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China's rising status makes it potential friend or foe

By Jaime FlorCruz, CNN Beijing Bureau Chief
Guards carry the Chinese and South Korean flags at the G-20 but many wonder about the extent of Beijing's ambiitions.
Guards carry the Chinese and South Korean flags at the G-20 but many wonder about the extent of Beijing's ambiitions.
  • China-bashing reached a crescendo during the midterm elections in the U.S.
  • China official: Problems facing major economies not caused by Chinese currency
  • Tensions between China and Asian nations helps U.S. consolidate its ties in the region
  • China official: U.S. shouldn't fear the rise of China

"Jaime's China" is a weekly column about Chinese society and politics. Jaime FlorCruz has lived and worked in China since 1971. He studied Chinese history at Peking University (1977-81) and served as TIME Magazine's Beijing correspondent and bureau chief (1982-2000).

Beijing, China (CNN) -- In the months leading up to the G-20 summit, China has been branded as the bogeyman -- a scapegoat for many of the intractable problems that dysfunctional economies are now facing. Prickly topics include job losses, trade imbalances and currency manipulation.

Critics in Washington accuse Beijing of keeping its currency artificially low to enjoy an unfair advantage. They say the renminbi is 20 to 40 percent undervalued. Some U.S. lawmakers have even proposed legislation threatening to impose tariffs on Chinese imports.

China-bashing reached a crescendo during the midterm elections in the U.S., when several candidates aired political ads that attacked opponents for promoting policies that boosted trade with China. The message was simple: China is a sinister rising power; U.S. jobs are being lost to the Chinese juggernaut.

"What do you say to people who blame China for lost jobs in the U.S.?" I asked China's deputy foreign minister Cui Tiankai in an interview last week.

See more of CNN's coverage of China

"We're aware of the economic problems in some of the economies in the world, including some of the major economies," Cui replied. "But their problems are not caused by the value of Chinese currency. They have to look at their own economic structure, their own macroeconomic policies, to identify the real causes of their problems. If they caught a cold, they cannot ask China to take medicine because this will not cure their cold."

But China has become so big that when it figuratively sneezes the world catches cold. It has moved markets lately.

Last month, market shares dipped around the world when China announced a modest interest rate hike, the first in three years. Two days later, markets moved upwards on the news that China's economy, although slowing down, is still growing at about 10 percent.

Envy of China is now mixed with fear. There is fear, for example, that China has cornered the supply of rare earth elements essential in the manufacture of products ranging from iPads to missiles. China supplies about 95 percent of the world's market. Weeks ago, Japan, the U.S. and Europe complained that China is holding back its export of rare earth.

Will China use it as a "card" in a trade war? China says it will not, but fear remains.

Analysts blame that fear on China's recent behavior. They note China's tough words on the territorial disputes in South China Sea, elevating the disputes to the level of "core national interest." This has prompted concerns among other countries in the region that claim territorial rights in parts of the sea.

They see an angry China locked in political skirmishes with Japan over a collision of a Chinese fishing boat with two Japanese coast guard ships near disputed islands in the East China Sea. They also watched TV reports of large-scale ground, air and naval exercises by China's military.

"Dramatic military exercises and sharpened rhetoric about China's territory make for good domestic consumption but have a negative effect on foreign relations," said Drew Thompson, director of China Studies at The Nixon Center, a think tank in Washington.

But heightened tension has helped the U.S. consolidate ties with South Korea, Japan and other countries around China. When U.S. President Barack Obama visited in India this week, he even endorsed India as a future permanent member of the U.N. Security Council -- an idea that some analysts say must make China uncomfortable.

"China is probably feeling encircled, but it's their own fault," said author Gordon Chang. "They have driven India into the arms of the United States, so this U.S.-India tie-up is really a marriage made in Beijing."

China's status as a rising power makes it a potential friend and foe. To some, it is a valued trading partner. To others, it is a fierce competitor.

Deputy Foreign Minister Cui, a seasoned America-watcher, said the U.S. shouldn't fear the rise of China.

"I think the U.S. has to be confident that China will never challenge its position in the world," he told me. "We will never do that because leadership in the world would be very costly. We cannot afford it. If you want to waste your money on that, you do it. We're not going to do it."

It may be so, but what China urgently needs to do is to clearly communicate its long-term intentions. Otherwise, other countries can only look at China's growing military might and economic clout and wonder what the Asian giant will do with its power in the future.

Read last week's "Jaime's China": China's chess match with Myanmar

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