China's Trade Gains Pitted Against Its Nuclear Might

India's nuclear weapons tests have stimulated debate about the corresponding implications of China's plans to increase its nuclear arsenal. So far, discussion has centered on issues of international security. What's being overlooked is how China's continued investment in its nuclear capability will affect its domestic stability.

While politicians in Beijing are concerned with establishing China as an international military player, southern Chinese are far more concerned with expanding their country's growing involvement in international markets. China's overall GDP has increased by more than 9 percent each year for the last five years. This growth is due, in large part, to the dynamism of the south.

Chinese in that region have begun to base their identity on global integration in foreign markets rather than on the anti-imperialist nationalism prevalent in China throughout Mao's reign. If northern politicians embark on a policy of nuclear arsenal expansion, the south fears a chilling effect on its relations with its trading partners.

Although China is already considered a potential military threat by numerous states, its nuclear capability has not inhibited foreign governments from expanding economic engagement with Asia's rising superpower. However, the wealth generated by China's global trade makes possible increased military expenditures. Though the Beijing government says it only spent $8.6 billion in 1996 on defense, public and private institutions monitoring China suggest that defense expenditures were actually four to five times that amount.

If other governments perceive that trade with China may produce a military behemoth, the downsides of economic engagement will outweigh the economic benefits, and commercial contacts may be limited. In the end, China will have to assess whether an enlarged nuclear arsenal is worth the potential reduction in commerce. Do the relative gains derived from increased trade provide greater benefits than the absolute gain of greater military might?

Perhaps the critical element that will determine the answer to this conundrum is to be found within the Chinese body politic. In the north, political reforms have not yet led to enormous economic gains. It's in the south, where the standard of living has dramatically increased, that the citizens have a vested interest in a stable international trading system. If the pursuit by northern politicians of a policy of nuclear arsenal expansion alienates China's economic partners, then the Chinese in the south may sense a threat to continued economic prosperity. If the government's military policy sacrifices southern prosperity, there may well be civil unrest.

The Chinese leadership seeks an international role in both the commercial and military spheres. Yet it appears that these two objectives may be mutually exclusive. If China doesn't increase its nuclear capability it risks falling behind India, Pakistan, and North Korea. On the other hand, if China does pursue an expansion of its nuclear arsenal it risks losing domestic cohesion.

At a time when the Chinese domestic order is in flux, the loss of domestic peace is a big risk to take. When making military decisions, the Chinese government must begin to calculate the effect not only on national security but also on internal cohesion.

* Justine A. Rosenthal is a research associate at the Council on Foreign Relations in New York.