China crisis and wishful thinking

is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:

A few weeks ago I mentioned the Sept. 24, 2010, joint statement between ASEAN and the US reaffirming "the importance of regional peace and stability, maritime security, unimpeded commerce, and freedom of navigation, in accordance with relevant universally agreed principles of international law, including the United Nations Convention on the Law of the Sea (UNCLOS) and other international maritime law, and the peaceful settlement of disputes."

As I wrote then, what could possibly be wrong with such a logical to-the-point-of-mundane statement? Nothing. But, as reported by the Canadian Press, China reacted, again predictably hysterically, that "China claims sovereignty over the entire sea and all the island groups within it."

It’s an interesting game that China is playing, appearing to be the victim while simultaneously asserting its role as Asia’s resident bully. And the attitude has seemingly spilled beyond its government. A few months ago, a Chinese trawler intentionally rammed itself into Japanese coastguard ships while within disputed waters. The position taken by China was not meant to be conciliatory. Chinese Foreign Ministry spokeswoman Jiang Yu, in an incredible display of undiplomatic-speak that would make our MalacaƱang’s Vietnam delegation spokestwits proud, dismissed Japan’s statements outright by saying that "it is futile to play tricks by deceiving the world and international public opinion" and that "Japan’s sophistry is untenable." Actually, all that Japan said was for China to remain "calm."

Sadly, in the end, Japan caved in. Setting aside national pride, Japan released the members of the trawler, including the captain that allegedly ordered the deliberate ramming into the Japanese vessels. The triumphant moment of China was not a pretty sight: the released captain glowing defiance upon arriving in a Fujian Province airport and Japan left to looking weak. Interestingly, Japanese prosecutors chose to acquit the Chinese captain on grounds of lack of premeditation. How a ship can ram not one but two vessels without premeditation is incredible. Most commentators instead credit the release due to the energy of China’s shrill reaction and to the amount of business that China bludgeons Japan’s businessmen with. This was vividly illustrated when Chinese exporters allegedly started siding with its government by withholding shipments of minerals needed by Japan’s electronics industry.

While pragmatists may claim that between the group of rocks that is the Senkaku islands and the amount of business that Japan stands to lose, the release of the Chinese sailors was a good call, such is a profound mistake.Japan undutifully gave the world a dilemma, something that will haunt it for a longer time to come. It gives China confidence as to its methods. Emphatically, it places the Philippines, which is disputing the Kalayaan and Scarborough Shoal with China, in a very difficult position. Unfortunately, part of the difficulty is self-inflicted, particularly when the Philippines decided to acquiesce to China’s vehemence and labeled the disputed group of islands as outside our baselines, categorizing them instead as a "regime of islands" under Philippine jurisdiction. The Philippines has no reason to be satisfied with its legal cleverness: China racheted up its claim to the islands anyway by calling it a "core national interest."

The Philippines should view its relationship with China with greater objectivity, not allowing itself to be dazzled by the money and business that is being dangled by China or to be awed by its supposed power. There is something unsettling in the way China employs its muscle, betraying perhaps a lack of maturity or even an insecurity, which is really bizarre to say of a country that is quite proud of its old civilization. Nevertheless, that is that and the Philippines should ensure that its longer-term interests are maintained, alongside its short-term interests. Part of this is maintaining our friendship and ties to those countries that have more or less proven their allegiance with us in one way or another.

Obviously, one of these countries is the US and the latter is clearly trying to get its grip on what China’s true ambitions are. The problem becomes more acute considering China’s insistence in maintaining its quite low-valued currency. American legislators are gearing up to go to a currency and trade dispute with China. The public seems supportive of this but, unfortunately, the Obama administration is seemingly oblivious to the danger, like Japan, of it being made to look weak in the face of Chinese clatter. This is made all the more frustrating if one considers David Frum’s view (writing for CNN.com) that the "recession was made in China ... [with China manipulating] its banking system so the accumulated surplus dollars never get spent ... and because the Chinese had so many dollars, they lent the dollars very, very cheaply," leading to "an American debt binge."

We really need better, sustained, and deeper thinking with regard to this. Twits and PSP addicts simply won’t cut it. Otherwise, as a friend of mine would say: ergo sum dim sum.