff said China proposed the creation of a $20 billion fund to finance infrastructure projects in Latin America and the Caribbean.

He also offered a credit line of up to $10 billion to nations of the Community of Latin American and Caribbean States (CELAC).

In addition, a Chinese-Latin American cooperation fund of $5 billion would be set up for investments.

- Brazil-China deals -

Earlier, Rousseff and Xi oversaw the signing of several agreements between the two emerging powers.

Chinese companies agreed to buy 60 Brazilian Embraer E190 passenger airplanes worth a total of $3.2 billion.

The two countries also reached agreements to cooperate in railway projects and shipping that could facilitate Brazilian exports to resource-hungry China.

The Asian giant’s import-export bank will loan $5 billion over three years to Brazilian mining powerhouse Vale so that the company, which ships iron ore to China, can buy or rent vessels.

The two nations signed a cooperation agreement for railway projects, with Brazil hoping China will help build tracks linking the continent-sized South American country to Peru’s Pacific coast.

Xi and Rousseff, whose nations marked 40 years of diplomatic relations, also launched the Portuguese-language version of China’s Baidu Internet search engine.

“Our relations, which represent a truly strategic partnership, are developing at an unprecedented speed in diverse areas of cooperation,” Rousseff said.

Xi said China aims to “strengthen our strategy to create an even more prosperous future for our nations.”

- Alternative to US -

Xi arrived in Brazil this week for a summit of the BRICS group of emerging powers — Brazil, Russia, India, China and South Africa — and South American presidents.

The visit is Xi’s second to Latin America since taking office last year, when he toured Mexico, Costa Rica and Trinidad and Tobago.

This week, the BRICS agreed to launch a New Development Bank to fund infrastructure projects in developing nations and an emergency reserve, drawing praise from Latin American presidents who see them as alternatives to Western-dominated financial institutions.

“We welcome this commitment to a new international order that is just and equitable,” Castro said in written remarks.

Venezuela’s leftist President Nicolas Maduro hailed the “relations of mutual respect between a world giant like China and Latin America.”

With the visit, Xi is presenting China as an alternative to the United States in the region, analysts say.

“China is an option that matches with the leftist political sympathy that it has with some countries in the region,” said Rubens Figueiredo, foreign relations professor at Sao Paulo University.

China’s massive purchases of commodities and exports of manufactured goods to the region have boosted its two-way trade with Latin America to a total of $261.6 billion last year, according to official figures.

After Brazil, Xi will head to Argentina, a key source of soybeans for China, before visiting oil-supplier Venezuela and communist ally Cuba.

Despite China’s growing investments in the region, it will be hard for Beijing to dislodge the United States in Latin America, said Yun Sun, East Asia expert at the Washington-based Stimson Center think-tank.

“US-Latin America long-standing, traditional ties will not be easily affected by the Chinese political and economic engagements, which are more recent and less comprehensive than US-Latin American relations,” she told AFP.

KERRY, HAGEL TO VISIT INDIA TO PUSH STRATEGIC TIES

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By David Brunnstrom

WASHINGTON (Reuters) – America’s top diplomat and the head of its Defense Department will visit India in coming weeks seeking to revitalize a relationship the United States sees as a crucial counterbalance in Asia to an increasingly assertive China.

Secretary of State John Kerry will represent the United States in an annual session of Strategic Dialogue with India scheduled for July 31, and he will be followed to New Delhi by Defense Secretary Chuck Hagel in early August, U.S. officials said on Wednesday.

They will be the most senior U.S. officials to visit India for talks with the new government of Prime Minister Narendra Modi since his May election. Modi is expected to visit the United States in September.

In testimony for a hearing of the U.S. Senate Committee on Foreign Relations, Nisha Biswal, the U.S. assistant secretary of state for South Asia, noted that President Barack Obama had said the U.S.-India relationship would be “one of the defining partnerships of the 21st century.”

She also said Modi had told U.S. Deputy Secretary of State Bill Burns in India last week that the world would benefit from closer U.S.-India ties.

“Across the board … we have an opportunity here to engage more robustly with in India in how the Asian landscape unfolds,” she said. “And we look forward to engaging with the new government in that agenda.”

Biswal referred to planned joint military exercises involving India, the United States and Japan, a country with a growing strategic rivalry with China in East Asia.

“We see opportunities for increasing the collaboration across Southeast Asia,” she said.

“We are engaging more frequently in consultations and dialogue with India on ASEAN (the Association of Southeast Asian Nations) and look forward to increased and more frequent consultations across the East Asian sphere,” Biswal said, adding:

“A rising India is in some ways going to be an ameliorating influence on China, in China’s own growth and China’s own behavior in the region.”

Amy Searight, the U.S. deputy assistant secretary of defense for South and Southeast Asia, said there was “a real strategic convergence” as India looked east in Asia and the United States pursued its “rebalance” to the continent.

“We both are looking to the challenges in East Asia today, of which a rising China is certainly a major part,” she said.

Searight said there were growing relationships between India and Japan and India and the ASEAN countries, including Vietnam, a country which has been playing out a bitter territorial rivalry with Beijing in the South China Sea.

Referring to India’s growing relationships with other Asian countries, Searight added: “We want to capitalize on that … we want to support that activity.”

THE FALSE NARRATIVE OF CHINESE-INDIAN FRIENDSHIP

A signboard is seen from the Indian side of the Indo-China border in the northeastern Indian state of Arunachal Pradesh.

A signboard on the Indian side of the Indo-China border in Arunachal Pradesh, November 11, 2009. (Adnan Abidi / Courtesy Reuters)

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By Tansen Sen | Foreign Affairs

Although China and India are often described in the West as rivals, the governments and some scholars of those countries have deliberately tried to paint a different portrait of their relationship. Since at least the first half of the twentieth century, several prominent members of Chinese and Indian elites have been in thrall to an intellectual movement known as pan-Asianism, which posits a deep cultural — and, by extension, political — solidarity between Asia’s two largest countries. The rhetoric of pan-Asianism has evolved over the decades, from the “brotherly” relationship described by the Indian intellectual Rabindranath Tagore and his Chinese contemporary Liang Qichao in the early twentieth century to the euphoric “Hindi-Chini bhai-bhai” (India-China brotherhood) celebrated by political leaders in the 1950s to the idea of “Chindia,” put forward by the Indian politician and columnist Jairam Ramesh in our current era.

The core aspect of this rhetoric has remained consistent: it has always justified present-day friendship between China and India on the basis of allegedly harmonious ancient ties. Today, diplomats and academics in both countries routinely claim that the two have enjoyed more than 2,000 years of mutual solidarity and peaceful exchange. This romanticized narrative is used as a diplomatic tool by policymakers who want to sidestep acrimonious border disputes and foster closer cultural ties between Beijing and Delhi.

An increasing number of scholars, however, are acknowledging that this narrative not only distorts historical reality but also, as demonstrated by the military conflict between China and India in 1962, may not be capable of sustainably resolving tensions between the two countries. A new collection of academic essays, India in the Chinese Imagination, is an overdue effort to more accurately portray and critically examine the ancient ties between China and India, with a special focus on the role of Buddhism. The contributors reveal that China regularly rejected aspects of Indian culture that did not fit into the Chinese context. Solidarity between the two civilizations, contrary to the claims of present-day diplomats and politicians, was never truly attained.

TWEAKING BUDDHISM

The first corrections to the standard narrative appear in the book’s introduction, where the editors of the book, Stanford University professor John Kieschnick and Tel Aviv University professor Meir Shahar, point out that direct contact between the two regions in ancient times was in reality very limited and mostly mediated by various middlemen, including Parthians and Sogdians from Central Asia and Arabs and Persians from the Middle East.

The editors also note that claims of a long-standing Chinese-Indian relationship are complicated by the fact that China and India didn’t exist as coherent or independent states until the twentieth century. Using contemporary countries as a shorthand for describing the ancient world obscures how amorphous Asian borders once were. Consider the case of the ancient Buddhist monk Bodhidharma, who is typically described by Chinese and Indian scholars and politicians as a native of southern India responsible for introducing martial arts to China in the fifth or sixth century after taking residence in the famous Shaolin Temple. But in a splendid chapter by the late John R. McRae, a leading scholar of Zen Buddhism, the truth is shown to be more complicated. McRae writes that the earliest Chinese reference to Bodhidharma records him as a person from an area now under the jurisdiction of Afghanistan and Pakistan. This raises the question of why he should be evoked as a symbol of close ties between Beijing and Delhi, rather than as a symbol of ties between Beijing and Kabul, or Beijing and Islamabad.

Buddhism typically plays a central role in contemporary Chinese-Indian cultural diplomacy. This, however, comes at the neglect of the study of Hindu influences on Chinese society. India in the Chinese Imagination highlights this important facet of ancient interactions between India and China. In one chapter, Meir Shahar examines China’s popular fiendish divinity called Nezha, which he traces back to Hinduism. Nezha, Shahar argues, has its origins in Nalakubara, the son of the famous Hindu deity known as Vaisravana. The latter was introduced to China in the seventh century through translations of Tantric Buddhist texts and appropriated by Chinese storytellers who began associating him with a historical Chinese warrior from the Tang dynasty named Li Jing. Nezha is a remarkable example of the amalgamation of Chinese and Indian mythologies — but to that extent, Nezha also testifies to the distinctiveness that was attained during the process of transmitting Indian ideas to China.

Another Indian deity discussed in this volume is King Yama, the god of death. Similar to Vaisravana, Yama originated in ancient Hindu tradition and was later incorporated into the Buddhist pantheon. From there, he made his way to Chinese culture. Columbia University’s Bernard Faure traces the avenue by which Yama and the ritual practices associated with him spread. In China, Yama eventually became identified as a fearsome deity in charge of judging and punishing the dead, and he was often portrayed in images that illustrated the torments of hell. China’s Buddhist clergy, Faure notes, used Yama to induce fear among the Chinese populace about karmic retribution, which “may reflect an attempt by the Buddhists to strengthen their hold on Chinese society.” The idea of hell that emerged in China thus bore traces of ancient Indian culture, but eventually developed into an entirely distinct conception with roots in indigenous Chinese culture.

This volume also explores the culture of sexuality in China and India, a subject that most scholars have avoided until now. Focusing on the Hindu-Buddhist deity Mahesvara (commonly known as Shiva), Nobuyoshi Yamabe of the Tokyo University of Agriculture compares phallic symbolism in Chinese and Indian texts. Yamabe discovers that local Chinese Buddhists censored sexually explicit discussions and images filtering into China from India. It seems that the Chinese were insistent on maintaining their own traditions concerning sexuality, rather than adopting those common in India.

This theme — China’s uneasy appropriation of certain aspects of Indian culture — is also the theme of the final three chapters of the book. Robert H. Sharf of University of California, Berkeley, illustrates that medieval Chinese Buddhists were indifferent to the contemporaneous philosophical debates in India about existential issues. The French scholar Christine Mollier examines the ways that the Chinese (especially adherents of traditional Daoist religion) struggled to accept Indian concepts of karmic causality with the “simultaneous rejection and appropriation of the foreign tradition.” Stephen R. Bokenkamp of Arizona State University explores Chinese strategies for dealing with unfamiliar Indian scripts. These chapters show that the ancient encounters between these two very distinct cultural zones were extraordinarily complex, because they were each operating on the basis of beliefs and practices that seemed mutually irreconcilable. These and other chapters do demonstrate that ancient China and India managed to become connected with each other, but only through an arduous process of translating, rendering, explaining, and altering new ideas. Each cultural zone acquired an image of the other — but those images were distinct from what each side saw when they looked in the mirror.

CHINDIA’S BORDERS

The question of whether the ancient cultural exchanges are in any way relevant to the contemporary relations between China and India is mostly outside the scope of the book. But, with many diplomats and politicians in both countries answering that question in the affirmative, it deserves closer scrutiny.

There are three significant differences between the interactions that took place in the first millennium AD and present-day bilateral relations. First, territorialized states — and the sense in both states of distinct national interests — did not exist when Buddhist monks and itinerant traders wandered ancient China and India. Although various Indian polities and the courts of successive Chinese dynasties conducted diplomatic exchanges, the overall context and aims of political communication were vastly different from the contemporary political agenda. The emergence of two nation states in the mid twentieth century resulted in the creation of a common border for the first time. It is this border that is now the key cause of conflict between India and China. Ancient interactions between the two regions, even in the absence of a common border, were not always peaceful and harmonious, as pan-Asianist and bhai-bhai propagandists would have us believe. Chinese governments on several occasions instigated regime changes in South Asia. And in the early fifteenth century, the famous Ming admiral Zheng He used military force in the Malabar coast and Sri Lanka, most likely to demonstrate Ming dynasty’s hegemony in the Indian Ocean region.

Second, using Buddhism to promote contemporary exchanges and understanding is a complicated matter. As is clear from the chapters in India in the Chinese Imagination, the spread of Buddhist teachings to China involved several modifications and rejections of teachings and practices. In fact, by the tenth century, the Buddhists in China had started charting their own path and formed their schools of Buddhist teachings that needed little, if any, input from their Indian counterparts. The invoking of Buddhism in contemporary relations discounts this important divergence and fails to recognize the distinct Buddhist traditions in India and China that have evolved over the past 1,000 years.

Finally, it must be recognized that China and India — their worldviews, self-perceptions, social and political concerns, and geographical contours — have changed vastly over the past 2,000 years. To say that the two regions have had a continuous and consistent relationship with one another is mistaken, because the two societies have not had consistent relationships with themselves. The rhetoric of Chindia might serve the purposes of contemporary international relations and government propaganda. But it crumbles when exposed to first-rate scholarship of the sort found in India in the Chinese Imagination.

JAPAN’S PM VISITS PAPUA NEW GUINEA

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By Will Morrow

Japanese Prime Minister Shinzo Abe’s spent two full days in the resource-rich South Pacific nation of Papua New Guinea (PNG) last Friday and Saturday, underscoring the geo-strategic ambitions behind his government’s decision to “re-interpret” Japan’s constitution to enable the country’s armed forces to engage in overseas military operations.

Abe was accompanied by a business delegation of more than 150 people on the first visit by a Japanese PM to the small country in three decades. Abe’s tour, which also included New Zealand and Australia, came days after his announcement of a constitutional “reinterpretation” aimed at removing any obstacle to the re-emergence of Japanese militarism. A major component of that strategy means securing energy supplies.

Japan was the first buyer from ExxonMobil’s just-completed $US19 billion liquefied natural gas project in PNG, which is expected to produce 255 billion cubic metres of LNG over the next 30 years. Abe told the Port Moresby Post-Courier before his visit that “the government of Japan regards the LNG development project as one of the priority areas of our bilateral cooperation.”

Another major Japanese business interest in PNG is a plan by Mitsubishi Corporation and Itochu to develop a $1 billion petrochemical plant. According to the Australian, the Japanese business delegation accompanying Abe included the chairman of JX Holdings, the parent company of Nippon Oil, which owns 4.7 percent of PNG LNG. In addition to a $197 million pledge of government aid, Japan is offering PNG low-interest loans from the Japan Oil, Gas and Metals National Corporation.

As the Australian noted, the prospect of ongoing LNG imports from PNG “holds special appeal for Japan, since 60 percent of its gas imports presently have to traverse the increasingly disputed South China Sea.” The South China Sea has been the stage of increasingly tense territorial disputes, fomented by the United States, between China and the Philippines and Vietnam.

While China was not publicly mentioned during Abe’s PNG visit, commentators said the trip sent a message to Beijing. “This visit is a big signal to the region, and also to China, that Japan still has a stake in the region,” Jenny Hayward-Jones, director of the Myer Melanesia Program at Australia’s Lowy Institute, told the Australian Broadcasting Corporation. “Its trade and investment interests are strong, and it has a political interest if its prime minister is prepared to spend two days in PNG and bring a huge delegation with him.”

Abe declared Japan’s “determination to even more actively contribute to ensuring peace, stability and prosperity in the international community, including the Pacific regions.” Washington has used similar words to justify its “pivot to Asia”—a systematic military, diplomatic and economic build-up aimed against China.

Well aware of the deep antiwar sentiment and opposition to the constitutional reinterpretation in the Japanese working class, Abe also sought to use the PNG visit as a platform to promote patriotism and reverence for Japanese soldiers killed in World War II.

Abe conducted a stage-managed trip to Wewak, where he visited the Brandi battlefield and a war memorial for Japanese troops. PNG, where about 200,000 Japanese soldiers died, was the scene of some of the most terrible fighting of World War II.

Abe vowed never to “repeat the horrors of war,” telling reporters: “I pledged in front of the spirits of the war dead that Japan wants to be a country that thinks about world peace with its friends in Asia and around the world.” Yet, he clearly glorified the military campaigns of World War II. According to the Japanese public broadcaster NHK World, Abe said Japan’s present-day prosperity was based on the troops who sacrificed their lives.

Abe also visited Cape Wom, the site of the Japanese army’s surrender in PNG, and reportedly secured an agreement with PNG Prime Minister Peter O’Neill for the return of soldiers’ remains to Japan. This will lay the basis for a series of militarist reburial ceremonies, designed to overcome popular hostility to preparations for another war.

Abe’s comments are in line with his administration’s efforts to whitewash the crimes of Japanese imperialism, including the Japanese army’s use of sex slaves, or “comfort women,” during World War II, and the Nanking Massacre of 1937, in which up to 300,000 Chinese civilians and soldiers were killed.

Because of its energy and mineral resources, and strategic location, PNG, a longtime Australian colony, is being drawn into the firing line of the mounting tensions between the US, China and Japan.

The strategic significance of the ExxonMobil LNP plant was highlighted in 2011, when then-US Secretary of State Hilary Clinton accused China of seeking to undermine the US grip over the project. She told the Senate Foreign Relations Committee that the project was an example of the competition underway between China and the US.

Referring to the gas supplies at stake, she asserted: “ExxonMobil is producing it. China is in there every day, in every way, trying to figure out how its going to come in behind us, come in under us.” She declared it would be “mistaken” to think the US would retreat from “the maintenance of our leadership in a world where we are competing with China.”

So far, Washington has encouraged the unshackling of Japanese militarism, as part of its build-up against China. But US and Japanese imperialism fought for control over PNG, and the entire Asia-Pacific region, in the last world war. The re-emergence of Japanese militarism and its quest to secure access to energy and other critical resources once again poses the question of which imperialist power will dominate the region and, in particular, subjugate China.

CHINA TELLS UNITED STATES TO STAY OUT OF SOUTH CHINA SEA DISPUTE

By Ben Blanchard

BEIJING (Reuters) – China told the United States on Tuesday to stay out of disputes over the South China Sea and leave countries in the region to resolve problems themselves, after Washington said it wanted a freeze on stoking tension.

Michael Fuchs, U.S. deputy assistant secretary of state for Strategy and Multilateral Affairs, said no country was solely responsible for escalating tension in the region. But he reiterated the U.S. view that “provocative and unilateral” behaviour by China had raised questions about its willingness to abide by international law.

China claims 90 percent of the South China Sea, which is believed to contain oil and gas deposits and has rich fishery resources. Brunei, Malaysia, the Philippines, Vietnam and Taiwan also lay claim to parts of the sea, where about $5 trillion of ship-borne trade passes every year.

China’s Foreign Ministry repeated that it had irrefutable sovereignty over the Spratly Islands, where most of the competing claims overlap, and that China continued to demand the immediate withdrawal of personnel and equipment of countries which were “illegally occupying” China’s islands.

“What is regretful is that certain countries have in recent years have strengthened their illegal presence through construction and increased arms build up,” the ministry said in a statement.

China would resolutely protect its sovereignty and maritime rights and had always upheld resolving the issue based on direct talks with the countries involved “on the basis of respecting historical facts and international law”, it added.

China “hopes that countries outside the region strictly maintain their neutrality, clearly distinguish right from wrong and earnestly respect the joint efforts of countries in the region to maintain regional peace and stability”, it added, in reference to the United States.

Recent months have seen flare-ups in disputes over rival offshore claims.

Anti-Chinese riots erupted in Vietnam in May after China’s state oil company CNOOC deployed an oil rig in waters also claimed by Vietnam, which has also accused China of harassing its fishermen

China’s official Xinhua news agency said authorities had on Tuesday deported 13 Vietnamese fishermen and released one of two trawlers seized recently for illegally fishing close Sanya on the southern tip of China’s Hainan island.

Relations between China and the Philippines have also been tested in recent months by their dispute over a different area. A Foreign Ministry spokesman in Manila said the Philippines strongly supported the U.S. call for all sides to stop aggravating the tension.

The United States wants the 10-nation Association of South East Asian Nations (ASEAN) and China to have “a real and substantive discussion” to flesh out a call for self-restraint contained in a Declaration of Conduct they agreed to in 2002, with a view to signing a formal maritime Code of Conduct, Fuchs said.

A U.S. official said the issue was raised again last week with China at an annual Strategic and Economic Dialogue, a bilateral forum that seeks to manage an increasingly complex and at times testy relationship.

China’s Foreign Ministry said that it and ASEAN were carrying out the Declaration of Conduct and “steadily pushing forward” talks on the Code of Conduct.

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WORLD TRADE ORGANIZATION RULES AGAINST U.S. TRADE IMPORT TARIFFS ON CHINA STEEL, SOLAR PANELS

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By Robert Evans

GENEVA (Reuters) – World Trade Organisation judges said on Monday the United States broke its rules in imposing hefty duties on Chinese steel products, solar panels and a range of other goods that Washington argues enjoyed government subsidies.

In a similar case involving U.S. methods in deciding when foreign imports are unfairly priced, another WTO panel ruled in support of some claims by India against tariffs on steel exports from three of its major firms.

Trade diplomats said the two cases, both under scrutiny for nearly two years by the separate panels, reflected a widespread concern in the 160-member WTO over what many see as illegal U.S. protection of its own producers.

In the $7.2 billion Chinese case, the panel found that Washington had overstepped the mark in justifying the so-called countervailing duties it imposed as a response to alleged subsidies to exporting firms by China’s government.

Under the 1964 Marrakesh accords, which also set up the WTO, these duties can only be levied when there is clear evidence that state-owned or partially state-owned enterprises passing on the subsidies are “public bodies.”

The panel found that Washington had produced insufficient evidence for this, and was also at fault in its calculations of the value of the subsidies to Chinese firms producing items like kitchen shelving, grass cutters and even citric acid.

And it told the United States it should adapt its measures to bring them into line with the WTO’s agreement on subsidies and countervailing measures, dubbed the SCM in trade jargon.

SOME COMFORT

The ruling, which gave the United States some comfort in rejecting some aspects of the Chinese complaint, was welcomed in a statement from China’s Ministry of Commerce distributed by Beijing’s trade mission in Geneva.

“China urges the United States to respect the WTO rulings and correct its wrongdoings of abusively using trade remedy measures, and to ensure an environment of fair competition for Chinese enterprises,” the statement said.

The United States said it was weighing its options. U.S. Trade Representative Michael Froman said the decision to reject many of China’s challenges was a victory for American businesses and workers. “With respect to the other findings in the panel report, the Administration is carefully evaluating its options, and will take all appropriate steps to ensure that U.S. remedies against unfair subsidies remain strong and effective.” Many other members of the organisation, including the European Union and Japan, declared themselves interested parties in the disputes, although they did not say if their sympathies lay with the United States or its challengers.

The ruling in the Indian case – which involves steelmakers like Tata[TATAI.UL] , Jindal and Essar[ESRG.UL] who are supplied by the state-run iron-ore mining firm, NMDC – was not so clear-cut.

It said the United States had “acted inconsistently” in terms of some provisions of the SCM agreement and had unfairly reduced Indian trade revenue. Washington should bring its measures into line with the pact, the panel said.

But it rejected many of the technical aspects of the Indian case.

Froman hailed the panel ruling while recognising it as a “mixed result.”

“The panel’s findings rejecting most of India’s numerous challenges to our laws and determinations is a significant victory for the United States and for the (U.S.) workers and businesses making these steep products,” he said.

WORLD TRADE ORGANIZATION RULES AGAINST U.S. TARIFFS ON CHINESE AND INDIAN GOODS

By Lucy Hornby in Beijing and Shawn Donnan in London | The Financial Times

The World Trade Organisation has ruled that the US improperly applied punitive tariffs on steel, solar panels and other imports from China and India, in a blow to Washington’s efforts to challenge the role of state-owned companies in developing economies.

The rulings highlight the difficulties posed by the industrial structure of China and many other developing countries, dominated by a few state-owned or state-supported champions, for a global trading system built around the idea of corporations clearly separated from the government.

The US has been trying for years to build a case against Chinese state-owned companies, saying they benefit from both overt and hidden subsidies that unfairly lower their cost of production. It has argued that those amount to government subsidies for export industries, which are banned by the WTO.

The two cases disputed the way Washington imposed “countervailing duties”, which can only be applied when the exporters are “public bodies”.

In its ruling in the Chinese case on Monday, a WTO panel reaffirmed a 2011 judgment that set a narrow definition for what could be considered a government entity. It stuck to the 2011 panel’s definition that state-owned companies could not be simply considered “public bodies” because they were majority-owned by governments. Instead, the panel said, the US had to prove that Chinese state-owned enterprises also performed “government functions” or exercised “government authority”.

The ruling was welcomed by China’s commerce ministry. “China urges the United States to respect the WTO rulings and correct its wrongdoings of abusively using trade remedy measures, and to ensure an environment of fair competition for Chinese enterprises,” it said in a statement.

Mike Froman, the US trade representative, said Washington was “carefully evaluating its options, and will take all appropriate steps to ensure that US remedies against unfair subsidies remain strong and effective”.

Monday’s ruling challenges many tariffs imposed by Washington between 2007 and 2012, hobbling Washington’s use of tariffs as a punitive tool. The US now has to revise those tariffs.

In a separate case before the WTO on Indian steel, a panel of WTO judges cast aside Washington’s argument that supply from state-owned iron ore and coal miners allowed Indian steel exporters to be treated as public bodies, although it also rejected many of the technical aspects of India’s case.

The Chinese plaintiffs also objected to the way Washington used third-country benchmarks, rather than actual transactions, to establish the true cost of exports from China. However, the WTO panel upheld the US approach.

In many of the industries in question, including steel, solar panels, aluminium extrusions, paper and citric acid, overcapacity and cut-throat competition have pushed the cost of Chinese products to the minimum in China as well as overseas.

Washington argues that Chinese domestic prices reflect the distorting effects of state subsidies on land, interest rates and other input costs.

HOW TO PREVENT U.S.-CHINESE RELATIONS FROM BLOWING UP

Sea power: Chinese naval recruits in Qingdao, December 2013.

Sea power: Chinese naval recruits in Qingdao, December 2013. (China Daily / Courtesy Reuters)
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By James B. Steinberg and Michael O’Hanlon | Foreign Affairs

At their summit in California last June, U.S. President Barack Obama and Chinese President Xi Jinping committed themselves to building trust between their countries. Since then, new official forums for communication have been launched (such as the military-to-military dialogues recently announced by the two countries’ defense ministers), complementing existing forums such as the Strategic and Economic Dialogue (which features the countries’ top diplomats and economic officials). But despite these efforts, trust in both capitals — and in the countries at large — remains scarce, and the possibility of an accidental or even intentional conflict between the United States and China seems to be growing. Given the vast potential costs such a conflict would carry for both sides, figuring out how to keep it at bay is among the most important international challenges of the coming years and decades.

The factors undermining trust are easy to state. East Asia’s security and economic landscape is undergoing massive, tectonic change, driven primarily by China’s remarkable economic rise in recent decades. That economic miracle, in turn, has made it possible for China to increase its military capacity and ramp up its political role in the region and beyond. China’s leaders and prominent strategists have been at pains to insist that China’s rise will be peaceful and poses no threat to its neighbors or the existing international political and economic order. But many members of the world community remain concerned and even skeptical, noting that history and international relations theory are replete with examples of conflict arising from clashes between a dominant and a rising power.

Such skepticism has been fueled, moreover, by China’s own recent actions, from its assertive maritime operations in the East China and South China seas to its unilateral proclamation of an “air defense identification zone” around the Diaoyu Islands (known in Japan as the Senkaku Islands), in the East China Sea. And U.S. military planners have become increasingly concerned about the trajectory of China’s military modernization and about its “anti-access/area-denial” (A2/AD) doctrine, which they see as an ill-disguised effort by China to weaken the United States’ ability to defend its interests and support its alliance commitments in the western Pacific.

At the same time, the Obama team has been actively promoting its own strategic reorientation, the “pivot,” or “rebalance,” to Asia. The administration insists that its motivation is to enhance regional stability for the benefit of all, rather than to contain or threaten China. But few Chinese, particularly in the military and national security communities, are convinced. They, too, read their history and international relations theory and conclude that the United States, like most dominant powers before it, is determined to maintain its hegemonic dominance, thwarting China’s rise and keeping it vulnerable. As evidence of malign American intent, they point to enhanced U.S. capabilities, such as expanded regional missile defense; new and augmented basing arrangements in Australia, Guam, and Singapore; and recent military exercises and reconnaissance conducted close to Chinese territory, as well as the persistence of Cold War–era security alliances. And the only plausible justification for the emerging U.S. military concept of “air-sea battle,” they claim, is a desire to coerce China with the threat of a decapitating preemptive attack.

Given the uncertainty surrounding the future of Asian security, each side’s actions can be understood and legitimized as measures designed to hedge against the possibility of future hostility or aggression on the part of the other. But it is just such rational short-term thinking that can generate a longer-term spiral into even greater mistrust, making future conflict a self-fulfilling prophecy — which is why it is crucial to find ways of transcending or minimizing such a classic security dilemma.

One way to head off unnecessary conflicts is to reduce the malign role played by misperceptions. These can emerge from two quite opposite directions: from one side either perceiving a threat where none is intended or failing to believe in the credibility of the other side’s intent to defend its interests. This means that the practical challenge for both Washington and Beijing is to dispel false fears while sustaining deterrence by making credible threats where they are seriously intended. The good news is that history and theory suggest four tools can be helpful in this regard: restraint, reciprocity, transparency, and resilience.

Restraint is the willingness to forgo actions that might enhance one’s own security but that will appear threatening to somebody else. Reciprocity is a response in kind by one side to the other’s actions — in this case, a signal that restraint is being understood as forbearance (rather than weakness) and is being met with emulation rather than exploitation. Transparency helps allay fears that the other side’s visible positive gestures mask hidden, more hostile intentions. And resilience provides a margin of safety in keeping crises from escalating and in making it easier for either side to try to start a virtuous cycle of restraint, reciprocity, and transparency. Fortunately for everybody, there are a variety of practical measures both Washington and Beijing can take in national security policy that can bring these tools to bear in increasing trust and reducing the risk of conflict.

CONVENTIONAL THINKING

From Washington’s perspective, the greatest uncertainty about China’s future intentions stems from the rapid and sustained growth of Chinese military spending and the accompanying investment in sophisticated conventional armaments that challenge U.S. capabilities. It is true that even the most generous assessments of China’s current military spending — that it approaches $200 billion annually, or about two percent of GDP — still put it at less than a third of U.S. spending (currently $600 billion a year, or about 3.5 percent of GDP). At current rates of growth, Beijing’s annual military budget would not equal Washington’s until around 2030. And even then, the United States could rely on large accumulated stocks of modern weaponry, years of combat experience, and the spending of its allies and partners (now around $400 billion annually).

But if China wants to calm international fears and signal that its goals are legitimate self-defense rather than the ability to project power abroad and threaten others, there are several constructive steps it could take. Given that U.S. spending covers capabilities not just in Asia but around the globe, a convincing case can be made that China can achieve adequate self-defense by spending about half of what the United States does. By reducing the current rate of growth of its military budget in coming years, therefore, China could telegraph that its objective is self-defense rather than complete parity. And it could exercise restraint in acquiring weapon systems (such as long-range antiship ballistic missiles) whose purpose, especially if procured in large numbers, seems inconsistent with a claim that it welcomes the U.S. military presence in the western Pacific. More broadly, China could offer greater transparency about its military budget and spending and provide greater clarity about the goals of its A2/AD doctrine.

The United States, in turn, could take steps to make clear that its own conventional military modernization is not designed to threaten legitimate Chinese security interests. The declining U.S. military budget is one such show of restraint. But Washington could do more in this regard, such as by clarifying the purpose of its air-sea battle concept, changing the concept’s name to “air-sea operations,” including military services besides the navy and the air force more centrally in U.S. Asia policy, and modifying some of the more “offensive-minded” features of the air-sea doctrine that appear to directly threaten China’s command-and-control and strategic assets with a possible preemptive attack early in a conflict. To enhance the credibility of such doctrinal modifications, the United States could cap its procurement of long-range, precision-guided ballistic missiles and strategic bombers, which if acquired in sufficient numbers could be seen as posing an existential threat to China. By deploying a mix of conventional assets that did not require a heavy reliance on early escalation (including bases that were more effectively hardened and assets that were more survivable in the face of an attack), Washington could help mitigate a U.S.-Chinese arms race and lessen the risk of a conflict breaking out early in a crisis.

FROM SPACE TO CYBERSPACE

The most iconic confidence-building measures during the Cold War were strategic arms control agreements, which despite some problems ultimately helped Washington and Moscow increase crisis stability and limit offensive and defensive nuclear arms races. For various reasons, formal arms control agreements are less well suited to contemporary U.S.-Chinese relations than they were to U.S.-Soviet relations and could in some cases prove counterproductive. That said, there are a number of steps in the unconventional weapons arena that could help allay mutual suspicion and reduce the likelihood of accidental or premature escalation of conflict.

Take space, for example. Given the deep U.S. dependence on satellites for both military and civilian purposes, Chinese planners are clearly considering how to neutralize the advantages space offers for U.S. military operations. Yet precisely because of that dependence, the United States would be under pressure to act forcefully and quickly if it believed those assets were at risk, leaving little time for fact-finding or diplomacy to defuse a crisis. For this reason, measures that can enhance the security of Washington’s space assets are particularly compelling, and they will become more attractive to Beijing, too, as it increases its space capability over time. Absolute security in space cannot be guaranteed, since every maneuverable civilian satellite has the inherent capacity to destroy another satellite. But by adopting measures such as agreed-on “keep-out zones” around satellites, norms of behavior can be established that legitimate the use of force in self-defense without having such use be seen as provocative. Resilience is important here, too, as the United States will need redundancy in space and aerial systems to compensate for a certain unavoidable degree of vulnerability.

The key to stable U.S.-Chinese relations over the long term is for each side to be clear about its redlines.

Similarly, the United States and China could agree to a treaty, ideally involving other countries as well, banning collisions or explosions that would produce debris above an altitude of roughly 1,000 miles in space, the zone where low-earth-orbit satellites routinely operate. This area is already becoming cluttered with debris in ways that could render future space operations dangerous, and since tests of missile defense systems typically take place at a lower altitude, such an arrangement would be all gain with little pain. The two sides could also agree not to develop or test dedicated antisatellite weapons or space-to-ground weapons. Testing constraints alone would not eliminate the potential for such capabilities, of course, but they could reduce the confidence each side had in them, along with the willingness to invest in and rely on what would be rendered potentially destabilizing systems of uncertain effectiveness.

Restraint can play a particularly important role in enhancing confidence in the nuclear realm. China’s restraint thus far in its nuclear deployments, for example, helps give credibility to the defensive nature of its nuclear doctrine. Similarly, U.S. restraint in deploying large numbers of ballistic missile interceptors that could neutralize China’s retaliatory capability offers reassurance of American defensive intent. Even without formal codification, continued observance of this restraint would build trust, which could be further strengthened by both sides’ ratification of the Comprehensive Nuclear Test Ban Treaty and implementation of the verification regime that accompanies it.

Such measures could be enhanced by transparency agreements, such as an “open skies” regime, which would give further credibility to each side’s restraint. This regime could build on the arrangement by which the United States and Russia, and other NATO and former Warsaw Pact states, conduct overflights of each other’s territories (at the rate of roughly 100 flights a year) under an accord dating from the early 1990s. Countries know how to protect their most precious secrets from such overflights, so the arrangement presents no true national security concerns. But such an accord could lessen Beijing’s frustration over routine U.S. reconnaissance flights near Chinese coastlines. Such flights could even be modestly reduced, as former National Security Adviser Zbigniew Brzezinski has proposed — a step that merits serious study, particularly if China shows a willingness to reciprocate with greater transparency.

Cyberspace is especially challenging. As in space, the United States’ high degree of dependence on its cyber-infrastructure poses vulnerabilities and creates pressure to respond quickly to any attack, possibly even before its source can be fully identified. And the recent U.S. focus on “active defense” of this infrastructure seems to imply Washington’s willingness to act offensively to neutralize emerging threats, with all the attendant danger of escalating retaliation.

There are many reasons to believe that both Washington and Beijing are unlikely to target cyber-infrastructure unless and until they find themselves on the brink of a major conflict. If nothing else, the countries’ mutual economic dependence offers protection against a surprise attack. But other parties, including nonstate actors such as terrorists or hackers, might have an interest in faking such an attack in order to trigger a crisis or even war. For that reason, the United States and China should agree to joint investigation of “anonymous” cyberattacks, establishing transparency and a credible commitment to avoid targeting each other’s civilian infrastructure. And resilience is particularly important in cyberspace, since the more each side reduces its vulnerability to a “bolt from the blue” attack, the more time will be available to try to figure out what actually happened and reduce the risk of an unintended spiral of escalation.

NEIGHBORHOOD WATCH

The most likely prospect for a direct military encounter between the United States and China in the near term comes from the growing tensions in the East China and South China seas. U.S. security commitments to Japan and the Philippines, both of which have territorial disputes with China, and U.S. willingness to assert basic navigational rights in the region (which set the stage for a close encounter between the USS Cowpens and Chinese ships last December) could entangle Washington in a conflict even though the United States itself has no territorial claims in the area. These tensions are not likely to be resolved anytime soon. The actual interests at stake are small, and many of the conflicts involved could be managed were there sufficient mutual will to do so. But all involved seem to fear that any show of restraint or accommodation will be taken as a sign of weakness, leading to even more assertive behavior in the future. This makes it all the more important to find ways of preventing crises from emerging or keeping them contained once they do so.

China could provide reassurance about its intentions by agreeing to and implementing the Association of Southeast Asian Nations’ proposed code of conduct for the South China Sea. Restraining its military deployments and agreeing to operational procedures that would reduce the danger of accidents or miscalculations would make Beijing’s assertions of peaceful intent more credible, and similar procedures could be agreed on in connection with the Diaoyu/Senkaku Islands. (This is an area where the bigger policy change needs to come from Beijing; there are other areas where a disproportionate burden of the responsibility lies with Washington, such as in a reduction in the size of offensive nuclear forces in coordination with Russia.)

U.S. and Chinese officials, moreover, need to establish better mechanisms for clear and direct communication during a crisis. Since 1998, the two countries have had a hot line connecting their political leaderships, but they have little military-to-military communication, due largely to Beijing’s wariness of such engagement. A military maritime agreement, also dating to 1998, encourages consultation and transparency on each country’s respective activities but doesn’t cover operational rules of the road or specific tactical movements. It would make sense to establish a formal military hot line patterned after the U.S.-Soviet one; at a minimum, the two countries should each possess a much more complete set of contacts for the other’s top military leaders to facilitate rapid communication in crisis situations.

The two sides, and perhaps other regional actors, could also agree to an incidents-at-sea accord comparable to that between Washington and Moscow during the Cold War, including not only navies but also coast guards and perhaps even merchant vessels as well. Both sides will inevitably and legitimately continue their surveillance, but they could do so with far less risk. The accord would be designed to ensure that ships do not approach one another too closely, that carrier air operations are not interfered with, and that submarines do not surface or behave in other potentially risky ways.

Regarding regional issues, even though another Korean war seems unlikely, events on the peninsula in recent years (such as North Korea’s ongoing nuclear and missile programs and its sinking of the South Korean frigate Cheonan and shelling of Yeonpyeong Island in 2010) serve as reminders that the risk of escalation to a wider conflict persists. Should a crisis erupt as a result of new provocations or a North Korean collapse, it is not hard to imagine the United States and China being drawn in, with potentially tragic consequences. So taking practical steps now to lay the groundwork for a coordinated response to a possible future crisis makes sense.

At the least, each side could reassure the other that its crisis response plans (including to secure North Korean nuclear materials or restore political order) are designed to be stabilizing rather than threatening. For Beijing, the reluctance to talk about such subjects for fear of offending Pyongyang could be circumvented by beginning the conversation as a track-two discussion among academics and retired officials. Beijing should also recognize that on a reunified peninsula, Seoul would have the decision over whether American forces should stay. Washington, for its part, should assure Beijing that any future U.S. force posture on the peninsula (assuming that Seoul would still want some U.S. presence) would be smaller than the current one and not based any further north than it is now. And both Seoul and Washington should be prepared to invite China to help in any future contingency, at least in the northern sectors of North Korea.

Even though cross-strait tensions have eased in recent years, Taiwan remains a contentious issue in U.S.-Chinese relations, in part because China has not renounced the use of force to reunify Taiwan with the mainland and in part because the United States continues to sell arms to Taipei. Some tension would seem to be inevitable given the fundamental differences in interests between the parties. Yet even here, reassurance can play a role. For Beijing, this means making its stated intention of seeking a peaceful path to unification credible, by putting some limits on its military modernization and stopping military exercises focused on intimidating Taiwan through missile barrages or blockades. For Washington, it means making sure that the arms it sells Taipei are in fact defensive and demonstrating a willingness to scale back such arms sales in response to meaningful, observable, and hard-to-reverse reductions in China’s threatening stance toward Taiwan.

Fortunately, both sides are already pursuing key elements of such an agenda. However, Beijing’s current missile buildup, and the possibility of Washington’s countering it by helping Taiwan improve its missile defenses, creates the potential for a new round of escalation — or it could lead to a new round of reassurance. China could usefully start the latter process by reducing its deployed missile force.

MORE SIGNALS, LESS NOISE

The key to stable U.S.-Chinese relations over the long term is for each side to be clear about its true redlines and the price, at least in general terms, it is willing to pay to defend them. As with reassurance, accurately communicating resolve requires more than just words; it involves demonstrating both the will and the capacity to make good on threats.

That means Washington needs to make Beijing understand that it will defend not just its own territory and people but also those of its formal allies and sometimes even its nonallied friends. This is partly what the Obama administration’s rebalance was supposed to do, but to achieve that effect, it needs to be followed up on and be executed seriously rather than be allowed to languish. Of course, demonstrating resolve does not have to mean meeting every provocation with a direct military response. Sometimes, nonmilitary responses, such as sanctions and new basing arrangements, may make the most sense, as may using negotiations to offer appropriate “off-ramps” and other avenues for de-escalation of a crisis. The best way to signal resolve prudently in a particular case will depend on various factors, including the degree of coordination Washington can manage to achieve with its allies and partners. But it is crucial to signal to Beijing early and clearly that there are some lines it will not be permitted to cross with impunity.

The flip side of this is that the United States needs to understand and respect China’s determination to defend, with force if necessary, its own vital national interests. To the extent that those interests are defined appropriately, this would be an acceptable assertion of China’s legitimate right of self-defense under Article 51 of the UN Charter, and given its history of past vulnerability to invasion and aggression, it is understandable for China to take steps to make its own resolve credible. The difficulty here is that in recent years, Beijing has seemed to assert an ever-expanding list of “core” interests and has often handled them truculently, turning even relatively minor and routine disputes into potentially dangerous confrontations and needlessly risky tests of mutual resolve. Beijing needs to recognize that over time, such behavior dilutes the legitimacy and force of its more important claims, sending conflicting signals and undermining its own long-term interests.

U.S.-Chinese relations may be approaching an inflection point. A long-standing bipartisan U.S. consensus on seeking constructive relations with China has frayed, and the Chinese are increasingly pessimistic about the future of bilateral dealings as well. Yet U.S. fatalism about China’s rise could lead to resigned acceptance of a new reality or muscular resistance designed to protect old prerogatives — both unpromising and ultimately self-defeating strategies. Building a relationship around the principles of strategic reassurance and resolve offers the prospect of a more promising future without jeopardizing legitimate interests on either side. In effect, rather than simply hoping or planning for trust, it substitutes a “trust but verify” approach. This is much sounder than classic hedging, since it seeks to reduce the possibility of unintended provocation and escalation. And with luck, it can be enough to help keep full-scale conflict at bay, an outcome that prudent people on both sides should be seeking.

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