Obama uses gunboat diplomacy with North Korea -- and China

President Obama made a clever strategic move after a North Korean rocket attack killed two civilians and two soldiers Tuesday in South Korea. He decided to respond with a naval surge – directed not only at North Korea but also at its closest ally, China.

The president ordered an aircraft carrier strike force into the Yellow Sea, off the western shore of North Korea – the scene of the North’s barrage on a South Korean island. But this is also an area that Beijing vigorously claims as its own watery turf.

By sending in the USS George Washington carrier to conduct joint exercises with South Korea, Mr. Obama is risking an eyeball-to-eyeball confrontation with China. In recent months, top Chinese military officials have warned the United States not to send ships or planes into the Yellow Sea. They have even promised financial retribution.

China “won’t stand” for such US naval provocation, wrote Maj. Gen. Luo Yuan of the People’s Liberation Army in an August editorial. “Imagine what the consequences will be if China’s biggest debtor nation [the US] challenges its creditor nation,” he stated.

Indeed, any threat by China to sell off some $750 billion in US debt that it holds cannot be taken lightly. The US economy would nose-dive if the Chinese stopped recycling their export earnings into US Treasuries.

But for Obama, the risk of another Korean War and, more important, North Korea’s export of nuclear material and know-how to the Middle East, may be seen as an even bigger risk.

After this latest attack on South Korea by the erratic regime of Kim Jong-il, the US was forced to use old-fashioned gunboat diplomacy and send a message to China that it must finally rein in its wily ally and neighbor.

Washington really has no other options for changing Pyongyang’s behavior than to force China to act. In the past, Beijing has indeed temporarily cut off vital fuel supplies to North Korea after violent attacks on the South. But lately China prefers to be silent, notably after the sinking of a South Korean ship last March that killed 46 sailors.

Even as the US and China struggle over what to do with North Korea, there is a larger issue at stake: Will the big-power contests of the 21st century be shaped by a nation’s economic clout or by the traditional means of the past – military might?

To be sure, China is rapidly building up its navy to thwart the still-powerful US Navy in Asia. It will soon have missiles to knock out American ships. And its ships have recently bullied a few other Asian nations.

But China is also wielding the market power of its 1.3 billion people and its strong export industries to win friends and to badger adversaries. It has used big investments, trade deals, and massive purchases in strategic ways. And in a recent territorial dispute with Japan, Beijing even cut off exports of so-called rare earth minerals needed for Japanese high-tech industries.

China feels even stronger now as the US economy remains dormant with American consumers less dominant as buyers of other nations’ exports. The Chinese economy recently surpassed Japan’s and is second in size to America’s. And it watches with anticipation as Obama tries to cut the US military budget.

Obama’s big-stick move against China may end up only highlighting the fact that US is losing its ability to wage “dollar diplomacy,” or the use of its big economy to shape global trends. Obama’s hesitation to punish China for its flagrant currency manipulation, for example, reveals the weak hand of the US to fend off China’s hold on the American economy.

The North Korean crisis could end up being a defining moment for China and the US. The two nations are in a contest for power and influence, with each one not yet quite sure whether guns or money will rule the future.

As they have done during previous crises, leaders on both sides need to hold lengthy private talks and come up with a way to avoid either a military or financial confrontation. Both giants have too much to gain by cooperating rather than competing.

And they can’t let North Korea ruin what could be a productive partnership.