INTERNATIONAL CHRISTIAN UNIVERSITY

“In the end, China will win: A Research Paper on the Emerging new
World Order and Hegemon in Asia”

A Final paper presented to:

Prof. Wilhelm M. Vosse

In partial fulfillment of the requirements in GPA 1448: WORLD ORDER STUDIES

Autumn Term

By:

BENJAMIN D. SISON
GSPA 076714
Division of Public Administration
November, 2005
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Benjamin D. Sison
GSPA 076714 World Order Studies
Prof. Welhem Vosse

“In the end, China will win: A Research Paper on the Emerging new World
Order and Hegemon in Asia”

Abstract:

This paper will discuss China’s recent activities in the areas of economic
development. As we all know, China today have made a tremendous achievements in
economic programs and is now at the center of direct foreign investments by
prospective investors especially in Southeast Asia. Foreign investors are eyeing
China as one of the potential hub to put up their businesses and industrial factories
due to conducive business environment and more liberated economic activities, a
broader market of consumer goods, and vast at the same time cheap labor forces.
This trend in economic progress makes China as one of the biggest competitors
among both developing countries and the industrialized countries all over the world.
The adherence of China to the ideologies of globalization and its accession to the
World Trade Organization has contributed a lot to the increased productivity and
economic progress of China. With China’s membership to the World Trade
Organization, the same will add to China’s participation in international trading
globally. It is further expected that China’s active participation in this organization
will further its economic growth and productivity in the next couple of years. The
paper will partly discuss issues of boundary disputes in the South China Sea, its
economic and strategic importance as well as China’s position over settlement of the
conflict. Furthermore, this paper will also discuss the role of Asian Reform Forum
(ARF) in China’s diplomatic relations and confidence building measures with Asian
States in settlement of conflict and regional interest. At the concluding part of this
paper, this paper will discuss the emerging China as hegemon in Southeast Asia
towards a new world order given the new trend of China’s economic reforms opening
its door to a more liberated market economies and posturing a good environment in
diplomatic relation. The concept of power will also be discussed as China is
advancing towards posturing a possible challenge to the United States through high
economic growth and modernization of its military capabilities and logistics.
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INTRODUCTION

After the end of World War II, the United States played a vital role in the
reconstruction of devastated economies and infrastructures all over the world. The
United States government spearheaded the establishment of the Bretton Woods
Institution, which gave birth to the International Monetary Fund (IMF) and the World
Bank (WB), formerly known as the International Bank for Reconstruction and
Development (IBRD)1. The former takes charge of the stability of monetary policies
and the latter helps devastated countries to rebuild its infrastructure facilities brought
about the destruction of war2. It was during this period when Americans were able to
advance its interests across all regions of the world in both economic, political and
commercial interest3. In terms of the military, the postwar period was an opportunity
for the United States government to further American’s rapid demobilization since the
United States is more interested mainly in using and projecting economic power and
influence4 all over the regions.

During the period of Cold War from 1945 to 1989, power is largely dominated
by United States and the Soviet Union. From then on, the term superpower5 was used
to describe both the United States and Soviet Union in the international arena. Both
demonstrated their capabilities in terms of economic development, and influence over
other states throughout the world. As said by William T.R. Fox in Aldred and Smith’s
book, Superpower in the Post-Cold War Era:

“What contend in making an international superpower was not

more than just a country’s possession of the attributes of power:
military, economic, political and ideological. A superpower was
principally distinguished by dynamism and pro-activity, by the
ability and willingness to project power and influence.” 6

1
Harold K. Jacobson and Michel Oksenberg, 1990, China’s Participation in the IMF, the
World Bank, and GATT. Michigan: The University of Michigan Press. p. 21.
2
Ibid.
3
Russel Ong, 2002, China’s Security Interest in the Post Cold War Era, Richmond,
Surrey, London: Curson Press.
4
Ken Aldred and Martin A. Smith, 1999, Superpowers in the Post-Cold War Era.
Wiltshire, Great Britain: Macmillan Press, Ltd., p. 19.
5
Aldred and Smith, p.18.
6
Ibid.
 4

The emergence of United States and Soviet Union into a superpower was felt
during the period, where the Soviet Union rejected the proposal of the United States
for its American Marshall Plan Aid7 which required economic cooperation and
exposure of Soviet’s economy to international scrutiny for both itself and the Central
European countries within the US influence. It was also during this period where the
ideological belief of the Marxism-Leninism8 is gradually gaining its mass based
support in Soviet Union. The Soviet Union started to modernize its military and
increase its logistics9. It was also during this period when the ideologies of
communism was gaining its momentum in other parts of the region as supported by
communist regime. 10 The United States, raising alarms over the recent developments,
continued to establish a strong policy in regional security among allied countries11.
From then on, the world was dominated by the two superpower in the international
sphere.

The collapse of Soviet Union after the Cold War in 1989, changed all the
atmosphere in the international community. A unipolar world order was then
dominated by United States12. The shift from bipolar to unipolar world order put the
United States in a position to further its influence and dominance in all regions of the
world13. United States was seen as the only superpower of the world because of its
stable economy, advance military and capacity, and political stability14. Practically,
United States dominance was clearly seen in terms of economic policy and regional
security in the regions15. The deployment of US troops around the world and
increased military spending16 puts the United States as the new hegemon after the
cold war. It was also after the cold war were the idea of global capitalism was further
propagated by the idea of globalization as advocated by neo-liberalist idea of Bretton

7
Aldred and Smith, p. 22ff.
8
Ibid.
9
Robert Ross, 1993., China, The United States, and Soviet Union. Tripolarity and Policy
Making in the Cold War. Armond, New York: M.E. Sharpe, Inc., p. 164.
10
Ibid.
11
Ibid.
12
Ong., p.5.
13
Aldred and Smith, p. 21.
14
Ibid.
15
Ong, p. 142.
16
Ibid.
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Woods institution17. The United States government was successful in introducing the
open market economies in international trading18. Various trade agreements were
forged both between develop and developing countries under the pretext of mutual
cooperation and development. The United States alliance with other states was
strengthened through multilateral security cooperation in the region. In general, the
post cold war period was characterized as US dominance in foreign policy to advance
its interest in all regions both economic and security19.

Today, China’s economy is gaining momentum. In recent years, China

demonstrated a surprising and dramatic economic developments up to the present. In
the advent of globalization, China is the center of foreign direct investment by
prospective investors especially in the Southeast Asia. Foreign investors are eyeing
China as potential hub for foreign direct investment due to advantages of vast and
cheap labor forces, a wide range of consumer markets of goods and services, and
more liberated market economies20. This trend in the economic progress makes China
as one of the biggest competitors in the world market both developing countries and
industrialized countries. The adherence of China to ideologies of globalization and its
accession to the World Trade Organization will further bolster economic development
in China as this will open its door to international market trading21. It is further
expected that its membership in WTO will more likely advance its economic growth
and even surpass the United States in the next couple of years.

Statement of the Problem and Objectives

The objectives of this paper is to present and analyze the recent developments
in China’s economic activities, modernization of military and enhance capabilities,
diplomatic relations with Asian States in its effort to establish balance of power and
emerging hegemon in Southeast Asia towards a new world order. This paper hopes to:

17
Axel Hulsemeyer, 2003, Globalization in the Twenty-First Century, New York: Palgrave
Macmillan, p.3.
18
Harold K. Jacobson and Michel Oksenberg, 1990, China’s Participation in the IMF, the
World Bank, and GATT. Michigan: The University of Michigan Press.
19
Ibid.
20
Ibid.
21
Ibid.
 6

a. To discuss the historical developments of the dominant world order;

b. To describe the booming economic development of China in adherence
to the ideologies of globalization;
c. To discuss the role of China, Asian Reform Forum (ARF) and Asian
States in multilateral cooperation in the Asian region;
d. To discuss diplomatic relation of China with other Asian states in
territorial boundary dispute over the South China Sea; and,
e. To discuss China’s modernization of its military and enhance
capabilities.

In the context of China’s economic developments in the recent years,

enhanced military capabilities and improved diplomatic relations with its neighboring
states, the following questions were formulated:

a. Will China emerge as the new hegemon and establish a balance of

power with the United States in the unipolar world order?
b. Does China pose a threat or opportunity to its neighboring countries?
c. What are the implications in US interest in the region over China’s
emerging power?

II. The Booming Economic Development of China.

China is considered to be the largest economies of the world 22 considering the

size of their country and the total number of population. The impressive performance
of China’s economic growth and development actually started during the period in
1980’s associated with the enhancement of its military capabilities in maintaining
regional security in the region.23 During this period, the main focus of China’s
economic policy and strategy was a shift from import substitution to active
participation and engagement in foreign trading as an engine of growth.24 Hence,

22
Christopher Findlay and Andres Watson, 1997, China Rising: Nationalism and
Interdependence London: Routledge. p. 107.
23
Aldred and Smith, p. 90.
24
Findlay and Watson, p. 107.
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China started to develop its local industries little by little, depending less on
importation of goods from other regions. This strategy adopted by China may have
resulted to it gradually opening its doors to international trading and participation in
the world economy. China thus began to export locally manufactured goods in the
neighboring countries and even in the west. As a result of this economic reform
introduced to improve its economy, China’s trading position would seem, accelerated
and greatly improved.

In due considerable years, China’s performance in both international trading

tremendously rose to be the eleventh among the list of the world’s top trading
countries in 1995.25 According to Christopher Findlay and Waltson, China’s two way
trade reached 280.9 Billion US dollars. They added that China’s share in the
international trading has risen from 0.8% to 2.9% by the end of 1995. The dramatic
increase in the volume of trade and structure in China’ economic activities gives more
encouragement among policy makers to improve the domestic organization of foreign
trade, management of foreign currency and the degree of openness to direct foreign
investment.26 Subsequently, after laying down the basic foundation of economic
policy, China eventually started to create special economic zones with improved
infrastructure facilities to attract more foreign investors around the world. By 1995,
China hence became one of the major destinations of foreign direct investment. Most
multi-national corporations both in United States, Europe and in Southeast Asia
considers China as potential haven for foreign direct investment due to its vast labor
forces, a wide range of consumer market considering China’s huge population, cheap
labor, and a more liberated market economies in Asia. As a result of this, Findlay and
Waltson said that,

“The experience of China during the 1980’s and 1990’s

tended to support the argument that openness to trade is a
mechanism for achieving more rapid and efficient growth
and better distribution of domestic resources. China’s
increasing participation in the world economy has become
an important factor in promoting both growth and economic
restructuring. The linkage between trade and economic

25
Findlay, p. 108.
26
Ibid.
 8

reforms is thus an essential element in China’s economic

success and in the effectiveness of gradualism in reform.”

In the late twentieth century, the gross domestic product of China consistently
ranked among the tenth largest around the world.27 In 1986, Chinese exports totaled
about 5.6% of all exports from developing countries in contrast from the figures in
1980, which is 3.4%.28 It was also during this period where China ranked as the
fourth leading exporter among developing countries and was about to surpass the total
export of the Soviet Union.29 On the following year and onwards, the economic
performance of China continued to rise dramatically. The total exports climbed to US
dollar 39,464 million which is about 6.8% of all exports from developing countries
surpassing exports of developed countries such as Spain, the German Democratic
Republic, Austria, Australia, Denmark, Czechoslovakia, and Norway.30

The influx of foreign capital to China continued to rise and has grown
tremendously. In 1988, direct foreign investment flows to China exceeded seven
billion US dollars.31 The figures attained by China in terms of economic development
and in international trading during this period of years revealed that China is heading
towards becoming into economic giant and has contributed a lot to the growing and
expanded actor in the international market and world economy. China’s gross
domestic product (GDP) grew at an average annual rate of 10.5% during the period
1980 up to 1986 making it as one of the most expanding economies in the world.32
(See Table 1 below).

27
Harold K. Jacobson and Michel Oksenberg, 1990, China’s Participation in the IMF, the
World Bank, and GATT, Michigan: The University of Michigan Press, p.11.
28
Ibid.
29
Ibid.
30
Ibid.
31
Ibid.
32
Ibid.
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Table 1
Average Annual Percentage Growth in Gross Domestic Products in China
and other Developing Countries (1980-1986)

Country Growth Rate

China 10.5
All developing Countries 3.8
Low income developing 2.9
countries other than China
and India
Hongkong 6.0
India 4.9
Indonesia 3.4
Korea 8.2
Malaysia 4.8
Singapore 5.3
Taiwan 6.8

Source: IBRD, World Development Report 1988 (In Harold K. Jacobson and Michel Oksenberg,
1990, China’s Participation in the IMF, the World Bank, and GATT, Michigan: The University of
Michigan Press, p. 69.)

China’s trading activities with its neighboring countries particularly with the
ASEAN states grew more rapidly at an average of 75% per year over the period 1993
up to 2001.33 In 1992 and 2003, China’s total export to ASEAN states totaled to US
dollars 4,667 millions and 30,928 millions in 2003 respectively, whereas total imports
from ASEAN states totaled $4,413.02 millions in 1992 and $ 47,327 million in
2003.34

The following table gives the list of countries in trade with China:

Bruce Vaughn, February 8, 2005. “China-Southeast Asia Relations: Trends, Issues, and
33

Implications for United States”. 2005 CRS Report for Congress. Congressional Research Service,
Library of Congress, <http://www.fas.org/sgp/crs/row/RL32688.pdf#search='Changing%20World
%20Order%3A%20China%20and%20SouthEast%20Asia>. FAS is an acronym for The Federation of
American Scientists is a nonprofit, tax-exempt, 501c3 organization founded in 1945 as the Federation
of Atomic Scientists. Its founders are members of the Manhattan Project, creators of the atom bomb
and deeply concerned about the impations of its use for the future of humankind. FAS is the oldest
organization dedicated to ending the worldwide arms race and avoiding the use of nuclear weapons for
any purpose.
34
Ibid.
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Table 2
Select Regional States Trade with China in US Dollars

China Exports to China Imports from

1992 2003 1992 2003
Brunei $ 10 $ 34 $5 $ 312
Cambodia $ 13 $ 295 $ 0.2 $26
Indonesia $ 471 $ 4,482 $ 1,554 $ 5,747
Laos $ 28 $ 98 $4 $ 11
Malaysia $ 645 $ 6,141 $ 830 $ 13,986
Burma $ 259 $ 910 $ 131 $ 169
Philippines $ 210 $ 3,093 $ 155 $ 6,307
Singapore $ 2,030 $ 8,864 $ 1,236 $ 10,485
Thailand $ 895 $ 3,828 $ 425 $ 8,827
Vietnam $ 106 $ 3,183 $ 73 $ 1,457

Source: Vaughn, February 8, 2005. 2005 CRS Report for Congress.

Note: (In billions as adjusted for inflation. Jane Perez, Across Asia, Beijing’s Star is Rising,” The New
York Times, August 28, 2004).

In November 2000, during the Asian- China Summit, which was attended by
Chinese Premier Zhu Rongji, China proposed the creation and establishment of a free
trade area among the ASIAN states to be named as ASEAN Free Trade Area or
AFTA.35 With the continuing effort in the process of integrating Cambodia, Laos,
Burma and Vietnam36 in the free trade area, it is expected that the formation of these
neighboring states will lead to a common regional economic bloc in the region to
forego free trade in goods, services and capital investment within the region. With
these recent developments in Chinese economic relations to its neighbors, it is further
expected that these countries will gain economic advantage in the next coming years.

III. China’s 1st Strategy: China’s adherence to the ideologies of

Globalization and accession to WTO.

The People’s Republic of China is one of the biggest populations all over the
world. Although, there was a tremendous improvement in the growth of gross

35
Ibid.
36
Ibid.
 11

domestic product (GDP) during 1980’s, in terms of per capita income, China is still
considered poor and a developing countries in Asia37. In its effort to improve the
economy, Chinese policy makers view the importance of establishing an official
relation among key international organizations to further improve the economic flow
and development and sustainability of their economy38. In 1980, China officially
joined these key international organizations particularly the International Monetary
Fund (IMF), the World Bank (WB), and later in 1986, China officially negotiated for
its full participation and negotiation in the General Agreement on Tariff and Trade or
the GATT.39 These key international economic organizations was created in the
aftermath of World War II during the conference in Bretton Woods in 1944. The
organization of these key economic organization was spearheaded by United States of
America and other delegates basically from develop countries in Europe to help other
countries especially the under-develop nations to rebuild and improved their
economies after the devastation of war. The International Monetary Fund’s objectives
was to provide a forum for multilateral consideration of the international monetary
issues and source of fund and provider to enable countries to deal with its problems in
terms of short term balance of payment difficulties, thereby assisting this countries to
maintain a more relatively stable exchange rates of their own currency and making
their respective currency readily convertible with other nation’s currency. 40 On the
other hand, the World Bank (WB), provides capital assistance to member countries
for the purpose of promoting economic growth and more broadly seeks to encourage
the free flow of capital from more prosperous or industrialize countries to less
develop or under-develop countries.41 These institutions created during the Bretton
Woods conference were the prime movers of the idea of globalization, which
practically gained support among the neo-liberal idea of market economy. Being
dominated by United States in terms of voting and representation 42, the idea of open
market economy was further enhanced giving more emphasis to open free trading,
market liberalism, capitalism, and free flow of capital investment.

37
Jacobson and Oksenberg, 1990.
38
Ibid.
39
Jacobson and Oksenberg, 1990. p. 65.
40
Ibid.
41
Ibid.
42
Ibid.
 12

China’s membership to these key international economic organizations further

improved its international trading with other countries and its economy. In 1986,
China’s export grew more extensively roughly doubling in value from 1979 to 1986.43
On the same year, China became the leading exporter among developing countries.
China’s economic performance in terms of gross domestic products consistently put
China into better position in economic stability. The membership of China to the
International Monetary Fund and the World Bank were viewed by many observer as a
success for China’s economic development. The involvement of these key
international economic organizations, play a vital and significant role for China most
importantly in shaping economic reform policies to further improve China’s
sustainable development. Such membership according to Harold Jocobson prompted
changes in policies, policy processes, and institutions in China. He further stressed
that perhaps more significantly, the contracts between China’s leaders and fund Bank
officials coupled with the influence of other Western economist altered or changed the
perception of many Chinese leaders and economist about the world economy and their
own economic performance. He further added that the standards of evaluation derived
from Western economic theory in the minds of many Chinese replaced the concepts
imported from the Soviet Union in 1950’s.

The General Agreement on Tariff and Trade or commonly known as GATT

conducted its first multilateral trade negotiation in Geneva in 1947. China sought its
participation ever since up to 1986.44 GATT was primarily designed to ameliorate the
problems that had stymied the international economy in 1930’s, the growth of almost
insurmountable obstacle to trade resulting from protective tariff such as the U.S.
Smooth Hawey Tariff and non-tariff barriers.45 The GATT promotes trade
liberalization primarily among its members that imposes obligations and confers
privileges under the principles of reciprocity, nondiscrimination and transparency46.
China’s active participation in GATT came only after further decision to reform and
adjust its economy47. It was during 1980, when China regularly sent its officials to

43
Ibid.
44
Jacobson and Oksenberg, 1990, p.36.
45
Jacobson and Oksenberg, 1990, p.24.
46
Ibid.
47
Ibid.
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participate in commercial and trade policy conducted by GATT48. China’s

participation in this organization further enhanced China’s privileges in international
trade since this improved its position to negotiate for the elimination and lessening of
protective tariff and non-tariff barriers among the trading countries49. On the other
hand, China, being a member will have to submit its trade regime to international
scrutiny and surveillance50. In addition, China will have to undertake measures to
open up and liberalize its market among its trading countries. This in effect
dramatically increased the export and imports of China as some restriction were
loosened in the international trading51. During the 1980’s, about 85% of China’s
export were from the contracting parties to GATT and more that 90% of its imports
were from these member contracting parties and by 1986, the combined volume of
Chinese export and imports from GATT contracting parties was $ 66.1 billion.52 The
following table gives China’s main trading partners.

Table 3
China’s Principal Trading Partners, 1987 by Percentage of Total

Exports Imports
European Community 9.9 16.8
Japan 16.2 23.3
United States 7.7 11.2
Sub Total 33.8 51.3
Hongkong 34.9 19.5
Total 68.7 70.8

Source: IMF, Direction of Trade Statistic Yearbook, 1988 (Washington D.C.:IMF, 1988), 136-37.) (In
Harold K. Jacobson and Michel Oksenberg, 1990, China’s Participation in the IMF, the
World Bank, and GATT, Michigan: The University of Michigan Press, p. 99.)

In December 2001, China officially joined the World Trade Organization53

replacing the General Agreement on Tariff and Trade. Based on the principle of open
market economy, China’s accession to the World Trade Organization (WTO) may
48
Ibid.
49
Ibid.
50
Ibid.
51
Ibid.
52
Jacobson and Oksenberg, 1990, p.86.
53
Wang Rongjun., in Kokubun Ryosei, Wang Jisi, 2004 “China’s Foreign Trade Policy after
WTO Accession”, The Rise of China and Changing East Asian Order, Tokyo, Japan: Japan Center
for International Exchange, p. 119.
 14

further its economic growth and in the next couple of years. It is believed that the
active participation of China to international trading and its accession to this
organization will lead to China’s advancement of economic progress in Southeast
Asian region and even that of the Western countries. This action and adherence of
China to open market and liberal economies may possibly mean that China’s reform
and its opening to the international market, have entered into a new stage of economic
order and are now thus institutionalized. According to Wang Rongjun, among the
commitments of China that has been fulfilled and in effect as of today includes cutting
tariff, opening most of the industries to foreign competition, amendment or repealing
old foreign trade laws and regulations, and issuing new ones that comply with the
World Trade Organization’s rules and principles. He further added that the changes
that has been made to this policies and to fulfill this obligations to WTO are not just
perfunctory policy adjustment but rather the changes are permanent, reform-
deepening transformations of China’s trade regimes. China’s major economic reforms
after its membership to WTO, has further attracted foreign investors all over the
world.54 They view China as one of the most viable options to invest due to a more
conducive business climate considering China’s vast labor and cheap resources,
access to raw materials and wide range of consumer market in consideration to its
huge population. The influx of foreign direct investments to China has grown more
rapidly during these days. Foreign trade became the engine of China’s economic
growth in 1990’s contributing about 7.5% on the average to the GDP growth.55

Table 4
China’s Imports and Exports of Enterprise in 2002 (US $ 100m)

Exports Year on Year Imports Year on Year

Change (%) Change (%)
State owned enterprises 1,228.6 8.5 1,144.9 10.6
Foreign invested enterprises 1,699.4 27.6 1,602.7 27.4
Collective enterprises 188.6 32.6 94.8 18.5
Private enterprises 137.8 159.5 95.6 180.9
Others -1.3 12.5 14.1 -49.7
Source: Ministry of Commerce (2003). (In Wang Rongjun., “China’s Foreign Trade Policy after
WTO Accession”, 2004, In The Rise of China and Changing East Asian Order, Tokyo, Japan:
Japan Center for International Exchange, p. 129.

54
Rongjun 2004, p. 120.
55
Ibid.
 15

Since China’s adherence to globalization and accession to the World Trade

Organization, a rule-based behavior has been one of the basic principles of
government conduct56 According to Rongjun, even though rules do not necessarily
mean leading to liberalization, the ongoing efforts of the government to impose a
systematic set of rules will continue to boost the economic performance of China.
Chinese leaders acknowledge the importance of acceleration and enhancement of high
technology industries and the importance of direct foreign investment to further boost
the economy and sustainable economic development57. Wang further stressed that
China is well determined to fulfill its obligations to the WTO as this will contribute to
the full modernization of China and the full integration to the world economy.

IV. China’s 2nd Strategy: Establishment of good Diplomatic relations and

Multilateral Cooperation among ASEAN States over Settlement of
Boundary Dispute in the South China Sea.

China’s relationship among the ASEAN states, who are partly claimants to the
disputed South China Sea issues significantly improved. In its effort to maintain a
harmonious relationship among the claimants’ country, China shifted its strategy in
the settlement of issues concerning boundary dispute in the South China Sea.

The Spratly is a group of small islands, reefs, shoals and cays located between
8 degrees and 11 degrees, 40 minutes North latitude58. The Spratly Islands link the
Pacific Ocean and the Indian Ocean59. All its islands are coral, low and small, about 5
to 6 meters above water, spread over 160,000 to 180,000 square kilometers of sea
zone with a total land area of 10 square kilometers only.60 The Spratly is located about
300 miles off the Vietnamese coast and 600 miles southeast of the Chinese island of
Hainan61. The Philippine Island of Palawan is 50-90 miles to the east and the
Malaysian state of Sabah and country of Brunei are 160 miles to the south 62. The

56
Ibid.
57
Ibid.
58
Chemillier-Gendreau, Monique, 2000, Sovereignty over the Paracel and Spratly Islands.
Hague, Netherlands: Kluwer Law International, p. 19.
59
Ibid.
60
Ibid.
61
Ibid.
62
Ibid.
 16

People's Republic of China, Taiwan and Vietnam claim the entire area; the
Philippines, Malaysia and Brunei claim some parts while all except Brunei have taken
military actions (e.g., occupying islets) to support their claims.63

The Spratly islands are believed to contain a vast reserve of oil and natural
gas. China’s Geology and Mineral Resources Ministry have estimated that the
Spratly area holds oil and natural gas reserves of 17.7 billion tons (1.60 × 10¹ kg), as
compared to the 13 billion tons (1.17 × 10¹ kg) held by Kuwait, placing it as the
fourth largest reserve bed in the world.64 Naturally, this discovery of oil reserve
further intensified each of the member claimants assertion of its ownership in the
disputed island.

To further understand the global and economic importance of the South China
Sea and the Spratly Islands, the region is one of the busiest shipping lanes in the
world. During the 1980s, at least two hundred and seventy ships passed through the
region each day and currently more than half of the world’s supertanker traffic, by
tonnage, passes through the region’s waters every year.65 Tanker traffic through the
South China Sea is over three times greater than through the Suez Canal and five
times more than through the Panama Canal; twenty five percent of the world’s crude
oil passes through the South China Sea.66

There have been observations among other leaders that the China has annexed
and occupied islands not for resource exploitation but rather for surveillance reasons.
For example, Mischief Reef would be an ideal site from which to observe United
States naval vessels traveling through western Philippine waters67. China’s invasion
of the islands may be aimed at opposing the Taiwan rather than the Philippines as the
Spratly lie across water essential to the Taiwan. Clearly, the strategic location of the
Spratly Islands and the promise of resources are the primary motives for claiming
these islands.

63
Ibid.
64
Baker John C. and Wiencek David G., 2002. Cooperative Monitoring in the South China
Sea: Satellite Imagery, Confidence Building Measures, And Spratly Islands Disputes, Westport,
CT: Praeger Publishers, p.45.
65
Ibid.
66
Ibid.
67
Ibid.
 17

Since the major issue here is the vast resources it may contain in the island, the
strategic location of the islands with its potentials to control or disrupt the sea lines of
communications and passage has implications for non-claimants such as Singapore,
Japan, and the United States, whose economic and strategic interests are mostly linked
with freedom of navigation through the South China Sea. Therefore, in this sense,
non-claimant nations are concerned about how the issue is resolved. More than a
mere concern, non-claimant nations will challenge any solution that may affect their
strategic interests.

To address these conflicting issues over sovereignty claims over the disputed
island, China in its effort to maintain harmonious relationship among claimant’s
country has to establish multilateral cooperation among the Asian claimant states. It
was noted among analysts that China’s intention to establish diplomatic relations with
ASEAN states started during 1990 when then Premier Li Peng’s visit to Malaysia,
Philippines, Laos and Sri Lanka.68 The first round of formal talks was actually started
in Malaysia during the ASEAN Ministerial Meeting wherein China gladly accepted
the invitation to participate in the said conference in July 199169. China, represented
by Chinese Foreign Minister Qian Qichen reiterated its position to settle the issues in
the South China Sea through peaceful resolution of the conflict and joint multi-lateral
and bilateral cooperation among the claimant’s country70. Interestingly, on that similar
occasion, China dispatched its team headed by Wang Yinfan, then Director of Asia
Department of the Ministry of Foreign Affairs to attend the second informal workshop
in “Managing Potential Conflict in the South China Sea” hosted by Indonesia in
Bandung on the same time in 1991.71 The positive view of China over the acceptance
of the invitation of the ASEAN in its Ministerial Meetings and the participation in the
second informal talks in Indonesia sends a positive signal among the ASEAN member
states that China is taking into serious consideration the settlement of the conflict
through diplomatic and joint cooperation. During the 1992 Summit of the ASEAN,
leaders from different member countries declared that ASEAN shall move to a more

68
Lee Lai To, 1999, China and the South China Sea Dialogues, Connecticut, London:
Praeger Publishers, p. 22.
69
Ibid.
70
Ibid.
71
Ibid.
 18

higher levels of political and economic cooperation in the wake of the challenge of
globalization to secure and maintain regional peace and prosperity.72 Thus in 1994,
the ASEAN and its dialogue partners decided to create officially the ASEAN
Regional Forum (ARF)73 which will serve as the major venue for carrying out its
objectives of regional harmony and stability among member participating states and
dialogue partners. China and Russia became the consultative partners of the ASEAN,
India became a participant on becoming a dialogue partner in 1996, and Mongolia and
the Democratic People’s Republic of Korea were admitted in 1999 and 2000
respectively.74 From then on, China actively participated in joint cooperation among
member countries to foster constructive dialogue and consultation on political
concerns and issues concerning security of common interest and contribute to the
efforts towards various confidence building and preventive diplomacy in the Asia
Pacific region.75 It is assumed that China’s participation in ASEAN and the ARF
reduced the tension of military confrontation in the disputed island up to the present
reiterating its commitment and multilateral policy of cooperation in settlement of the
conflict. During Philippine President Gloria Macapagal Arroyo’s state visit to Beijing
last year, both governments agreed to a joint exploration of mineral resources in the
disputed island.

V. China’s 3rd Strategy: Enhancing Military Capabilities and Modernization

The collapse and disintegration of Soviet Union after the Cold War period has
changed the world order to a unipolar system being dominated by Unites States as the
sole superpower in the world with the capacity to structure a world order that could be
detrimental to China’s security interest in the region.76 Threat from Soviet Union was
then lessened giving more opportunities for China to develop a strong economic base

72
ASEAN, 2005, “Overview: Politics and Security”. <http://www.aseansec.org/92.htm>. The
ASEAN official homepage is maintained by the Public Affairs Office of the ASEAN Secretariat with
mailing address at: 70A Jalan Sisingamangaraja, Jakarta 12110 Indonesia, Phone: (6221) 7262991,
Fax: (6221) 7398234.

73
Ibid
74
Ibid
75
Ibid
76
Ong., 2002, p. 136.
 19

and modernize its military. The post cold war period thus gave Chinese leaders the
idea to re-assess its security interest in the region particularly on issues of economic
and political security. Along with economic reforms, China modernized its military
capabilities and acquired weapons development and technology by purchases mainly
from Russia and Israel.77 According the Bulletin of the Atomic Scientist and the
SIPRI Yearbook 1999, the size of China’s nuclear arsenal is about 400 warheads, 20
nuclear armed missiles are deployed in the intercontinental role and another 230
nuclear weapons on deployed or can be deployed in aircraft, missiles and submarines
with regional capabilities, while the 150 remaining nuclear warheads are believe to be
reserved for tactical uses for short range missile, low yield aircraft drop bombs and
possible artillery shells or demolition munitions.78 Frank Moore in his research article
said that:

“China currently maintains a minimal intercontinental nuclear

deterrent using land-based intercontinental ballistic missiles
(ICBMs). The Dong Feng-5 (DF-5) liquid-fueled missile, first
deployed in 1981, has a range of 13,000 km and carries a single
multi-megaton warhead. Twenty are believed to be deployed in
central China, southwest of Beijing. Unlike China's earlier
ballistic missiles, which were stored in caves and moved out for
launch, the DF-5 can be launched directly from vertical silos—
but only after a two-hour fueling process. In order to increase
the survivability of the DF-5s, dummy silos are placed near the
real silos. The DF-5's range gives it coverage of all of Asia and
Europe, and most of the United States. The south-eastern US
states are at the edge of the missile's range. Two additional
long-range ballistic missiles are in the development stage, the
8,000 km DF-31 and the 12,000 km DF-41. Both missiles are
expected to be solid-fueled and based on mobile launchers. It is
not known how many missiles China plans to deploy nor how
many warheads the missiles may carry, but it is believed that
China is hoping to deploy multiple nuclear warheads and
penetration aids. These may be either multiple re-entry vehicles
(MRVs) or the more capable, but technically difficult multiple
independently-targetable re-entry vehicles (MIRVs). First

77
Ong, 2002, p. 160.
78
Frank W. Moore, June 2000, “China’s Military Capabilities”. Institute for Defense and
Disarmament Studies, Cambridge MA 02139 <http://www.comw.org/cmp/fulltext/iddschina.html>.
The Commonwealth Institute, is an independent, non-profit, non-governmental public policy research
center doing critical studies in the fields of international security, inequality and poverty. It is located
located in Cambridge, Massachusetts, USA.
 20

deployment for the DF-31 could occur before 2005; the DF-41
is likely to follow, possibly around 2010”.

Apart from China’s intercontinental nuclear forces, China deploys three

weapons in the intermediate rage ballistic missile (IRBM) and medium range ballistic
missiles(MRBM) categories as part of its regional nuclear forces. 79 These missiles are
capable of posing strategic threats to countries in Asia such as India and Japan and
also to United States through its military bases in Japan and South Korea.80 Moore
further said that:

“The PLAAF has 20-40 Q-5 Fantan attack aircraft that it

uses in the nuclear role. The Q-5 is a substantially upgraded
version of the MiG-19, which was initially deployed in the
Soviet Union in 1954 and later produced by China under the
designation J-6. It can carry a single free-fall nuclear bomb
over a combat radius of 400 km. Two types of short-range
ballistic missile (SRBM) entered service with China’s Second
Artillery forces around 1995: the DF-11/M-11, with a range
of 300 km, and the DF-15/M-9, with a range of 600 km. As of
2000, a few hundred DF-15s and DF-11s may be deployed;
but most if not all are believe to be equipped with
conventional warheads.”

In term of conventional forces, China is considered to be the largest militaries

all over the world although some are considered old in physical age and technology,
which is included in the current inventory of China’s military armaments. 81 In 2000,
the total estimated number of Chinese Military personnel is 2.5 million, of which 1.8
millions are in service with the People’s Liberation Army (PLA) ground forces.82
There are also a large number of reserve and paramilitary units about 1.2 million
which do not fall under the direct supervision and control of the PLA, and
approximately 1.1 million personnel who are serving in the People’s Armed Police
for internal security and border defense forces under the supervision of the Ministry

79
Ibid.
80
Ibid.
81
Ibid.
82
Ibid.
 21

of Defense.83 The number is expected to increase in size in the near future as part of
China’s modernization and restructuring plan.84

China’s inventory of tanks and as of January 2000 is about 10,100 units both
produced and copied technology from Soviet Union, and has currently possesses
about 4,350 aircraft of which majority are combat purposes.85 China also possesses a
quite number of submarines and naval warships destroyer both equipped with nuclear
capability attack86. The following is a table comparing the increase in military
expenditures.

Table 5

Comparative Military Expenditures between China, Japan & US, and

ASEAN-10, 1990-2001

Countries 1990 1995 2000 2001

SIPRI SIPRI SIPRI IISS SIPRI IISS
(US $ Bn)
China 12.0 13.9 23.1 42.0 27.0 46.0
Japan 34.3 36.9 38.0 45.3 38.4 39.5
U.S. 405.5 316.4 305.2 304.1 306.5 322.3
ASEAN-10 14.1 17.8 15.6 15.1 8.1 15.2
(US $ Mn)
Brunei 307 255 - 353 - 279
Cambodia 58 106 80 195 78 188
Indonesia 756 925 1,111 614 - 860
Laos - - - 20 - 19
Malaysia 1,053 1,744 1,567 2,579 1,766 3,249
Myanmar 6,146 8,036 5,727 1,020 - 1,088
Philippines 733 945 843 1,357 - 1,065
Singapore 2,284 3,208 4,523 4,316 4,542 4,280
Thailand 1,803 2,598 1,808 2,419 1,731 1,831
Vietnam 1,031 - - 2,303 - 2,351

Sources: Stockholm International Peace Research Institute (SIPRI) 2002 Military Expenditure
Database <first.sipri.org> and International Institute for Strategic Studies (IISS) The Military
Balance, 2002-2003. Figures for ASEAN-10 based on an aggregate of SIPRI and IISS data;
those in brackets are based only on available SIPRI data .

83
Ibid.
84
Ibid.
85
Ibid.
86
Ibid.
 22

China’s modernization of its military capabilities was basically essential to its

quest for regional security to develop an environment that would not hinder China’s
pursuit for economic development and its ambition to establish and become a great
power in the century.87

VI. Conclusion:
Rising China: A Threat or Opportunity

China’s economic performance during the last ten years significantly

improved its economy. As shown in the economic indicators previously discussed,
China was considered to be one of the biggest economies of the world. The influx of
direct foreign investments (FDI) to China helps further its economic growth and
development. The adherence of China to ideologies of globalization and embracing
the idea of open market economies put China as one of the biggest competitor in
international market and trading. This economic miracle as viewed by many perceive
China as the emerging economic power and hegemon in Asia towards a new world
order and balance of power.

To some observers, the rise of China in terms of political, economic and

military capabilities poses both a threat and opportunity among its neighboring
countries particularly the ASEAN, Japan, Korea, and United States interests in the
region. Among the members of the ASEAN states, China’s emerging economic
powers in totality signaled a positive and good opportunities to enhance further
development of Asian economies. Asian leaders perceive China as a friendly ally in
economic development especially during the wake of Asian financial crisis where
China despite pressures to devaluate its currencies continue to resist so as not to
trigger further its effects among ASEAN countries.88 This further helps to rebuild the
image of China as a country willing to extend and eager to help and contain the
imposed policy of the International Monetary Fund (IMF), which was viewed by
many as American intrusion and inappropriate policies advocated by IMF. 89 The
continued efforts of Chinese leadership to establish diplomatic relation and

87
Ong, 2002, p.181.
88
2005 CRS Report for Congress.
89
Ibid.
 23

cooperation among ASEAN member states including Laos, Cambodia and Vietnam
further improved China’s relations to attain multilateral and peaceful resolution to
settlement of boundary disputes in the South China Sea. This was manifested in
China’s effort during the Asian Reform Forum (ARF), were China signifies its
intention to settle the conflicting issues of boundary disputes by multilateral
cooperation and thus forging the signing of Joint Declaration on the Conduct of
Parties in the South China Sea in 2002.90

The continuing effort of China in forging an agreement on establishing a

regional cooperation on trade will further improve the economies of ASEAN and the
integration of Laos, Burma, Cambodia and Vietnam to the ASEAN Free Trade Area
(AFTA).91 The signing of the Framework Agreement on China-ASEAN
Comprehensive Economic Cooperation held during the summit in Phonm Penh last
November 200292 will further increase trading in goods, services and foreign direct
investments between China and AFTA members states.

Because of these improved image of China in regional cooperation among the

member ASEAN states, claimants country to the disputed South China Sea issue
somewhat boils down and reduced its tension for military confrontation unlike during
1988 where a military confrontation between China and Vietnam took place that
resulted in the killings of about 70 Vietnamese soldiers patrolling in Spratly93. Also,
in 1995, China invaded the Mischeef Reef, which are being claimed by Philippines94.
After such skirmishes, China has been acting into a more responsible and cooperative
way of peaceful resolution unlike during 1990’s95. Just recently, China and the
Philippines agree on a three-year joint effort of oil exploration of mineral resources in
the disputed island during President Gloria Macapagal Arroyo’s State visit to China.96
In totality, ASEAN countries view China’s rising economic growth and dynamism as

90
2005 CRS Report for Congress.
91
Ibid.
92
Ibid.
93
Ibid.
94
Ibid.
95
Ibid.
96
Republic of the Philippine, Office of the Press Secretary, September 3, 2004, “GMA to
bring home RP-China business contracts worth $1 billion.”
<http://www.ops.gov.ph/chinavisit2004/news3.htm#President%20Hu>.
 24

an opportunity both in achieving economic development and sustainability as well as

regional security cooperation.

On the other hand, some observers view that the United States as likely to be
affected by the rising power of China in the Asian region. After the September 11
attack, the United States policy on regional security is largely focus on war on
terrorism. This was followed by US led invasion to Afghanistan and Iraq. As
observed, the United States seems to give more priority on security issues against
terrorism and the propagation of Muslim radical groups, which was allegedly being
supported by these countries. On top of this, the security interest of Unites States in
Southeast Asia seems to be given less priority. Thus, giving more advantage to China
to expand its influence in the region. In real perspective, it lessens US interest in
promoting stability and balance of power with strategic importance of keeping
Southeast Asia from being dominated by any hegemon, US being excluded from the
region by another power or groups of power, freedom of navigation and protection of
sea lanes, trade and investment interest, support of treaty allies, and the promotion of
rule of law, democracy, religious and human rights freedom in the region97 thereby
giving China to advance its interest among neighboring states. Taiwan is also wary
over China’s rising power and modernization of its Armed forces since China still
adheres to its One China Policy.98 China, it would thus seem, is still determined to
isolate Taiwan and to impede its bid for independence. Japan, on the other hand, is
raising alarms over China’s increase in military spending99 as potential source to raise
confrontation over historical issues between Japan and China. The Chinese
government strongly opposed the recent visit of Prime Minister Koizumi to Yasokuni
Shrine as insult to Chinese citizen.

Based on my analysis, China is undoubtedly emerging as a superpower and

trying to establish a kind of new world order that would challenge the United States
hegemony after the cold war. The economic growth now being enjoyed by China and
its accession to WTO will further expand China’s influence in international market

97
2005 CRS Report for Congress.
98
Ibid.
99
Noel M. Morada in Kokubun Ryosei, Wang Jisi, 2004, “Asean and the Rise of China,” The
Rise of China and Changing East Asian Order, Tokyo, Japan: Japan Center for International
Exchange, p. 233.
 25

and global trading among countries in Southeast Asia and the West. In further
consideration, China along with its economic developments are further enhancing its
military capabilities by modernization and acquisition of high technology armaments.
China’s significant increased in military spending suggests that China is ready to face
any challenge that may impair its security interest and hamper its economic
development.
 26

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