China, One World Two Systems?

di: Francesco Sisci

How Hong Kong’s and China’s position in the world is no longer tenable, as it was seen 20 years ago.

In the late 1990s, Beijing decided to adhere to the newly established World Trade Organization (WTO), which was to replace GATT (General Agreement on Tariff and Trade), regulating trade in the free world that had been battling the Soviet empire. The USA, leading those talks and promoting the new organization, had settled on allowing a grace period for China to fully integrate into the global system. This system was not just commercial, but also political.

China had then barely managed to skirt the 1997-1998 Asian financial crisis, which brought down governments and regimes all over Asia and proved in this part of the world that the US was the paramount example of a well-managed economic system. In the previous decade, the US also caused the USSR to disband and later overawed the Europeans, whose monetary system was disrupted by the 1992 financial crisis. The euro, then an objective challenge to dollar dominance, had been approved by the EU but only in return for an eastward expansion of the Union, something that would weaken European ability to easily reach a unified consensus on the moves of the new currency.

Basically, in the late 1990s, the USA and China agreed on establishing a situation parallel to that of Hong Kong. The territory had just in 1997 been returned to Beijing under the principle of “one country, two systems” (一国两制): that is, China and Hong Kong were to be run according to different sets of rules, although both agreed they belonged to one China and eventually they would be united under one rule. Similarly, China was joining the WTO under the provision that we could call new “one world, two systems”, or to be more Chinese: “one heaven, two systems” (一天两制). The two systems were to be run differently although both understood they would eventually merge into one – the free market/free politics one would spread all over the world.

Not much was made very explicit at the time, for fear of shaking sensibilities in the East and West, but the general sentiment was certainly there.

For the US, it was a major feat in the face of massive accusations of hostile Chinese espionage, as detailed in the Cox Committee investigations. In China there was fear that a sudden change to the western world would disrupt the country’s stability.

China, US ally in a different system

The present emergency in Hong Kong is actually the crisis of “one country, two systems.” The idea was clever. It was devised in the early 1980s, and apparently it was born out of the relationship China had developed with the United States since the early 1970s. China was giving Hong Kong and itself a grace period to integrate into the world. This grace period was set as 50 years. It was giving enough time not for Hong Kong to adapt to China, which would have been easier as the small territory could have been swallowed by Mainland China in days, but enough time for China to adapt to Hong Kong, representing the global system outside of China. “One country, two systems” was actually a parallel space given to China to adapt to the world.

In fact, it was clear since the early 1970s that China had been accepted into the US system, although with some reservations, as it was still a communist country. At the time, facing the Vietnam War, Nixon realized it was difficult to fight a two-front battle with the USSR. It was losing ground in Vietnam not militarily but politically, and so it decided to flip China against the Soviets since China had long been sending hints that it would rather go over to the American side. In this way, China was given a special status within the US alliance. In the ’70s and the ’80s, it was allowed to be strategically integrated de facto into a military alliance with the US, without actually changing its regime.

This situation of “one heaven, two systems” was becoming strained in the early 1990s, when the Soviet empire had fallen apart and China was growing stronger. Because of the crackdown on the protests in Tiananmen in 1989, US had become less enthusiastic about Chinese evolution, but the Chinese leadership also became more suspicious of American intentions in China. Moreover, China was changing its political and economic system, but the changes were not as significant as the US and the Western world was expecting.

Bombing Belgrade

Things continued in a hazy state for most of the ’90s. In the meantime, China managed to join the WTO and thus agreed practically to join the global system economically and therefore implicitly also politically within some 20 years. However, after this commitment – which had been difficult to reach in China, and even more so in America, where the public was divided on granting such a long grace period – things took a turn for the worse.

During the war in Yugoslavia, when US and NATO forces were attacking Belgrade, equipment from the Chinese embassy in Belgrade allegedly aided Serbian forces, who had lost their radar instruments in NATO bombings. The Chinese help possibly proved crucial for Yugoslavian forces. Thinking that Yugoslavia was completely blinded by the NATO bombings, Americans took to flying at a lower altitude. Then Belgrade’s anti-aircraft missiles downed the latest-generation B2 bomber.

This was a massive blow for America because it allowed the Chinese, Russians, and Serbians to get their hands on the so-far secret material of the B2. In apparent retaliation, the United States “accidentally” bombed the embassy in Belgrade. This kind of response prompted anti-American demonstrations in China and soured China-US relations. Moreover, in the early 1990s, bilateral ties were plagued by the constant issues of China’s IPR violations.  Ostensibly, China stole all kinds of high tech and software secrets from the United States without paying their dues. In the meantime, however, American companies gained a wider foothold in the internal Chinese market. So, the two things were kind of evening out in the late 1990s.

China no more in 2000

Politically things were moving differently. At the end of the 1990s, China started supporting the then South Korean President Kim Dae-jung’s Sunshine Policy of opening up to North Korea. The Japanese and American right-wing opposed this kind of opening. Then the 2000 election George W. Bush started spinning things against China. On April 1, 2001, there was the EP3 incident, when an American surveillance plane crash-landed on Hainan Island after a mid-air collision with a Chinese fighter. This proved that relations were turning for the worse and that tougher confrontation between China and the US was coming. The 9/11 terrorist attack on the United States changed completely the strategic picture. That and the 2008 financial crisis bought China about 15 years, time in which China took the US for granted, and China was basically out of the US strategic picture.

Yet a forewarning of the present difficulties came in 2014 with the rise of the Umbrella Movement in Hong Kong. This was the year when moods started to radically change in the United States. More people became disillusioned about China, but still, there was a minority hoping for China’s positive political opening up. The movement in Hong Kong petered out as the internal political power struggle following the fall of Chongqing Party Chief Bo Xilai turned attention back to China’s internal issues.

Negotiations and future

Now, in 2019, lasting protests in Hong Kong and trade friction with the US prove that times have definitely changed, and “one country, two systems” can no longer hold water.

Moreover, it is not just President Donald Trump. Watching a recent debate of US Democratic candidates from China (on September 13, 2019), it seems that a Democratic president could be tougher on China than Trump. Could he also renege on a possible China trade agreement reached by Trump? Even this possibility casts a shadow over the next negotiations and could give pause to the Chinese. In fact, it seems the Democrats are also sending a message to China: “don’t trust an agreement with Trump; we won’t abide by it.” Is this actually the case?

Apparently, the Democrats don’t want the Chinese to give Trump the “I cracked the Chinese resistance” card to play in the election. Therefore, it seems that an effective US-China agreement can only be a bipartisan achievement. This, in turn, could still mean a year of growing tensions – or will Trump go for something small and try to sell it as big? And what will the Chinese do if caught in this US political game?

Here, the situation in Beijing and Hong Kong harks back to the late 1990s: will China join the world global system or will it try to drag its feet? This, at the end of the day, is the predicament.

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