Asia2025: Hi, welcome back to the program.

Well, Hillary Clinton’s visit to China has finished with some interesting statements in tow, while we are now gearing up for the National Peoples’ Congress and the CPC meeting next week in Beijing.

I’m in Shanghai and going to witness first hand this year China’s development as countries around the globe navigate the new economic environment, and of course, talk to many analysts here about the US-China relationship and what is in store in 2009.

There is a lot to talk about, as you know. For example, while Hillary Clinton claimed human rights issues would take a back seat in US-China relations last week, the US then turned around after the visit and claimed that human rights are worsening in China.

Needless to say China was not amused and the China Daily published an extensive rebuttal summarising US human rights abuses with the headline ‘US, Get Your Own House in Order’.

Interesting reading.

Last program we talked about currency manipulation and stability.

This program, I want to focus on China’s mission in the Gulf of Aden.

Reports in the West suggested China was seeking to flex its naval muscles and by participating in the exercises gave credence to the idea of China developing a blue water navy. A commander of the Chinese navy, Wu Shengli, was more candid.

He said: it’s the first time we go abroad to protect our strategic interests armed with military force. It’s the first time for us to organise a naval force on an international humanitarian mission and the first time for our navy to protect important shipping lanes far from our shores.

And of course that will be the nature of my discussion today, how this naval expedition has more to do with China protecting its shipping lanes that are important for trade than anything else.

Some of you may know that 75% of China’s energy supplies come through the shipping lanes of this area; the Gulf of Aden leads into the Suez Canal.

An important point to note: that while the discussion around this Chinese maritime endeavour hit the press, a curious incident was reported by the Chinese press where allegedly an Indian submarine was caught trailing the Chinese naval fleet on its way to the Gulf and was forced to surface in the Indian Ocean.

My guest today is Shen Dingli Director of the Centre for American Studies at Fudan University and frequent guest on this program.

He tackles China’s maritime expedition and responds to reports predicting China’s demise in the current financial crisis. Notably he states that US policy towards China has not changed despite the new US Administration. This is an important point I think.

And we discuss US-Chinese interests in this global financial crisis with Shen Dingli saying there is no need to save the financial system. He says if China suffers it will produce better Chinese policy in the long run.

Just briefly, we do touch on US Secretary of State Hillary Clinton’s visit but will do so in more depth next week when we also look at the National People’s Congress and the Central Party meetings in Beijing.

As rain hit the windowpane on a very wet week in Shanghai I asked Shen Dingli whether the pirate mission was more about protecting China’s trade and important sea lanes than anything else.

SD: Yes, I would agree with this. China has vast interests to secure the freedom of navigating in the open sea. Therefore we need to access to the open sea and need to show that we can do it in a free way, safe way.

Asia2025: Do you have fears that that may be blocked in the future? Is that something China fears?

SD: Well, theoretically every country would have this fear. America would have this fear, and Japan would have this fear. Russia would have this fear. Of course China would have this fear.

Asia2025: There’s a Chinese naval convoy there and there’s a large US presence in the region. The US does have a military base in the Gulf of Aden near Somalia, Ethiopia and Eritrea, and these were Somalian pirates that have been attacking Chinese ships.

The US has a fairly big presence in this region doesn’t it?

SD: Yes, but it has not stopped the pirating. And the small contingent of Chinese fleet has also not stopped. Therefore we need more countries to contribute in order to reduce the contentions. But even with our best effort to, we’re not able to stop it.

Asia2025: Is this also about sending a message to other powers about China’s naval power, because traditionally it has operated in the South China Sea and so people have ... the assessment in the West has been China is saying we have blue naval capability.

SD: Well China has not said this, but other countries can interpret if they would like to do so.

Asia2025: Well there was a quote by Jin Yinan of the National Defence University who said

‘...I believe the Chinese navy should send naval vessels to the Gulf of Aden to carry out anti-piracy duties. With China being a major world economy, it’s very difficult to say that security problems across the world have nothing to do with us.’

Now, my reading of this is to say we’re going to the Gulf of Aden to protect our trade in these troubled times. That may be about causing us, the peer competitor, major problems.

Is my reading correct?

SD: Well I think the reading is we have an interest for our commerce, sea-based commerce, and this is threatened. Therefore we need to use our defence force to protect our legitimate sea-based commerce, that’s all.

Asia2025: Well US Congressional reports and Pentagon reports are full of claims about China’s naval aspirations. There’s the Kilo Class submarines, etc.

Does China have aspirations to blue water naval status? And hasn’t the development of a naval capability by China suggested that it does want to be a major power, if not the major power?

Doesn’t this support claims that China’s rising power seeking hegemony as some commentators in the United States claim?

SD: Okay. Every country that has the right of war desire to attain the legal status in the world, commensurate with international law.

There is no reason to say that China would not have aspiration to have a blue water, to go to space, to dominate as long as it would not violate international law. Anything US is doing today, when the US consider it’s commensurate with international law, is anything, any other country including China, can do legitimately.

When we are not in a de-legitimate way to stop US to quest for such dominance, US should also not be a de-legitimate way to stop any other country to seek dominance or to be competitive, as long as we do it, attain leadership, absolute legitimate legalness.

Asia2025: Interesting, because you are actually following a maritime power strategy that was developed first by the British and then the Americans that has allowed them to expand and consolidate their empires.

So this string of pearls strategy is actually following Western military strategy isn’t it?

SD: I’m not sure. We have our own strategy, but that strategy should be for peace, to defend, not offend. America’s big military is for peace, to defend.

And if there is anything we need to learn, that is to build the defensive peaceful dominant force in the world. That could be even bigger than America. And many times bigger than America, but for peace, for defence.

Asia2025: But do you think China can ...

SD: America cannot disallow any other country to build its ability for international peace and for defensive purpose. America is not in a position to disallow any other country to do. America should welcome any other country to share the American’s mission. So only competency is that how big is their capability to attain the mission is.

But America, there is no law, no constitution in the world to disallow any other country to have a bigger defensive capabilities and America to achieve the same peaceful and defensive purpose that America defence armed force aspires to do.

Asia2025: Do you think China can compete with the United States, though with its hubs and spokes allies at the moment, and since September 11, it’s really increased its allies in the region, as you know, and globally.

SD: We are not in a position to compete with anybody. We do whatever we want to do. The outcome is that we could beat other countries, surpass other countries, but we never want to compete. But even if we don’t want to compete we can be bigger than them and eventually, but not at this time. So repeat, no competition, but we do it unilaterally.

And we may not need to have a need to have allies. It’s a country, the combination of India and America. The biggest democracy, the second biggest democracy. Population together China has the population.

There is no reason that China cannot do many times bigger in terms of defensive capability and resource after 20 and 50 years.

Asia2025: But isn’t that size of China exactly why the United States and its allies will always hedge against China, precisely because of your size?

SD: No problem. America has attained its position, as long as it’s for peace and defence, nobody should stop it. And we should welcome America to use its own national resource for international common good. And no other country should have legal means through international law to disallow China, to do many more times than they are doing, as long as China is able to do, China should do legally, and they should stop China legally. But in the world there is no legal way to stop China.

You cannot disallow China to have more population. And the Chinese people are so smart, you cannot make Chinese people to be foolish. Therefore America has only 300 million people. We have four times more than American people. If each Chinese people is as smart as one American people, our national intellectual resource will be many times bigger than America.

Asia2025: Yes, but what about reports of social instability in China? There’s a lot of anniversaries coming up. You’ve got unrest in the Western Provinces whether it be Tibet, I mean, and recently the Party called for the army to stay loyal to the party.

And the Western press, as I said, has been talking about social instability. Isn’t there a chance that China could be weakened?

SD: I’m repeating, China can weaken itself, as America has weakened itself already by entering into Iraq.

But other countries should use legal means to threaten China or to weaken China. If they use illegal means to strengthen China they would be disagreed by other people in their countries. Or they use illegal means to weaken China. They are not legal and moral. And they weaken themselves.

Therefore we could only address why China cannot beat America itself in the competition because China’s own problem could make it not able to attain its dream, but not by other countries.

No country in the world has forced America to attack Iraq. It’s only America that has made decision to attack Iraq, therefore America is weakened. And no country can make China to have its own system like this. Only China can continue to enforce such a system.

Asia2025: You’re listening to Asia2025 with Maryann Keady. We’re talking about the Gulf of Aden mission and US-China interests in the financial crisis.

In Hillary Clinton’s visit there was talk of a strategic, economic and diplomatic dialogue being set up. I mean, what frankly did emerge from the Clinton visit?

Because just prior to it, Timothy Geitner called China a currency manipulator. And then Hillary Clinton’s visit comes.

What has emerged from this dialogue and what do you expect?

SD: Well fundamentally I see no change.

If US would continue to think China is a manipulator, what the US is going to do - to impose punitive tariffs on Chinese exportation to the US? Then US has a stake of $US50 billion of course to export to China.

Would US invite China to make America manufacturers to lose job and market? And China would import anyway, this would be open to Japan and to other EU countries.

How the US could lose the $US50 billion market in competition with Japan and EU?

So simply, I think if the US would not change its rhetoric, US has no tool, no means, no approach to threaten China because US cares about this market. And with a base population of 1.3 billion people, the rising middle class, the affordable class of Chinese to buy American, the chance is greater and greater.

Could US ignore after another three to five years another market of $US50 billion, in China, that can tap America’s production? It’s coming very soon.

China has a base population that is so huge. So the improvement of Chinese economy could very quickly bring benefits to any other country because China would buy. In the past Chinese are too poor to buy. Now there are many Chinese. Even one percent of Chinese will be able to travel abroad. That would be 13 million Chinese. If each of them were to spend $US5,000 in America to tour America, America would reap a huge amount of wealth.

So I think no matter what America would say, they virtually have no tool to condition China. And they have to eventually to follow President Bush and Geitner’s predecessor, Harry Paulsen.

Understanding China is a manipulator, but to pretend now to understand.

So Obama, Hillary, Tim Geitner, would all eventually follow Bush and Henry Paulsen. They all understand China is manipulating. But because they have no tools, unlike what Geitner states, has written into the memo, America would use whatever America law would give the Administration in terms of legal tools, America has no tools.

America cannot afford to lose ever expanding Chinese market to tap America’s production. That’s all. So I think we are not affected to any degree by Mr Geitner.

And Hillary also could not bring anything to China that China could not get. President Obama would not stop weapons of Taiwan, would not stop missile defence, would not stop space weaponisation, would not stop to continue to deploy missile defence in Czech and Poland. He would virtually be the same in terms of US national security.

He would be the same as Bush. So I see no change at all.

Asia2025: That’s very interesting. So you’re seeing absolutely no change in the Obama Administration and the Bush Administration on its China foreign policy?

SD: For the fundamental American’s dominance in the world, no change.

Obama would not lose American leadership in the world. He could not. He vowed to regain the vitality and leadership and respectability by the world people to America. He became President because he vowed for this, therefore he would spend more money on defence, go to space to watch Russia, China and other rising power to build a missile defence. If China, Russia, Iraq, North Korea and other countries would have intercontinental striking capability, he would do exactly the same as Bush.

Asia2025: What about the financial crisis though? Can China survive the financial downturn in the United States?

I know that you’ve suggested that you’re interdependent in some ways in the economy and obviously both of you, you know, many of the experts talk about both of you needing each other. But China has so many US reserves.

What is the relationship now between the two countries on the financial front, because China is affected and has lost money in the United States and Western economic crisis?

SD: Well, some philosopher said anything existing has a reason. I don’t think it would need to think it’s a downturn. It’s a good wake up warning. We have done the wrong way for too long. Therefore need to change.

Namely, China should not accept America’s outsourcing to build for America. China should not open its labour market to America for America to exist. China need to now to develop its economy that fast, medium pace, slowly, to 50 years, not 20 years. That’s the warning. If we would stop this financial crisis we would be hurt more.

We should appreciate the crisis, let’s reflect what kind of a life we need to spend. I think that’s what we want to do.

Asia2025: Will China be still buying US bonds? Therefore effectively helping the United States in its own financial crisis?

SD: Fundamentally, we should not open our labour market to America.

They came to China to exploit the Chinese. The make more money in exploiting Chinese. And we burnt more energy, polluting China’s soil, rivers, air, fundamental long term irreversible hurt. And we save American sky, air and lakes. There are no more foolish policies than this.

Therefore the money we earned has blood. It’s not moral. We should stop. We are a socialist country led by Communist Party, we should not do this. That’s the message.

And the money we earned has something. And when America has some trouble, the American money has weakened, what we invest America our wealth has been devalued. It’s not a bad thing to devalue, to understand in order to understand we have gone on the wrong path for too long. If there was no financial crisis, we would be hurt more.

More Chinese would be exploited, more Chinese territory would be deteriorated. Therefore hurting our wealth to some extent saved China.

So we can get far more than what we could potentially lose. That’s the value of this. Fundamentally we should not savour it, we should let it happen. And that’s the message.

For instance, when Nationalist Party, Kuomintang, was in China in 1949, shall we rescue it, therefore China would be stable? Or to let it go?

We have turmoil and then we change government. Certainly we should let the old government be gone. Never save it, because it has gone around the wrong direction, exploiting people. Did not bring peace and tranquillity to people.

So it’s a bad regime. Why we keep it? Why we save it? For America. American government hate North Korea, so why save North Korea? Let the regime collapse. That’s what America would consider.

But we should also understand the current international capitalist system has lots of problems. We should revamp, modify, but not to save. That’s my message. I would have no pain for Chinese money lost in America, if that would make China to understand we should not continue to do business.

Asia2025: Do you think China then can survive this financial downturn because ... because it does affect its export economy, the production has slowed. Will people not be frustrated at the lack of economic progress? And can China effectively play hardball with the United States?

SD: Again the philosophical question first. Why we need to survive? Why we cannot fail? In my view to fail is better than to survive because our development mood is fundamentally flawed. Fundamentally flawed. Hurting the ecology, hurting the food, hurting the air, hurting the environment. And let our poor people to be exploited and pulling our own people and cutting their benefits.

Therefore such fast development might not have benefited lots of people that really they want to be benefited, or they deserve the benefit. So if the long way that accumulate our wealth through exporting, would not survive, namely to fail, I am happy with this.

Asia2025: So but with failing you’re also suggesting possibly political instability as a result?

SD: We need good politics, good political cleverness. Why we use the fast development to sustain something that need to be fundamentally revamped. So I really don’t care if we fail.

Asia 2025: And that was Shen Dingli, Director of the Centre for American Studies and Executive Dean of the Institute for International Relations at Fudan University, an author of numerous articles on US foreign policy.

You can go to the Fudan website to check them out at www.cas.fudan.edu.cn.

That’s it from me this week. Next program we talk more about US and China relations, the history and the future as the financial crisis deepens.

Thanks for listening. Have a great week.