Pacific Currents: The Responses of U.S. Allies and Security Partners in East Asia to China1s Rise

309 Pages·2008·2.13 MB·English

by  Evan S. Medeiros

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pacific
CurrentS
The responses of U.S. Allies and Security
Partners in East Asia to China’s Rise
Evan S. Medeiros
Keith Crane | Eric Heginbotham
Norman D. Levin | Julia F. Lowell
Angel Rabasa | Somi Seong
Prepared for the United States Air Force
Approved for public release; distribution unlimited
PROJECT AIR FORCE
The research described in this report was sponsored by the United States
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be obtained from the Strategic Planning Division, Directorate of Plans,
Hq USAF.
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Is Available For This Publication
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Preface
The rise of the People’s Republic of China in Asian economic and security affairs is one
of the most consequential developments in the 21st century. China’s regional power
and influence are growing at the very time that U.S. strategic equities in Asia are
increasing. China’s rise raises the prospect of intensifying security competition in East
Asia both between the United States and China and between China and Japan. These
developments have prompted some American and Asian commentators to question
whether China will eventually displace the United States as the predominant power in
East Asia by gradually chipping away at the foundation of the U.S. network of defense
alliances and security partnerships in the region.
To address these potential challenges, this book analyzes how U.S. allies and
major security partners have responded to the rise of China in the last decade in their
domestic political, economic, diplomatic, and military policymaking. This book
assesses the reactions of the five U.S. defense allies in Asia plus Singapore. Document-
ing and assessing these responses are critical for U.S. policymakers and military plan-
ners for several reasons. First, China is the big, new, and uncertain variable affecting
the foreign policies and, in some cases, the domestic affairs of countries throughout
East Asia. Second, understanding whether and how China’s rise will alter the con-
tent or operation of U.S. relationships in the region will help the United States main-
tain a robust network of alliances and security partnerships. Third, limited systematic
research on East Asian responses to China has been done to date.
This document is directly relevant to policymakers and military planners who
are focused on ensuring that the United States maintains maximum access to the
region and maximum freedom of maneuver in conducting U.S. diplomacy and mili-
tary affairs. This book’s results will help policymakers and defense planners calibrate
the tone and substance of U.S. regional diplomacy and military policies to ensure that
U.S. alliances and security partnerships remain highly effective in shaping the strategic
landscape in East Asia as China’s regional power and influence grow.
This book is part of a substantial and growing body of RAND Corporation
research—now spanning a decade—that examines the changing regional security
environment in Asia and, specifically, China’s improving diplomatic and military capa-
bilities. Recent RAND Project AIR FORCE work on Asia includes the following:
iii
iv Pacific Currents: The Responses of U.S. Allies and Security Partners in East Asia to China’s Rise
(cid:116)(cid:1) Roger Cliff and David A. Shlapak, U.S.–China Relations After Resolution of Tai-
wan’s Status, MG-567-AF, 2007.
(cid:116)(cid:1) Roger Cliff, Mark Burles, Michael Chase, Derek Eaton, and Kevin Pollpeter,
Entering the Dragon’s Lair: Chinese Anti-Access Strategies and Their Implications for
the United States, MG-524-AF, 2007.
(cid:116)(cid:1) Evan S. Medeiros, Roger Cliff, Keith Crane, and James C. Mulvenon, A New
Direction for China’s Defense Industry, MG-334-AF, 2005.
(cid:116)(cid:1) Keith Crane, Roger Cliff, Evan S. Medeiros, James C. Mulvenon, and William
H. Overholt, Modernizing China’s Military: Opportunities and Constraints, MG-
260-AF, 2005.
This research was sponsored by the Commander of the Pacific Air Forces and was
conducted within the Strategy and Doctrine Program of RAND Project AIR FORCE
for a fiscal year 2006 study, “China’s Rise Through the Eyes of U.S. Allies and Security
Partners in Asia.”
RAND Project AIR FORCE
RAND Project AIR FORCE (PAF), a division of the RAND Corporation, is the U.S.
Air Force’s federally funded research and development center for studies and analyses.
PAF provides the Air Force with independent analyses of policy alternatives affecting
the development, employment, combat readiness, and support of current and future
aerospace forces. Research is conducted in four programs: Aerospace Force Develop-
ment; Manpower, Personnel, and Training; Resource Management; and Strategy and
Doctrine.
Additional information about PAF is available on our Web site:
http://www.rand.org/paf/
Contents
Preface ................................................................................................. iii
Figures ................................................................................................. xi
Tables .................................................................................................xiii
Summary ..............................................................................................xv
Acknowledgments ................................................................................. xxv
Abbreviations ......................................................................................xxvii
CHAPTER ONE
Introduction ........................................................................................... 1
Scope and Methodology ............................................................................... 2
Organization ............................................................................................ 4
CHAPTER TWO
China’s Changing Economic Relations with Asia .............................................. 5
Trade Flows ............................................................................................. 5
China as a Key Export Market ..................................................................... 5
Declining Importance to China ................................................................... 8
China as an Assembly Hub for East Asian Electronics .......................................... 9
Trade in Services ......................................................................................11
Chinese Payments for Services, Factor Incomes, and Transfers ...............................13
Chinese Earnings from Services, Factor Incomes, and Transfers .............................14
Foreign Direct Investment: Competitors or Collaborators? ......................................15
Patterns of Foreign Direct Investment into China ..............................................15
Chinese Investment in the Six Nations ..........................................................17
Competition for FDI ...............................................................................18
Winners and Losers from Trade with China ......................................................19
Winners ..............................................................................................19
Losers .................................................................................................21
Net Assessment ........................................................................................21
v
vi Pacific Currents: The Responses of U.S. Allies and Security Partners in East Asia to China’s Rise
CHAPTER THREE
Japan .................................................................................................. 23
National Conditions ................................................................................. 24
Domestic Politics and Public Opinion .............................................................25
The History Question and Yasukuni ............................................................ 26
Popular Perceptions of China .................................................................... 28
The LDP’s China Posture ......................................................................... 30
The Opposition ......................................................................................31
Economic Responses ..................................................................................32
Trade with China ...................................................................................33
Foreign Direct Investment Flows ................................................................ 34
The Economic Ministries’ Position ...............................................................37
Japanese Businesses Embrace China ..............................................................39
Diplomatic and Foreign Policy Responses ........................................................ 40
Tighter Embrace of the United States ............................................................41
Strategic Relations with India, Taiwan, and Australia ........................................ 42
Reengaging Southeast Asia ........................................................................45
Democracy, History, and Asian Leadership .....................................................45
Bilateral Relations with China ................................................................... 46
Defense Policy Responses ............................................................................49
Military Planning and Guidance ................................................................ 50
New Missions, Old Budgets .......................................................................51
Strengthening the Coast Guard ...................................................................55
Conclusions and Implications .......................................................................55
Policy Integration .................................................................................. 56
Domestic and International Variables ............................................................58
Indicators of Change ...............................................................................59
CHAPTER FOUR
South Korea ...........................................................................................63
National Conditions ..................................................................................65
Domestic Politics and Public Opinion ............................................................ 68
Domestic Politics ................................................................................... 68
Popular Views and Public Opinion ...............................................................72
Economic Responses ..................................................................................73
Fading Optimism and Growing Concerns ..................................................... 77
Assessing Winners and Losers .................................................................... 80
Diplomatic and Foreign Policy Responses .........................................................82
Defense Policy Responses ............................................................................85
Defense Policy ......................................................................................85
Military Relations with China ....................................................................89
Contents vii
Conclusions and Implications ...................................................................... 90
Driving Forces and Likely Futures ................................................................91
The Strength of U.S.–South Korean Security Relations .......................................93
Potential Tests of Will ............................................................................. 94
CHAPTER FIVE
The Philippines ...................................................................................... 97
National Conditions ................................................................................. 98
Domestic Politics and Public Opinion ........................................................... 100
Economic Responses ................................................................................ 102
Winners and Losers from Trade with China .................................................. 104
Trade in Services .................................................................................. 107
Foreign Direct Investment ....................................................................... 108
Role of the Ethnic Chinese Business Community ............................................ 109
Diplomatic and Foreign Policy Responses ....................................................... 110
Bilateral Relations with China .................................................................. 110
Philippine-ASEAN Interactions ................................................................ 112
Relations with the United States ................................................................ 114
Taiwan Policy...................................................................................... 115
Defense Policy Responses .......................................................................... 116
Rebuilding of U.S.–Philippine Military Ties .................................................. 118
Defense Cooperation with Other Countries .................................................. 119
Military Exchanges with China ................................................................. 120
Conclusions and Implications ..................................................................... 120
Key Findings ...................................................................................... 120
Future Responses and the Implications for the United States ............................... 122
CHAPTER SIX
Thailand ............................................................................................. 125
National Conditions ................................................................................ 126
Domestic Politics and Public Opinion ........................................................... 128
A Pro-China Tilt? ................................................................................. 129
Party Differences .................................................................................. 130
Economic Responses ................................................................................ 132
Chinese-Thai Trade ............................................................................... 132
Thailand and China in Regional Production Chains......................................... 133
Thailand’s Chinese Business Groups ........................................................... 136
Interlocking FTAs and Thailand as Hub ...................................................... 137
Chinese Investment in Thailand ................................................................ 139
Diplomatic and Foreign Policy Responses ....................................................... 141
Bilateral Relations with China and the United States ........................................ 141
Improving Relations with Burma, India, and China ......................................... 143
viii Pacific Currents: The Responses of U.S. Allies and Security Partners in East Asia to China’s Rise
Multilateralism and Regional Politics .......................................................... 145
Defense Policy Responses .......................................................................... 147
Force Modernization Plans ...................................................................... 147
Threat Perceptions and China ................................................................... 149
Strategic Relations and Military Diplomacy with China .................................... 150
Security Cooperation with the United States .................................................. 152
Cultivating New Security Partners ............................................................. 153
Conclusions and Implications ..................................................................... 155
Policy Integration ................................................................................. 155
Variables and Indicators .......................................................................... 156
CHAPTER SEVEN
Singapore ............................................................................................ 159
National Conditions ................................................................................ 160
The Ethnic Dimension ........................................................................... 162
Domestic Politics and Public Opinion ......................................................... 162
Public Perceptions of China ..................................................................... 163
Economic Responses ................................................................................ 164
Singapore’s Stake in Regional Economic Integration ......................................... 165
Merchandise Trade ............................................................................... 167
Foreign Direct Investment ....................................................................... 171
Economic Winners and Losers .................................................................. 175
Diplomatic and Foreign Policy Responses ....................................................... 176
Regional Policy .................................................................................... 176
Taiwan Policy...................................................................................... 178
Defense Policy Responses .......................................................................... 180
Defense Cooperation with the United States .................................................. 181
Importance of Technology Cooperation ....................................................... 183
Defense Relations with ASEAN States and China ........................................... 184
Conclusions and Implications ..................................................................... 185
CHAPTER EIGHT
Australia ............................................................................................. 189
National Conditions ................................................................................ 190
Domestic Politics and Public Opinion ........................................................... 195
Domestic Politics .................................................................................. 195
Public Opinion .................................................................................... 196
Economic Responses ................................................................................ 197
Trade ............................................................................................... 198
The Composition of Trade ....................................................................... 201
Foreign Direct Investment .......................................................................204