finance is the sinew of war.”rnThere is no better current example ofrnthis maxim than China. Not only isrntrade and investment helping to buildrnup that country’s infrastructure and industrialrnbase, it is pulling back to thernmainland the loyalty of the “overseas”rnChinese entrepreneurs who control sornmuch of Asia’s commerce and capital—rnand who hold influence with so many ofrnthe region’s governments. Having oncernfled communism, they now find the mixrnof state-capitalism and renewed nationalismrnbased on a shared cultural identityrnvery appealing. The efforts by the Riadyrnfamily in Indonesia to shape PresidentrnClinton’s policies favorably toward Chinarnbrought to public notice a trend thatrnhas worried trade and foreign policy analystsrnfor over a decade.rnMore pointedly, commerce is providingrnBeijing with the hard currency neededrnto buy military hardware, to licenserntechnology, and to hire scientific talent.rnThe United States ran a $39.5 billionrntrade deficit with China in 1996, buyingrnfive times as much from China as it soldrnto China. Despite the policy of “engagement”rnand a parade of American businessmenrntrekking to China, Americanrnexports were static at a mere $11.8 billion.rnThis amounted to barely two percentrnof our total exports. Americans exportrnmuch more to their natural allies,rnsuch as Japan, South Korea, Taiwan, andrnSingapore. The China market remainsrnthe illusion it has been for a century—rnbut an illusion Beijing manipulates veryrnwell to entice American business supportrnfor an appeasement policy.rnRussia has been the main source forrnarms. As Princeton’s Kent Calder hasrnobserved, “with Russia holding the greatestrnmilitary yard sale in history, the Chinese,rnflush with hard currency from theirrnsoaring, multibillion-dollar transpacificrntrade surpluses, stocked up.” LastrnNovember, China and Russia agreedrnthat future weapons purchases would bernpaid for with hard currency rather thanrnby barter as in the past. This makes Chinarna much more attractive market andrn”strategic partner” for Moscow. Therndollars then get passed on again withrnmore dangerous security implications.rnRadio Moscow has commented thatrn”with money earned from the sale ofrnRussian military equipment to China,rnRussia will be able to fund the developmentrnfor itself of the most up-to-daterntypes of armaments.”rnBut Russia is not the only countryrnlusting after China’s cash reserves.rnFrance, Italy, and Israel, among others,rnhave been contributing to China’s militaryrnexpansion. Geopolitically, the Europeanrnstates have little to fear from Chinarnto offset the lure of its money. It is thernUnited States that is facing the tiger—rnbut it is also the United States that isrnfeeding it.rnLiberal critics of Clinton’s “engagement”rnpolicy want to link trade with humanrnrights. But their moralistic hectoringrnof China will not force change.rnThere is little outsiders can do to changernthe internal order of a major authoritarianrnpower like China, whose ruling elite isrndetermined to retain power. This alsornapplies to the alleged “progressive” influencernof Western corporations in China.rnBusinessmen are unlikely to lead a revolutionrnagainst a regime with which theyrnare making money. They are more likelyrnto defend it. An example appeared inrnAviation Week & Space Technology on Julyrn1, 1996, just after last year’s vote onrnMFN by the House of Representatives.rnA four-page advertisement placed by thernChina Business Congress, a group ofrnAmerican firms promoting ties with Beijing,rnmade the following astonishingrnstatement: “China continues to operaterna socialist command model, but unlikernthe old Soviet model, this one works.”rnSo much for reform!rnThe real reason for suspending MFNrnis to deny China resources which the currentrnregime cannot be trusted to use in arnproper manner. There is no sense inrnhelping a country whose ambitions arerngenerating fear in the region. The aim ofrnsanctions is not mainly to pressure Chinarnto reform, but to hobble China until itrnhas reformed into a government that canrnbe trusted.rnToday’s policy is much like that ofrnEngland’s appeasement of Nazi Germany,rnwhich also had a strong economicrncomponent. Then, as now, the appeasersrnwanted not only trade but otherrnways to stimulate the German economyrnand expand its industry. In this view,rnpromoted by the Economic Section ofrnthe Foreign Office, England could becomernvaluable to Hitler as an exportrnmarket and should even endure a traderndeficit if it would improve relations. AsrnFrank Ashton-Gwatkin, head of the EconomicrnSection put it: “I myself believern. . . that this nearly mortal complaintrn[Nazism] will yield to the radio-activerntreatment of increased world trade.”rnThe U.S. State Department echoedrnthis same hope during last year’s MFNrndebate when it said of President Clinton,rn”His vision is clear: U.S. interests arernbest served by a secure, stable, open andrnprosperous China.” Last March, a dealrnpersonally brokered by Clinton gave Beijing’srnstate-owned China Ocean ShippingrnCompany a ten-year lease for 145rnacres of the U.S. Navy base at LongrnBeach, California, which is being closedrndue to budget cuts. This intersection ofrnan expanding China and a downsizingrnAmerica was explained by Defense Departmentrnspokesman Kenneth Bacon asrnfollows: “We have a policy of engagementrnwith China. And the central partrnof that policy is expanding commercialrnrelations with China. That’s what wouldrnbe done here.”rnWinston Churchill denounced thisrnapproach in his first speech to mentionrnHitler on July II, 1932. He warned ofrnGermany’s growing economic capabilitiesrn”with her factories equipped to thernvery latest point of science by British andrnAmerican money.” England’s appeasementrnpolicy was partially the result of itsrninability to confront Germany from arnposition of strength. Arms control agreementsrnand fiscally conservative administrationsrnhad stunted London’s militaryrncapabilities. Hitler was tempted to strikernwhenever he saw a window of opportunity.rnToday, the strategic situation is different.rnThe United States has unquestionedrnmilitary superiority over Chinarnand should seek to insure that the gaprnnever closes (indeed, it should bernwidened further by the deployment of arnnational missile defense system). This isrnnot said to incite a military confrontationrnwith China; just the opposite. Beijingrnknows it cannot directly challenge Washingtonrn—yet. The United States is still inrna position to act with confidence. Thernproblem is a lack of leaders willing to usernAmerica’s current advantage in economicrnand military strength to fortify its preeminencernin Asia. This failure may wellrncost future Americans a horrific toll inrnblood and treasure.rnWilliam R. Hawkins is Senior ResearchrnAnalyst for U.S. Representative DuncanrnHunter (R-CA). The views expressed arernhis own.rn, / () i) If l> .V c /• i /> f . . .rn1 – 8 0 0 – 8 7 7 – 5 4 5 9rn48/CHRONlCLESrnrnrn