THE WILLIAM J. CASEY INSTITUTE’S SYMPOSIUM ON THE STRATEGIC AND ECONOMIC OUTLOOK FOR THE ASIA/PACIFIC REGION

9 June 1997

The ANA Hotel
Washington, D.C.

In anticipation of congressional
consideration of President Clinton’s
proposal to renew China’s Most Favored
Nation (MFN) status for another year and
in light of growing concerns about U.S.
national and economic security interests
in East Asia (notably, the 1 July Chinese
takeover of Hong Kong), the William J.
Casey Institute of the Center for
Security Policy convened its third
semi-annual Casey Symposium to discuss
these and related issues.

Over 120 former and present government
officials, businessmen, diplomats and
public policy analysts participated in
this half-day event. The following
summary describes highlights of the
conversation, including points made in
the course of five of the most important
interventions. Four of these were offered
by the Symposium’s Lead Discussants —
Richard Bernstein, a veteran
correspondent and co-author of the
critically acclaimed new book, The
Coming Conflict with China; Senator
Jon Kyl (R-AZ), a member of the
Senate Intelligence, Judiciary and Energy
and Natural Resources Committees; Ambassador
James R. Lilley, former
Assistant Secretary of Defense for
International Security Affairs and U.S.
Ambassador to the People’s Republic of
China and to South Korea; and Senator
Thad Cochran (R-MS), a member of
the Senate Appropriations Committee and
chairman of the Government Affairs
Subcommittee on International Security,
Proliferation and Federal Services. The
fifth major intervention, dealing with
financial aspects of China’s troubling
agenda, was made by Roger W.
Robinson, Jr., a former Vice
President at Chase Manhattan Bank and
Senior Director of International Economic
Affairs at the Reagan National Security
Council, who currently holds the
Institute’s William J. Casey Chair.

The following observations made in
the course of this Casey Symposium
appeared to reflect concerns shared by
many of the participants. No effort was
made, however, to define or adopt
consensus positions on the issues
discussed.

I. The Burgeoning Chinese
Threat

Richard Bernstein led off the
discussion of the first section of the
Symposium by citing recent Chinese
leadership statements and writings meant
for internal consumption that candidly
describe the authors’ perceptions of an
inevitable confrontation between the PRC
and the United States. Particularly
noteworthy are the views expressed in a
1994 compendium of
such writings entitled Can the
Chinese Army Win the Next War, which
depict a protracted struggle in which the
United States is China’s principal
adversary.

It follows from the conclusion that a
Sino-American relationship once
characterized by cooperation in
containing Soviet power has become a
zero-sum game that China will
increasingly pursue policies that are at
variance with U.S. interests. Those
already evident include: ambitious
modernization programs creating far more
powerful strategic nuclear, conventional
and unconventional forces; espionage and
technology-theft operations in the United
States and elsewhere; the penetration of
U.S. and international securities markets
by Beijing’s military and intelligence
services; influence operations aimed at
suborning American politicians; unfair
and inhumane trade practices (involving,
among other things, piracy of proprietary
information and exploitation of slave
labor); prolific and indiscriminate arms
proliferation; and China’s efforts to
dominate the Western Pacific out to the
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Most participants appeared
unpersuaded, in light of the PRC’s
internal policy documents and evident
conduct, by the argument that Beijing
will only view the United States as an
adversary if Washington behaves in a
hostile manner toward China. In the face
of much evidence that the Chinese
government believes it has already
embarked upon a protracted confrontation
with the United States, it behooves the
Clinton Administration to develop a
long-term, strategically minded policy
for protecting U.S. interests.

II. U.S. Perceptions of the
Strategic Threat

Senator Jon Kyl observed that such
strategic thinking generally does not
come easily to democracies. By contrast,
totalitarian regimes like China’s that
are committed to acquiring and wielding
power tend to have both long- and
short-term strategic plans designed to
fulfill their aspirations. Since the
political elite of China continue to
exercise central control of all the
political and most of the economic
functions of the country, China’s
resources and diplomatic energy can be
cohesively used to achieve that nation’s
goals.

If anything, the surging nationalism
accompanying the imminent take-over of
Hong Kong is likely to reinforce the
Chinese government’s increasing
assertiveness. The United States must
reckon with the prospect that the
People’s Liberation Army will become even
more willing to flex its muscles in the
South China Sea and beyond as its
power-projection capabilities steadily
improve.

Roger Robinson noted that, in addition
to steadily improving the reach of its
military, Beijing is making strides
unprecedented among communist states in
diversifying its foreign sources of hard
currency and in recruiting politically
powerful new Western constituencies in so
doing. These objectives are being
achieved via the PRC’s
multibillion-dollar penetration of the
international and American securities
markets. Since 1988, China has issued
some eighty bonds. While the bulk of
these have been yen-denominated bonds,
the total amount of dollar-denominated
Chinese bonds (primarily issued in the
U.S. market) has now reached at least
$6.7 billion.

The United States has not, to date,
been sufficiently serious about:
determining through national intelligence
sources and methods the true identities
of these Chinese state-owned enterprises
and banks; tracking their activities on
behalf of the PLA and China’s security
services; monitoring the identity and
conduct of their affiliates, subsidiaries
and shell companies or unveiling the real
backgrounds of their chairmen, boards of
directors and other top management. As a
result, the full magnitude of this
strategic development has yet to be
popularly comprehended.

The short form is that this preferred
borrowing venue provides major Chinese
state-owned enterprises and banks
intimately connected with the PLA and
Beijing’s security services with access
to large sums of undisciplined,
unconditioned and inexpensive cash. This
money can be easily diverted to finance
activities inimical to U.S. security
interests — not to mention being at odds
with American principles and values.
Worse yet, in the process, Beijing is
ensuring that influential groups in the
United States and elsewhere in the West
have a financial vested interest
in ensuring that China is not subject to
future U.S. economic sanctions,
containment strategies or other forms of
isolation and/or penalties.

The Clinton Administration and the
Congress should take steps to deny
PLA-front companies and other
inappropriate Chinese borrowing entities
the opportunity to sell bonds in the U.S.
market. This step can be taken in a
non-disruptive fashion (e.g., by creating
a security-minded screening mechanism for
these would-be participants in the
American bond and equities markets)
without fear of jeopardizing U.S.
exports, jobs or
“people-to-people” contacts
unaffected by such transactions.

Among the other topics that demand
careful strategic thought by U.S.
policy-makers are:

• Sino-Russian Strategic
  Cooperation: The United
  States must be alert to the
  possibility that this cooperation
  will greatly enhance China’s
  military capabilities. (A case in
  point is Russia’s reported
  willingness to provide China with
  its formidable SS-N-22 supersonic
  anti-ship cruise missile — a
  weapon system designed to attack
  U.S. AEGIS air-defense vessels
  and aircraft carriers. Subsequent
  to the Casey Symposium, Rep. Dana
  Rohrabacher [R-CA] led the House
  of Representatives to vote to cut
  off all U.S. assistance to Russia
  if even one of these
  missiles were transferred to
  China.)

Another concern is that China and
Russia may be collaborating in
the exporting of ballistic
missile and other advanced
weaponry to dangerous Middle
Eastern states, with a view to
diverting American power from
Asia — and, thereby, further
diminishing the U.S. capacity to
challenge either parties’
interests in the region.

• Global Ballistic Missile
  Defense System: China’s
  efforts substantially to upgrade
  its own long-range missile forces
  and its willingness to engage in
  what one Chinese official called
  “nuclear blackmail” by
  suggesting a willingness to
  attack Los Angeles add urgency to
  the requirement for prompt
  development and deployment of an
  effective ballistic defense
  system to protect the United
  States, as well as its forces and
  allies overseas.
• Concerns about Chinese
  Penetration of the Western
  Hemisphere: The U.S. should
  oppose Chinese efforts to gain
  access to facilities in Panama
  that could allow it to interfere
  with, or block, passage through
  the Canal or destabilize the
  United States by using Mexico as
  a trans-shipment point for
  weapons smuggling or
  drug-trafficking.

Strategic thinking concerning China
suggests that the United States cannot
afford to allow China’s aggressive
behavior to go unchallenged. The United
States must take great care to avoid
allowing commercial/economic gains to
override national security concerns when
contemplating policy towards China.
Washington must avoid the pitfall of
allowing further aggression to occur
without repercussions simply because
feigned ignorance is easier than tough
responses.

Most importantly though, the United
States must begin addressing Chinese
aggression from a strategic framework
that has thoroughly considered the entire
scope of the problem. This framework has
to consider the issues on all fronts,
assume a world-wide perspective, and must
incorporate economic, military and
diplomatic concerns in framing a cohesive
and coherent U.S. policy. To enjoy the
American people’s support, the policies
that emerge must conform to and reflect
the values and principles for which this
country stands.

III. Regional and
Geostrategic Dimensions of the Threat

Ambassador James Lilley provided an
extraordinary tour de horizon
of the regional context in which
China’s bid to confront the United States
is playing out. Among the more important
subjects discussed in this section of the
Casey Symposium were the following:

North Korea: One of
the major “flash-points” in
Asia is North Korea. The despotic
Communist regime that currently controls
North Korea has become increasingly
unstable due in large part to failed
economic and social policies. The country
is desperately lacking in food, oil and a
viable economic base. Such factors are
jeopardizing the iron-grip of the
Communist regime, prompting it to clamp
down even harder on any expression of
freedom in order to retain control.

The North Korean regime may,
nonetheless, survive for years to come if
it continues to receive help from China
and the West. Currently, the Chinese are
providing Pyongyang with large quantities
of food and oil, apparently in the belief
that it remains in China’s interest to
prop up this regime, despite its infamous
corruptness and increasing
unpredictability.

North Korea’s political instability is
especially disturbing in light of its
formidable military capabilities. North
Korea likely possesses some degree of
nuclear capability and could easily hit
Japan with its ballistic missiles.
Despite the North’s acute economic
difficulties, the regime in Pyongyang
still dedicates 30% of its GNP to the
military and its standing army is a
formidable threat to South Korea. Given
North Korea’s history of violence and
instability, and considering the fact
that the North Korean forces could
inflict serious damage on U.S. forces
stationed in South Korea, the security
interests of the United States would be
well-served by a coherent, articulate
policy towards North Korea.

Suggestions for what this policy
should entail include an even more
insistent U.S. demand that the North and
South hold direct talks in Korea. The
Clinton Administration should, however,
end its policy of giving food to North
Korea unconditioned on serious reform. It
should, instead, insist that the North
Koreans reduce the amount they spend on
the military so they may obtain some
semblance of economic stability. Most
importantly though, the United States
should make it absolutely clear that any
military assault on South Korea would
result in the instant and total
annihilation of North Korea by American
forces.

Japan: Another
imperative for the United States in Asia
must be continuing and strengthening its
security arrangements with Japan. For
obvious reasons, this relationship is the
key to U.S. security in the region. But
recent questions of stability in Korea
and China’s military development require
that U.S.-Japanese security be renewed
and reinvigorated.

In particular, if Washington wishes to
perpetuate Japan’s status as a
non-nuclear power, it behooves the
Clinton Administration to work with Tokyo
to field effective ballistic missile
defenses at the earliest possible moment.
(The fact that Japan operates its own
AEGIS ships makes a sea-based
anti-missile system based on the U.S.
Navy’s Wide Area Defense program a
natural choice for such cooperation.)

Hong Kong is a key
litmus test for future dealings with
China. Profound concern was expressed
about the likelihood that the PRC will
deny Hong Kong political liberty and, in
due course, impinge upon its economic
autonomy, as well. The United States —
and other freedom-loving nations should
impress upon China that such repressive
policies in Hong Kong will have
immediate, tangible and severe
repercussions.

In this connection, it is particularly
disturbing that Washington and other
allied capitals already seem to have
shrugged off Beijing’s gutting of the
democratically elected Legislative
Council and the imposition of new
restrictions on the freedom of assembly,
the domestic media, the flow of
information from abroad, foreign support
for Hong Kong policy research institutes
and access to the marketplace by
perceived opponents of the mainland’s
policies, to name but a few.

How China behaves towards Hong Kong —
and how the West responds in the event
that Beijing either uses force or other
coercive techniques to work its will in
the erstwhile British colony — will
almost certainly signal what lies in
store for Taiwan. Some
participants in the Casey Symposium
contended that, by sending two carrier
battle groups to the region last year,
the United States demonstrated its
determination in the face of the PRC’s
ballistic missile launches and amphibious
exercises aimed at intimidating the
Republic of China. A related view holds
that this incident served to reinvigorate
U.S.-Japanese security ties.

Others felt a far more ambiguous
signal was sent as the Clinton
Administration declined to spell out what
actions it would take if the PRC actually
attacked Taiwan and as it ordered U.S.
naval forces to steer clear of the Taiwan
Strait. A similarly pessimistic
assessment holds that Japan has drawn the
conclusion that China is the rising power
in the region, the United States the
receding one, and that Tokyo has begun to
adjust its diplomatic and military
postures to reflect this new correlation
of forces.

It seemed generally agreed, however,
that at least the Chinese took away from
this crisis a new appreciation of the
strategic significance that attends
control of the waters of the South China
Sea. That lesson seems to be contributing
to the current emphasis China is placing
on upgrading its naval power so as to
compete with — and perhaps, ultimately,
to challenge — the U.S. Navy in the
Western Pacific.

In remarks following lunch, Senator
Thad Cochran added his own impressions of
the geostrategic situation in Asia that
provides the context for contemporary
Sino-American relations — and that may
shape those of the future. These
impressions were drawn from Sen.
Cochran’s recent visits to the region and
from an important series of hearings his
Subcommittee on International Security,
Proliferation and Federal Services has
been holding this year.

China’s proliferation of conventional
and unconventional weaponry was cited as
a matter of particular concern. Although
China claims to adhere to the Missile
Technology Control Regime (MTCR), and
signed the Nuclear Non-proliferation
Treaty (NPT), recent Chinese actions
prove that China is quite willing to
disregard its international obligations
in pursuit of its larger objectives. In
this regard, the PRC’s transactions with
Iran and Pakistan merit particular
attention:

• Beijing has sold Iran, among
  other weapon systems and
  technology, advanced sea- and
  land-based anti-shipping cruise
  missiles. These capabilities pose
  a risk to naval as well as
  civilian vessels in the Strait of
  Hormuz and the Persian Gulf, a
  waterway which — if denied to
  the United States and its
  principal trading partners —
  would have profound and adverse
  economic as well as strategic
  implications. The PRC has also
  transferred to Iran guidance
  component systems that can be
  used to improve the accuracy and
  range of surface-to-air missiles
  and materials used in the
  creation of chemical weapons.
• China has also provided Pakistan
  with M-11 missiles and components
  used in the enrichment of uranium
  required for nuclear weapons.
  Pakistan is useful to China in
  that the two nations share a
  common enemy, India. Pakistan’s
  interest in pan-Islamist ideology
  and lucrative trade
  opportunities, however, have also
  made it a valuable cut-out for
  Chinese weapons of mass
  destruction and other technology
  transfers to much of the Middle
  East.

Sen. Cochran remarked, however, that
it is important not to ignore the role
the United States has been playing in
facilitating the transfer of potentially
dangerous dual-use technologies to China,
some of which, at least, are contributing
both to Beijing’s own military build-up
and to its international weapons sales.
The United States clearly needs to
re-examine its technology export
restrictions — or, more precisely, its lack
thereof — which have allowed 47 (or
more) supercomputers to be sold to
Chinese “end-users” who are
believed to be using them to design and
test nuclear weapons and perform other
worrisome tasks.

IV. Conclusion

Recent developments strongly suggest
that China is emerging as a significant
threat to U.S. interests in the strategic
Asia/Pacific region. It is, therefore,
inevitable that American policy-makers
will be obliged to address an
increasingly vexing array of challenges
from China and its clients.

If the United States is to meet these
challenges successfully — i.e., conduct
its relations with the People’s Republic
so as to enhance U.S. national security
as well as its economic prosperity —
Washington must begin to think
strategically, not simply in a tactical,
reactive mode. In particular, the
American government and people will need
to understand the true nature of the
danger China poses; they will also have
to adopt appropriate countervailing
approaches. The William J. Casey
Institute of the Center for Security
Policy hopes that the latest Casey
Symposium has contributed to this process
and looks forward to its further progress
in the course of future Symposia.

1. For more on
these activities, see the Casey
Institute’s Perspective
entitled Non-Renewal of
M.F.N. For China: A Proportionate
Response to Beijing’s Emerging,
Trade-Subsidized Strategic Threat
(No. 97-C 76, 9
June 1997).