China eroding US dominance

http://www.atimes.com/atimes/China_Business/GL08Cb05.html

China eroding US dominance
By Donald Alford Weadon Jr

Speaking Freely is an Asia Times Online feature that allows guest writers to have their say. Please click here if you are interested in contributing.

The Chinese National Offshore Oil Corporation's recent attempted acquisition of Unocal raised American fears that China could challenge American energy security. Inside the beltway, conventional wisdom said spiking such Chinese deals would make the United States safer. Torpedoed by concerted lobbying by energy firms and administration China hawks, the deal was replaced when, only days later, the Chinese acquired PetroKazakhstan of Calgary for over US$4 billion in cash, a fateful transaction which barely merited ink in the US media.

Rather than making America safer, the Unocal affair only increased China's incentive to seek and bolster reliable energy supplies through bilateral trade on a global scale at America's expense. Other energy deals are being reported weekly.

As hard as China tries to diversify away from the Middle East, economic considerations dictate that it must come back to the Gulf, still the world's lowest-cost oil producer. Beijing recognizes that the preponderance of oil and natural gas come from this strategic area, hence providing increased incentives to expand its influence there, a penetration already broader than Washington pundits might think.

Not recognizing spheres of influence, China is rapidly expanding ties throughout the Arabian peninsula, Iran and the Levant. Bilateral energy swaps for goods/services will grow, eroding US commercial advantage in many markets currently considered "locked" for US or Western goods and technology.

Chinese companies are rapidly outgrowing their image as a source of cheap products, and are threatening the reputation of the US, Western European and West Asian capitals as the "go-to" resource for higher-end technology and large scale project support. For consumers of high technology goods, China will soon be able to meet virtually any civilian or military need as its productive capacity serves more and more foreign companies, with China even purchasing control of technology market leaders, such as the purchase of IBM's laptop business by Lenovo.

Many Western companies have already opened research and development facilities in China, and China is seeking to acquire Western companies with significant consumer quality identification (for example, Haier's attempted purchase of Maytag). In China, claimed abuses of intellectual property rights have actually expanded duplication into a guild-like methodology for industrial training and growth. In the future, few Western technologies will remain unmatched by China in both the commercial and military spheres.

In the military sphere, Chinese influence is dismissed by noting the relative weakness of its naval forces. But littoral diplomacy is supplanting a blue-water navy: China, like a latter-day Alfred Thayer Mahan (the renowned 19th century American geostrategist and naval power advocate), is shaping key basing agreements along the oil shipping-sea-lanes between China and the Gulf. Those who assert that Chinese military technology is poor should take note that the US Army has procured Chinese night vision equipment for the Iraqi Army in lieu of US gear.

Furthermore, the Chinese understand leverage in the trade equation on all levels, and they have utilized it to bolster their trade development in the Middle East, whether it be through sophisticated financial guarantees or petroleum-based finance. In the Gulf, Chinese companies are slowly translating growing trade relations into a concrete presence and regional political influence.

Whether it is projects to showcase Chinese products or services, or significant infrastructure projects which require sophisticated design and construction capabilities (such as ports or airports), the Chinese are eager to offer an alternative to Western giants. The common ground that China and the Gulf nations have found in trade and economics inevitably is spilling over into a perception of shared strategic interests. China's export-led growth, and its ability to provide jobs for its people, turns on access to ever-increasing quantities of energy.

What is the best metaphor for this situation, which lacks both the linearity of checkers and the exquisite dynamism of chess? Perhaps it is the national game of China - wei ch'i or "Go" - where control of the board is the crucial objective and the timeline is slow and deliberate. As in this 4,000-year-old board game, China is using economic wedge maneuvers to expand its financial influence, harden its economic achievements into political interests, and ultimately achieve control of the "board". Note how a string of Chinese actions defending Iran at the UN dovetailed with a series of large China-Iran energy deals.

Energy and economic engagement with the developing world are not the only diplomatic tools at China's command. China is now capable of unilateral action, with its UN veto a sheathed sword against US action. American influence as has been traditionally exerted will be a thing of the past unless China's goals are understood, and they are effectively engaged.

Donald Weadon, an international lawyer, was among the first US lawyers to practice in China. He studied with Harvard in Iran, has practiced throughout Asia and the Gulf and lives in Washington, DC. He can be reached at dweadon@aol.com

(Copyright 2005 Donald Alford Weadon Jr)