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The CIIS Blue Book on International Situation and China's Foreign Affairs (2013)

CIIS Time: Jun 4, 2013 Writer: Su Xiaohui Editor: Wang Qiang

The CIIS Blue Book on International Situation and China’s Foreign Affairs (2013) is recently published by World Affairs Press (Beijing). The following are the contents and the preface of the book.

Contents

Four Features of the International Situation in 2012 (Preface)

                 ……………………………………………………Qu Xing

Part I  The International Situation in 2012

Chapter 1  New Changes in the International Pattern: A Balance of Power Comparison and the Intensifying Struggle for Rule and Order

                 ……………………………………………………Zhao Qinghai

Chapter 2  US Diplomacy in 2012: Seeking Stability and Preventing Disorder

                 ……………………………………………………Liu Feitao

Chapter 3  Russian Foreign Policy in 2012: The “Putin” Factor

                 ……………………………………………………Chen Yurong

Chapter 4  European Union in 2012: Multiple Rivalries and Difficult Balance

                 ……………………………………………………Jin Ling

Chapter 5  Japan in 2012: Intensifying Right-Leaning Politics

                 ……………………………………………………Zhang Yaohua

Chapter 6  Central Asia in 2012: Overall Stability and Severe Challenges

                 ……………………………………………………Cheng Min

Chapter 7  The Middle East in 2012: Exacerbation of the Turmoil

                ………………………………………………………Sun Lixin

Chapter 8  Korean Peninsula in 2012: Controlled but Persisting Tensions

                  ……………………………………………………Yu Shaohua

Chapter 9  The Iranian Nuclear Issue in the Shadow of the US Election

                 ………………………………………………………Li Guofu

Chapter 10  South Asia in 2012: Decreased Counter-terrorist Cooperation and Increased Strategic Jostling

                 ………………………………………………………Li Qingyan

Chapter 11  Latin America in 2012: an Uphill Battle and Enhanced Solidarity

                 ………………………………………………………Jia Xiudong

Chapter 12  Africa in 2012: Overall Stability and Regional Turbulence

                 ………………………………………………………Wang Hongyi

Chapter 13  International Arms Control and Disarmament in 2012: Little Progress and Severe Challenges

                 ………………………………………………………Teng Jianqun

Chapter 14  The World Economy in 2012: A Prevalent Slow Down

                 ………………………………………………………Wei Min

Part II  China’s Foreign Affairs in 2012

Chapter 15  China’s Diplomacy in 2012: Dissolving Challenges and Creating Opportunities

                ………………………………………………………Ruan Zongze

Chapter 16  China’s Multilateral Diplomacy in 2012: Active Involvement and Prominent Role

                ………………………………………………………Chen Xulong

Chapter 17  China’s Economic Diplomacy in 2012: A Powerful Force for Growth

                ………………………………………………………Xu Jianguo

Chapter 18  China’s Military Diplomacy in 2012: Relieving Pressure and Attaining New Progress

                ………………………………………………………Xu Longdi

Chapter 19  China’s Public Diplomacy in 2012: Achievements and Limitations

                ………………………………………………………Zhang Weiwei

Chapter 20  China’s Foreign Policy with Neighboring Countries in 2012: Dealing with Complex Security Environments

                ………………………………………………………Su Xiaohui

Chapter 21  China-US Relationship in 2012: Exploring New Type of Relationship between Great Powers

                ………………………………………………………Cui Lei

Chapter 22  Sino-Russian Relations in 2012: Consolidating and Enhancing a Strategic Partnership

                ………………………………………………………Li Ziguo

Chapter 23  China-EU Relations in 2012: Pragmatic Cooperation and Link between the Past and the Future

                ………………………………………………………Cui Hongjian

Chapter 24  Sino-Japan Relationship in 2012: Cold Politics and Cool Economy under the Impact of the “Purchase” of the Islands

                ………………………………………………………Jiang Yuechun

Chapter 25  China-India Relations in 2012: Positive Changes and Long-Standing Problems

                ………………………………………………………Tang Qifang

Chapter 26  Sino-African Relations during the Post Global Financial Crisis Era: Challenges and Policy thoughts

                ………………………………………………………Liu Youfa

Chapter 27  Sino-Latin American Relations in 2012: New Opportunities, New Challenges

                ………………………………………………………Wang Youming

Chapter 28  China-ASEAN Relationship in 2012: Gratifying Progress with Disputes under Control

                ………………………………………………………Song Junying

Chapter 29  China-South Pacific Countries Relations in 2012: A Hopeful Future on a Solid Foundation

                ………………………………………………………Wang Zhenyu

 

Four Features of the International Situation in 2012 (Preface)

The year 2012 is now over. When we look back at the year 2012, four features of the international situation can be discerned: first, the west Asian and north African region remained chaotic, with order yet to be established; second, the world economy continued to grow but has still not fully recovered; third, relations among the major powers were stable but still tinged with uncertainty; and fourth, there were tensions on China’s periphery, but with no major disruptions occurred in international relations.

I. Lingering Chaos in West Asia and North Africa

The evolution of the situation in west Asia and north Africa unraveled in an unanticipated way. At the outset of the turbulence, many international observers believed that the overthrow of a dictator in some of these countries could usher in multi-party democracy on the Arab soil, that universal suffrage would effectively release the social pressures, and that relevant countries would soon become orderly again. However, more than two years since the unrest began, the so-called “Arab Spring” has not brought about the kind of change desired by the west, even despite ongoing political transformation in west Asian and north African countries. People feel that regional turmoil has continued, that extremist forces are expanding, that terrorist activities are on the rise, that deep-seated contradictions continue to ferment, and that the economic situation is deteriorating. The Syrian crisis has dragged on, Islamic forces have emerged even further, Israel’s security environment has deteriorated, and no real progress has been achieved with Iranian nuclear talks.

1. Protracted Crisis in Syria

The unrest in Syria has lasted for more than a year, and Bashar al-Assad’s ability to sustain his grip on power has outdone most expectations. European and American sanctions have rendered the Syrian economy unsustainable, public discontent is rising, the Prime Minister has departed from his position, and some security officials have been killed. But thus far, the mass mutiny of the army and defection of a large number of senior officials has not produced a “domino effect.” Instead, government military forces have continued to enjoy an absolute advantage over the rebel forces. Western leaders tried on many occasions in a high-profile manner to force Bashar to step down and they overtly and covertly provided assistance to the Syrian rebels. But taking into consideration the lessons learned from the wars in Iraq and Libya, and amid concerns that al-Qaeda and Islamic extremist forces might, in disarray, grow in power, Western countries could not resolve to intervene in Syria via war. They were further constrained by the domestic election cycle in their home countries. Therefore, it will take some time for the opposition to topple Bashar through armed struggle.

Western efforts to “consolidate” the opposition forces have remained ineffective. The west stepped up efforts to integrate the Syrian opposition groups in order to help unite their political factions and unify their armed forces. The United States openly abandoned the Syrian National Council (SNC), which was mainly composed of overseas exiles and previously was supported by the US On October 31, 2012. Former US Secretary of State Hillary Clinton publicly stated that the US had “made it clear that the SNC can no longer be viewed as the visible leader of the opposition. They can be part of a larger opposition, but that opposition must include people from inside Syria and others who have a legitimate voice that needs to be heard. This can not be an opposition represented by people who have many good attributes but have, in many instances, not been in Syria for 20, 30, 40 years.” Hillary Clinton also warned that “there are disturbing reports of extremists going into Syria and attempting to take over what has been a legitimate revolution” and that “we also need an opposition that will be on record strongly resisting the efforts by extremists to hijack the Syrian revolution.” In Doha on November 11, a number of Syrian opposition groups, with support from the United States, announced the establishment of the National Coalition for Syrian Revolutionary and Opposition Forces, and the United States, Turkey and other countries as well as the Arab League, the Gulf Cooperation Council (GCC) and some other regional organizations immediately announced their recognition of the National Coalition. On January 28, 2013, France hosted an international conference in Paris that was attended by senior officials from more than 50 countries, regions and international organizations, all in support of the National Coalition. Thus far, the Syrian opposition has often appeared united but remained divided in actuality; the armed forces have yet to be consolidated, while the situation on the battlefield has not changed substantially.

An inclusive political dialogue has remained elusive. The international community has continued to promote a political settlement of the Syrian issue and attempted to avoid the greater humanitarian disaster that would result from a foreign interventionist war. Following their veto of the UN Security Council resolution in October 2011, a resolution that could have lead to foreign military intervention, Russia and China again used their veto at the Security Council in February and July 2012, thus offering the last chance for a political settlement of the Syrian issue. China put forward a six-point proposal for a political solution of the Syrian issue, sent a number of special envoys to the Middle East, and also contributed to the offices of Kofi Annan, the joint U.N.-Arab League special envoy to Syria, whose six-point plan largely borrowed from China’s proposal. In June, the Action Group for Syria, established on Annan’s initiative, convened a meeting in Geneva that was attended by the foreign ministers of the five permanent members of the UN Security Council, as well as by Turkey, Iraq, Qatar, the UN Secretary General, the Secretary-General of the League of Arab States, and the High Representative of the European Union for Foreign Affairs and Security Policy. At the meeting, Chinese Foreign Minister Yang Jiechi put forward a new proposal. The Group issued a statement after the meeting to support Annan’s “six-point peace plan” and also agreed on a set of principles and guidelines for a Syrian-led transition, a plan that featured the establishment of a transitional governing body. However, the principles of the statement, though written on paper, have proven elusive due to different interpretations of the core issue of whether the transitional governing body should include Bashar al-Assad’s government.

2. Further Islamic Revival

The Islamic Revival Movement benefited the most from the political unrest in west Asia and north Africa. The revival movement made its first breakthrough in Tunisia. Following the departure of Tunisian President Zine al-Abidine Ben Ali in March 2011, the Ennahda Movement (the Islamic Revival Movement Party of Tunisia) officially became registered as a legal political party. In October of the same year, the Ennahda Movement obtained 41 percent of the popular vote in the Constituent Assembly elections, becoming the largest party in the parliament. In December, the party succeeded in forming a cabinet and began to dominate national affairs. Almost at the same time, the Justice and Development Party in Morocco, a moderate Islamic party, won its first parliamentary elections. In January 2012, the party’s general secretary, Abdelilah Benkirane, formed a new government and began to lead the country. In July 2012, Libya held its first parliamentary elections in 40 years. While the Justice and Construction Party, the political branch of the Libyan Muslim Brotherhood, failed to become the largest party in parliament, it had a tremendous impact on the direction of the elections. Prior to the elections, officials from the Libyan National Transitional Council repeatedly said that Sharia, a form of religious law, should be the main basis of Libyan legislation and should not become the subject of a referendum, and that “all the laws that run contrary to Sharia shall be null and void.” Vigorous promotion of Sharia was a decisive factor for Libya’s coalition of secular political parties to win elections. In January 2012, Egypt’s Muslim Brotherhood was victorious in the parliamentary elections, and in June, the Freedom and Justice Party, a political wing of the Muslim Brotherhood, won the presidential election when its party chief Mohamed Morsi was elected president of Egypt. Throughout 2012, domestic political conflicts continued unceasingly, bringing about heavy casualties during street demonstrations in Egypt. The major reason for the turmoil was the jostling for power between the Muslim Brotherhood and secular forces.

Against the backdrop of an Islamic revival, there was increasingly intense public anger at the desecration of Islamic culture. In February 2012, US troops in Afghanistan burned a copy of the Quran in the trash, triggering a wave of protests in Afghanistan and beyond. The US embassy and key Afghan government agencies came under siege. The US embassy was forced to shut down, while NATO had to recall its entire staff in Afghanistan. Five days of protests caused more than 200 casualties, with four US soldiers falling victim to the violence. US President Barack Obama, Defense Secretary Leon Panetta, Secretary of State Hillary Clinton, and Commander of US and NATO troops in Afghanistan John R. Allen all offered a formal apology to Afghanistan, an act that only cooled the situation temporarily. In September, a movie insulting the Muslim prophet Mohammed was released in the United States, triggering waves of protests in more than twenty countries around the world, leaving hundreds of people killed or injured. The protests became even more forceful and violent in Libya, Egypt, Tunisia and Yemen, countries that are referred to as being in transition. On the anniversary of September 11, a day of great symbolic importance, the US Consulate General in Benghazi was attacked, and J. Christopher Stevenson, the American Ambassador to Libya, and three other embassy staff were killed on the spot. This was a rare incident in the history of US foreign relations. Secretary of State Hillary Clinton openly questioned: “How could this happen in a country we helped liberate, in a city we helped save from destruction?”

3. Israel’s Deteriorating Security Environment

Israel’s security is an important factor in the formation of Middle Eastern policy in the United States and Europe. The United States and Europe have been the driving forces behind the “Arab Spring.” As a result, Israel should have cheered for the transformation of west Asia and north Africa. Instead, however, Israel has maintained a “strategic silence” throughout the “Arab Spring,” clearly very concerned that the changes in the Arab world will lead to unrest in many areas surrounding Israel. In 2012, tensions were kindled in areas vital to Israel’s security, such as the Sinai Peninsula, the Gaza Strip, the Golan Heights and Lebanon.

The Sinai Peninsula’s role as a security buffer zone has been weakened, largely because unrest in Egypt has reduced the government’s control over the Sinai Peninsula. In August 2011, militants infiltrated the Israeli coastal city of Eilat through the Sinai Peninsula, killing eight Israelis. In August 2012, another group of militants attacked Egyptian border control facilities on the Sinai Peninsula. After killing 16 Egyptian border guards, they attempted to cross the border for attacks on Israel but were repelled by Israeli defense forces. Israel had to agree to the Egyptian government’s decision to increase troops on the Sinai Peninsula to strengthen the border defense of Egypt, but the deployment of tanks on the Sinai Peninsula by the Egyptian side has changed the nature of the Sinai Peninsula as a demilitarized zone.

Armed conflicts broke out again in Gaza. With the weakening of the Egyptian government’s control of the Sinai Peninsula, the Palestinian Islamic Resistance Movement (otherwise known as Hamas) in the Gaza Strip found more supplies of weapons, and the number of rockets fired into Israel from Gaza doubled. In November, Israel launched a military offensive against Gaza, dubbed “Operation Pillar of Defense.” Within eight days, Israeli forces carried out air strikes on 1,500 targets in Gaza, killing more than 130 Palestinians and injuring more than 1,100. Meanwhile, Hamas fired more than 1,500 rockets into Israel, but 420 of them were intercepted by Israel’s “Iron Dome” missile defense system. Still, five Israelis were killed and many others injured.

The Golan Heights came under attack for the first time in nearly 40 years, largely due to the instability that the Syrian civil war has unleashed in the region. In November 2012, artillery fire from Syria twice hit an Israeli army outpost in the Golan Heights, and Israeli forces fired warning shots against the Syrian artillery positions. The conflict, though small in scale and leading to no casualties, marked the first time that Syrian and Israeli armies exchanged fire in the Golan Heights in more than 40 years. The Syrian opposition forces intend to overthrow the Bashar government, but at the same time they decided to warn Israel “not to intervene in the Syrian civil war.”

In 2012, it also became more likely for Lebanon’s Hezbollah to acquire sophisticated weapon technologies. In February 2012, Israeli diplomatic missions and personnel in India, Georgia, and Thailand were the victims of bombing attacks. In July, dozens of Israeli tourists were killed or injured in a bus explosion in Bulgaria, and the Israeli government has accused Hezbollah of involvement in the attack. Following the August attacks on Mount Sinai, Hezbollah’s leaders said that Israel is a threat to regional security and stability. In October, Hezbollah’s Iranian-made unmanned aircraft penetrated Israeli airspace and was shot down by the Israeli army. Hezbollah’s leaders said that “if Israel attacks Lebanon, there will be thousands of rockets fired upon Tel Aviv and other Israeli cities.” There has thus been a sudden exacerbation of the already tense relationship between Israel and Hezbollah. In January 2013, the Israeli intelligence agency found that Hezbollah personnel were being trained in a chemical weapons research center in Syria, and also that a convoy of trucks was delivering Russian-made missiles to Lebanon. The nightmare that Syria’s state-of-the-art weapons might flow to Hezbollah was thus becoming a reality. In response to this fear, on January 30, Israeli military aircraft flew into Syrian territory and destroyed the research center and convoy. Israeli Deputy Prime Minister and Defense Minister Ehud Barak stated publicly at the Davos World Economic Forum that Israel would not tolerate the proliferation of weapons of mass destruction in Lebanon.

4. No Substantial Progress with Iranian Nuclear Talks

The talks between Iran and the Permanent 5+1 on Iran’s nuclear program have been stalled since January 2011, and the United States and Europe have continued to tighten sanctions against Iran in the period. The United States National Defense Authorization Act of 2012 stipulates that foreign financial institutions that engage in transactions with the Central Bank of Iran for oil trading will be expelled from the US market. The EU announced a complete cessation of oil imports from Iran starting on July 1, 2012. European and American sanctions have had a serious impact on the Iranian economy, with Iran’s oil exports plunging 40% in the first half of 2012.

The Iran and P5+1 talks have been unstable and irregular. In April 2012, the talks resumed in Istanbul, and the United States said that this would be “the last chance for a peaceful solution to the Iranian nuclear issue.” In May and June, two rounds of talks were held in Baghdad and Moscow. The Istanbul talks brought about a reset of the diplomatic efforts over the Iranian nuclear issue while the Baghdad talks saw both sides put forward specific proposals. In Moscow, the group decided to set up an expert group to review the proposals of all parties. The atmosphere of the talks has been good, and public opinion has become quite optimistic. However, after three rounds of talks, the parties have found that their differences still remain. The United States and Europe continue to demand that Iran completely stop its twenty-percent uranium enrichment activities, close down its Fordo underground nuclear facilities, and ship its nearly 200 kilograms of twenty-percent enriched uranium out of the country. Iran reiterated that it did not have any intention to engage in nuclear weapons development, instead insisting on its right to the peaceful use of nuclear energy. It requested that the international community ensure that the needs of Iran for twenty-percent enriched uranium be met in order for the country to stop production of the same kind of uranium and so that the West can lift its sanctions against Iran. Upon the completion of yet another round of talks, it was discovered that negotiations essentially had returned to square one. After June, the concerned parties could not even agree on where the next round of talks would be held. The Iranian nuclear talks stalled again in the second half of 2012.

II. An Illusive World Economic Recovery

1. Overall World Economic Downturn

On December 18, 2012, The United Nations Department of Economic and Social Affairs released its report entitled World Economic Situation and Prospects 2013. The report projected that the growth of world gross product (WGP) was expected to reach only 2.2 percent in 2012, less than the 2.7 percent growth rate that it reached in 2011 and well below the 4.0 percent rate that it attained in 2010. On January 15, 2013, the World Bank released its Global Economic Prospects (GEP) report and it featured a summary of world economic growth, trade and investment in 2012. The report declared that the global economy remains fragile, as high-income countries continue to suffer from volatility and slow growth, sovereign debt-ridden countries slip into deeper recession, and developing countries and transitioning economies grow at a markedly slower pace. World trade growth continued to decline in 2012, down from 12.6 percent in 2010 to 6.4 percent in 2011, reaching 3.2 percent in 2012. Private capital flows to developing countries and transitioning economies declined from $525 billion in 2010 to $425 billion in 2011, and further down to $206 billion in 2012, altogether marking a year-on-year decrease of more than 50 percent. Data from authoritative international institutions shows that although the world economy is still recovering from the financial crisis, the distinctive features of the world economy in 2012 include a lack of resilience, weak growth momentum, and local recessions.

2. Developed Countries in Recession

In October 2012, the IMF released a report lowering its global economic growth prospects in 2012 from 3.5 percent to 3.3 percent, its lowest level since 2009. According to a January 2013 World Bank report, the average growth rate of developed economies in 2012 was only 1.1 percent. The US economy grew by 2 percent in the first quarter of 2012, a quarter-on-quarter decline of 1 percent; it grew by 1.3 percent in the second quarter, down 0.7 percent compared with the same quarter in 2011. In response to the third round of quantitative easing, economic growth rebounded to 2.7 percent in the third quarter, a quarter-on-quarter increase of 1.4 percent. Throughout the year, the US economy fluctuated at a low level of growth with insufficient resilience. The year-on-year growth rate was about 2.1 percent in 2012, while the outlook for 2013 was 1.7 percent. The Eurozone’s growth remained basically stable in the first quarter but turned downward for three consecutive quarters during the second, third and fourth quarters, suggesting the second recession in four years, with a year-on-year growth of -0.5 percent. New EU member states only achieved a growth rate of 1.2 percent. Meanwhile, the Japanese economy grew by 1.3 percent in the first quarter, and then contracted by 0.1 percent in the second quarter and 0.9% in the third quarter. It improved slightly in the fourth quarter ending the year with a total annual growth rate of 1.5%, but the outlook for 2013 has fallen to 0.6%.

3. Worsened Structural Problems in Three Major Western Economies

After hitting Greece and other countries, the European debt crisis has continued to make inroads into the core areas of Europe: the sovereign debts of France, Italy and Spain have all suffered credit downgrades. To cope with their challenges, developed countries chose to “drink poison to quench thirst” by introducing a variety of “quantitative easing” measures. According to a Morgan Stanley study, 70 percent of the developed economies took quantitative easing measures in 2012, breaking the bottom line of quantitative easing in advanced economies. According to estimates made by the OECD, the average ratio of sovereign debt to GDP of its member states amounted to 107.6% by the end of 2012, and it will continue to rise for many years to come. Following the injection of 1 trillion euros in late 2011 and early 2012, the European Central Bank launched the “Outright Monetary Transactions Scheme” on September 6, with the ECB committed to “unlimited, sterilized bond-buying” from its member states.

The American and Japanese economies rebounded slightly in the fourth quarter due in part to the short-term effects of their quantitative easing measures. After introducing an open-ended round of Quantitative Easing (QE3) with no ceiling on September 13, the US launched its fourth round of quantitative easing on December 12, expanding the existing scale of asset purchases. The American sovereign debt ratio now exceeds 110 %. In Japan, just one month after the scale of asset purchases expanded to 10 trillion yen, it was further expanded by 11 trillion yen on October 30. According to information disclosed by the international ratings agency the Fitch Group, Japan’s debt ratio ran up to 240% of its GDP. Developed countries competed to announce quantitative easing measures in 2012, not only worsening their own structural economic problems but also posing a huge potential risk to the world economy.

4. Simultaneous Slowdowns in Emerging Economies

The quantitative easing measures taken by the US, Europe and Japan have caused rising commodity prices and declining foreign trade, and as a result emerging economies suffered disproportionately because of their generally high dependence on foreign trade. Compared with developed countries, emerging economies continued to enjoy high growth, but the actual growth rate year-on-year declined. According to data released by the United Nations in early 2013, China’s economic growth rate dropped from 9.2 percent in 2011 to 7.7 percent in 2012; Russia’s economic growth fell to 3.7 percent from 4.3 percent in 2011; the Brazilian economy grew by 1.3 percent compared with 2.7 percent the previous year; the growth rate of the Indian economy was down to 5.5 percent from 6.9 percent; and the South Africa saw its economy grow by only 2.7 percent, down from 4.5 percent. As for the economic performance of the BRICS countries in 2012, China experienced its fourth consecutive year of economic slowdown, while Brazil, India and South Africa have all been through three years of decline. Russia’s economy grew at the same rate in both 2011 and 2010, but it declined by 0.6% in 2012 compared with 2011, leaving the country on the brink of a three consecutive years in decline.

III. Big-Power Relations Combine Stability and Uncertainty

2012 was a year of important elections, with the United States, Russia, France, China, Japan, South Korea and other countries going through power transfers. During the election year, these countries focused on their domestic agendas, and the overall relations between big powers remained stable. However, since new governments in these countries will bring new changes to their diplomacies, there will be a certain amount of uncertainty in relations between the major powers.

1. The Transfer of Power in China, the United States and Russia Means more Continuity than Change

During the Russian presidential elections in March 2012, Prime Minister Vladimir Putin was unsurprisingly elected president, and then he appointed the departing President Dmitry Medvedev as prime minister, thus completing a picturesque transition between the duo of Medvedev-Putin into the duo of Putin-Medvedev, all with the ruling United Russia Party remaining in power. In November, the Communist Party of China held its 18th National Party Congress and elected a new central committee with Xi Jinping as general secretary, achieving a smooth transition of the collective leadership of the Communist Party of China. The transition established a strategic direction for reform and opening and peaceful development has been consolidated. That same month, the United States held its quadrennial presidential elections, and the incumbent President Barack Obama, on behalf of the Democratic Party, defeated Republican candidate Mitt Romney. The fact that the ruling parties in these three countries remained in power means that they do not have to go through a new “running-in” process as a result of changing political parties, and that relations among them can sustain their current tracks.

2. US-Russian Relations Are Advancing amid Jostling

In 2012, the Obama administration urged the US Congress to terminate the “Jackson Vanik Amendment,” give Russia a permanent normal trade relations status, and it supported Russia’s full membership in the OECD, thus clearing the legal obstacles to the development of economic and trade relations between the US and Russia. Significant progress was made in US-Russia cooperation on oil exploration in the Black Sea, the Arctic Ocean and the Siberian region. The momentum of economic and trade cooperation between Russia’s Far East and America’s Pacific Coast was strengthened.

At the same time, however, the US-Russian strategic jostling has remained intense in some areas. In 2012, the United States attempted to use the occasion of the Russian presidential election to instigate a so-called “Color Revolution” in Russia, seriously displeasing Putin. After winning the presidential election, Putin cited a “scheduling conflict” as an excuse to skip the G8 summit held at Camp David in the United States, and Obama cited the same kind of reason for his refusal to attend the APEC summit held in Vladivostok, Russia. The US Congress passed an act that places sanctions on Russian officials for “human rights violations,” while the Russian State Duma passed laws prohibiting American adoption of Russian orphans and requesting political organizations that accept US funding for their activities in Russia to clarify their status as “foreign agents.” In Central Asia, the US instigated Uzbekistan’s withdrawal from the Collective Security Treaty Organization (CSTO), while Russia incited Kyrgyzstan to declare that it would not renew the American lease of the Manas air base. At the UN Security Council, the US forced Russia into a corner on several occasions involving resolutions on Syria, while Russia, in coordination with China, repeatedly vetoed these resolutions without hesitation. Despite Russia’s security concerns, the United States insisted on promoting an anti-missile system in Europe, while Russia invested heavily on the development of nuclear weapons and land- and sea-based long-range missiles for increased strategic deterrence against the United States. It has been more than 20 years since the collapse of the former Soviet Union, but there has been no substantial change in the fact that the United States and Russia remain each other’s most serious strategic threats.

3. Sino-US Relations Move forward amid Mutual Suspicion

In 2012, the United States continued to advance its “rebalancing” strategy in an attempt to shape China’s peripheral environment. US troops and weaponry stationed in the Asia-Pacific region have increased significantly in both quality and quantity. In 2012, the US also hosted the “Pacific Rim-2012” military exercises on an unprecedented scale. It announced its return to the Subic Naval Base in the Philippines. The US substantially readjusted its policy toward Myanmar, relaxing sanctions on the country, sending its first Ambassador to Myanmar in 22 years, and having the US President pay a visit to Myanmar for the first time in history. The United States attached so much importance to Myanmar not because of any dramatic change in its geopolitical or resource conditions, but rather because of the increased significance of Myanmar in relation to the American strategic response to the rise of China. The US showed an increasingly obvious tendency on island disputes in East Asia, rendering support to claimants in disputes with China and adding gasoline to the flames in the East China and South China Sea disputes. The US government repeatedly rejected Chinese enterprises’ normal merger and acquisition deals in the US, and they frequently initiated anti-dumping measures against Chinese exports to the United States. During the 2012 US presidential election, China became one of the central topics in the presidential debates. Both presidential candidates raced to show who was tougher on China, with Romney claiming that if elected, he would immediately label China a “currency manipulator,” while Obama called China an “adversary” and a “potential partner.” In addition, the United States continued its long-established policy of interfering in China’s internal affairs under the pretext of human rights and democracy, making statements on issues concerning China’s core interests such as US arms sales to Taiwan and Tibetan secessionist forces. All of these actions are in violation of the principles of the Sino-US relations. This shows a serious lack of mutual trust between the two countries. There is uncertainty in Obama’s second term China policy.

On the other hand, Sino-US relations moved forward despite all of these difficulties. Vice President Xi Jinping paid a successful visit to the United States in February 2012, and the US responded positively to China’s idea that efforts should be made to break the historical curse of an inevitable conflict between a rising power and an established power; the two countries, China believes, should work to “build a new type of big-power relationship for the 21st century.” The fourth round of the China-US Strategic and Economic Dialogue was successfully held in Beijing in 2012, with 50 deliverables on the strategic track and 67 on the economic track of the dialogue. Obama refrained from labeling China a currency manipulator despite pressure from many Republicans. Meanwhile, the US Defense Secretary announced an invitation for China to participate in the 2014 “Pacific Rim” multinational military exercises. China-US trade was close to $500 billion in 2012, a year-on-year rise of 8.2%, a record high, and the United States eclipsed the EU to become China’s largest export market.

4. Sino-Russian Relations Steadily Deepen

The Sino-Russia Comprehensive Strategic Partnership of Coordination became more substantiated due to America’s strategic pressure on both China and Russia and also because of interference in the internal affairs of these two countries. During and after his campaigns in the Russian election year, Putin twice wrote to the press speaking highly of the significance of Sino-Russian cooperation. Less than a month after taking office, President Putin paid a state visit to China. During the visit, the two sides issued a joint statement and pledged to consider the strengthening of the Comprehensive Chinese-Russian Strategic Partnership of Coordination a bi-national priority. The partnership should be based on equality, mutual trust, mutual support, common prosperity and long-lasting friendship. In light of the current international political realities, the two sides reached a high degree of consensus on a number of issues, including the opposition of attempts to modify and wantonly interpret the Charter of the United Nations and universally recognized norms governing international relations; exploring the potential for their cooperation at the United Nations, the Group of Twenty, the BRICS, and the Shanghai Cooperation Organization; and working towards abandoning Cold War mentalities and a confrontational approach among nations and groups of nations. The two sides also established brilliant and feasible goals for future cooperation. In 2012, China and Russia engaged in effective cooperation in the UN Security Council, firmly blocking resolutions that attempted to give the green light to foreign military intervention in Syria. As for their economic cooperation and trade, building upon a 42 percent increase in bilateral trade in 2011, last year witnessed a 20 percent increase in Sino-Russian trade, bringing the total trade volume to nearly $90 billion. The goal set by the heads of state of the two countries to increase bilateral trade to $100 billion by 2015 may even be achieved ahead of schedule in 2014.

Of course, problems may arise between neighbors. In July 2012, a Russian border patrol boat opened fire and hit a Chinese fishing boat entering the Russian exclusive economic zone for fishing. In the same month, the Russian side detained two Chinese fishing boats that crossed the border for fishing purposes. Frequent fishing incidents indicate an urgency to address this structural problem between the two countries. The two sides held consultations on fishing quotas to be offered by Russia to China for fishing in Russia’s exclusive economic zone, the corresponding economic compensation expected from China, and the establishment of a maritime law enforcement and security cooperation mechanism at an early date. This example demonstrates the value of resolving differences and potentially troublesome incidents through friendly consultations.

5. Relations between the EU and Other Parties Remain Basically Stable

In 2012, China-EU trade registered a negative growth of 3.7 percent due to the recession in Europe, but the cooperation between the two sides in the political, cultural and urban development areas deepened. During high-level dialogues, Chinese and EU leaders agreed that the bilateral comprehensive strategic partnership is entering a new stage of development, and that they are determined to “turn the China-EU partnership into a model of international cooperation in the 21st century.” In 2012, China and the EU launched a high-level dialogue mechanism on people-to-people exchanges and established a “Partnership for Urbanization” program. Progress was also made in sub-regional cooperation between China and Europe. China and the EU identified more areas for increased cooperation and more building blocks for the bilateral relationship so that it can weather the difficult times.

There was no change in the US-Europe relationship:they are still political partners, military allies, and economic competitors. Progress was made in US-European missile defense cooperation, and NATO worked out a new roadmap for troop withdrawal from Afghanistan, but the United States still has an attitude of idly watching the brewing European debt crisis, and the two parties continue to have differences over NATO operations, defense expenditure sharing, the European debt crisis management, and other key issues. Europe is an important partner for Russia. The fact that Putin, upon election as Russian president, visited Germany and France shortly after his maiden tour to CIS countries indicated that Putin’s policy was to continue to advance the Russia-EU Partnership for Modernization. However, before the Russian presidential elections, the EU joined hands with the United States in attempting to instigate an anti-Putin movement in Russia on an unprecedented scale. They also promoted the anti-missile system in Europe in collaboration with the United States regardless of the security interests of Russia, expressed concerns over Putin’s strategic plan to establish an Eurasian Economic Space, indefinitely delayed visa-free treatment for Russian citizens, and ignored Russia’s interests on Syria and the expansion of the EU and NATO. The structural dilemmas in EU-Russian relations will be difficult to eliminate.

The French Socialist Party candidate François Hollande was elected French President after defeating the incumbent right-wing candidate Nicolas Sarkozy. Hollande’s foreign policy reflects a consistent feature of the French left. France remains on the forefront of the Syrian issue, was the first country to extend diplomatic recognition to the Syrian opposition, and sent mass troops to Mali to combat Islamic extremist forces. As for the management of the European debt crisis, in his presidential campaign Hollande proposed to renegotiate the EU’s “financial covenant,” an idea at odds with the position of German Chancellor Angela Merkel, prompting concerns over the Franco-German relationship. However, on the day of his presidential election, Hollande visited Chancellor Merkel in Germany to show the importance he attached to Franco-German cooperation. France and Germany reached a compromise on their different ways of thinking about the management of the European debt crisis: austerity-oriented or growth-oriented, finally leading to relevant decisions at the EU summit.

IV. Tensions Arose on China’s Periphery without Major Disruptions of Ties

In 2012, China saw a series of complex developments on its periphery, including simultaneous provocations from the Philippines, Vietnam and Japan on the question of China’s territorial sovereignty. China took effective measures to resolutely stymie these countries’ violations of China’s sovereignty and legitimate maritime rights so as to both strengthen actual control of the islands and safeguard regional stability.

1. Defending China’s Territorial Sovereignty over the Huangyan Island

On April 10, 2012, the Philippines dispatched a warship with heavily armed soldiers to China’s Huangyan Islands to harass Chinese fishermen operating in the waters surrounding the island. After receiving a distress signal from the fishermen, the Chinese government immediately sent China’s marine surveillance ships to the Huangyan Island waters and rescued Chinese fishermen who were illegally held by the Philippines’ military. The surveillance ships secured the entrance to the lagoon of the Huangyan Island and the Philippine side had to withdraw its warships from the Island. The Philippine side had to withdraw its naval vessels from the waters, and after more than a month of jostling between government vessels from the two sides, the Huangyan Island now remains firmly in the hands of China. When the Philippine side could not get the upper hand in its collision with China on the sea, it tried to pressure China at the diplomatic level. In late April, the Philippine Foreign Minister and Defense Minister visited the US and held the “2+2 consultation” with the US in an attempt to get the United States to express its support for the Philippine position on the Huangyan Island issue. In July, the Philippine side attempted to insert its own stance on the Huangyan Island into the Joint Statement of the ASEAN Foreign Ministers’ Meeting in Phnom Penh. Then, in November, the Philippine side tried to put the Huangyan Island on the agenda of the East Asia Summit. In January 2013, the Philippines brought the Huangyan Island issue to the International Tribunal for the Law of the Sea.

China also made a strong response on the diplomatic front. The Chinese Foreign Ministry has repeatedly expressed China’s firm and unchanging stance on the Huangyan Island, indicating that China will “prevent” any provocative acts taken by the Philippine side. The Vice Foreign Minister of China in charge of relevant affairs summoned the Philippine representative to China three times within a month following the incident at the Huangyan Island, warning the Philippine side “not to misjudge the situation and continue its reckless escalation.” The Vice Foreign Minister reaffirmed that China would adhere to diplomatic consultation to settle the current state of affairs but that it is also “making all kinds of preparations in the event that the Philippines escalates the state of affairs.” In his speech at the Chinese People’s Association for Friendship with Foreign Countries on May 15, State Councilor Dai Bingguo said that with rapid development, China should remain modest and prudent, but that China should not be bullied by other countries. He continued, saying that “a small country should not bully a big country either, as the Philippines does.” Foreign Minister Yang Jiechi said at the ASEAN Regional Forum on July 13 that “the Philippines’ dispatch of a warship to hurt the Chinese fishermen on China’s territory sparked widespread concern and strong dissatisfaction in China. China hopes that the Philippine side will face the facts and not make trouble again.” At the East Asia Summit on November 21, 2012, Premier Wen Jiabao said that “Huangyan Island is China’s inherent, indisputable territory. China’s action to safeguard its sovereignty is legitimate and necessary.”

The Philippines’ moves did not win support from the international community. The US-Philippine “2+2 meeting” held at the height of tensions over the Huangyan Island was characterized and presented by the Philippine media as support from the United States to the Philippines, but the American side repeatedly clarified that “the interests of the United States in the region are the freedom of navigation and regional peace and stability rather than involvement in territorial disputes, and that the United States takes no sides on territorial disputes.” The ASEAN Foreign Ministers’ Meeting in July skipped any statement than included the Philippine stance on Huangyan Island in its joint statement, thus breaking a 20-year practice of the ASEAN Foreign Ministers’ Meeting. The Philippines brought the Huangyan Island issue to the International Tribunal for the Law of the Sea, but the Tribunal reiterated that it handles maritime delimitation issues rather than territorial disputes. This invalid move by the Philippines was meant as a response to domestic public opinion pressures, but the International Tribunal for the Law of the Sea has no jurisdiction over and will not accept the case involving China’s sovereignty over the Island, and the Chinese side will not accept international arbitration over its own territory.

The countermeasures taken by China on the Huangyan Island issue in 2012 closed the page of history over the past 20 years in which Chinese fishing boats and fishermen were frequently harassed in the waters surrounding the Island. In January 2013, former Philippine foreign undersecretary Lauro Baja acknowledged, “When our ships withdrew from Bajo de Masinloc (China’s Huangyan Island) in June and now (we) can not access the area, the island came under virtual occupation (control) by China.” Philippine Foreign Secretary Albert del Rosario confirmed Baja’s claim.

The Philippine provocation triggered countermeasures by China and bilateral economic cooperation and personnel exchanges were not immune to the effects of these measures. That said, there was no armed conflict between China and the Philippines and the diplomatic missions of the two countries are still functioning, with ties and exchanges between the two countries.

2. Countermeasures against Vietnam’s Maritime Legislation in Violation of China’s Sovereignty

The Chinese side made repeated attempts to remind the Vietnamese side that its domestic maritime legislation could not undermine China’s sovereignty. However, on June 21, 2012, the Vietnam National Assembly passed the "Vietnamese Law of the Sea,” describing China’s Xisha and Nansha Islands in the South China Sea as being within Vietnam’s “sovereignty” and “jurisdiction.” On the same day, the Chinese Foreign Ministry issued an official statement that proclaimed that “it is illegal and invalid for any country to lay territorial and sovereign claims to the Xisha and Nansha Islands or take any actions on that basis.” Vice Foreign Minister Zhang Zhijun summoned the Vietnamese Ambassador on the same the day and expressed China’s resolute opposition and strong protest against the Vietnamese moves. In addition to these diplomatic representations, China also took three separate countermeasures.

First, it established Sansha City. The day after the Vietnamese National Assembly passed its so-called Law of Sea, China announced the establishment of Sansha City in order to strengthen the administration and development of the Xisha, Zhongsha and Nansha islands and their adjacent waters in the South China Sea. On July 19, the Central Military Commission approved the establishment of the Sansha Garrison. On November 27, Hainan province amended the Regulations on the Management of the Coastal and Border Defense and Security Affairs, authorizing public security units to board, inspect, detain, expel, and suspend or alter the voyage of foreign ships illegally entering waters under Hainan’s jurisdiction. The establishment of Sansha City and the passage of supporting mechanisms and regulations were countermeasures in a legal sense against the attempt of Vietnam to strengthen its claim of China’s Xisha and Nansha Islands through its domestic law of the sea.

Second, China held the bid for oil exploration in the South China Sea. Four days after the passage of Vietnam’s so-called law of the sea, the China National Offshore Oil Corporation published a notice that it would open nine blocks for public bidding for joint oil and gas development in parts of the South China Sea. The nine blocks cover an area of 160,000 square kilometers, close to the Nine-Dash Line on the Chinese side. Vietnam claimed that this area is located on its continental shelf and interfered with the cooperation between Chinese and American companies in the area 20 years ago. Then in order to show restraint, China shelved the Sino-foreign cooperative project. After China left, however, Vietnam moved into the area to explore and drill for oil, soon producing oil. That China resumed the international tender for oil and gas exploration in the area meant that China will never again tolerate Vietnam’s harassment in the area. This move by China is of strategic significance and also a powerful economic countermeasure against Vietnam.

Third, China has increased surveillance in the South China Sea. Vietnam’s so-called law of the sea put China’s Xisha and Nansha Islands under its “sovereignty” and “jurisdiction” and claimed to “enforce the law” against foreign vessels “invading” the area. Five days after the so-called law was passed, China sent a maritime surveillance fleet to the Xisha and Nansha Islands for a surveillance mission, making a voyage of up to 4500 km. The Chinese fleet pushed back the government vessels of Vietnam on several occasions during the mission and rendered the relevant provisions of the Vietnamese law of the sea a historical laughing stock.

3. Striking Back at Japanese Provocations over the Diaoyu Islands

The year 2012 marked the 40th anniversary of the normalization of diplomatic relations between China and Japan, and it should have been an important opportunity for an in-depth development of the friendly relations and cooperation between the two countries. However, the bilateral relations experienced serious twists and turns due to the farce of the “island purchase” deliberately instigated by the Japanese radical right-wing politician Shintaro Ishihara. Out of its long-standing extreme political stance, Ishihara advocated “purchasing” the islands in the name of the Tokyo metropolitan government. Instead of stopping Ishihara’s move, the Japanese central government, taking advantage of its opportunity, tried to use the so-called pressure from Ishihara as an excuse to strengthen Japan’s claim over the Diaoyu Islands through the so-called “nationalization” of the islands, an act that was in contravention of the understanding and consensus on shelving the Diaoyu Islands dispute reached at the time of the establishment of Sino-Japanese diplomatic relations. In response, China threw a “combination of punches” against Japan on various fronts, including diplomacy, law, maritime surveillance and fishery law enforcement.

On the diplomatic front, the Chinese Government issued a statement, on the same day of Japan’s implementation of the so-called “nationalization” of the islands, essentially refuting Japan’s move from various historical, legal, and political perspectives. The statement said that “long gone are the days when the Chinese nation was subject to bullying and humiliation by others. The Chinese government will not sit by idly watching its territorial sovereignty being infringed.” The Chinese Government repeatedly summoned the Japanese ambassador to China and expressed China’s resolute opposition to and strong dissatisfaction with Japan’s move. Japan sent a special envoy to visit the United Nations and other major countries in an attempt to explain that there is no dispute over the Diaoyu Islands issue, but China refuted the views of the Japanese side on these occasions. China precisely explained the Sino-Japanese dispute over the issue of the Diaoyu Islands, while the Japanese side was very passive diplomatically.

On the legal front, China announced the base points and baselines of the territorial waters of the Diaoyu Islands, released a string of geographic coordinates of the Diaoyu Islands, published location maps, 3-D graphs and sketch maps of the area, and presented its “Partial Submission Concerning the Outer Limits of the Continental Shelf beyond 200 Nautical Miles in the East China Sea” to the UN Secretariat. These documents were submitted to the Secretary-General of the United Nations and related UN agencies in the name of the Chinese state. These legal actions not only strengthened China’s domestic legal basis for the exercise of sovereignty over the Diaoyu Islands; they also hedged against Japan’s claims over China’s Diaoyu Islands at the United Nations through international law.

On the maritime surveillance and fishery law enforcement front, China has carried out routine patrols over the territorial waters of the Diaoyu Islands following Japan’s so-called “nationalization.” Chinese marine surveillance fleets engaged in regular patrols within 12 nautical miles of the territorial waters of the Diaoyu Islands, Chinese maritime surveillance aircraft flew into the airspace of the Diaoyu Islands, and Chinese fishery law enforcement ships carried out large-scale missions to protect Chinese fishing vessels operating in nearby waters.

China’s counterattack against the Japanese did not stop at the diplomatic and legal level. More importantly, China has strengthened its presence in and control of the waters surrounding the Diaoyu Islands, thus terminating the so-called exclusive actual control of the islands by the Japanese side. Now, the two sides insert their presence and control in surrounding waters in a dual and competitive manner. For Japan, the loss outweighs the gain, and it must regret having done what was done. But the wheel of history cannot be rolled back. Based on this outcome, we can see that if Japan continues to take provocative measures on the Diaoyu Islands, it will get nowhere other than providing China with yet another opportunity to enhance its control over the Diaoyu Islands.

The China Institute of International Studies’ annual Blue Book on the International Situation and China’s Foreign Affairs is a summary and result of the close tracking and intensive research of the international situation as well as in-depth analysis and thorough interpretation of China’s diplomacy. It is hoped that our research will be of significance to international studies scholars, contribute to the thinking of the public interested in Chinese diplomacy, and provide a genuine Chinese perspective to foreign readers. The authors of the book will be very pleased if this turns out to be the case.

This book is the collective wisdom of the China Institute of International Studies (CIIS). The authors were intently devoted to their writings, while experts carefully reviewed the submissions. CIIS Vice residents Ruan Zongze and Dong Manyuan assisted in reviewing the entire draft copy of the publication. Director Chen Xulong and Deputy Director Su Xiaohui of the Department for International Strategic Studies at the CIIS were responsible for soliciting contributions, editing, and other work including a great deal of coordination. The efficient, responsible and strict editing and proofreading of the World Affairs Press was crucial to the successful publication of this book. My appreciation also goes to the readers and other personages concerned for their praise and support of this book over the years.

                                           Qu Xing

                    President of the China Institute of International Studies

                                  Taijichang, Beijing January 2013