National Bureau of Asian Research, 2019, 383 pp., $34.95
Council on Foreign Relations Special Report No. 85, January 2020, 82 pp., $9.99
Peterson Institute for International Economics, 2019, 200 pp., $23.95
Oxford University Press, 2019, 224 pp., $27.95
The coronavirus pandemic has exposed, like no crisis before it, just how difficult it has now become for the United States and China to find common cause. One remarkable feature of the past few months has been the near-total lack of communication and cooperation between the world’s two leading powers, who instead have publicly engaged in reciprocal bouts of name-calling, finger-pointing, and blame-shifting. The difference between this behavior, and their more responsible coordinated actions after both the September 11 attacks and the 2008 financial crisis, is both striking and lamentable.
How did we reach this point?
The opening with China in the early 1970s and subsequent normalization of diplomatic relations was initially driven by Cold War realpolitik. A different phase began after Deng Xiaoping’s Southern Tour and China’s entry into the World Trade Organization in 2001. We admired China’s lifting hundreds of millions of people out of poverty and responded enthusiastically as U.S. companies gained market access to Chinese consumers and low-cost production facilities. But as Beijing continued to accumulate wealth and power, a minority warned that Washington was blind to the strategic challenges that China posed to our industrial competitiveness, the U.S. security position in Asia, and democratic norms more broadly. More vocal were those who hoped that as China got richer, it would gradually adopt democratic norms and individual liberties, and it would not upset the liberal world order, but rather supplement America’s leadership of it. These hopes have not panned out.
With the Trump Administration, a more muscular approach to China is now ascendant in Washington. Believing that we have entered into a new period of “great power competition,” China is viewed as a near-peer competitor that seeks nothing less than “international domination,” in the words of Secretary of State Mike Pompeo. A competing and more temperate analysis is offered by many experienced academics, scholars, and former U.S. government officials, who acknowledge many troubling aspects of Beijing’s behavior but do not believe that China poses an existential strategic threat, nor that it aspires to replace us as world leader. They also believe that our shared economic interdependence makes it necessary for our two countries to work together.
On either side of the debate, a small cottage industry has arisen of selectively citing historical examples of established powers that have resisted, actively opposed, or accommodated rising ones. From Athens and Sparta to Wilhelmine Germany searching for its place in the sun, these cases are interesting in their own right, but all one can say with confidence is that no one has ever cited an historical precedent that did not support their pre-existing argument.
Unfortunately, these analogies are not very helpful in answering fundamental strategic questions: Can different Sino-American conceptions of regional and international order be reconciled? If they are negotiable, what would Washington consider an appropriate role for China in the Asia-Pacific and globally, and how would we best go about obtaining it? How can the United States accommodate China’s desire for national rejuvenation, while preserving the benefits of economic interdependence, limiting the military risks Beijing poses to us and our allies, and continuing to promote a world order based on representative government and liberal values?
Four new studies now join this debate and illustrate its complexity. Ironically, they provide ammunition to both those who see China as a rising threat to be confronted boldly and those who see it as a manageable problem to be handled more patiently.
In the latest edition of the annual Strategic Asia series from the National Bureau of Asian Research, Ashley Tellis warns about aspects of China’s rise that are transforming the international system. In a typically clear and concise overview, Tellis outlines worrying Chinese behavior that includes threatening U.S. friends and allies across Asia, engaging in unlawful land reclamation and militarization in the South China Sea, tilting the commercial marketplace, weakening the global trading system, encouraging protectionism and trade wars by subsidizing state-owned enterprises (SOEs), favoring certain firms under its Made in China 2025 program, and generally trying to undermine U.S. primacy in the western Pacific. China aims to displace the United States first regionally and then globally, according to Tellis—hence the “expanding strategic ambitions” of his study’s title.
The contributing chapters highlight China’s expanding capabilities and influence across specific functions and areas. In its own immediate neighborhood, China is adopting an array of policies that may be characterized as keeping the two Koreas in, the Japanese down, and the United States out.
China’s strategic ambitions do not include helping Washington broker a denuclearization deal with North Korea or even meaningfully discipline Pyongyang for its continued development of nuclear weapons and ballistic missiles. Patricia M. Kim explains that China seeks stability along its borders, with a lessening of American influence and ultimately the elimination of the U.S. alliance system in the western Pacific. It hopes to condition the behavior of its neighbors and induce deference to its preferences by creating economic dependence through access to China’s market. But Kim states that China “has yet to earn the region’s allegiance or admiration, nor has it fundamentally weakened the U.S. alliance system.”
A major reason is the resolute approach taken by Japan, despite President Trump’s emphasis on the alliance’s “expensive” economic burdens and his lukewarm, erratic support for Prime Minister Shinzo Abe. China’s primary competitor in the region, Tokyo has managed to maintain a robust trading relationship even while it has refused to cede regional leadership to Beijing, with their sparring over rival claims to the Senkaku/Diaoyu Islands remaining a major flash point. Since 2012, China has ramped up its military incursions in the area, while Abe has expanded both the budget and mission of Japan’s Self-Defense Forces while continuing to host 54,000 U.S. forces on Japanese territory.
Much like Japan, Taiwan shows few signs of accepting China’s regional hegemony. Xi Jinping cannot achieve his goal of “national rejuvenation” without re-absorbing Taiwan, Michael S. Chase tells us, yet China’s policy of carrots and sticks has been largely counterproductive since the election of the Democratic Progressive Party (DPP) in 2016. An escalating and multidimensional pressure campaign has included “diplomatic isolation, military intimidation, economic coercion and influence operations.” China appears to be fighting a losing battle, using the wrong weapons, to win the hearts and minds of the Taiwanese, especially the younger generation. The Chinese Communist Party’s handling of the 2019 protests in Hong Kong and its ongoing repression of Uighurs in Xinjiang province only underscored its intolerance for free speech, freedom of religion, the rule of law, and other democratic norms that the Taiwanese value.
China has had greater success in influencing the behavior of the ASEAN states, argues Ja Ian Chong. “The Trump Administration’s unpredictability and ambivalence have shaken confidence in Southeast Asia over Washington’s reliability as a partner,” but the key factors are propinquity and power, which allow Beijing to peel away individual members (with the possible exception of Indonesia) by threats or promises. ASEAN’s traditional collective action problems are therefore likely to get worse. Chong predicts that “ASEAN’s initiative and autonomy will likely decline” and that “Washington should not expect the grouping to play a large role in moderating PRC behavior, much less to act as a buffer for U.S.-China friction.” And although the Trump Administration has expanded its strategic aperture to encompass the Indo-Pacific region as part of a wider Asia, it is unclear whether Delhi is willing or able to play a role balancing China in the foreseeable future.
In his discussion of China’s “new global values,” Francois Godement explains just how circumscribed China’s conception is compared to our ideas of universal human rights and individual dignity. China is promoting “a low-cost and relatively valueless international order, revolving around the country’s self-interest,” which centers on national sovereignty (i.e., noninterference in domestic affairs) and free trade. If anything, Godement understates the CCP’s ambition and reach. According to Freedom House’s Freedom on the Net 2019, China has been the world’s worst abuser of internet freedom for four years running, with censorship last year reaching “unprecedented extremes” amid the 30th anniversary of the Tiananmen Square massacre and the ongoing protests in Hong Kong. The CCP closed individual accounts on a highly popular social media platform “for any sort of ‘deviant’ behavior,” reports Freedom House, “including minor infractions such as commenting on environmental disasters, which encouraged pervasive self-censorship.” This effort coincided with the CCP’s rollout this year of a “social credit score” for each Chinese citizen, used to indicate their political reliability and thus determine opportunities for education, work, and travel.
This “WeChat terrorism” is no longer confined to China’s borders. While the Chinese government has always been sensitive about its image abroad, Beijing is now “expanding its ability to shape information and discourse relating to China abroad, especially on issues that Beijing views as core to party legitimacy, such as Taiwan, Tibet, and human rights,” according to the DNI’s Worldwide Threat Assessment for 2019. Recent targets of this extraterritorial censorship campaign include Delta, United and American Airlines, Marriott, major Hollywood studios, the Japanese retailer Muji, and perhaps most notably, the NBA after the General Manager of the Houston Rockets sent out a six-word tweet supporting anti-government protesters in Hong Kong. While Godement notes that the CCP prefers to “condition behavior,” it has clearly become more aggressive in using its power to spank foreign firms that stray from the official line.
Two of the strongest chapters in this volume detail how China is altering the regional and financial landscapes. Joel Wuthnow explains how the Belt and Road Initiative (BRI), China’s colossal effort to develop overland and maritime passages across Asia to the Middle East, Africa, and Europe, contains three separate strategies. BRI is a way to enhance the prestige of Xi and the CCP, to find new outlets to relieve China’s industrial overcapacity and help struggling SOEs, and to buy friends and win influence diplomatically. Yet Wuthnow suggests that there is less than meets the eye here, and is skeptical that BRI will realize its many goals. He notes that there is no complete list of projects, that the focus and scope have changed over time, and that it has elements of an elaborate public relations campaign. “China’s own limitations, hedging by its partners and alternative financing provided by other states and international organizations could all militate against the initiative,” he writes. In a complementary chapter on China’s development assistance strategy, Samantha Custer and Michal J. Tierney concur, stating that “Beijing’s ability to convert its official financing into improved popular perceptions of China, as well as discrete economic and security concessions from foreign leaders, is neither straightforward nor permanent.” This will only be truer in the wake of COVID-19.
China has had more success in creating an alternative financial architecture that poses a major, longer-term threat to U.S. leadership. Rush Doshi explains that China’s aim is “gradually eroding the dollar’s central position in the global economy.” It has created competing financial arrangements designed to reduce the importance of the dollar as the world’s reserve currency, including renminbi internationalization; developed SWIFT alternatives for international financial transactions; and started alternative credit rating agencies. He warns that “Beijing is likely to more overtly weaken the financial pillars of U.S. power while strengthening the financial pillars that support China’s own order building in Asia,” and that the renminbi could become the dominant currency in the region within the next decade. Whether Beijing can exploit the post-COVID-19 environment to further weaken U.S. financial leadership bears careful watching.
Strategic Asia 2019: China’s Expanding Strategic Ambitions contains some general policy guidance, but nothing like the array of 22 specific policy prescriptions offered by Robert Blackwill, a former U.S. Ambassador to India and veteran DC policymaker, in Implementing U.S. Grand Strategy Toward China.
Blackwill believes that China aspires to become the world’s leading power, that Washington has grossly misunderstood these ambitions for decades, and that we have lost valuable time while China has imposed its preferences on the region. Consequently, if the United States is to ensure a stable order in Asia and preserve a leading role in shaping the international system, we need a new grand strategy to reverse U.S. decline and leverage alliances to help balance against Chinese power, while promoting liberal values and engaging diplomatically with Beijing on issues like climate change and arms control.
Many of his recommendations have little to do with China per se, but are sensible and longstanding ideas on how to revitalize the American economy, reform our immigration and educational systems, reduce income inequality and partisan political bickering, ramp up our military, and reinvigorate our diplomacy. Many would be as welcome in a Biden Administration as in a second Trump Administration.
Blackwill’s 2020 monograph represents a subtle but significant shift in his thinking from five years ago, when he co-authored, with Ashley Tellis, an earlier Council on Foreign Relations study on the China challenge. In 2015, the authors talked about “preserving American primacy” and ensuring that the United States remains “at the apex of the global hierarchy.” Five years later, Blackwill has abandoned the possibility of U.S. hegemony, judging that American primacy in the region is now “illusory.” The United States “no longer has the option of broadly based primacy in Asia” and the best we can now do is to balance Chinese power. Left unsaid is where he believes the Sino-American balance of power will reside in five years’ time if Washington does not adopt his recommendations.
Blackwill’s critical assessment derives not only from America’s past missteps and strategic drift, but also from the continuing vigor of the Chinese economic engine. In The State Strikes Back: The End of Economic Reform in China?, Nicholas S. Lardy warns us that Washington may have even more reason to fear China in the future.
Lardy shines a discerning light on China’s economic performance over the last few decades, the reasons for its recent slowdown, and what measures Xi and the CCP need to take to squeeze out more growth in the future. A senior fellow at the Peterson Institute for International Economics, Lardy is a careful and iconoclastic thinker and long-time expert on the Chinese economy. He concludes that China’s progress has slowed since 2012 primarily because of the political choices it has made in moving away from market-led growth and a leading role for the private sector. Instead, it has favored a state-led industrial policy that misallocated resources to inefficient and loss-making state-owned enterprises (SOEs), merging smaller SOEs to create inefficient monopolies, and undermining private property rights, thereby discouraging investment.
By 2016, over 43 percent of state firms were loss-making, and the amount of money they lost was seven times greater than in 2005, according to data from the Ministry of Finance. Easy credit from state banks, corruption, and misallocation of capital contributed to these results. Lardy notes that these losses are understated due to subsidies from the state, which allowed state-owned banks to continue to extend loans to inefficient SOEs. Last year, China’s GDP registered its slowest growth rate since the early 1990s, and the gap between returns from SOEs and private enterprises reached an all-time high.
“[A]bsent significant further economic reform returning China to a path of allowing market forces to allocate resources,” Lardy cautions, “China’s growth is likely to slow, casting a shadow over its future prospects.” He estimates that annual growth of 8 percent is possible, maybe higher, and contrary to many other analysts, he believes that this rate could be sustained for the next one or two decades. He dismisses the rising debt burden as an anchor on this growth, which could be resolved by a more efficient allocation of capital; he dismisses as well the coming demographic time bomb, which could be partially offset by increased productivity from investing more resources in education and training and by raising the retirement age. Among his prescriptions for Beijing are allowing SOEs to fail or be acquired by profitable private firms, which would better allocate state banking resources, and reducing barriers to entry for private firms, especially in banking and logistics.
Lardy argues that these are policy choices that Xi, the so-called “Chairman of everything,” could undertake immediately. If he did so, China’s economy could once more attain robust growth, allowing it more easily to underwrite Beijing’s strategic ambitions.
Lardy is an economist and not a political scientist, so it is unfair to expect him to answer the questions that his analysis begs: Why hasn’t Xi favored the type of economic reforms Lardy advocates to unlock China’s full potential? Why has he reneged on his 2013 pledge that the market would have a “decisive role in the allocation of resources”? Why have Xi and the CCP deliberately decided not to maximize efficiencies, despite the governance risks involved in a slower pace of economic growth? Why have they chanced alienating the public, triggering social unrest, and discrediting the CCP?
An answer lies in a remarkable example of forensic scholarship by Jude D. Blanchette, in China’s New Red Guards: The Return of Radicalism and the Rebirth of Mao Zedong. Blanchette offers an intellectual history of post-Mao thought that highlights the continuing influence of ideology on decision-making. He identifies a loose collection of academics, scholars, and conservative party members who have “rejected the triumphalism of Western liberal democratic capitalism, were skeptical of US-dominated globalization, and advocated egalitarian socialism under the leadership of a nationalist CCP.” Labeled “neo-Maoists,” partly to help shield themselves from state repression, they combine a nostalgia for Mao with opposition to the party’s drift towards capitalism and corruption and its “exploitation of the country’s workers, peasants and other marginalized groups.” They reflect some of the deep divisions in Chinese society, giving voice to those left behind during China’s reform and opening to the West, those for whom the “China dream” of rising living standards has become a mirage.
Blanchette explains why Xi and the CCP have not only allowed this neo-Maoist political movement to survive, but also why they have listened to its grievances and adjusted official policy. At heart, the CCP faces a longstanding crisis of political legitimacy. It is “an ideologically confused Communist Party” that is tied to Mao-era socialism and his promise of radical equality even as its popularity since the 1980s has been based on delivering ever-higher levels of material prosperity. The challenge for the leadership is how to balance economic reforms and maintain the “unchallenged supremacy” of the CCP (including Mao’s contentious legacy).
This tension has made the party vulnerable to accusations from the left that it has abandoned socialism and workers. Blanchette chronicles these leftist critiques during the 1980s (including the violent suppression of student demonstrators at Tiananmen Square), through Deng’s 1992 Southern Tour that tipped the balance back to reform and opening, and then during the leadership of Jiang Zemin and Hu Jintao, as the Party has oscillated between these competing goals.
Under Xi Jinping, who officially holds a degree in Marxist theory and ideological and political education from Tsinghua University, the pendulum has swung decisively towards greater party control, a line consistent with the position of the neo-Maoists. “As the son of a legendary party leader and having spent his entire professional career working for the party,” Blanchette writes, “Xi’s investment in protecting the party’s perpetual monopoly on power is total.” His reformist credentials have been widely misunderstood. For Xi, reform did not mean allowing the market to have more influence over the economy but rather “consolidating the party’s grasp over the economy, not relinquishing it. . . . The crisis Xi saw was not the urgency of economic reforms and a reckoning with state-owned enterprises, but rather a political crisis within the Communist Party” (emphasis in original).
The policy consequences of Blanchette’s analysis are significant. As long as Xi remains in power and privileges the Party over market forces, China is unlikely to return to the robust economic performance that it realized in the 1980s and 1990s and that Lardy says is possible in the future. It cannot maintain even its recent economic pace without more market freedoms and less party control. A less economically dynamic China will be beset domestically by greater indebtedness, corruption, unemployment, and social discontent, and should pose less of a threat to U.S. interests, friends, and allies in Asia, not to mention America’s global leadership.
This contradiction is just one of many that will constrain Beijing’s ambitions in the years to come. China may aspire to displacing the United States as the world’s undisputed heavyweight champion, but it will be hard-pressed to do so. The CCP continues to spend more than half its defense budget on internal security. China needs friends and allies, but can only count on Russia among the world’s top powers, and then just some of the time; this relationship is based more on transient convenience than fundamental principles and values. Moreover, Chinese hegemony is not a goal that is shared by other countries in the region, who will resist this outcome. China will continue to struggle to impose its vision of an Asian order without provoking opposition from the United States and regional neighbors that will join together to thwart Beijing’s designs.
Indeed, Beijing’s aggressive foreign policy moves in the past few years have provoked a counter-reaction in Asia, prompting more security cooperation and intelligence-sharing. Even its efforts at economic statecraft through BRI have prompted a donor backlash by civil societies across Africa and South and Southeast Asia, which cite fears of predatory lending, debt traps, and corruption. And once the COVID-19 crisis ends, there is likely to be a public reckoning that will find China’s actions criminally wanting, especially during the initial stages when the virus could have been contained.
Even a China that isn’t ten feet tall will present challenges to the United States over the next decade. China will remain a savvy and determined adversary across multiple domains, it will remain aggressively engaged in cyber espionage against the U.S. government and American corporations, and, as the COVID-19 crisis showed, it will remain opportunistic in trumpeting its model of authoritarian capitalism as a superior governing system to liberal democracy.
Sino-American conceptions of regional and international order cannot be reconciled anytime soon; Beijing and Washington may acknowledge each other’s core interests but cannot acquiesce to them. The United States and China thus seem destined for an open-ended period of antagonism at best and conflict at worst. Some issues may be deferred, some may be elided, and some will have to be confronted, ideally through diplomacy. As Beijing upgrades its nuclear weapons arsenal, ballistic missiles, and especially space capabilities, bilateral discussions on strategic stability and arms control should be at the top of the diplomatic agenda. Both leaderships will also have to corral nationalist passions, which can easily be inflamed.
The United States needs to be clear about what it can and cannot expect from China. We should expect China to advance its own interests, which means continuing to build alternative regional organizations where it can exert greater influence over both the agenda and outcome, engaging in IP theft and forced technology transfers, sponsoring its Made in China 2025 state-controlled industrial scheme, trying to undermine American alliances, and modernizing its military. Washington should not expect China to become the “responsible stakeholder” of a liberal world order that we have sustained since the end of the Second World War. A more reasonable hope is that Beijing will continue to be a “selective stakeholder,” supporting those elements it prefers, like free trade and norms of non-aggression and sovereign rights, while opposing others, like human rights and Internet freedom.
China’s rise had already been complicating U.S. calculations across the board when the Trump Administration upended America’s foreign policy priorities. Under the mantle of “America First,” President Trump has retreated from longstanding international responsibilities, publicly shortchanged traditional friends and allies, downplayed the importance of alliances, buddied up to dictators and authoritarians, and has behaved impulsively and capriciously—even while helping to drive both parties toward a more hawkish position on China.
Together, these trends have accelerated a questioning of America’s purpose, which has coincided with rising right-wing populism and broader self-doubt among liberal democracies. For those with long memories, this introspection recalls the domestic hand-wringing in the 1980s over Japan as #1; for those with longer memories, it recalls the malaise and “misery index” in the 1970s over U.S. fears that the Soviet Union was winning the Cold War.
And yet, while past performance is no guarantee of future success, we should take heart from how these previous competitions turned out. It is not inevitable that China will continue to rise economically, that it will be able to casually resort to nationalism to distract public opinion from its failures, or that it will be able to indefinitely stifle or repress its citizens. At the same time, a rejuvenated and self-confident America that models a more equitable society at home, that invests in our alliances and national security, that promotes free trade, and that endorses human rights and freedom, represents a tested and winning formula that will sustain U.S. leadership in a new century.
Unfortunately, none of these four thoughtful studies can predict the destinies of either China or the United States. In the U.S. case, at least, whether we will once more muster the willpower to rise to today’s challenges will start to be determined by the political choices that Washington, and the American people, make this coming fall.