Chinese foreign policy of the mid-1980s stems from four interrelated calculations. First, China’s reform-minded leaders, whom I call confident nationalists, believe that through increased involvement in world affairs China can attain wealth and power while preserving its national essence. Second, they claim that the international setting permits a concentration upon domestic development; particularly because the Soviet Union is preoccupied with other pressing concerns, China can enjoy a stable environment in East Asia for the foreseeable future. Third, they claim that China can benefit from effective participation in the international economic system and can attract foreign involvement in its economic development. And fourth, they believe that China can pursue steady, independent, pragmatic and purposeful policies not only toward the three major powers of concern to them (the Soviet Union, the United States and Japan) but also toward three areas of crucial importance (Korea, Indochina and Taiwan).

The foreign policy of the reformers that emerges from these considerations is complex and subtle. Its overriding purpose is to forge a tranquil security environment in support of ambitious domestic economic development. The reformers want to lay the foundation for the eventual attainment of modern military force and international greatness. They combine a search for military security with a desire to expand economic ties with all potential trading partners. They seek to preserve Chinese sovereignty and autonomy while accepting the constraints of increased commercial and security links with the outside world.

The key question about this foreign policy is its durability: Is it the unique product of Deng Xiaoping? How deeply wedded is Deng himself to these views? Can the reformers sustain this policy in the face of internal opposition? The launching in late 1986 of a campaign against "bourgeois liberalism" and "complete Westernization" and the sudden dismissal of General Secretary Hu Yaobang, a principal proponent of political reform, raised new questions about the stability of Chinese foreign policy.

In some respects Chinese foreign policy increasingly resembles the foreign policies of other great powers. While the charting of broad foreign policy guidelines remains the prerogative of a few people at the top (principally Deng Xiaoping), refining and implementing the policy have become much more bureaucratic and diffuse. The Ministry of Foreign Affairs has lost its previous dominance over the conduct of Chinese foreign relations, as such agencies as the Ministry of Finance, the People’s Bank and the China International Trust and Investment Corporation have become important Chinese actors on the world stage. Coherence can only be imposed at the apex of the government and Communist Party apparatus in the Zhongnanhai (Beijing’s citadel of power), where, in a pattern resembling the American system, policy coordinating committees have begun to proliferate.

With policy the result of bureaucratic interplay, the Chinese find it more difficult to summarize their policy in single, authoritative, programmatic statements, as was the case in the early 1960s in the polemics with the Soviet Union, in Lin Biao’s famous 1965 analysis of guerrilla war and in the 1974 "three worlds" theory of international affairs.

Furthermore, China today is more accessible to foreign analysts than in the Mao and early Deng eras. The proliferation of journals and statistical compendiums reveals much more about the economy, foreign relations and the decision-making process, although much data remains classified. Chinese leaders travel more, occasionally answer questions from foreign journalists and meet frequently with foreign visitors. In short, more information is available, although it is screened less carefully. As with the study of other countries, analysts must separate the authoritative and serious statements and developments from the uninformed, the opinionated and the trivial.

Hence, the underlying themes of Chinese foreign policy are best deciphered through a distillation of the entire range of Chinese pronouncements and actions. Yet such an analytical approach has risks. It may attribute greater coherence and logic to Chinese foreign policy than it deserves. It cannot discern whether the explanations that the Chinese offer for their policies are accurate or merely justifications for moves dictated by internal political considerations. And it may well be that, behind the facade, the leaders of China are less confident of the future than their public image suggests.

II

The current expression of Chinese nationalism provides the first key to understanding the foreign policy of the mid-1980s. The opening to the outside world, the adoption of Western dress and the influx of foreign cultural influences have led many foreign observers to conclude that internationalism now prevails in Beijing. But negotiations with Chinese officials, whether for diplomatic, commercial or scholarly purposes, soon dispel such notions. The determination to advance national interests remains very strong. Deng and the reformers constantly reveal their pride in China’s national heritage and their dedication to making China a major actor in world affairs. There has been no erosion in the long-term commitment to reunite Taiwan with the mainland or to settle China’s border claims on terms suitable to Beijing. The strong protectionist impulses underlying Chinese foreign trade policy, their space program and the unprecedented port calls by Chinese naval vessels in the Indian Ocean symbolized the aspirations of the top leaders for national greatness and international influence.

Today’s leaders are no less nationalistic than Mao and his supporters, but the nature of their nationalism is different. The ideological fervor, acerbic rhetoric and gratuitous insults of Maoist nationalism have subsided. Certain ubiquitous slogans of the 1960s captured the spirit of that era: "World in chaos; situation excellent." "Down with American imperialism and its running dogs." "China has friends everywhere." "The Chinese people contribute to all mankind." These slogans are still seen, but only on decaying, weed-encrusted billboards at neglected street corners and on the far edges of airport runways.

Modern Chinese intellectual traditions embrace a variety of nationalisms and nationalistic foreign policies. For the past century Chinese intellectuals have been deeply divided over the defining characteristics of the national essence, and political figures have given expression to several forms of nationalism. Each of these nationalisms—emotional, xenophobic, assertive or confident—is rooted in a different assessment of the sources of national weakness and has different foreign policy implications.

Self-pitying, self-righteous and aggrieved nationalism blames China’s ills on the transgressions of the outside world. Many intellectuals and midlevel officials, more emotional than reasoned, give voice to such sentiments. They display deep ambivalence toward the outside world, exhibiting both intense scorn and admiration, resentment and appreciation. This nationalism, which is hypersensitive to perceived insults and quick to claim that the outside world owes China a debt, has much in common with the nationalism evident in many developing countries today.

Strident, xenophobic and isolationist nationalism came to the fore in the Boxer Rebellion at the turn of the century and again during the Cultural Revolution. This nationalism seeks to eradicate foreign influence and holds that national salvation must be attained through exclusive reliance upon indigenous virtue, strength and ideas. Xenophobic nationalists attribute Chinese weakness to loss of ideological purity or cultural distinctiveness. While disagreeing among themselves over what the indigenous culture should be, such nationalists concur that the requisite national regeneration can only occur through isolation and rejection of the outside world.

Militant, rigid, assertive and occasionally muscular nationalism was revealed by Chiang Kai-shek in his unswerving belief that Taiwan was part of China and by Mao Zedong in the provocative manner with which he engaged in polemics with the Soviet Union in the mid-1960s. This variant of Chinese nationalism is reflected in irredentist concerns, such as Deng’s handling of relations with Vietnam, the primacy attached to Hong Kong and Taiwan in the early 1980s, and in the occasional threats made by both Mao and Deng that the Taiwan issue may have to be settled by force. To varying degrees, assertive nationalists attribute Chinese weakness to external economic exploitation and cultural infiltration but recognize the useful role of the outside world, particularly its technology, in their quest for modernity. They pursue a limited and cautious Chinese involvement in world affairs as they seek to terminate their vulnerabilities and humiliations.

The leaders of modern China have not exhibited the ultra or expansionist nationalism that so many rising powers have manifested, but one should not exclude the possibility that as its military strength grows, China will begin to press more firmly some of its more ambitious foreign policy goals.

Finally, there is the Chinese nationalism that has flourished in the mid-1980s. It can be traced to the nineteenth century and to such notables as Zhang Zhidong, who encouraged the importation of foreign technology while preserving the cultural identity of China, and Yan Fu, who urged his countrymen to embark upon a long-term strategy of modernization for purposes of national survival. Although no one or two adjectives adequately captures this nationalism, "confident nationalism" seems to encapsulate its essence. It is a patient and moderate nationalism rooted in confidence that over time China can regain its former greatness through economic growth, based on the import of foreign technology and ideas. It is a calculated nationalism, linked to a strategy for economic and political development. It is also a determined and resolute nationalism, flexible in tactics, subtle in strategy, but deeply committed to the preservation of national independence, the reunification of China (including Hong Kong, Macao, Taiwan and disputed islands in the South and East China Seas) and the attainment of national wealth and power.

The confident nationalists ascribe Chinese weakness to an inadequate industrial base, underdeveloped transportation, poor communications facilities, a poorly trained manpower base and inefficient economic and political institutions. They believe Chinese culture is sufficiently resilient to survive the contacts with the outside world that are necessary to remedy these deficiencies. They welcome extensive relations with the outside world and believe China can help maintain stability in the Asia-Pacific region.

Confident nationalists have not been able to dominate the political stage for long stretches in this century, however, because the Westernization that flourishes under their aegis creates a backlash in China and raises doubts about their real commitment to nationalistic aspirations. Assertive nationalists are quick either to seize upon the failures of their more patient colleagues and argue for a reversal of policy or to fasten upon the successes and argue that the time has come to push for new gains. Thus, while confident nationalism has been ascendant in the mid-1980s, the other forms of nationalism have continued to lurk in the background and could swiftly come to the fore again.

III

The way Deng Xiaoping and his close supporters perceive China’s security environment provides the second key to understanding their foreign policy. The pattern of interaction among the three powers of principal concern to China—the Soviet Union, the United States and Japan—largely determines the strategic choices confronting the leaders in Beijing. China’s posture is perhaps better conceived in terms of an East Asian "quadrangle"—the United States, Japan, the Soviet Union and China—than the more familiar Beijing-Moscow-Washington "triangle." The quadrangular metaphor acknowledges the importance that Deng and his associates assign to Japan. China’s leaders seek flexibility and balance within the quadrangle. They wish to develop broad-based relations with the United States, forge extensive economic ties with Japan, and improve and stabilize their basically adversarial relations with the Soviet Union. They balance their slowly growing military ties with Washington with improvements in diplomatic relations with Moscow. They seek to offset their burgeoning economic relations and trade deficit with Japan through a rapid expansion of barter trade with the Soviet Union and Eastern Europe. China’s leaders, in short, wish to reduce their vulnerability to or dependence upon any single major power in the Pacific.

This orientation contrasts with earlier approaches. Chinese leaders no longer assert, as in the 1960s, that a chaotic world and intense Soviet-American confrontation serve their interests. Indeed, they have concluded that the worldwide social unrest and revolutionary tide of the 1960s have subsided, and they welcome the stability of the 1980s. No longer do the leaders of every revolutionary movement throughout the world troop to Beijing, to be feted by Chinese officials and lionized in the People’s Daily. Deng Xiaoping and his associates have abandoned the view that China gains from ever-rising Soviet-American tensions. They now believe that contained rivalry between Moscow and Washington benefits Beijing, but that beyond a certain point the tension is harmful. It fuels an arms race that leaves China further behind and could drag Beijing into conflicts not of its own making.

China’s current foreign policy also contrasts with that of the 1970s, when Beijing first leaned toward and then sought an alignment with Washington and Tokyo to counter Soviet military expansion in the Asia-Pacific region. Gone are the expressions of concern that the strategic balance was shifting in favor of the Soviet Union, that the danger of world war was great, but that cooperation among Moscow’s adversaries could avert war. Virtually gone also are the dire warnings about the Soviet pincer movement southwest from Indochina and southeast into the Indian Ocean, aimed at the Strait of Malacca, which China perceived as a Soviet attempt to sever the key transportation link between Western Europe and Northeast Asia, thereby increasing the vulnerability of each to Soviet pressure.

China’s current assessment of the strategic balance is guardedly optimistic. The Chinese now perceive that strategic parity exists between the Soviet Union and the United States and is likely to persist through the rest of the century. This gives Beijing breathing room. As a result, instead of calling for Sino-American strategic cooperation, Beijing now underscores its determination to pursue an independent foreign policy. A favorite formula used by all leaders in public and private is that China will not be subordinate to or ally itself with any superpower. China’s determination to carve out an autonomous or distinct role for itself is revealed in several recent developments: the vocal condemnations of President Reagan’s policies in South Africa and the Middle East; the welcome given Nicaraguan President Daniel Ortega during his visit last September; the warming of relations with East European countries, as evidenced by the recent visits of East German leader Erich Honecker and Polish leader Wojciech Jaruzelski; and the rapid increase in Chinese arms exports.

This long-term confidence is also revealed in the Chinese approach to military modernization. The percentage of the government budget devoted to military expenditures has decreased in recent years from 15 percent in 1983 and 12 percent in 1984 to ten percent in 1985. Deng and his associates have also announced plans to create a leaner fighting force by reducing the size of the People’s Liberation Army (PLA) from roughly four million to three million. Many defense industries are being encouraged to produce for the civilian economy and to earn substantial hard currency by exporting arms as well.

Beijing has not rushed to purchase the foreign military equipment and technology that the governments of Western Europe and the United States have offered to license for sale to the P.R.C. To be sure, some purchases have occurred and others are under negotiation, most notably an American avionics package for China’s F-8 fighter. Initial discussions are also under way for additional acquisitions, such as antisubmarine warfare torpedos. Yet Chinese imports of military technology and equipment have moved forward at a more measured pace than some Western observers had anticipated five years ago. China recognizes that the creation of a truly modern military force first requires the training of adequate numbers of scientists and technicians and the creation of the requisite high-technology electronics and metallurgical industries. China cannot afford to purchase the hardware it needs to reduce its military vulnerability to the Soviet Union; instead it is pursuing a long-term strategy to redress the imbalance by developing its industrial infrastructure.

Before elaborating on Beijing’s policy toward the Soviet Union, the United States and Japan, it is necessary to reject two common interpretations of the strategy of the mid-1980s derived from the triangular perspective, namely that Beijing seeks a position of equidistance between Moscow and Washington or seeks to occupy the advantageous "swing" position among the three nuclear powers in Northeast Asia.

Chinese rhetoric does support the equidistance argument. Official Chinese statements tend to condemn American and Soviet foreign policies with equal vehemence. If anything, Reagan Administration policies in Latin America and Africa and the Strategic Defense Initiative receive greater criticism than any Soviet activity outside of Afghanistan and Indochina. Moreover, current Chinese press treatment of General Secretary Mikhail Gorbachev’s proposed economic reforms and of Sino-Soviet exchanges is quite laudatory. The image of the Soviet Union conveyed in China’s official media today is dramatically different from a decade ago. In some respects it is more favorable than the official portrayal of the United States.

But in reality, China has a much more intimate relationship with the United States than with the Soviet Union. Consider: in 1985 trade with the United States totaled $7.7 billion, compared with only $1.9 billion with the Soviet Union (although the gap narrowed in 1986). Nearly 17,000 Chinese students and scholars are in American universities, but not more than 200 were studying in the Soviet Union in 1985. The PLA welcomes American military delegations and naval ships but peers suspiciously across the border at SS-20s, Backfire bombers and advanced MiGs deployed in the Soviet Far East. China’s reformers know who threatens them and recognize that seeking a genuine equidistance would entail succumbing to the pressure the Soviet Union has brought to bear.

The second view is that Beijing cultivates better relations with Moscow and Washington than the two have with each other in order to derive leverage over both. In this interpretation Beijing seeks to extract concessions from Washington in exchange for not improving Sino-Soviet relations. Certainly the record suggests that Beijing does integrate its policies toward the two superpowers and times its moves toward one in order to influence the other. The Chinese leaders made overtures toward Moscow in 1981-82 at precisely the same time they were pressing Washington not to sell an advanced fighter jet to Taiwan. And the ongoing discussions between Chinese and Soviet deputy foreign ministers as well as the higher-level exchanges at the vice-premier level have probably introduced a more cautious note in American arms sales to Taiwan and encouraged the Reagan Administration to relax controls over technology transfers to Beijing.

But this does not mean Deng and his followers believe they can sustain an advantageous swing position. They apparently understand they could easily overplay their hand. Excessive flirtation with Moscow could raise questions in Washington about China’s long-term reliability and thus constrain the flow of Western technology and capital. This may help to explain the cautious and methodical fashion with which Beijing has pursued improved relations with the Soviet Union. Furthermore, Hanoi can prevent Beijing from playing off Moscow and Washington. By stepping up its actions in Cambodia or along its border with China, Vietnam can force a predictably hostile response from Beijing and elicit support from Moscow, thus inhibiting any Sino-Soviet détente. This happened in May 1984, for example, on the eve of a scheduled visit by First Deputy Prime Minister Ivan V. Arkhipov to Beijing.

The concept of the triangle emerged in the late 1960s, at the peak of Sino-Soviet tensions and just as the Soviet military buildup was occurring and the American withdrawal from Vietnam had begun. The metaphor usefully captured the underlying strategic structure and fluidity in East Asia at the time. Since then the Sino-Soviet conventional military balance has deteriorated to China’s disadvantage, Japan has fully emerged as an international economic colossus, and three regional powers have demonstrated economic or military vibrancy. South Korea and Taiwan have developed robust modern economies with global reach, and Vietnam, allied with the Soviet Union, is China’s military rival in the south. The triangle metaphor simply no longer captures the new complexities that China confronts. Responding to the new strategic setting, China’s foreign policy of the mid-1980s has become multifaceted.

Soviet Union. The Chinese claim that three obstacles inhibit the normalization of Sino-Soviet relations: the Soviet invasion of Afghanistan, Soviet support of the Vietnamese occupation of Cambodia, and the military buildup in Mongolia and the Soviet Far East. In spite of these obstacles Beijing remains intent upon expanding commercial, scientific and cultural relations with the Soviet Union.

Trade has grown rapidly, from $1.2 billion in 1984 to $1.9 billion in 1985, and well over $2 billion in 1986. The highest-level visits since 1969 occurred in 1984-86, when First Deputy Prime Minister Arkhipov visited in December 1984 (a visit reciprocated by Deputy Premier Yao Yilin in July 1985), and First Deputy Prime Minister Nikolai Talyzin visited Beijing in September 1986. Nine rounds of discussions on improving relations have now been held at the deputy foreign minister level. And a constant stream of official delegations now flows between the two countries. All this occurs despite the lack of significant movement on the three "obstacles" and the continued Soviet military buildup in Siberia and Vietnam. In 1985-86 this buildup included the testing of an improved SS-20; the deployment in the Pacific of an additional VTOL (vertical takeoff and landing) aircraft carrier, a cruiser and two guided-missile destroyers; the basing in Siberia of additional Backfire bombers and the first MiG-29s; as well as the Soviet military buildup at Cam Ranh Bay in Vietnam. General Secretary Gorbachev did promise, in his July 28, 1986, speech in Vladivostok, a thinning of Soviet forces in Mongolia, but even if redeemed, this pledge would do little to alter the actual military balance.

The basic Chinese strategy appears to be to foster a stable relationship in which rancor and personal animus are minimized. Beijing wishes to deprive Moscow of pretexts for returning to the volatile, tension-ridden confrontation of the 1960s and 1970s. Cooperation can arise in those realms where compatibility of interests exists, most notably in trade and cultural relations. But Deng and his followers, especially in the military, have asserted that the adversarial dimensions of the relationship outweigh the constructive elements. Deng’s assessment was revealed in his careful response to Gorbachev’s July overture for improved Sino-Soviet relations: while not rejecting Gorbachev’s offers to reduce tension and expand contact, Deng was quick to note that the Soviet leader had excluded Indochina from the areas in which the Soviets were prepared to accommodate Chinese interests. The Chinese approach of the mid-1980s has not been acerbity toward Moscow. Rather, the long-term strategy has been to develop the economic capacity to reduce Sino-Soviet military imbalances while reducing the immediate danger through diplomacy.

Some Chinese leaders (the elderly Chun Yun is frequently cited by foreign observers as a leader of this group) appear to seek more than this—a genuine détente that would alleviate the military rivalry and result in greatly expanded trade. Assertive nationalists also might prefer Soviet economic and cultural influence to disruptive Western capitalistic and democratic ideas, and seek a diminution in Soviet tension in order to press the United States on the Taiwan issue.

United States. In almost every sphere and at every level, China continues to manage its relations with the United States in a steady and methodical fashion. The American military presence in the western Pacific is still welcomed for providing necessary balance to expanding Soviet strength. Sino-American military relations continue to take significant steps forward, highlighted in 1986 by the American licensing of munitions technology and avionics equipment for sale, frequent exchanges between the defense establishments of the two countries (including Secretary of Defense Caspar Weinberger’s successful visit in the fall of 1986), a naval pass exercise in the South China Sea, and the long-awaited call on a Chinese port by the U.S. Navy in November. In the educational sphere, the number of Chinese students and visiting scholars in the United States continues to expand. As to commercial relations, American efforts to limit Chinese imports elicited firm complaints from Beijing, but there were no threats of immediate or extensive retaliation. The underlying theme of Chinese policy toward the United States in 1985-86 was to keep the relationship on track.

In several respects, however, Sino-American relations are encountering constraints. Official consultations on such matters of mutual concern as Korea, Indochina and the Soviet Union, while substantial, are not as extensive or intimate as some American officials would like. Trade, which totaled $6.1 billion in 1984, $7.7 billion in 1985 and $5.9 billion for the first nine months of 1986, has not risen as rapidly as with other developed countries. The European Community has now surpassed the United States as the second largest exporter to China. The disappointing explorations for South China Sea petroleum reserves have meant that this potential linchpin of Sino-American relations—considerable U.S. involvement in China’s offshore petroleum development—is unlikely to fall into place. The Reagan Administration spent some political capital with Congress in 1984-85 in order to elicit its assent to a nuclear technology agreement (eventually approved by Congress in late 1985), only to find little Chinese interest in pursuing purchases. As this example suggests, political will in Beijing as well as in Washington will continue to be required for Sino-American economic relations to continue to expand.

Japan. American observers often underestimate the importance of Japan to China. Both the Japanese government and the private sector have had considerable influence on Beijing’s economic development strategy since the early 1970s. To diversify energy sources and secure a market for steel exports, the Ministry of International Trade and Investment and several influential businessmen reached an understanding with Premier Zhou Enlai in 1973 that Chinese imports of whole plants and equipment would eventually be paid for through petroleum exports, with Japan providing the interim financing through low-interest loans. This agreement was reiterated and expanded in the 1978 long-term trade agreement that helped to stimulate the overly ambitious, expansive economic program of the immediate post-Mao era.

That strategy, while flawed in some respects, is beginning to yield results, and Sino-Japanese commercial ties are burgeoning. In fact, China has now become Japan’s second largest trading partner. To be sure, the decline in petroleum prices and the failure to discover large offshore reserves in the Bohai Gulf have had a chilling effect, and Japanese investors have not rushed to China. China, to its chagrin, has developed substantial trade imbalances with Japan. Yet Japan has committed $3.5 billion in low-interest loans since 1979 and has become the most important international financial market for China. For example, the Chinese have floated 11 separate bond issues on the Japanese market since 1981. Still, Japanese firms have been reluctant to invest directly, collectively ranking a distant third behind Hong Kong and U.S. firms in investments in China: altogether, Japanese firms have invested a total of $360 million through 1985.

To be sure, resentment of Japan persists among a populace that still recalls the brutality of the 1931-45 invasion and occupation, and Chinese leaders give voice to these memories, as when they protested Prime Minister Yasuhiro Nakasone’s August 1985 official visit to the Yasukuni Shrine honoring Japan’s war dead. But mostly the reformers have tried to cultivate favorable popular sentiment toward Japan.

The Chinese, however, resist becoming heavily dependent upon Japan, and they see merit in compensating for the major Japanese presence through cultivation of commercial ties with competing West European and American firms and through rapid expansion of trade with the Soviet Union and Eastern Europe. The Chinese are ambivalent about the future strategic role of Japan in East Asia. While expressing some apprehension about resurgent Japanese militarism, many strategic thinkers, at least, acknowledge that Tokyo must assume an increased defense burden to balance Soviet strength. They believe that this must be done under an American aegis and that any defense buildup must be strictly delimited. In sum, they believe Japan must assume a larger role economically and militarily in sustaining stability and prosperity in the region.

IV

Perhaps the most dramatic aspect of Beijing’s foreign policy calculus is the opening to foreign investment and the rapid increase in foreign trade. Total trade soared from $15 billion in 1977 to $70 billion in 1985. Foreign direct investment in China in 1984 and 1985, according to one careful observer, exceeded that in any other developing country.

The Chinese media project a glowing image of foreign investment and trade. The Chinese claim that 2,300 joint ventures have been established since 1975, representing an external commitment of $6 billion. In reality many of the agreements are not joint ventures in the precise sense of the term, but entail various forms of cooperation. Moreover, the value of foreign commitments cited by the Chinese includes estimates of transferred technology and of optional, future investments and therefore overstates the actual capital flow.

In 1984-86, China’s turn to the outside encountered several difficulties. Despite a continued, robust expansion in exports (up 15 percent in the first three quarters of 1986 over 1985), China still faces a severe trade deficit. The trade deficit for 1986, which is likely to total $9-10 billion, represents the third year of significant imbalance, in spite of substantial efforts to curb imports. The result has been a rapid draw-down on foreign currency reserves and the accumulation of foreign debt. Compounding the problem, the drop in world crude petroleum prices cost China roughly $3 billion in foreign exchange earnings in 1986; in 1985, China had earned nearly $6 billion in petroleum exports.

The major, long-term problems, however, were not just the trade deficit or foreign indebtedness; indeed, at China’s level of development, prudent borrowing makes sense. Rather, the issues were whether the nation was using its assets to purchase such items as automobiles and consumer durables instead of much needed capital goods, and at what point China would reach the limits of prudent indebtedness. On these counts, many Chinese and Westerners offer sober analyses. A considerable portion of imports have met only nonproductive consumer demand. At the current level of trade deficits, China could reach the limits of a reasonable trade imbalance in less than a decade.

Furthermore, many foreign businessmen in Beijing were beginning to weary of the problems they confront: inconsistent legislation, arbitrary bureaucrats, red tape, high costs and problems in repatriating earnings. As a result, the rate of foreign investment slowed in 1986, posting a decline for the first time since 1979. Nor has the Chinese government been able to attract as many low-interest loans from international financial institutions and developed countries as it had hoped.

These mounting problems did not visibly discourage China’s reformers in 1985-86. They adopted stringent measures to reduce imports and to establish control over expenditures of foreign currency. Their actions were generally endorsed by influential foreign advisers, who felt that the People’s Bank and the Ministry of Finance needed to improve their ability to use monetary and fiscal controls to regulate the economy. The Chinese in 1986 applied to join—the Chinese would say rejoin—the General Agreement on Tariffs and Trade, and prepared for the difficult negotiations over their tariff and nontariff barriers, export pricing policies, and so on. They anticipate that these negotiations will be protracted. Some foreign observers detect a grudging but growing government willingness to compensate for trade deficits and lagging foreign investment by borrowing at commercial rates for key development projects such as power plants. To improve the business climate the State Council enacted additional measures to facilitate foreign investment in export-oriented and high-technology enterprises. Finally, to underscore their commitment to internal economic reform, the reformers invited several distinguished American delegations to consult on how to organize capital markets in Chinese cities.

V

Chinese interests have long been vitally engaged in Korea, Indochina and Taiwan, and Beijing’s current policy toward each exhibits the long-term objective of increasing Chinese influence through a combination of carrot and stick.

Korea. Nowhere is the confident Chinese foreign policy of the mid-1980s more evident than in Korea, where Beijing is engaging in substantial and only thinly disguised indirect trade with the South at some risk to its close relationship with the North. Trade with the South was estimated to total $600 million in 1985, according to Japanese sources, with a substantial increase expected in 1986. South Korean businessmen who hold U.S. identification regularly visit Beijing. The improvement in Beijing-Seoul relations is evident in other ways, including China’s eager participation in the Asian Games held in Seoul last fall and the Republic of Korea’s handling of recent airplane hijackings and defections from the People’s Republic.

Meanwhile, the Chinese continue to court North Korea’s Kim Il Sung through high-level visits and rhetorical support, although the formulations concerning American troop deployments and support for unification are more constrained than in the past. Perhaps as a result, Soviet influence in the North appears to be growing. The Soviet Union for the first time has supplied Pyongyang with MiG-23s, and Soviet reconnaissance planes have begun to use North Korean airspace to gather intelligence on China.

Given the crucial role that Korea plays in Chinese national security considerations, it seems likely that Beijing has carefully calculated its policy on the peninsula. There is concern in Beijing about the North’s drift toward Moscow, but Chinese leaders seem to have concluded that either the proud and nationalistic North Koreans will not permit the Soviet Union to achieve a dominant position in the North or that the Soviet Union will not provide Kim Il Sung the backing he seeks. In recent contacts between the Soviets and the North Koreans, including Kim Il Sung’s October 1986 visit to Moscow, the North Koreans did not appear to secure the extent of support that they had sought. As a result of these considerations, China is willing to continue its current two-track policy toward the North and the South.

Indochina. Persistence in the face of obstacles and setbacks characterizes Chinese policy in Indochina. Vietnam continues to permit a growing Soviet military presence in exchange for military support for its occupation of Cambodia. The Sino-Vietnamese border remains tense, and Hanoi must continue to deploy forces there against the threat it perceives from the north. In Cambodia, resistance forces backed by China, the United States and Thailand have become a disruptive force with staying power, but they are unlikely to acquire sufficient force to dislodge the Vietnamese. To date, the increased pressure on Vietnam has only added to its dependence upon Soviet assistance.

But China’s leaders apparently believe that at some point the Vietnamese leadership will adjust its policy. Either Soviet support will diminish (perhaps due to Soviet desire to improve relations with Beijing), or the new generation of Vietnamese leaders will seek to reduce their military burdens in order to focus on their domestic economy. The changes in Vietnam’s leadership announced at the December congress of the Vietnamese Communist Party do not indicate that Vietnam is prepared to seek a rapprochement with China, but they do suggest that Hanoi is increasingly aware of the need to modify some of its domestic policies in order to alleviate its current economic difficulties. The result could be a more flexible Vietnamese government, not necessarily friendly to China but willing to temper some of its immediate ambitions. At that point, a neutral government might become viable in Phnom Penh. Until then, China appears determined to resist Hanoi’s efforts to consolidate its dominance over Indochina.

Taiwan. When China assumes sovereignty over Hong Kong in 1997, its relations with Taiwan will enter a new phase. Thus far, Taipei, although tolerating indirect trade and scientific exchanges, has been unwilling to engage in direct economic, cultural or political exchanges with the mainland. (The negotiations over the return of a plane hijacked to the mainland last May were a noticeable exception.) Unless the authorities on Taiwan terminate trade, transportation and tourism with Hong Kong after that date—an unlikely development—direct contact between Taiwan and a portion of the People’s Republic will begin. And the question will then arise in Taipei: If direct contact exists between the Hong Kong portion of the People’s Republic and Taiwan, why not permit such contact with other portions? As leaders tend to base current behavior on future realities, the known future of Hong Kong is already affecting Taiwan-mainland relations. Namely, although Taipei has not responded to Beijing’s call to permit trade, transportation and tourism, in reality these contacts are now occurring. From Beijing’s vantage, the next step in the peaceful evolution of relations between Taiwan and the mainland has already begun.

The P.R.C. recognizes that problems could arise. Failure to manage the Hong Kong transition well would call into question Beijing’s ability to reach a credible political accommodation with Taiwan. A very high level of American military sales to Taipei could prompt the authorities on the island to disdain the mainland. Democratization and weakening of Nationalist Party (Kuomintang) control in Taiwan could erode the island’s commitment to "one China." Particularly worrisome to Beijing are the calls of the new Democratic Progressive Party in Taiwan for "self-determination." But most leaders in Beijing appear to believe that these problems can be managed and that their peaceful, patient strategy for reaching an accommodation with Taipei will continue to elicit a limited, acceptable and growing response.

VI

Chinese foreign policy since the establishment of the People’s Republic has not been particularly consistent. While many observers would point to continuities in objectives and strategy, nonetheless Beijing did lean to the Soviets in the 1950s, glorified its isolation in the 1960s, and appeared to be headed toward an alignment with the United States in the 1970s. The key question, in light of the previous twists and turns and the leadership instability exhibited in January 1987, is whether the "confident nationalism" of the mid-1980s is likely to persist. The answer, in part, is to be found in the factors that had come together by 1984 and had helped produce the current orientation toward the outside world.

First, the August 17, 1982, communiqué between Beijing and Washington limiting U.S. arms sales to Taiwan and the September 1984 joint declaration with Britain on Hong Kong’s future at least temporarily reduced the pressure on Deng from the assertive nationalists among the leadership. Having demonstrated his own commitment to core nationalistic aspirations, Deng gained time to pursue a more measured pace in determining how the Hong Kong and Taiwan issues are ultimately resolved.

Chinese officials believe that changes in the Soviet-American military balance in Washington’s favor and in the Soviet condition have presented Beijing with greater flexibility. In the early 1980s China’s leaders concluded that the Soviet Union was heavily burdened with a laggard domestic economy, the war in Afghanistan and assistance to its Vietnamese, Cuban and various African clients. Moreover, the American military buildup of the 1980s poses new and severe challenges to Moscow in Europe and in its development of strategic and defensive weapons. Thus, although the Soviet military posture in the Asia-Pacific region has improved, its ability to exercise leverage and its interest in doing so have at least temporarily diminished. China has determined that there is less immediate need than in the late 1970s to seek an alignment with the United States and Japan against the Soviet Union.

China’s economic success at home also has produced a greater confidence. During the severe retrenchment of 1980-82, brought on by government deficits, trade imbalances and high inflation, a mood of uncertainty seemed to grip China’s leaders. But in the mid-1980s, the reformers confronted similar problems with greater steadiness.

This steadiness extended to their foreign policy, where they concluded that on many issues, time is in their favor. Would it really be possible for Taiwan, for example, to remain aloof and refuse direct commercial contact with an increasingly prosperous mainland? Could Vietnam pursue an intensely anti-Chinese foreign policy as its northern neighbor gradually modernizes its military and expands its commercial relations with the Soviet Union? Would not Japan and the United States remain attracted to a China that promises to open gradually its economy? Confidence among the leaders in their economic future, in short, prompted confidence in their foreign policy.

Another important development helps explain the evolution in Chinese diplomacy. The Chinese foreign policy establishment is much better informed today than a decade or even five years ago. The cumulative effect of foreign travel, the steady stream of foreign leaders and strategic thinkers to Beijing and the outpouring of translated materials has been a more realistic sense of world affairs. To be sure, not all officials have benefited equally from the exposure to the outside world, and in some respects the increased sophistication and awareness is superficial. Nonetheless, to a considerable extent the pragmatism and practicality of Chinese external conduct stem from the greater awareness of international currents and domestic politics in foreign countries. (The reduced ideological rigidities at home also enable Chinese diplomats and scholars to provide more honest reporting.)

Two examples illustrate the point. Drawing upon Western analyses and their extensive reading of the Soviet press, China’s Soviet specialists have developed an informed and broad-based perspective on the Soviet Union, which they convey to their leaders via numerous journals not ordinarily accessible to foreigners. Similarly, the Chinese image of the United States has evolved considerably. In the Mao era, China’s America specialists portrayed the United States in rather crude Marxist categories: American politics involved a struggle among a few competing financial cliques, and the government was an instrument of the capitalist class to oppress the workers. By the mid-1980s, the leading America watchers accepted a pluralistic interpretation. They consider the clash among interest groups and bureaucratic politics to be at the heart of the American system. China’s top officials follow changes in the Senate or upcoming presidential elections with some understanding. To be sure, the role of Congress in the making of American foreign policy continues to perplex the Chinese, and they still lack the savvy of other East Asian leaders in using the American system and legal structure to advance their interests. But the Chinese are much less likely to overreact to pro-Taiwan or anti-P.R.C. rhetoric from marginal American politicians; their diplomacy has become somewhat more attuned to the American style.

Another factor producing "confident nationalism" is the generational succession now under way. Revolutionaries are yielding power to bureaucrats who matured within the communist system. The revolutionaries’ searing experiences were the struggle against Chiang Kai-shek and his Nationalist regime, the war against Japan and the positions of privilege that imperialists had carved in China. Their lives were dedicated to terminating the national humiliation, to reunifying the country and to establishing China as an equal in the world. No less nationalistic than their predecessors, the post-revolutionary generation (now aged 45-55) is rapidly coming to the fore. Its searing experiences, in turn, were the disasters of the Great Leap Forward (1958-60) and the Cultural Revolution and its aftermath (1966-76). This generation appears less interested in heroics and immediate gratification on the international scene and more preoccupied with stability and economic growth at home. While they matured during the Sino-Soviet alliance and then the Sino-Soviet dispute (and hence relations with Moscow appear to loom large in their minds), they seem to be a more technically proficient generation who feel that valuable time was wasted in the Mao era and are eager to get on with the task of national development, however it can best be done.

VII

Thus several sources of current Chinese foreign policy go well beyond Deng Xiaoping. Some of the factors—generational change and greater awareness of world affairs—are nearly irreversible. Other factors—particularly the mood of confident nationalism—are directly attributable to Deng, but his putative successor, Zhao Ziyang, appears to partake of the same intellectual tradition.

Uncertainties exist because a wide range of developments could call into question one or more of the considerations on which current policy is based. The global economy, the Soviet-American military balance, Japanese economic policy and popular opinion in Hong Kong and Taiwan, for example, are not within the control of the leaders. Developments in any of these areas would necessitate modification in Chinese foreign policy.

Domestic developments could also have an impact on foreign policy. The reform program could encounter severe difficulties, causing a loss of confidence and optimism among the leaders and the populace, and some aspiring figures could begin to espouse an alternative form of nationalism as a strategy for gaining political support. Signs of popular discontent, such as the student protests that erupted on the nation’s campuses in December, could strengthen the hands of those leaders who are cautious about the opening to the outside world. Less confident than the current leaders that China can withstand corrosive external ideas, they would argue that the student unrest is partly a product of harmful Western influence.

Foreign trade and investment could continue to fall short of expectations, especially if protectionist impulses grow abroad or economic growth in the developed world becomes sluggish. As a result, the Soviet Union and Eastern Europe would become more attractive trading partners, and the incentives for reforms to make the economy more attractive to Western businesses would be reduced. The current favorable orientation to the West, in short, would be weakened.

Conversely, the continued Soviet military buildup in East Asia and the Pacific could eventually propel renewed, open calls for strategic cooperation among China, the United States and Japan. China’s nonprovocative policy toward Moscow has not had a discernible impact on Soviet military deployments but has only reduced border tensions. One could envision circumstances that would prompt the Chinese leadership to conclude that their current task is simply not producing desired results and to seek closer alignment with Tokyo and Washington. For example, the Chinese could conclude they had to compensate for increasing Soviet influence in North Korea by pursuing their contacts with the South more vigorously.

Further, the emotional Hong Kong or Taiwan issues could force themselves onto Beijing’s agenda, not through mainland desire but through activities of the populace in these two locales. For example, as 1997 approaches, the people of Hong Kong could spontaneously demand a role in their future governance. Should Beijing ignore such pleas and attempt to quell a popular movement, it would call into question its commitment to the "one nation, two systems" formula. But failure to act probably would disenchant the assertive nationalists in Beijing. Similarly, the Taiwan issue remains a potential source of trouble should the United States not adhere to the arms sales agreement or should political developments on Taiwan weaken the commitment of the authorities there to a "one China" policy.

This recitation of possible sources of change suggests that the foreign policy of the mid-1980s almost surely will evolve. Until late 1986, the foreseeable developments appeared likely to induce only evolutionary change, not sweeping reappraisals of policy as in the past.

But then, in early 1987, it seemed that leadership instability and a change in the brand of nationalism the leaders espoused could bring about a more significant swing in foreign policy. The succession arrangement that Deng Xiaoping had so carefully nurtured for the past six years went awry, and in January, Deng’s previously anointed successor, General Secretary Hu Yaobang, abruptly lost his office, allegedly for not handling the student protests well and for other unspecified errors. (He remained on the standing committee of the Politburo.) Premier Zhao Ziyang became the acting general secretary, and Deng Xiaoping vigorously cracked down on advocates of "bourgeois liberalism" and "complete Westernization." In response to the student calls for democracy and meaningful elections, the official media began to flail the American political system as a "sham democracy."

A high price has been paid for these changes. An orderly succession is not in sight. The transfer of Premier Zhao to head the party apparatus undercut the long-standing effort to separate the party from the government, a principal aim of the reforms. The hastily called expanded Politburo meeting that dismissed Hu was attended by a substantial number of party elders who had allegedly retired. This detracted from Deng’s repeated call for orderly procedures at the apex of power. And Deng Xiaoping, after withdrawing from daily involvement in political affairs, has returned to the forefront of political battle.

To be sure, the extensive ties which now exist between China and the outside world make it unlikely that China will revert to its Cultural Revolutionary isolationism and zealotry. And Deng Xiaoping has demonstrated a remarkable capacity to pursue reform and an opening to the outside world during the past eight years. Nonetheless, the anti-Western sentiments expressed in early 1987 and the lashing out against intellectuals suggest that assertive nationalists and even xenophobes are once again coming to the fore. The fate of China’s reform effort appeared to some to be hanging in the balance. Zhao Ziyang to date has revealed himself to be a confident nationalist, and the announcement of the demotion of Hu Yaobang also stressed that China’s current foreign policy would remain unchanged. To make this pledge convincing, Deng Xiaoping must re-establish an orderly succession arrangement and place limits on the attacks against Westernization.

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  • Michel Oksenberg is a professor of political science and research associate of the Center for Chinese Studies at the University of Michigan. He has recently completed with Kenneth Lieberthal a study for the Department of Commerce, Bureaucratic Politics and Chinese Energy Development.
  • More By Michel Oksenberg