China flexes its muscles

China's threat to impose sanctions on US companies involved in the recent $6.4 billion arms deal with Taiwan represents a worrying escalation of tensions between Washington and Beijing. Relations between the two giants are at a delicate stage and President Barack Obama's latest decision to sell weapons to Taipei comes against a backdrop of disagreements over Google and cyber-security, climate change, currency, trade and Tibet.

Some observers believe Bejing's angry reaction to the arms deal represents a new assertive approach adopted by China in its relations with the US and other countries. On issues such as climate change, its borders with India and internet freedom, for example, China has adopted a tough tone in keeping with its increasingly growing importance on the world stage.

Kenneth Lieberthal, a former US National Security Council official who is now at the Brookings Institute said last week: "There has been a change in China's attitude. The Chinese find with startling speed that people have come to view them as a major global player. And that has fed them a sense of confidence."

There is no doubt China has recently adopted a new confident tone, aided, no doubt, by the fact that it was only partially affected by the global financial crisis and that its economy expanded by 8.7 per cent in 2009. It is now on course to overtake Japan and become the world's second largest economy.

China has always made it clear that it opposes any arms sales to Taiwan, so its hostility to such deals has been consistent. What is new, however, is its threat to impose sanctions against any US companies involved these sales, and this represents a shift towards a more hardline attitude.

Taiwan is an extremely sensitive issue for the Chinese. The island has been administered by a separate government from China since the end of the civil war in 1949 and Beijing considers it to be an integral part of its territory. China has offered it a "one country, two systems" solution, similar to what was done with Hong Kong after Britain gave up the territory in 1997.

Huang Xueping, spokesman for China's Ministry of National Defense, said last week: "The Taiwan issue is directly linked to China's core interests. We will never make concessions over our sovereignty and territorial integrity."

Is the US correct in selling arms to Taiwan? There is no doubt that Beijing has spent much more money on arms than Taiwan, which makes the island republic very nervous, as do the military manoeuvres that China regularly conducts close to Taiwan. Furthermore, China has 1,000 missiles targetted at Taiwan, the US arms sales are the third instalment of a package started under President George W. Bush and Washington is obliged under the Taiwan Relations Act to help in the island's defence.

On the other hand China argues that Beijing and Washington had signed the "August 17th" communiqué in 1982 in which the US promised not to carry out a long-term policy of arms sales to Taiwan and intended to gradually reduce arms sales to the island. Of course, "gradually" and "long-term" are subject to interpretation, and I also think that China was not surprised at this latest arms deal, but nonetheless made a point of reacting furiously because this involves one of its core interests.

One can also argue that making Taiwan militarily stronger will help ensure greater parity between China and Taiwan, which will in turn make the likelihood of the use of military by Beijing force less likely.

President Obama's decision to meet the Dalai Lama, Tibet's exiled spiritual leader, later this month is also bound to cause further friction between the US and China. Beijing has already warned that such a meeting "would damage trust and co-operation between our two countries". China considers the Dalai Lama a separatist (which he denies) and asks foreign leaders not to meet him.

Like Taiwan, Tibet is a very sensitive issue for the Chinese and in 2008 for example, Beijing cancelled a summit with the EU after French President Nicolas Sarkozy met the Dalai Lama.

The main issue at stake is whether these disagreements between the US and China will affect China's international co-operation. After the Taiwan arms deal China said this would "endanger co-operation with the US on key international and regional issues".

We will have to wait and see whether Beijing adopts a difficult position on issues such as climate change, North Korea and Iran, for example, which can make things very difficult for the Americans.

On the other hand America still follows a one-China policy and Washington certainly understands Beijing's strategic importance. I think Chinese sanctions against US companies selling arms to Taiwan will be counterproductive and could lead to American sanctions against certain Chinese companies. In such a scenario, Beijing would be the big loser.

What is needed now is a cooling down period. Both countries can have disagreements, but ultimately, good relations between the two are in everybody's interest.