(Mr. Ben Mah, author of America and China, America and the World, and America in the Age of Neoliberalism, is a frequent contributor to this website.)

On the heel of the first anniversary of his presidency, President Obama in his State of Union address described the American economy with these words: “But the devastation remains. One in 10 Americans still cannot find work. Many businesses have shuttered. Home values have declined. Small towns and rural communities have been hit especially hard. And for those who’d already known poverty, life has become that much harder.”1.

       Indeed, things are not better for American working people since he took office, notwithstanding the president’s campaign slogan of “Promise of Change” and his $787 billion stimulus package. One of the reasons for this is that “Obama’s ‘job creation’ scheme channels billions toward the privately owned telecommunication, construction, environmental and energy corporations, where the bulk of the government funds go to salaries and bonuses for senior management and staff and provide profits to stock holders, while a lesser part will go to wage workers.”2.

      As a matter of fact, “Obama has reneged on every promise he made, from ending wars, to closing Gitmo, to providing health care for Americans, to curtailing the domestic police state, to putting the interests of dispossessed Americans ahead of the interests of the rich banksters who robbed Americans of their homes and pensions.’’3.

      Not surprisingly, the president’s approval rating, from the high of over 80 percent when he entered office, dropped below 50 percent, with many analysts believing it will continue to slide.4.

      To stop the continued slide of his approval rating and to appease the American Labour, which is one of his important constituents, President Obama initiated a series of strategic moves against China. After unsuccessfully using China as a scapegoat in the December Copenhagen Climate Summit, the U.S. Secretary of State Hillary Clinton unceremoniously employed “digital diplomacy” over Google’s dispute with China in early January, 2010. She delivered her message with a veiled threat to China’s economic interests. This was followed with the announcement of $6.4 billion arms sales to Taiwan. According to Helene Cooper, the New York Times Washington-based diplomatic correspondent, with the announcement of Taiwan arms sales, “the United States leveled a direct strike at the heart of the most sensitive diplomatic issue between the two countries since America affirmed the ‘One China Policy’ in 1972.”5.

      The 1972 Shanghai Communiqué, in which the United States acknowledged that Taiwan is part of China and there is only one China, has been the cornerstone of Sino-U.S. relations for over 30 years. The selling of $6.4 billion of weapons to one of its provinces would be a direct challenge to China’s sovereignty.

      The Taiwan arms sales package consists of Patriot interceptor missiles, the Black Hawk helicopters, Harpoon land and sea missiles. Most unsettling to China is that the arms sales occur at a time when cross-Straits relations are improving with thriving trades in recent years. Moreover, while claiming the arms sales are solely for defensive purpose, they are really offensive weapons. The Patriot interceptor missiles are designed to protect Taiwan missile launch sites, as Taiwan’s medium range of 3,000 kilometers missiles are now entirely capable of reaching major cities in China.6.

      The introduction of the offensive weapons to Taiwan is a worst affront to China, who announced immediately to impose sanctions against U.S. arms manufacturers. These U.S. companies happened to be the most prominent members of the U.S. military- industrial complex, namely Lockheed Martin, Boeing, Raytheon and United Technology. For years, China has been a lucrative market for Boeing, whose civilian aircrafts have dominated the Chinese market. Boeing always has a close relationship with China. Boeing’s CEO has been welcomed by the former Chinese leaders with open arms in Zhongnanhai, the center of power in Beijing. Chinese leaders, beginning with Deng Xiaoping, visited Boeing when they were in America for a state visit and showered Boeing with multibillion dollars of contract. Boeing, on the other hand, for her commercial interests, has used the merging with McDonnell Douglas as an excuse to kill the Sino-U.S. joint venture, thereby destroyed the Chinese civilian aircraft industry and pushing China’s aviation technology backward a quarter of a century. What is more alarming for China is that while Boeing is selling aircrafts to China and filling its coffers with profit, its lobbyists in Washington are busy pushing for more arms sales to Taiwan, directly damaging China’s national interests.

      As a member of powerful industrial complex in America, Boeing’s influence is pervasive in Washington. A former member of Boeing’s board of directors, General James Jones is also Obama’s National Security Advisor and a former commander of the War in Iraq and a supporter of military spending increase. 

      Indeed, military spending has increased since Obama assumed the presidency, as the administration intensified the war in Afghanistan and started a new one in Pakistan. In a time of economic difficulties, the administration has no hesitation in cutting domestic social spending, and at the same time increasing military spending to $708.3 billion--$1.2 trillion in real terms-- a year.7. In fact, the defense industry is happy with Obama, as Loren Thompson, the president of the defense industry think tank related: “The defense industry is pleased but bemused... It’s been telling itself for years that when the Democrats got control it would be bad news for weapons programs. But the spending keeps going on.”7.

      It is puzzling then, that as a candidate, the promise of change has been the constant theme of his presidential campaign, yet once he assumed office, Obama seemed to be unable to abandon the influence of the powerful military-industrial complex. The answer to this question lies in the nature of American politics and campaign financing. As a result of outsourcing in the era of globalization, the Democratic Party’s traditional power bases which consisted largely of the industrial and manufacturing unions were destroyed. Denied the source of funding, the party has to depend on financial support from the members of military-industrial complex and other interest groups, who are rich and powerful. Thus, lobbying influence is one of the most important factors in Obama’s decision regarding the arms sales to Taiwan and is at the risk of increasing tension with China.8.

      Washington further ratcheted up the tension when Secretary of State Clinton publicly criticized China for not agreeing to new sanctions against Iran over its nuclear program. Adding insult to injury, Clinton also disclosed that Obama will meet with Dalai Lama over China’s objection. As to the drastic change of the policy towards China, one administration official stated: “This was a case of making sure that there was no misunderstanding that we will act in our own national security interests.”5.

      In treating Taiwan and Tibet as America’s own national security interests, Washington unmistakably violates not only the Shanghai Communiqué but all the subsequent agreements signed with China, thereby sowing the seeds for potential conflict between the two countries for years to come.

      This should not be a big surprise, as the Pentagon had for some time viewed China as a potential belligerent adversary. In 2007, Robert Gates, the President Bush’s as well as the current Defense Secretary, testified before a Congressional Committee by lumping China, Russia, Iran and North Korea together for increased defense spending. Pentagon officials all “have reiterated concerns about Russia and China with an alarming consistency. In fact China and Russia have been substituted for Iraq in the former axis of evil category.’’9. Although China, unlike the United States and its NATO allies, has no troops outside her border, she is still portrayed as a threat to the United States and its neighbors. What is of most concern to Mr. Gates and his Pentagon officials is that China has developed high-technology systems that can challenge the best of the United States. That is unforgivable to Mr. Gates and the Pentagon, as China will be able ‘to project power and deny other countries the ability to threaten it.’6.

      Mr. Gates’ assertion was enforced by Michael McConnell, the National Director of Intelligence, as he pointed out that China, Russia and OPEC countries ‘as the main threats to the United States, even more than al-Qaeda.’6. The China threat was also echoed by the member of the military-industrial complex, as the vice president of Lookheed Martin, citing the missile programs in China, Russia, Iran and North Korea states : ‘’the world is not a very safe world ... and it is incumbent upon us in industry to provide [the Pentagon] with the best capabilities.’"6. The Pentagon and its militarist defense contractors thus using China threat to justify increasing military spending to the tune of $1.2 trillion in real terms.

      Unfortunately for the American tax payers, increased military spending results in a record breaking deficit, pushing American government finances to a precarious position at this time of economic crisis. Consequently, America is much in need of China to support its massive debt issuance and would resort to the old trick that the U.S. played on the Asian countries during the Asia Financial Crisis.

      Not unexpectedly, on February 3, 2009, only three days after the arms sales announcement, Mr. Obama once again raised the problem of the revaluation of Chinese currency. He told the Senators that the United States will ‘make sure that our goods are not artificially inflated in price and their goods are not artificially deflated in price; that puts us at a huge competitive disadvantage.’9.

      In reality, Mr. Obama’s rehtoric is no more than a smoke screen, as U.S. trade deficit has nothing to do with currency exchange rates. The U.S. trade deficit with China is the result of China becoming a popular destination for the outsourcing of the American multinationals, who are the president’s key campaign contributors and have profited tremendousely by exploiting China’s cheap labor. Being afraid to offend American Big Business, Mr. Obama used China as a whipping boy to gain political popularity.

      In addition to gaining political supports from his labour union supporters, another ulterior motive of Mr. Obama is to press China to revalue upward its currency, to open her financial market, and  to allow free capital flow with a flexible currency exchange rate. The outcome of the revaluation of the Chinese currency will lead to ‘enormous capital inflows into yuan and Chinese government intervention, which would balloon Chinese reserves, and increase Chinese purchases of Treasuries.’10.

      The increased purchase of the U.S. Treasuries will partly solve the financing problem for Obama, as he shifts the ongoing economic crisis to China. The Chinese financial market, operating in an environment of free capital flow with a flexible currency exchange rate as demanded by Washington, could easily be manipulated with derivative trading by the financial speculators from Wall Street. The savings of the hard working and frugal Chinese people will vanish, either through the process of inflation, or hyper-inflation, which were all too familiar to the people in Asia during the Asia Financial Crisis of 1997.

      Obama’s agressive provocation of  China raises a few eyebrows in Washington, as Leslie Gelb, the president emeritus of the Council of Foreign Relations stated : ‘It will unsettle and unnerve international affairs, and ignite a new and damaging testing of great power wills.” He urged the administration to avoid yet “another major international problem that detracts from fixing the American economy.”11.

      But Obama has already shrewdly calculated that America’s strategic and commercial interests would not be damaged, and that China would continue to open her market to be plundered by American businesses. As one administration official stated: “The   President’s view is that obviously we have to have a mature enough relationship with China that we can be candid and firm where we disagree and cooperate forcefully when we agree”12. Washington’s view of China is similar to many Western politicians; it holds that even when China’s sovereignty is being challenged, the “Chinese leaders talk tough…but in reality they act in a careful and highly calculated manner to avoid confrontation.”12.

      Therein lies the problem of Chinese diplomacy, as in the past, China merely reacts with protest even when her vital national interest and sovereignty are challenged by the Western powers. The Chinese diplomatic protest has become a laughing stock in the international community and nobody takes it seriously. To stop the interference in China’s internal affairs and win respect from the United States, China must take strong measures such as sanctions against the commercial interests of the multinational firms, whose lobbyist influence in Washington largely determines America’s policy towards China.

Notes:
1. President Obama: “State of Union”  February 23, 2010
2. Petras, James: “Global Depression and Regional Wars”, P 34  Clarity Press  2009
3. Roberts, Paul Craig: “Rule by the Rich”, January 27, 2010  Global Research
4. Turnquist, Chris: “Is Social Media Destroying Obama’s Approval Rating”, socialmediatoday.com
5. Cooper, Helene: “U.S. Arms for Taiwan Send Beijing a Message”,  January 31, 2010
6. Rozoff, Rick: “Washington Confronts Beijing. U.S.-China Military Tensions
Grows”, January 20, 2010 Global Research
7. Flanders, Laura: “The Defense Industry is Pleased with Obama”, February 3,
      2010
8. Roberts, Paul Craig: “Rule by the Rich”, January 27, 2010  Global Research
9. Landler, Mark: “currency Dispute Likely to Further Fray U.S.-China Ties”, February 3, 2010
10. Goldman, David: “Geithner blows up the World”, January 22, 2009  Asia Times
11. Gelb, Leslie H.: “Obama’s Dangerous China Game”,  The Daily beast.com
12. German-Foreign-Policy Com: “Strategic attrition”,  September 27, 2007