The Sunday Times
June 28 1998

It's not such a big dragon, after all 
SUMMITS are not what they used to be. But in the case of President Bill Clinton's visit to China, we should all be grateful. 

During the cold war, summits were both grand and valuable occasions. A Soviet-American summit forced arms control negotiators to strike a deal. In our unimaginatively named "post-cold war" era, summits tend to be grand but vacuous affairs. 

As in classical Chinese painting, what is most important in the modern Sino-American summit is the blank space - what is not achieved. 

The main lure for most pilgrims to China is the prospect of economic gain. But Beijing is also hoping for "rewards" - especially for its good behaviour in not devaluing its currency and making the Asian economic crisis even worse. It particularly wants to see progress towards Chinese entry into the World Trade Organisation (WTO). 

However, while some trade deals that have already been agreed can be repackaged as a summit achievement, there has been no new breakthrough on any important trade issue. The Americans continue to insist on further liberalisation of the Chinese economy before WTO entry becomes possible. 

Clinton's tough line on trade is a welcome rejoinder to the cheeky argument of Chinese officials and their western parrots that China is Pacific Asia's "regional stabiliser" in the economic crisis. Indeed, Beijing's spin-doctoring has reached new heights with the argument that its magnanimous efforts are being undermined by the failure of Japan to reform its economy. In truth, China's devaluation three years ago laid the basis for the Asian economic crisis that began last July. And China benefits from the falling value of the yen because loans from Japan are becoming smaller and easier to repay. 

When China eventually devalues again and triggers yet more gloom in the region, the blame will lie with its own failure to reform its economy and, in particular, its determination to bail out rusting state-owned industries. 

Despite the rhetoric about China's geo-economic importance, the Americans can afford to take a tough line. China matters far less than the modern Marco Polos claim. Its gross domestic product (GDP) is roughly on a par with Italy's. China barely makes it into the top 10 export market for most western countries. Direct American foreign investment in China has fallen in recent years, and even at its peak was less than the United States invested in Holland. Western companies regularly rank China as among the riskiest places to invest. China could drop off the economic map of the world without having a serious impact on the global economy. 

With a bankrupt banking system and state-owned industries producing 3% of GDP that rusts in warehouses, China's nominal growth rates of 7% are suspect and unimpressive. They are particularly suspect when the absence of far-reaching political reform makes the Chinese economy opaque and subject to the kinds of shock that shattered other southeast Asian economies. Thus the political dimension of the Sino-American summit has included a robust reaffirmation by Clinton that China "is on the wrong side of history". 

Western apologists for China had urged Clinton to reward it for concessions to common decency such as releasing some prominent dissidents. But he has continued to be rude about China's abysmal human rights record, concluding that only a post-communist China would deserve the world's respect. 

After economics and politics, the third dimension of modern summit diplomacy concerns security risks. Here, too, the Americans have resisted Chinese calls for concessions. 

There has been no agreement to lift an arms embargo, transfer higher technology or reduce American support for Taiwan. Chinese supporters claim the country deserves all these concessions because nuclear proliferation in the region demonstrates an increasing need for a "strategic partnership" with the United States. 

Yet China's transfer of nuclear technology and missiles to Pakistan encouraged India to test its own nuclear weapons last month. With Clinton enduring criticism at home for apparently turning a blind eye to China's missile programme, there is little prospect of a softening of American policy on security issues. 

Thus a grand but vacuous Sino-American summit - with some plain speaking from Clinton - can be judged a great success. But this will be merely one part of a longer-term process of engaging China and helping it to become a more co-operative player in international affairs. 

China is nothing more than a second-rate power with the ability to push around third or fourth-rate powers, such as the Philippines. And it is puny when up against a first-rate power such as the United States. 

China likes to think of itself as a "near-peer competitor" of the United States, on its way to full superpower status. In reality, it has an interest in and is capable of being managed by - a policy of "constrainment" - a mixture of engagement and constraint. Long may such Sino-American "constrainment" summits continue. 

Gerald Segal is director of studies at the International Institute for Strategic Studies and director of the Economic and Social Research Council's Pacific Asia programme 

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