CIAO DATE: 01/03

China’s Trade Opening: Implications for Regional Stability

Abstract

China’s entry into the World Trade Organization could have a decisive impact on that country’s long-term development as well as on its relations with Asian neighbors and the United States.

A best-case scenario posits a China confident of its role in the region, valuing stability and prosperity. A Chinese middle class could arise. Prospects would be good for mutually beneficial U.S.-China relations and for Chinese social and political reforms.

Although a strong China could become a regional aggressor, that prospect is unlikely. It is also unrealistic to expect that China will not modernize its military and use it to enhance its international influence. A strong, stable China is likely to cooperate with Asian neighbors to maintain regional peace and stability.

A worst-case scenario has Beijing failing at sustainable reform and finding itself hard-pressed to manage resulting economic and social ills and civil unrest. The leadership might encourage nationalism and military aggressiveness to ensure its survival. Internationally, China could become mired in a downward spiral of cheating, trade disputes, sanctions, and retaliation. U.S.-China relations overall would suffer, raising odds for conflict over sensitive issues such as Taiwan.

China will show little change in the short run. Encouraging domestic reforms ultimately serves U.S. interests, but strong doses of realism, clarity, consistency, and patience will be required.

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