CHINAwatch

China at 70 has much to celebrate, but its biggest challenges lie ahead

Cary Huang's column of 29 September in the South China Morning Post gives an up-to-date catalogue of China's impressive achievements under the Communist Party of China. In just seven decades, what would have taken the West centuries, a poverty-stricken, internationally weak, and backward Chinese nation has been turned into an economic and geopolitical powerhouse, a leading engine of global growth projecting influence across continents and oceans. A video clip From Ashes to Prosperity shows what breathtaking transformation the nation has undergone since the ravages wrought by the Japanese invasion. 

Huang mentions that "per capita GDP rose from just US$200 in 1979 – when 80 per cent of Chinese lived in absolute poverty in rural areas – to around US$10,000 last year, firmly in middle-income territory." This is singularly instructive, as China seems to have successfully escaped the much-hyped "middle-income trap". 

At his latest address at the United Nations, President Trump suggested that as the world's second largest economy, China is already an advanced country. It cannot pretend to remain a developing nation, thereby gaming the international trading system. Huang's observation is timely that "China is still neither an advanced nor a developed country. Nor can it properly be described as a rich nation. It is a developing giant on the world stage." His assertion is supported by China's GDP per capita below the worldwide average of US$11,570, not to mention backwardness in many other metrics, including the environment and institutions. 

This helps to debunk popular Sinophobia that China is a global superpower threatening to impose an authoritarian model on the rest of the world. "To be a true superpower, a country must wield global influence in many, varied spheres: in economics, in science and technology, in military matters and in soft power." In economics, China perhaps scores an A. But the country still lags far behind the United States in global military capabilities and behind many Western advanced countries, big and small, in scientific breakthroughs. "China has just three Nobel Prizes; one for science, one for literature and one for peace (the last of which was awarded against Beijing’s will)," Huang observes. 

Above all, "Today, every single nation to have joined the 36-member Organisation for Economic Co-operation and Development (OECD) has been not only a market economy, but also a free democracy." Despite its dramatic ascendancy, China's massive deficit of soft power stands in the way of its achievement of great power status. No matter how well China may excel in other fields, and how more influential China becomes globally, this deficit in soft power of universal appeal is likely to remain a stumbling block along the nation's ambitious trajectory. 

The concentration of power under President Xi may be necessary to combat corrupt interests and political detractors in order to steer the nation on course to realize the China Dream of becoming a fully developed nation by 2049, the hundredth anniversary of the Communist Party of China. However, with the rapid rise of a university-educated middle class, the goal's realization is likely to depend on a willingness to embrace modernity in governance – democracy, freedom and the rule of law.  

Why China says "No" to US arms control idea after US-Russian row over Intermediate-range Nuclear Forces (INF) Treaty

Live TV panel discussion on PressTV on  23 August 2019

America Must Prepare for the Coming Chinese Empire

Writing for The National Interest on 17 June, 2019, Robert Kaplan, managing director for global macro at Eurasia Group, warns of "the coming Chinese Empire".

A different class of America competitor multiple degrees more formidable than the former Soviet Union, China's ascendancy is driven by efficient state capitalism supported by robust civilizational culture and its Belt and Road Initiative of global ambitions.

Kaplan proposes that the United States should avoid getting entangled in the Middle East and should focus instead on the Indo-Pacific. While unlikely to become a firm US ally, India's capabilities should be strengthened together with boosting Taiwan's defences, both as counterweight against the spread of China's growing influence in the region.

He concludes by saying that "the last thing American policymakers or strategists should assume is that somehow we are superior to the Chinese, or worse: that somehow we have a destiny that they do not."

Course Correction: Toward an Effective and Sustainable China Policy

The above 51-page February 2019 Report by the Asia Society’s Center on U.S.-China Relations is meticulously prepared by an impressive array of leading US China experts. The team is led by Orville Schell, Arthur Ross Director of the Center on U.S.-China Relations, and Susan Shirk, chair of the 21st Century China Center and research professor at the University of California, San Diego School of Global Policy and Strategy. Ms Shirk previously served as deputy assistant secretary of state from 1997 to 2000. 

The Report advocates a change of course in US-China relations. This is in response to President Xi's stronger, more assertive China which is perceived to behave in ways often at odds with America's norms and values supporting the existing world order.

The Report's launch panel in Washington D.C. on 12 February pointed out that while China converged with those norms on initial entry into the World Trade Organization, in recent years it has increasingly diverged from them. As a result, there is strong bi-partisan consensus for a more robust stand against a rising "China Threat".

The Report delves into the full panoply of concerns with China on trade, military and technological ambitions, the South China Sea, Taiwan, human rights and China's growing global influence, including the Belt and Road Initiative. Under a banner of "Smart Competition", it suggests all-of-government re-balancing towards clear-sighted confrontation against China's perceived transgressions without giving up cooperation on issues of common interests.

The Report warns against over-reacting towards a Red Scare which harms best American interest. It acknowledges that the American people's attitudes towards China are more balanced. It also concedes that the United States should first strengthen its own competitive capacities and avoid trampling on allies and traditional American norms and global institutions which have served American interests well.

At the launch panel, Ms Shirk wanted the United States to rise above China's "lowest common denominator" of "exclusionary" behaviour, without comparing it  to President Trump's "America First" unilateralism. China's increasing role in providing common goods such as in the Paris Agreement on Climate Change and in fielding the largest contingent of UN Peacekeeping Force, more than the rest of Security Council Permanent Members' contributions combined, seem to be forgotten or interpreted as a sign of a China Threat to supplant the United States.

The Report seems another shot across the bow against China's perceived intentions to eclipse the United States in the Asia-Pacific, if not globally.  

America's about-face towards China has been a loud wake-up call. If this is not enough, even the European Union has now called for a united trade and tech front against 'rival' China.

Even before the trade war intensified, Beijing tried to enact laws to address the legitimate concerns of foreign investors such as intellectual property protection and equal treatment. At the March 2019 National People's Congress (NPC)/Chinese People's Political Consultative Conference (CPPCC) "Two Sessions", it is reported that the New Foreign Investment Law Goes on Fast Track . This augurs well for eventually shaping a historic, comprehensive US-China trade deal that would underpin better US-China relations, even as geopolitical rivalry endures. 

However, in light of serious misgivings in Western and other countries, China will have to double down on its contribution to common goods, create a more level-playing field for everybody, enhance its transparency, and somehow transform itself into a more tolerant, less authoritarian nation, if she to realize the essence of her Two Centenary Goals, as my South China Morning Post Op-ed of 24 January 2019 insinuates. 

Trade, People, and Money: Understanding China's Unique Capabilities

Stephen Olson, Hong Kong-based research fellow of the Hinrich Foundation, in an article of 24 October, 2018 in The American Prospect, a liberal magazine based in Washington D.C., suggests that the West, (particularly the United States), needs to  negotiate a modus vivendi with China's very different economic system and unique global capabilities in trade, peoples and money, "to pursue national objectives and shape it relations—economic, trade, strategic, and diplomatic—with other countries and multilateral institutions." This may well be pivotal in helping to shape a looming Chinese Century

Belt and Road is alive and kicking

A Standard Chartered Bank special report of 9 October, Belt and Road - Making its presence felt examines the latest developments on the ground in Asia, Africa and the Middle East, including what has happened after the US has declared a trade war against China. 

The report shows that -

"Trade and investment links between China and BRI countries continue to deepen, cementing alliances, improving competitiveness and shifting the global supply chain amid the US-China trade war. Rapid BRI expansion comes with challenges and risks – BRI partner countries face widening trade deficits and rising external debt. Bilateral debt relief offered by China should help to avoid systemic debt fallout. Increased transparency would likely improve project quality, address growing concerns and facilitate debt resolution. Commercial, environmental and social viability would help ensure project sustainability."

Download Standard Chartered - Belt and Road Report 9 October 2018  

According to a report dated 26 October, 2018 in the Asia Times, China's trade with Belt and Road countries exceeds US$860 billon over the first three quarters in 2018, a rise of 13.2% from a year earlier. Over the same period, Chinese enterprises have made a total US$10.78 billion of non-financial direct investment in these  countries, a rise of 12.3% from last year. They have helped establish 82 economic and trade cooperation zones, creating 244,000 local jobs and paying taxes and fees to host countries totalling US$2.01 billion.

During a historic visit to Beijing, the first in seven years, and accompanied by a 500-strong business delegation, Japan's Prime Minister Abe pledged to change course in relations with China, from confrontation to a "new era of cooperation", paving the way to Japanese participation in China's Belt and Road Initiative in some 30 joint infrastructural projects. Click here  Not only would this breakthrough reinvigorate interest in China's global Initiative, it would also help to shore up the corporate governance and credibility of both the projects concerned and the whole Initiative as well. 

China's 36,000-character White Paper on US trade war omits reference to an all-out New Cold War

The substantial White Paper, released on 24 September, expounds on the nature of China's trade relations with the US. Entitled "Facts about the China-US Trade Dispute and China's Stance", it tries to show that the two nations are at different stages of development with very different political-economic models. Yet, trade and investments between the two countries have grown by leaps and bounds, benefitting businesses and peoples in both countries as well as the world at large. Supporting this benign relationship is mutual economic complementarity and a multilateral rule-based order supported by the United States.

However, in recent months, the United States seems to want to upend this mutual relationship and global order by resorting to mercantilist bullying and economic nationalism under the banners of "national security" and "America First". While a trade war will hurt both countries, China will not sacrifice its national interests, which it is prepared to defend to the bitter end. China remains fully committed to economic reforms and opening up and continues to support a multilateral world order. It is not enthusiastic about a trade war and always keeps the door open for negotiations on the bases of mutual respect, mutual trust and win-win relationships.

Download The.Facts.and.Chinas.Position.on.China-US.Trade.Friction

The Paper contains a swathe of trade and economic data in support of the benign trading relations between the two countries, showing how much the US economy and American businesses and people have benefitted. It tries to showcase China's progress in foreign intellectual property protection and opening up of various sectors of China's economy. It explains that even the United States practises various trade discriminatory policies and subsidizes a host of industries including agricultural and high-end strategic businesses. Indeed, China's "Made in China 2025", which seems to alarm US policy makers in recent months, was inspired by the United States' "Strategy for American Innovation" (2011) and "National Strategic Plan for Advanced Manufacturing" (2012). 

What the Paper hasn't touched on, however, is the realization that the trade war is but a manifestation of an all-out bipartisan strategic pushback against China as a rapidly rising challenger to US global economic and geopolitical dominance. Click here Despite well-intentioned rhetoric of helping to bring China into the world's multilateral trading system (WTO), the reality has dawned on US strategists that instead of getting mainly the crumbs from the table (China makes only $8.46 from an i-phone), China is fast advancing to capabilities of eating America's lunch, at least in some areas. This is happening not only in trade, but in military projection  and geopolitics in theatres such as the South China Sea and China's Belt and Road Initiative extending to four corners of the globe.

These strategic worries do not bode well for early ending of the trade war, nor, for that matter, for early return to a more benign relationship between the world's sitting superpower and its perceived rising challenger. A Thucydides Trap has sprung in the form of All Measures Short of War. Welcome to a new US-China Cold War of the 21st century. 

China Reinvests Itself but is unlikely to displace American global leadership

A six-part China Central Television (CCTV) documentary (Chinese language), first aired nationwide in January 2018, features some of the nation's jaw-dropping breakthroughs in digitization, new energies, manufacturing technologies, life sciences, space and sea explorations, and a confluence of game-changing innovations suggestive of a Rising China. The commentary soundtrack was dubbed from the voice of a deceased famed broadcaster using artificial intelligence. 

Episode One -    Information Technology, New Energies, Manufacturing, Life Sciences, Aerospace and Ocean Exploration

Episode Two -    A far-reaching revolution to capture the immense possibilities of Nature's energies

Episode Three - Game-changing manufacturing technologies including bendable ultra-thin glass panels, wide-body aircraft, super-high-precision machine tools,  world's tallest cranes, individualized 3-D printing

Episode Four  - Overcoming the challenges of aging, deceases, and death, including super-agricultural products and innovative foodstuffs 

Episode Five  -  Exploring the depths of space and the oceans 

Episode Six   -  A rising tide of transformative technologies including the world's most powerful space telescope, micro-lighting, genetic sequencing, ultra-high speed rail, suggestive of the rise and reinvention of an ancient nation driven by the innovation of every team, every project and every city. 

A glimpse of China's prowess in applied innovation and technology is embedded in my January 2018 feature article (starting from middle of third column, p. 37) of The Global Analyst, an Indian business journal, drawing on Chinese Business - Landscapes and Strategies, London and New York: Routledge, 2018.

Examples include the world's first quantum science computer, most technologically-advanced ship elevator, world's largest gene pool, and most powerful astronomical radio telescope. These are driven by the world's largest R & D personnel, numbering 3.247 million in 2012, 29.2% of the world total, drawn from some 7 million university graduates with 30,000 doctorates a year. The number of engineering graduates is seven times higher than in the USA. Supported these projects are the rise of China's patent-filing to 928,177 in 2014, ahead of the United States at 578,802 and Japan at 325,989. 

Another dimension of Chian's global heft is its worldwide connectivity. My August 2017 PowerPoint presentation details how the Middle Kingdom manages to connect the world.

According to a South China Morning Post article of 15 April, 2018 by David Dodwell, compared with the United States, China has become by far the more important market for imports and exports for the world's top 20 economies. This relative dependence is even more pronounced in the case of APEC Members.  Download Importance of China's economy compared with US

The above startling developments have fed into a rising frenzy that China is set to displace America in leading a regional, if not global, order. They have also led to intellectual debate in the West struggling to make sense of President Xi's worldview that drives China's trajectory in a "New Era". Click here

China still faces many herculean obstacles both internally and externally. Why China will not usurp American leadership anytime soon is outlined by Harvard University Professor Joseph Nye, former US assistant secretary of defense and chairman of the US National Intelligence Council, in his Project Syndicate article of 9 April, 2018.

China will struggle to close the capability gaps with the United States, thanks to its declining and aging demographics, continuing dependence on imported energy, American cutting-edge technologies, preeminent universities, predominant role of the dollar, a rich landmass strategically guarded by two oceans, and American alliances with many advanced countries integrated with creative talents in the liberal world. Hence, according to Professor Nye, America's global leadership is likely to endure long after the Trump years.

With the rise of protectionism, would the economy be in trouble in China and rest of Asia in 2018?

A PowerPoint presentation to the Executives' Global Network (EGN) on 27 March, 2018. 

Download With the rise of protectionism would the economy be in trouble in China and rest of Asia in 2018

Why fixating on countering China’s Rise won’t keep America safer and more prosperous

Breaking with tradition, President Trump chose to personally launch a 55-page National Security Strategy on 18 December. He named China and Russia “revisionist powers” “attempting to erode American security and prosperity”. While conceding the need to cooperate with China, he vowed to make the United States more competitive and much stronger, including its military, always putting America first. 

This was shortly echoed by an 11-page summary of a 2018 National Defence Strategy. This asserts that henceforth, “great-power competition,” not terrorism, must be the primary focus of national security. A broad roadmap is unveiled, aiming at sharpening integrated military lethality, including nuclear weaponry, and expanding America’s military alliances.

Some American opinion-formers have regretted that the United States supported China’s entry into the World Trade Organization, which has helped China’s economic rise. There is bipartisan consensus that attempts to mold China into a “responsible stakeholder” of the US-led world order have been largely unsuccessful. A more robust anti-China mindset seems to have moved centre-stage, reminiscent of the “Offensive Realism” school of great-power rivalry.

Under a new “Indo-Pacific Strategy”, President Trump has re-energized a quadralateral strategic alliance of the United States, Japan, Australia and India, all not-so-friendly towards China. Various Chinese investments in the United States have recently been blocked. A 30% tariff has been imposed on Chinese solar panels, an ominous first salvo of what could escalate into a full-blown trade war. Secretary of State Rex Tillerson recently warned Latin America against dependency created by China’s Belt and Road Initiative Click here. A storm seems to be gathering in US-China relations. Click here

Amid growing sinophobia and Trumpist smoke and mirrors, it is easy to lose sight of the reality and paradox of China’s rise.

As China grows into a ten-thousand-ton panda, it can no longer follow Deng Xiaoping’s dictum of “hiding strength and biding time”. Even its own avowed benign behavior has not been sufficient to prevent smaller neighbors from hedging strategically.

Paradoxically, however, a stronger and more developed China may well offer greater opportunities to keep America safer and even more prosperous. President Trump once said the United States should have kept the oil in what turned out to be an unproductive War on Iraq (*). Nevertheless, even with geopolitical rivalry with China, there are ways for America to gain.

Examples abound.

First coming to mind is China’s capacity for stabilizing the dynamics of the Korean peninsula. With supreme leader Kim Jong-un’s new-found friendly Winter-Olympics overtures towards South Korea, China could be encouraged to broker a verifiable non-aggression deal between North Korea and the United States, perhaps backed by security guarantees by China along with other members of the six-party talks, including Russia.  

Second, the South China Sea is China’s artery of trade and resources. China is therefore unlikely to disrupt the normal flow of civilian and commercial navigation. But China’s “island building” with military installations diminishes America’s military flexibility. Nevertheless, apart from symbolic yet provocative “freedom of navigation operations”, the United States may select suitable sea routes for regular joint patrols with the Chinese navy. This would send a strong signal for regional peace and stability.

The United States could also explore the possibility of jointly developing with China and other countries the vast energy reserve in the South China Sea, subject to suitable environmental safeguards. Likewise, with depleting fishery resources, a US-China joint initiative for sustainable fisheries management would do wonders in minimizing regional conflict, while adding to the soft-power of both countries.

Third, a strong and prosperous China presents many opportunities for American investments and expertise. As an energy surplus nation, America can sell vast quantities of natural gas to China, the world’s biggest energy customer, to help reduce coal-fired pollution. China has recently removed foreign investment restrictions in a host of industries and services. These include rail transport equipment, automotive electronics, new energy batteries, electric vehicles, bio fuels, motor cycles, satellites, edible agricultural products and marine engineering.Click here According to a McKinsey report, China investment opportunities in 2018 include the middle-class consumer market, the digital economy, electric vehicles, the green economy, pharmaceuticals, wealth and asset management, and other financial services.

Last but not least, America’s strongest card of managing China’s rise is its  robust institutions and unmatched legacy of moral and ethical values, what makes for America as “a shining city on a hill”. Although much of this has been temporarily squandered by “America First” Trumpism, the reservoir of American soft power largely remains.

For example, instead of resisting China’s Belt and Road Initiative, the United States could participate in some much-needed regional infrastructural projects. This will enable it to set an example in good corporate governance including transparency, accountability and sustainability. An analogy is the China-initiated Asian Infrastructure Investment Bank (AIIB). Its diverse membership includes a host of American allies. Its more transparent and inclusive organization structure and its development of good governance along with the Word Bank are instructive.

However, all of the above opportunities would be compromised if US-China relations becomes strained.

China’s Ambassador to the US Cui Tiankai recently alluded to strategic misjudgment of China in some United States quarters Click here. Still beset with a mountain of economic, financial, social and environment obstacles, China has neither the global military capacity nor the geopolitical willingness to displace the United States’ role in world leadership any time soon.

In an ever-closely knit “global village” facing a host of common challenges including climate change, energy security and terrorism, China’s fate cannot be unbundled from the rest of the world, least of all the United States. Hence, President Xi Jinping’s clarion call for abandoning a binary cold-war mindset and forging a “new era for international politics” with a view to building a global “community of common destiny”.

With major historical, cultural, socio-economic and political differences, China’s choice of development path and its security and other core interests must be respected. As the country becomes much larger, its natural desire for more regional elbow room and international influence projection must be accommodated.

Fixating on confronting and thwarting China’s inevitable rise will not enrich the United States. On the contrary, engaging China more constructively would capture the “oil”, figuratively speaking, in China’s rapid development. It would keep America safer and more prosperous. It would also be a smart way of leveraging China’s rise to make America great again.

(*) Fire and Fury, Inside the Trump White House, Michael Wolff, Henry Holt & Co., New York, 2018, p.49.

****************************************************************************************************************************************************************************************************************************

An edited version of the above article appeared as an Op-ed in the South China Morniong Post of 15 February, 2018 with a different title "How a Sino-US relationship reset would help make America great again".