CHINA
25 September 2022
What lies ahead for China and the US?
Could a framework for “managed strategic competition” minimise the dangers of a catastrophic conflict between the US and China?
Relations between China and the US have never been worse in living memory. And they only deteriorated further with the recent visit to Taiwan by speaker of the US House of Representatives, Nancy Pelosi.
Some analysts like former Australian Prime Minister Kevin Rudd are so worried that they fear these two powers could accidentally cross a tripwire into crisis, escalation, conflict and then possibly war.
How did we reach this point?
The first factor is the narrowing balance of power between the two great powers, as China is catching up in economic, technological and military terms.
Then there is the leadership approach of Xi Jinping, which is fundamentally different from that of his three predecessors, Deng Xiaoping, Jiang Zemin and Hu Jintao. China is a different country today. Mr Xi has moved the ideology of the Chinese Communist Party (CCP) to the Leninist left, and the economy to the Marxist left. He has also shifted Chinese nationalism to the right, with a more assertive foreign policy in Asia and beyond. Mr Xi has abandoned Deng’s modest “hide and bide” approach to foreign policy.
The third factor has to do with changes in the US itself, which, during the Trump administration, replaced its strategy of “strategic engagement” with a policy of “strategic competition”, and seeks to prevent China from realising its national ambition to become the preeminent power in the Indo-Pacific and ultimately in the world.
So Mr Rudd, now President and CEO of the Asia Society, has drawn together in a recent book the 10 key elements that describe China’s worldview under the leadership of Xi Jinping.
First, the overriding objective is to keep the CCP in power at all costs, and to keep Mr Xi as head of the CCP at all costs. The idea of a transition towards a Singaporean-style democracy is completely off the table. Second, the CCP strives for national unity to maintain its legitimacy—this drives its actions in Xinjiang, Tibet and Hong Kong, along with its plans for Taiwan.
The third objective is growing the economy to maintain the social contract with the Chinese people, but also to enhance national economic power by funding the military. But the economy must now be environmentally sustainable because the Chinese people are tired of dirty air, water and soil, as well as contaminated food products. The fifth objective is to modernise the military so that it can fight and win wars.
Neighbourhood management involves key challenges. So, the next objective is for China’s 14 land neighbours to be benign and compliant to ensure a reasonable cordon sanitaire around the country. While the Belt and Road Initiative (BRI) aims to convert Eurasia into a zone of opportunity for Beijing which is economically dependent on China. And on China’s maritime periphery, it is pushing the US back in order to accommodate the eventual reunification with Taiwan. This means undermining US alliances— especially those with Japan, South Korea and Australia.
China is also trying to become the indispensable economic partner for the rest of the world—Africa, Latin America and the rest of Asia—such that they become reliable votes for China at the UN and other international organisations. And last, China is working to change the international system in a manner more compatible with China’s worldview, by challenging pre-existing international norms such as at the Human Rights Council, and building Sinocentric institutions like the Asian Infrastructure Investment Bank (AIIB) and the BRI.
Over the past four decades, China’s economic development has been extraordinary, as the role of state-owned enterprises and economic planning was wound back, and freer rein given to the private sector, along with increased engagement with the rest of the world.
But over time, a successful market economy has created a new bunch of entrepreneurial elites (such as Alibaba’s Jack Ma), who are independent of CCP control, and who are thus a challenge to its absolute control.
Thus, since 2017, a range of new measures have been implemented which are a brake on the private sector. Things like CCP committees in private companies, forced mergers of successful private and struggling SOEs, a reinvigoration of industrial policy and planning, and wealth redistribution from the entrepreneurial class to workers.
The ultimate objective of these measures is to bring the entrepreneurial class under political control. But one consequence is that they are contributing to weaker economic growth, which is creating a whole new bunch of tensions in Chinese politics.
Another contradiction has been China’s ham-fisted efforts to use the gravitational pull of the Chinese market to leverage foreign policy compliance from the rest of the world. A few examples are the coercive measures against Norway for the Nobel prize granted to the activist Liu Xiaobo; Sweden for protesting about the Swedish national incarcerated in China; Australia because of its call for an enquiry into the origin of COVID; and South Korea over the installation of THAAD anti-missile system supplied by the US. These actions have only tarnished China’s reputation and soft power.
Lastly, while China’s economic performance may have been extraordinary, its economic future looks problematic. It is in the midst of a demographic drama which began with the one-child policy. Fertility rates have been below replacement for many years. The working age population peaked in 2014, and its total population is peaking around now. This rapid population ageing is making a big hit on economic growth and public finances. But the economy has more to worry about. The move away from market economics is also dragging down productivity growth.
These contradictions sit oddly with Mr Xi’s chant that “The East is rising and the West is declining”. And may only incite Mr Xi to be even more assertive on the international stage to distract domestic public attention.
In his book, Mr Rudd proposes a system of “managed strategic competition” to minimise the dangers of a catastrophic conflict between the US and China. He suggests a few component parts. First, the two sides should identify and communicate irreducible red lines to the other side. Second, a framework should also be developed to embrace non-lethal strategic competition in all other domains. Third, political and diplomatic capital should be invested in collaboration in public goods like climate change, financial stability, public health management and nuclear non-proliferation.
It should not be impossible for the two sides to work together. Both countries have every interest in avoiding war. But the level of distrust is so great that it will take a sea change for the two to work together. Mr Rudd has been criticised for being naive in his proposal. He admits that establishing a framework for managed strategic competition would be very difficult, but argues that the possibility of war is too horrendous to consider.
As unrealistic as it might seem, a positive turn of events is even possible in the coming months. In all likelihood, Mr Xi will be reappointed for a new five-year term at the 20th National Congress of the Chinese Communist Party in October, after which he may be a more constructive partner. And Mr Xi and President Biden will meet at the G20 leaders’ meeting in Indonesia in November, by which time the US midterm election will have taken place, and Biden may even have an interest in developing a partnership for managed strategic competition. Hope springs eternal!
Some analysts like former Australian Prime Minister Kevin Rudd are so worried that they fear these two powers could accidentally cross a tripwire into crisis, escalation, conflict and then possibly war.
How did we reach this point?
The first factor is the narrowing balance of power between the two great powers, as China is catching up in economic, technological and military terms.
Then there is the leadership approach of Xi Jinping, which is fundamentally different from that of his three predecessors, Deng Xiaoping, Jiang Zemin and Hu Jintao. China is a different country today. Mr Xi has moved the ideology of the Chinese Communist Party (CCP) to the Leninist left, and the economy to the Marxist left. He has also shifted Chinese nationalism to the right, with a more assertive foreign policy in Asia and beyond. Mr Xi has abandoned Deng’s modest “hide and bide” approach to foreign policy.
The third factor has to do with changes in the US itself, which, during the Trump administration, replaced its strategy of “strategic engagement” with a policy of “strategic competition”, and seeks to prevent China from realising its national ambition to become the preeminent power in the Indo-Pacific and ultimately in the world.
Understanding China’s worldview
One destabilising factor for the relationship, according to Mr Rudd, is that Americans tend to think that foreigners, including the Chinese, reason like them, and have a similar “worldview” to them. Nothing could be further from the truth.So Mr Rudd, now President and CEO of the Asia Society, has drawn together in a recent book the 10 key elements that describe China’s worldview under the leadership of Xi Jinping.
First, the overriding objective is to keep the CCP in power at all costs, and to keep Mr Xi as head of the CCP at all costs. The idea of a transition towards a Singaporean-style democracy is completely off the table. Second, the CCP strives for national unity to maintain its legitimacy—this drives its actions in Xinjiang, Tibet and Hong Kong, along with its plans for Taiwan.
The third objective is growing the economy to maintain the social contract with the Chinese people, but also to enhance national economic power by funding the military. But the economy must now be environmentally sustainable because the Chinese people are tired of dirty air, water and soil, as well as contaminated food products. The fifth objective is to modernise the military so that it can fight and win wars.
Neighbourhood management involves key challenges. So, the next objective is for China’s 14 land neighbours to be benign and compliant to ensure a reasonable cordon sanitaire around the country. While the Belt and Road Initiative (BRI) aims to convert Eurasia into a zone of opportunity for Beijing which is economically dependent on China. And on China’s maritime periphery, it is pushing the US back in order to accommodate the eventual reunification with Taiwan. This means undermining US alliances— especially those with Japan, South Korea and Australia.
China is also trying to become the indispensable economic partner for the rest of the world—Africa, Latin America and the rest of Asia—such that they become reliable votes for China at the UN and other international organisations. And last, China is working to change the international system in a manner more compatible with China’s worldview, by challenging pre-existing international norms such as at the Human Rights Council, and building Sinocentric institutions like the Asian Infrastructure Investment Bank (AIIB) and the BRI.
Chinese contradictions
These 10 points may seem like a neat and effective way for the authoritarian CCP to use its economic, technological and military power to lord over the rest of the world. But inherent contradictions have emerged in China’s worldview.Over the past four decades, China’s economic development has been extraordinary, as the role of state-owned enterprises and economic planning was wound back, and freer rein given to the private sector, along with increased engagement with the rest of the world.
But over time, a successful market economy has created a new bunch of entrepreneurial elites (such as Alibaba’s Jack Ma), who are independent of CCP control, and who are thus a challenge to its absolute control.
Thus, since 2017, a range of new measures have been implemented which are a brake on the private sector. Things like CCP committees in private companies, forced mergers of successful private and struggling SOEs, a reinvigoration of industrial policy and planning, and wealth redistribution from the entrepreneurial class to workers.
The ultimate objective of these measures is to bring the entrepreneurial class under political control. But one consequence is that they are contributing to weaker economic growth, which is creating a whole new bunch of tensions in Chinese politics.
Another contradiction has been China’s ham-fisted efforts to use the gravitational pull of the Chinese market to leverage foreign policy compliance from the rest of the world. A few examples are the coercive measures against Norway for the Nobel prize granted to the activist Liu Xiaobo; Sweden for protesting about the Swedish national incarcerated in China; Australia because of its call for an enquiry into the origin of COVID; and South Korea over the installation of THAAD anti-missile system supplied by the US. These actions have only tarnished China’s reputation and soft power.
Lastly, while China’s economic performance may have been extraordinary, its economic future looks problematic. It is in the midst of a demographic drama which began with the one-child policy. Fertility rates have been below replacement for many years. The working age population peaked in 2014, and its total population is peaking around now. This rapid population ageing is making a big hit on economic growth and public finances. But the economy has more to worry about. The move away from market economics is also dragging down productivity growth.
These contradictions sit oddly with Mr Xi’s chant that “The East is rising and the West is declining”. And may only incite Mr Xi to be even more assertive on the international stage to distract domestic public attention.
Minimising the risks of conflict
As Mr Rudd has argued, we are now in a period of unmanaged strategic competition. There are no rules of the road, there are no guard rails. And yet there are so many risks and flash points like Taiwan, the South China Sea, the East China Sea, nuclearisation of the Korean peninsula, along with cyber and space activities. Each of these flashpoints is capable of tripwiring us into crisis, escalation, conflict and war, by accident and/or design.In his book, Mr Rudd proposes a system of “managed strategic competition” to minimise the dangers of a catastrophic conflict between the US and China. He suggests a few component parts. First, the two sides should identify and communicate irreducible red lines to the other side. Second, a framework should also be developed to embrace non-lethal strategic competition in all other domains. Third, political and diplomatic capital should be invested in collaboration in public goods like climate change, financial stability, public health management and nuclear non-proliferation.
It should not be impossible for the two sides to work together. Both countries have every interest in avoiding war. But the level of distrust is so great that it will take a sea change for the two to work together. Mr Rudd has been criticised for being naive in his proposal. He admits that establishing a framework for managed strategic competition would be very difficult, but argues that the possibility of war is too horrendous to consider.
As unrealistic as it might seem, a positive turn of events is even possible in the coming months. In all likelihood, Mr Xi will be reappointed for a new five-year term at the 20th National Congress of the Chinese Communist Party in October, after which he may be a more constructive partner. And Mr Xi and President Biden will meet at the G20 leaders’ meeting in Indonesia in November, by which time the US midterm election will have taken place, and Biden may even have an interest in developing a partnership for managed strategic competition. Hope springs eternal!