Speech by Minister for Foreign Affairs George Yeo at the China Development Forum in Guangzhou on 12 October 2007

WILL CHINA BE ABLE TO EMERGE PEACEFULLY?

1. China's economic development in the last twenty years has been dramatic, raising hundreds of millions of people out of poverty and creating a significant middle class. However, the progress has been uneven with the coastal provinces doing much better than the inland areas. There are still many poor people living in the rural countryside. In the cities, income disparity is also growing. Land acquisition has created considerable social tension. In many places, the environment has been badly damaged.

2. All these problems can be tackled provided there is continuing peace and stability. China has the resources. Its infrastructure has improved beyond recognition. But China needs time to reform its social systems and modernise its culture.

3. The objective of China's foreign policy today is to have as favourable an external environment as possible so that the internal challenges can be gradually overcome. Following the instruction of Deng Xiaoping, China's approach is to keep a low profile internationally and abjure hegemony. In fact, Deng Xiaoping put this point across starkly when he said should one day China seek hegemony, the countries of the world should unite to bring down China.

4. However, China is not a world by itself. In fact, China's rapid development began only after it embarked on a post-Mao reform policy of opening up in 1978. It was only by plugging into the global network that China was able to transform itself, in the process transforming the world. China has become a great trading nation, exporting a large part of its output and importing huge amounts of raw material, beyond anything which Deng Xiaoping could have foreseen and this has created new external problems for China.

5. At one level, there is mercantilist fear - quite widespread - that China is too competitive. It is exporting too much; its trade surplus is excessive; its demand for raw material has raised commodity prices for everyone; it is grabbing energy resources in Africa and elsewhere; its currency is undervalued; and so on.

6. At a higher level, there is a strategic fear that China will become too powerful and eventually threaten other countries. The US as the sole superpower today sees China in that light, even though its public statements say otherwise. Russia, Japan and India worry too. China's neighbours are also concerned that, in their bilateral relations with China, each is too weak to deal with China on any basis of equality. China's centralised system is another source of apprehension because it allows Beijing to mobilise resources and pursue policies in ways which democratic countries find much harder to do. One cannot imagine China having a huge public debate over a major policy issue like the one the US is now having over Iraqi policy.

7. From China's perspective, the picture looks very different. It sees the major powers wanting to slow China down. It sees US and Japanese policies on Taiwan as deliberately postponing reunification as much as possible. It sees the US willingness to bend nuclear rules for India as a move to enlist India into its efforts to contain China. It sees pushing democracy in China as a means to undermine China, complicating both its internal governance and its foreign policy. In the trade field, problems are often politicised and blown out of proportion. The response to CNOOC's attempt at purchasing UNOCAL was alarmist. Lead paint and magnets have overnight cast a shadow not only on China's toy industry but on all other Chinese products as well.

8. Thus, whether China wishes it or not, it has no choice but to engage the rest of the world and help manage these contradictions. Former US Deputy Secretary of State, now World Bank President, Robert Zoellick, made the case that China has to become 'a responsible stakeholder' in the global system. Indeed, unless China plays this game well, its economic development will be adversely affected. China has become too big to keep a low profile.

9. To the great credit of the Chinese Government, it has maintained admirable strategic discipline, particularly in the maintenance of Sino-American relations. For example, when each new US administration tries to shift its China policy especially on Taiwan, China's response has always been to stay firm but not escalate, gradually forcing the new administration to go back to its old position and we are likely to see a repeat of this in 2009.

10. China was dogged in pursuing its entry into the WTO. The negotiations were very tough but China persisted, never allowing its long-term objective to be deflected. When reports appeared in 2002 of President Jiang Zemin's newly-ordered Boeing 747 being bugged, China kept quiet, at least in public. When the Chinese embassy in Belgrade was destroyed by US missiles in 1999, the Government allowed controlled public demonstrations for about a week so that the Chinese people could vent their anger, and then wound it down.

11. By participating in regional and international organisations like WTO, China creates a better external environment for itself and contributes to global peace. It is better to have endless arguments in the UN and WTO than to settle disputes by force. Both China and small countries like Singapore have a vested interest in a rules-based world where conflicts are resolved in a civilized way.

12. In China's strategic thinking, stabilising the border regions is always a most important priority. In the Nanyang, China went out of its way to build good relations with ASEAN. Premier Zhu Rongji's proposal for a China-ASEAN FTA in the year 2000 was a brilliant move. In the subsequent negotiations, China took a strategic approach and won the goodwill of ASEAN countries. In the South China Sea, China and ASEAN have agreed to resolve boundary problems peacefully and concentrate on joint economic development although Vietnam remains deeply suspicious.

13. In Central Asia, China initiated the Shanghai Cooperation Organisation (SCO) in 2001, acknowledging the strategic position of Russia. The SCO has been quite successful in promoting economic integration in Central Asia and combating the three evils of 'terrorism, separatism and religious extremism'. This year, a huge combined military exercise was conducted with great fanfare and publicity.

14. Northeast Asia is more complicated because of the Korean Peninsula. China has played a key role in the Six-Party Talks. Although the problem of North Korea will take time to resolve, the situation there has become more relaxed in recent months and prospects for peace are much better. China's relations with Japan improved significantly after Shinzo Abe took over as Prime Minister. Reciprocating Prime Minister Abe's gesture of visiting China first, PM Wen Jiabao turned on his charm when he visited Japan a few months ago and under Prime Minister Fukuda, bilateral relations will get better. Both China and South Korea see ASEAN+3, which is ASEAN plus Japan, South Korea and China, as being very important for improved cooperation in Northeast Asia. Japan is however concerned that it should not be confined to ASEAN+3 and wants to promote parallel tracks in APEC (Asia Pacific Economic Cooperation), which includes the US, and the EAS (East Asia Summit), which includes India and Australia as well.

15. In fact, ASEAN, China, Japan and Korea are all happy to pursue these three tracks simultaneously - APEC, EAS and ASEAN+3 - at the same time. The difference is one of emphasis which we can live with.

16. APEC is important because it brings the two sides of the Pacific together. After three terrible wars, the US is completely engaged in our part of the world and should one day the US disengage, it will be a darker and more dangerous world for all of us. APEC is developing well. We had a good meeting in Sydney recently and agreed to consider the possibility of a Free Trade Area Asia-Pacific as a long-tem possibility. The habit of meeting helps us to overcome problems which can suddenly arise.

17. I remember clearly the events after the EP3 spyplane incident over Hainan in April 2001 when Sino-US relations took a sudden plunge and became very tense. Fortunately, there was an APEC Trade Ministers' Meeting scheduled in Shanghai in June. Amb Zoellick was the first US cabinet secretary as USTR to visit China after the incident. He made friendly remarks which were immediately reported back to Beijing. Bilateral relations got better after that and Chinese Commerce Minister Shi Guangsheng and Amb Zoellick reached agreement on China's entry to the WTO after a late-night session. After September 11, the US and China became allies in the war against terrorism. When President Bush flew into Shanghai for the APEC Summit in October 2001, Chinese fighter airplanes escorted Air Force One into Chinese airspace. From April to October, positions turned 180 degrees. Because no relationship in the world is more important than Sino-US relationship, APEC must remain the premier organisation in our region. However, we have to be clear that both Hong Kong and Taiwan participate in APEC as economies and not as countries.

18. Sino-Indian relations will become more important in the coming decades. Historically, there was little political contact between these two great civilizations because of the Himalayas. There was only war between them, in 1962, a war which India lost, which remains a scar in India's psyche today. But bilateral relations have since gotten much better. Last year, the Nathu La Pass between Tibet and Sikkim was reopened after 44 years. The countries of Southeast Asia which are in between China and India, and greatly influenced by them over the centuries, have a strong interest in seeing good relations between these two giants. The East Asia Summit is a forum which brings them together. Both China and India are improving their road and rail links to Southeast Asia which also link them to each other and the present situation in Myanmar is one which concerns both of them.

19. In order to create better conditions for Asia's integration, India has decided to rebuild the ancient Buddhist university of Nalanda and offer it as a project to improve inter-civilisational understanding and cooperation. Prime Minister Manmohan Singh has proposed this to the East Asia Summit leaders. For hundreds of years, Nalanda attracted students from all over Asia including the great Chinese monks, Fa Xian, Xuan Zang and Yi Jing and the university taught not only Buddhism but also science, mathematics, philosophy and astronomy and other subjects and this project has earned the support of India, Japan and China and the other Southeast Asia countries.

20. Beyond regional organisations, however, China has to play a bigger role in international organisations like the UN and WTO. So far, China's general approach has been to play defence. In the coming years, however, China needs to play a responsible leadership role together with the US, EU and others. Developing countries expect this of China as a leading developing country. If the Doha Round cannot be concluded in the coming months, China must work with the other major trading nations to keep the multilateral trading system going. After all, China is a major beneficiary of the multilateral trading system. On energy security and climate change, China should also play a positive role. At the APEC Business Summit in Sydney recently, President Hu Jintao assured everyone that China will be 'a responsible country'. This is important because, without the full participation of the US, China and India, there can be no effective action to slow down global warming.

21. There is one other area where China's involvement in global coordination is vital and that is the financial field. Exchange rates, trade surpluses and official reserves are not the only problems. Among the G8 countries, coordination of macro-economic policy and financial management is well-established. Without China's participation, however, many issues cannot be properly addressed. As a stakeholder in the global system, China has both rights and responsibilities. As the stakes are considerable, China should be brought into the G8 earlier rather than later.

22. The wise management of China's external relations will help create favourable conditions for China's economic development and for global peace. As China gains in strategic weight, it is important for the Chinese people to remain mindful of Deng Xiaoping's advice. Excessive nationalism will add to the fear of China and conscribe China's policy options. For example, how Chinese spectators behave during the coming Olympic Games where billions of eyeballs will be on Beijing will set international views of China for years to come. China is not the sole arbiter of its strategic environment. The other major powers, especially the US, must also be prepared to accommodate China's legitimate interests. So long as these two big players - China and the US - remain on the same table, the game is on for the rest of us. The day when one or the other leaves the table, it will be much more difficult. Keeping the game going is the challenge of China's peaceful emergence in this century.

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