Bush's Asia Strategy

November 19, 2005; Page A6

President Bush has been forging a new coalition of the willing in Asia as he makes the rounds of Kyoto, Pusan, Beijing and Ulan Bator. For the edification of the Chinese, primarily, he has made clear that the U.S. has close friends in the region and plans to protect its interests there.

This does not presage a Cold War between the U.S. and China, but it does reflect a Bush policy of organizing U.S. allies in Asia to resist any ambitions China might have for regional hegemony. The president has had warm one-on-one meetings with the leaders of South Korea, Indonesia and Malaysia at the Asia Pacific Economic Cooperation Summit in Pusan, demonstrating that the U.S. values their friendship. His side trip to Mongolia on Monday will be a pointed reminder to its big neighbors, China and Russia, that Mongolia welcomed U.S. help in establishing democratic government and merits U.S. protection.

His main diplomatic effort centered on Japan, where on Wednesday he emphasized that country's close political, economic and security ties with the U.S. and his friendship with Prime Minister Junichero Koizumi. Speaking to a business group in Kyoto, the President had pointed words for China: "We encourage China to continue down the road to reform and openness -- because the freer China is at home, the greater the welcome it will receive abroad."

That word "welcome" carries a world of meaning at a time when China's outpouring of low-cost manufactured goods is stirring protectionist complaints around the world. The President reminded Beijing that sales to the U.S. have greatly aided China's economic growth and that the U.S. supported Chinese entry into the World Trade Organization. A fraying of the trade relationship has been reflected in a deal that forced China to limit certain textile exports to the U.S.

Mr. Bush will air further trade grievances this weekend in his meeting with Chinese President Hu Jintao in Beijing. Some are legitimate, for example the failure of China to police the theft of intellectual property and local authorities' nasty habit of resolving commercial disputes with foreigners by clapping them in jail, as they did last year with Los Angeles businessman David Ji. Other U.S. complaints are spurious, especially the U.S. claim that China is unfairly tilting the trade balance by keeping the dollar value of the yuan artificially low.

It is true that the yuan peg to the dollar over the last decade greatly aided China's development. It's true as well that the modification China made last summer, repegging to a "basket" of currencies, made the yuan only a tad more expensive in the conduct of trade. But if a reliable currency has drawn direct investment into China by the Japanese, Americans, Taiwanese and Europeans, what is wrong with that? The world economy works best when rich countries are spending to build up the productive capacity of poor ones. It has raised millions of Chinese out of poverty.

China, however, would get fewer complaints about its huge trade surpluses if it displayed a firm intention of making the yuan fully convertible. Then the Chinese people could play a greater role in the recycling of dollars back into the market and China would fall naturally onto the path of more balanced economic development. Currently, the central bank parks many of the dollars China earns into U.S. Treasury securities, which does little for the Chinese people and not incidentally helps finance the free spending ways of the U.S. Congress.

China is hesitant because making the yuan convertible would constitute a large grant of economic freedom to the Chinese people, something the Chinese Communist Party is reluctant to do. If the Chinese could buy dollars freely with yuan, who knows what ideas they might get into their heads? Beijing worries as well about how this might inflict more competition on Chinese banks, damaging their continuing ability to serve the ends of the party and government.

Mr. Bush was of course talking about more than economic freedom in Kyoto. He was suggesting that the democratic world will retain its suspicions of China until the party loosens its tight grip on the behavior of the Chinese people: "As the people of China grow in prosperity, their demands for political freedom will grow as well. . . . By meeting the legitimate demands of its citizens for freedom and openness, China's leaders can help their country grow into a modern, prosperous and confident nation."

In short, Mr. Bush on this swing through Asia has been sending the message that the U.S. wishes China well but that Beijing will not earn trust from the world until it takes steps to grant its people their rights of free expression and the protection of law. It was a reminder that, while China is pressing its claim to great power status, it won't be accepted by the world's democracies until it makes democratic reforms. Mr. Bush clearly wanted to emphasize that Asia has strong democracies that are more inclined to side with the U.S. than China in any face-off.