PacNet #2 Balancing accessibility and quality in Blue Dot Network infrastructure finance

An earlier version of this article appeared in East Asia Forum.

While US-led Bretton Woods Institutions have supported infrastructure projects since the 1940s, there has been criticism in recent years that the United States has been inadequate in responding to China’s Belt and Road Initiative (BRI). The Biden administration should utilize the Blue Dot Network (BDN) to incentivize private investments in sustainable infrastructure projects in conjunction with the existing Bretton Woods Institutions.

By striking the right balance between accessibility and quality, the BDN would create a unique opportunity to narrow the infrastructure gap while also responding strategically to the BRI through coalition building.

In November 2019, Australia, Japan, and the United States launched the BDN, a voluntary program aiming to certify infrastructure projects that would meet high standards of transparency, sustainability, and developmental impact to help countries pursue quality infrastructure investments. Given that there is currently no certification process to assess quality infrastructure projects, the BDN could also be used by the Bretton Woods Institutions to evaluate existing projects, including those under the BRI.

The BDN is seen as a way to provide project finance alternatives to China’s BRI. One of the major differences often highlighted between the Bretton Woods Institutions and the BRI relates to the lower than optimal lending criteria of the BRI. Since Chinese government-owned banks have the backing of the state, BRI partner countries can receive loans even if the projects are not expected to be profitable.

Even before the COVID-19 pandemic, the World Bank estimated that nearly one-third of BRI partner countries were at high risk of debt distress. However, the low emphasis on environmental and social impact assessments by the BRI has meant the World Bank and other lending institutions have struggled to promote high-quality infrastructure projects. The BDN certification process must be a driver for projects with better commercial lending viability while still maintaining an openness that will invite a critical mass of private investment to guide quality infrastructure goals.

While the BDN has received $2 million from the US State Department, no specific projects for certification have been announced. The undersea fiber optic cable to Palau has been the only project that has attracted financing from all three BDN countries Still, it is unclear whether it will be a test case for receiving certification by the BDN.

The Center for Strategic and International Studies has pointed out that the United States does not have the appetite to compete on a dollar-to-dollar basis with the BRI, and should instead focus on promoting rules that reflect US values. But efforts to promote “the highest standards” have been criticized for only reflecting the values of developed countries. To avoid such criticism, the BDN will have to be implemented in a way that captures the characteristics and needs of recipient countries rather than applying a one-size-fits-all standard.

Given that the BDN is expected to invite private investment, the emphasis on accountability might be more focused on the investors seeking a better rate of return than the people affected by the policy. Therefore, It is imperative to see how the BDN will balance promoting high-quality infrastructure projects while also being accessible enough to shrink the infrastructure gap, which is projected to be about $94 trillion over the next two decades.

In recent years, there has been exponential growth in environmental, social, and governance related assets, with approximately one-third of global assets in sustainable investments. Norway, the world’s largest sovereign wealth fund, recently released its plan to impose stricter ethical and environmental guidelines on its investments and stated that it would not be adding more emerging markets to its portfolio. While surveys show that a certification program for quality infrastructure projects would increase the likelihood of private sector participation in infrastructure projects, the standard-setting efforts will need to be structured in a way that promotes infrastructure projects in places of need as well.

These factors underscore the importance of standard creation through a multi-stakeholder mechanism. The OECD has provided technical support by building a multi-stakeholder design process for the BDN certification framework. The aim is to build in sustainability as an objective both at the design and the implementation phases, signaling to the financial markets that the risks have been managed, which would make it more attractive for private sector investment.

While the OECD indicated that BDN certification would be based on existing criteria such as the G20 Principles for Quality Infrastructure Investment, the OECD stated that stakeholders from 96 countries had been engaged in finalizing the BDN certification framework, including China as an observer. Given that the Biden administration has shown a keen interest in mobilizing allies and like-minded countries for various standard-setting initiatives, the BDN is a great opportunity to showcase US commitment to multilateralism.

Even though the BRI has been criticized for being poorly coordinated and too fragmented, the Trump and Biden administrations have perceived the BRI as a tool for achieving Beijing’s geopolitical goals. Countries, especially in Southeast Asia, have often shown reluctance to align with either the United States or China. However, some ASEAN members have expressed interest in pursuing financing opportunities with the trilateral partners.

The Biden administration needs to emphasize to developing countries that the BDN will be utilized for the common objective of achieving Sustainable Development Goals, rather than being perceived as another means to contain China.

John Taishu Pitt (jtp82@georgetown.edu) is a foreign associate at a law firm in Washington DC and a Fellow in the Institute of International Economic Law at the Georgetown University Law Center.

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PacNet #56 – America and China: Seeking an Updated Foundation for Enduring Engagement

The following is drawn from the introduction to the Regional Security Outlook 2022, prepared by the Council for Security Cooperation in the Asia Pacific 

The US and China bookend the core bilateral axis in the contemporary world. This relationship became increasingly distant over the last 20 years and went into free-fall in 2017-18 when the Trump administration openly stepped away from the broad posture of engagement that had underpinned US policy toward China since 1972. The incoming Biden administration therefore inherited a badly fractured US-China relationship.

Somewhat ironically, as concerns about US-China relations mounted, a widespread propensity to re-assess alignments and policy settings emerged as a helpful source of restraint on the behavior of key states. The proximate trigger for this propensity was, of course, Biden’s election win over Trump. There was some speculation that Beijing also faced new and difficult judgements. This stemmed from international polling suggesting that its policy settings and style of implementation were alienating many global audiences.

From the outset, the Biden administration made clear it agreed that the US posture of engagement toward China had run its course. The new administration believed that China was presenting itself as an ideological alternative to the prevailing liberal order and suggested that US-China rivalry could be characterized as centered on alternative systems of governance. As always, the cumulative stresses and strains of the past rolled over into 2021 and continued to develop as well as to interact with new events and developments. Above all, the COVID-19 pandemic continued its relentless erosion of stability, prosperity, and optimism around the world. Other, more specific concerns included, in particular, Taiwan but also the South China Sea, Myanmar, the Korean Peninsula, and Afghanistan.

The Biden administration could not easily suppress the major qualms about America that political leaderships around the world were grappling with. Although there was unmistakably hesitation in some quarters, Washington encountered a strong residual interest in re-engagement among its allies.

The so-called rules-based order has established itself as something of a lightning rod in the dispute between the US and China. At an initial meeting of senior officials in Alaska in March 2021, the Biden administration sought to have the relationship viewed as a package of selected, broadly agreed, areas of cooperation alongside areas of regulated or bounded competition centered on economic performance. China had for a number of years flagged its reservations about the rules-based order simply by pointing out that it had not been present when the order was framed. In Alaska, however, it expressed a broader and sharper view, characterizing the order—which even Xi Jinping acknowledged had been a decisive factor in China’s spectacular economic success—as a hegemonic construct that precluded fair competition and looked to the building of a new order devoid of these hegemonic characteristics.

This prospective insight into at least one aspect of China’s difficulties with the rules-based order seemed to be confirmed in July 2021 when China’s Foreign Minister Wang Yi formally presented US Deputy Secretary of State Wendy Sherman with a package of two lists and three “bottom lines.” The first of these “bottom lines” reportedly reads: The United States must not challenge, slander, or attempt to subvert the path and system of socialism with Chinese characteristics. This statement confirms that China seeks formal acknowledgement of and acceptance that systems of governance other than liberal democracy/market economies can be fully effective across all criteria and should be assessed without prejudice.

What we have, therefore, is both the US and China saying that the rules-based order has been subverted, with the US highlighting, inter alia, the unqualified concentration of power in the Chinese Communist Party constitutes as an unacceptable threat to fair competition with private enterprise in the West while China insists, also inter alia, that Western notions of democracy and human rights are now so entrenched that they cast a pejorative cloud over its own system of governance even though it performs effectively against “collective” variants of these essential qualities.

All things considered, China and the United States spent the greater part of 2021 posturing and probing for the high ground rather than engaging substantively on practical solutions to the problems bedeviling their relationship. The outlook, therefore, remained somewhat fraught, with the scope for further serious deterioration looking rather stronger than the prospects for constructive engagement.

We cannot delude ourselves. The differences in values and priorities, the associated differences in what is expected of the state and in the sources of the state’s authority are real and deep. The judgement of political, economic, and security commentators is all but unanimous: the events and trends of the recent past appear to have placed the tools, processes, and mindsets that sustain order and stability in the Indo Pacific under alarming cumulative stress. The Cold War resulted in the Indo-Pacific hosting formidable nuclear and conventional military capabilities. Then China emerged and engineered the fastest sustained expansion of its military power to major power proportions in recorded history. And all sides are deploying these capabilities to prevent or provoke change. Both sharp surprises like AUKUS and the persistent calculated brinkmanship in the East and South China Seas can be seen as warning signs that the potential rate of change to the status quo is exceeding the region’s absorptive capacity.

It is imperative that the policy community in the Indo-Pacific region demands, encourages, and facilitates efforts to probe, dissect, and unravel the policy settings of the major powers and to develop the space for a coexistence that is stable, peaceful, and competitive—in that order. Above all, this is a task that the ASEAN-managed multilateral security processes—especially the ARF and EAS—should and must be a prominent part of, not least because their inclusive membership is an inherent antidote to the forces of divergence that are currently so strong.

Ron Huisken (ron.huisken@anu.edu.au) is Adjunct Associate Professor, Strategic & Defence Studies Centre, ANU and Editor of the CSCAP Regional Security Outlook.

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PacNet #55 – What’s in a word? Calling it “containment” makes a huge difference

Any discussion of US-China relations will, without fail, include Chinese denunciations of America’s mistaken efforts to wage “a new Cold War” against China to check its rise and contain the spread of its influence. The US reply that heightened competition is not containment and attempts to show differences between the two policies are dismissed as empty rhetoric or outright deceptions.

It’s a frustrating conversation because the US policy is to compete with China, not to contain it, and there is a real and important distinction between those two approaches. The problem is that when I began to explore what a real containment strategy would look like—thinking, “that’ll show ‘em!”—it was quickly clear that it’s easy to confuse the two. Even rollback, an aggressive Cold War policy that sought to reverse Soviet influence, can be espied in elements of Western policy toward China.

But it’s critically important to differentiate between clear-eyed competition and blunt-force containment. Competition holds out hope for cooperation and a constructive relationship; containment does not. That hope could make all the difference.

When China looks at the United States, it sees a country increasingly subject to the growing influence of hostile forces. Following the Biden-Xi summit last month, Xinhua noted the Biden administration’s vow “that it does not intend to have a new Cold War with China.” But that grudging concession followed a long complaint about those in Washington who are “still latching onto looking at the world through a zero-sum lens and creating ‘imaginary enemies.’” Those “die-hard zero-summers” “resurrect Cold War metaphors” and reflect “Washington’s deeply ingrained Cold War paranoia.” This “obsolete thinking and entrenched ideological bigotry” is “exactly the way in which the United States once reacted to the Soviet Union’s achievements in the Cold War years.”

The commentary then provided a list of US actions that it says confirm the United States’ hostility to China’s rise. They include formation of the Quadrilateral Security Dialogue “to counter China.” Conducting Freedom of Navigation operations and regional war games “to flex its muscles.” Playing the Taiwan card—selling weapons, sending warships through the Taiwan Strait, and strengthening ties—“to disrupt China’s drive for national reunification and development.”

China’s ambassador to the United States Qin Gang added more items to the indictment in recent remarks to the Brookings Institution’s Board of Governors. He denounced plans “to host a Leaders’ Summit for Democracy to throw ideological labels on others, attack those different from them, and refuse to respect and recognize other countries’ development paths.” He rejected attempts to “abuse and overstretch the concept of national security, set up the so-called ‘Clean Network’ and ‘democratic technology alliance,’ and suppress foreign companies without any justifiable grounds.” And he dismissed US efforts to “politicize” the COVID-19 outbreak, contrasting the response to the pandemic—arguing over its origins—with the joint effort by the two countries to halt the 2014 Ebola outbreak in Africa.

It’s easy to lengthen the list of charges: establishing the Australia-UK-US (AUKUS) trilateral security partnership; strengthening US alliances around the region; the campaign to deny Huawei markets around the world; promoting diplomatic campaigns to secure international condemnation of Chinese actions in Hong Kong and Xinjiang; and encouraging a boycott of the 2022 Winter Olympics that China will host.

Each of those US actions makes sense to me, either as a reaction to Chinese behaviors that threaten US interests or those of its neighbors. From my perspective (and that of many others), US responses are defensive and designed to protect the status quo.

But as Qin countered in his remarks, “what are the rules? Who made these rules? Who are the traffic police?” Beijing looks to the United Nations for authorization for such actions and it has been silent. (A Chinese veto at the Security Council—actual or potential—could have something to do with that.) In that vacuum, US action looks capricious and unilateral.

What is troubling is my effort to contemplate a real containment strategy produced something that looked awfully similar to existing policy. It included the strengthening of security relationships throughout the region, with particular attention to China’s neighbors. The United States would engage in frequent exercises and shows of force to keep China off balance and force it to direct resources to the military. It featured diplomatic campaigns to spotlight Chinese transgressions and vigorous efforts to isolate the country. On the economic front, countries are discouraged from accepting Chinese aid, provided alternatives to those funds, and compelled to deny Chinese companies, its new technology competitors in particular, access to their markets. US companies are also discouraged from investing in or doing business with Chinese counterparts. All were designed to halt the spread of Chinese influence and isolate the country within the international order—to contain it.

The biggest difference would be this strategy’s efforts to undermine stability within China. These initiatives would identify sources of tension and friction in Chinese society and actively work to widen and magnify them. This would be the most aggressive expression of containment and is quite dangerous since it’s hard to mistake it for anything other than what it is: an attempt to destabilize the Chinese Communist Party and promote regime change.

My attempt to differentiate between competition and containment failed. That is frustrating because I genuinely believe—as do virtually all US policymakers and analysts—that US policy is designed to compete, not contain. Even hardline critics of US policy accept that conclusion since they complain that the United States isn’t doing enough to challenge China.

Does it matter? Is it significant that the United States is containing China but doesn’t use that word to describe its policy?

Absolutely. Containment asserts that the Chinese government is fundamentally illegitimate and cannot be given space in the international system. Competition, by contrast, bounds that enmity. By insisting that the United States “will cooperate when it can, compete when it should and confront when it must,” opportunities to work with the world’s second-largest economy and a formidable power are not dismissed out of hand. (The United States occasionally cooperated with the Soviet Union during the Cold War across a narrow range of issues, all directly related to security. There are more issues with which the West can work with China because of entrenched interconnections that never existed in Western-Soviet relations.)

Containment draws sharper, thicker lines between China and the West. It legitimates a wider range of actions, including offensive ones. Those then justify China’s pursuit of its own narrowly framed interests and validates responses that the West has already dismissed and condemned. It reinforces a downward spiral in relations. And since the goal is to contain China, there is little reward for Beijing to moderate its behavior—cooperation is no longer on the table.

Most significantly, containment and its dismissal of cooperation threatens to alienate US allies and partners. Those governments are concerned by Chinese behavior but they are not all in on the hard line. The European Union strategy toward China echoes the current tripartite US approach identifying China as “simultaneously (in different policy areas) a cooperation partner, a negotiation partner, an economic competitor and a systemic rival.” Japan aligns closely with the United States but it too worries about closing the door on relations with China. A shift from competition to containment could fracture the broader coalition of forces that is essential if there is to be any hope of changing the Chinese government’s behavior.

It isn’t clear if China cares one way or another. In one moment, Chinese interlocutors call for changes in US declaratory policy—such as accepting “mutual vulnerability” or adopting a no-first use policy. In the next, they dismiss US rhetoric as empty talk, highlighting gaps in words and its actions. Ironically, in the next breath, they ask—in some cases demand—that those countries accept its own assertions of benign intent, and ignore all material changes in Chinese capabilities, as well as any steps that it has taken that undercut its professions of goodwill and desire for peaceful coexistence.

The Chinese are right about one thing: trust is in short supply. While there is blame enough to go around, the failure to recognize their part in that downward spiral guarantees continued deterioration.

Brad Glosserman (brad@pacforum.org) is deputy director of and visiting professor at the Center for Rule-Making Strategies at Tama University as well as senior adviser (nonresident) at Pacific Forum. He is the author of “Peak Japan: The End of Great Ambitions” (Georgetown University Press, 2019).

PacNet #53 – What should Washington expect from US-China strategic stability talks?

National Security Advisor Jake Sullivan said that US President Joe Biden proposed strategic stability talks to Chinese Chairman Xi Jinping during their virtual meeting on Nov. 15 and that “the two leaders agreed that we would look to begin to carry forward discussions on strategic stability.”

The United States has long sought such discussions with China, but Beijing has invariably declined, arguing that “conditions are not ripe” because the US nuclear arsenal is much larger than China’s. Yet while promising that it would stick to “minimum deterrence” (codewords for a small nuclear force), Beijing has been growing its arsenal and, per recent evidence, this growth is advancing much faster than anticipated, with no end in sight.

If strategic stability talks take place, what should Washington expect?

The findings of unofficial US-China meetings offer insights. In the absence of official strategic stability talks, these meetings were, for a long time, the only game in town. They stopped as the broader US-China relationship deteriorated, but some have resumed recently, and they provide important lessons for Washington. I offer five here.

Lesson #1: Expect to be blamed

Beijing will air grievances and appear largely dismissive to US (and allied) concerns. Beijing justifies its military build-up by pointing to “US aggressive moves,” including efforts to build a coalition of democracies against China. Washington will hear criticisms of the Quadrilateral Security Dialogue and the Australia, United Kingdom, and United States (AUKUS) pact, Beijing’s new bête noire. US explanations that Beijing’s actions have triggered those developments will fall on deaf ears, and Washington will be told to be “more rational” and to abandon its “Cold-War mentality” and its quest for “absolute security.”

Of course, Beijing will also accuse Washington of changing its policy vis-à-vis Taiwan, notably by deploying troops there and by suggesting that the United States has defense commitments with Taipei.

As a result, while Beijing will say that it wants to improve the bilateral relationship, it will not articulate specific actions China should take to that end. For Beijing, the United States has destabilized the relationship and therefore the responsibility for stabilizing it rests on Washington.

Lesson #2: Expect challenges to insulate the nuclear dimension from broader competition

Beijing will express rhetorical support for attempts to insulate the nuclear dimension of the relationship from competitive dynamics in broader US-China relations, but it will also stress that such dynamics make it difficult for China not to compete in the nuclear domain.

Beijing will insist that it is not a “revisionist state,” unlike the United States, which has withdrawn from the Joint Comprehensive Plan of Action and the Intermediate-Range Nuclear Forces (INF) and Open Skies treaties, is developing low-yield nuclear weapons, and is refusing to cooperate on peaceful nuclear uses. For Beijing, these actions “prove” that the United States is not sincere about strategic stability and, after AUKUS, nonproliferation.

Still, Beijing will stress that China and the United States should commit to never fighting a war, especially a nuclear war. Expect reference to the Reagan-Gorbachev 1985 statement that “a nuclear war cannot be won and must never be fought” and a push for China and the United States to issue a similar statement.

Beijing, however, will go on to say that the chances of war will decrease if the United States refrains from deploying missile defenses or INF-range missiles in the Indo-Pacific. Read: Problems will go away if the United States lets China dominate the region. When Washington refuses and cites alliance commitments (which allies want strengthened because they fear China), Beijing will use this as evidence of US “nuclear aggressiveness.”

Lesson #3: Expect major disagreements over nuclear plans and strategies

Beijing will be angered that China is—will be—a major focus of the key US strategic reviews, notably the Nuclear Posture Review.

Beijing will dismiss US claims that China is now a US “nuclear near-peer” due to qualitative and quantitative force improvements, and possible posture change (to launch-under-attack). It will object that Chinese modernization complicates US-Russia nuclear reductions. It will reject arguments that the United States might consider building its arsenal back up (because it now has two major nuclear-armed adversaries, Russia and China) and that in response to requests from US allies, it might focus extended deterrence on China, not just North Korea.

Beijing will also reject the idea that it is politically impossible for Washington to acknowledge US-China mutual vulnerability—a goal that China has long sought. It will dismiss the charge that the apparent scope and scale of the Chinese build-up (and its open-endedness) suggests that China has given up on nuclear stability with the United States.

Instead, Beijing will maintain that Chinese nuclear strategy remains consistent and continues to be based on the same principles it laid out after it exploded its first nuclear device in 1964. These include the development of a small nuclear force and its use strictly for deterrence purposes, not warfighting. Beijing will stress that Chinese modernization aims solely to ensure that its forces remain survivable, and it will point to its no-first-use policy as the best example of China’s restraint. Beijing will dismiss “US media and think-tank speculations” about Chinese nuclear activities but insist that modernization is essential because China faces a “grave threat” from the United States.

Beijing will express skepticism over US claims that Washington has maintained a restrained posture in the Indo-Pacific, and that US missile defenses are limited. It will point to the US intelligence, surveillance, and reconnaissance technologies, arguing that China does not worry just about US firepower, but is also concerned by the US ability to search, locate, and neutralize Chinese forces.

Lessons #4: Expect crisis management to have potential

Beijing will reject limits on, let alone reduction of, its strategic weapons, but support efforts to avoid or manage crises and escalation. In other words, arms control is out, and crisis management is in.

Beijing may agree to a “multi-tiered crisis management dialogue” where the two countries define “basic principles” and explain perspectives on issues that concern the other. For instance, that could translate into the United States providing information about its damage-limitation and left-of-launch strategies in exchange for China explaining its co-location of nuclear and conventional systems.

Beijing may also agree to improve implementation of existing crisis management mechanisms, strengthen them, and develop new ones, especially those that address risks in the space and cyber domains, and with artificial intelligence. Beijing may support establishment of an emergency management office. Of course, also expect Beijing to say that a US-China no-first-use policy would reduce the odds of a crisis and, in the event of a crisis, decrease the risks of nuclear escalation.

Cooperation will not be smooth, however. Beijing will warn that a “lack of trust” between the two countries is an impediment to progress and charge Washington with creating “the conditions of cooperation.” Consistent with Lesson #1—that problems in the relationship are the fault of the United States—it will call out Washington for “creating crises with China or near Chinese territory” and demanding that Beijing manage them. Beijing may also make “issue linkages,” saying Chinese cooperation on crisis management will be difficult without US “flexibility” on trade, technology, or another issue.

Lesson #5: Expect cooperation on some non-bilateral nuclear issues

Beijing will show interest in joint work on nuclear security. It will want to engage with Washington to advance the multilateral arms control and nonproliferation regimes, including the Nuclear Nonproliferation Treaty, International Atomic Energy Agency, Comprehensive Nuclear-Test-Ban Treaty, and Nuclear Suppliers Group.

Beijing will also voice support for US-China efforts to address proliferation crises, but cooperation will remain limited. For instance, while recognizing that North Korea is a problem, Beijing will assert that it can be solved if the United States offered “reasonable security guarantees” to Pyongyang, granted sanctions relief, and normalized US-North Korea relations. Short of that, Beijing will continue to argue that the United States is the problem and confirm the suspicion that it is “using North Korea to justify its regional alliances.”

Bottom line: Keep expectations low and get ready for the long haul

Washington, then, should have low expectations for US-China strategic stability talks. Profound differences and disagreements mean that discussions will be difficult and frustrating, and it will take time to produce deliverables.

Focusing on crisis management shows some promise, however, and joint work on non-bilateral issues may help build a framework for cooperation. In any case, broad “strategic nuclear” engagement has stronger odds of success than narrow nuclear work. Talks should include nuclear weapons, conventional weapons, missile defense, and emerging technologies and domains that have or could have an impact on bilateral strategic stability.

Finally, to perform well, Washington should ramp up expertise in this area, both inside and outside the US government. It needs more experts who understand both China and strategic stability. This should receive its full attention.

David Santoro (david@pacforum.org) is President and CEO of the Pacific Forum. He is the editor of US-China Nuclear Relations: The Impact of Strategic Triangles (Lynne Rienner, May 2021). Follow him on Twitter @DavidSantoro1

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.

PacNet #50 – Fold, call, or raise? China’s potential reactions to AUKUS

Over a month has passed since the announcement of the defense cooperation agreement among Australia, the United Kingdom, and the United States (AUKUS). While the deal includes cooperation in a variety of areas, the most eye-catching aspect of the cooperation is the sale of nuclear-powered submarines, a crown jewel of US military technology, to Australia. Although AUKUS does not mention China directly, it is well-understood that China motivated the formation of this partnership. Given the scope of AUKUS and its relatively long implementation timeframe, there are four ways to analyze Chinese reactions: threat assessment, nuclear nonproliferation, potential responses, and the regional arms race.

The threat assessment

The Chinese worry about Australia obtaining nuclear-powered submarines, but do not consider the threat urgent. They are concerned by the impact such submarines could introduce to China’s maritime domains, especially in the South China Sea and the Taiwan Strait. Beijing, therefore, has focused on the deal’s geopolitical impact and attacked AUKUS, arguing that it is the product of a “Cold War mentality” among Canberra, London, and Washington and that it will undermine regional security and stability. Some have equated AUKUS with an “Asian version of NATO,” with the potential to expand to include other like-minded countries.

Despite the severity of the challenge, there is also an impulse in Beijing to “wait and see” as to its real impact, as the details remain elusive and consultations will take time. The Chinese are not yet clear whether the submarines will be built, or whether they will come from retired US fleet. In addition, Beijing believes that AUKUS might be scrapped by future political transitions in the Australian government, especially considering its high financial and strategic costs. The fact that three former Australian prime ministers have expressed varying reactions to AUKUS leaves China with a sense of hope that this may not be a done deal.

Impact on proliferation

The most stringent Chinese attacks on AUKUS have focused on its implications for nonproliferation. The Chinese Permanent Representative to the United Nations in Vienna made a statement on Sept. 16 on the deal’s “undisguised nuclear proliferation activities.” He called for the International Atomic Energy Agency (IAEA) to publicly condemn AUKUS, which, he claimed, demonstrates the “double standard” the United States and United Kingdom pursue in nuclear exports. According to a prominent Chinese arms control expert, director of the Arms Control Center at the China Institute of Contemporary International Relations (CICIR) Guo Xiaobing, AUKUS violates the mission and core obligations of the Nuclear Nonproliferation Treaty (NPT) in five different ways:

  • It contributes to the proliferation of a delivery system for weapons of mass destruction.
  • It contributes to the proliferation of fissile materials that could be used to make nuclear weapons.
  • It has the potential to lead to the proliferation of uranium enrichment technologies.
  • It undermines the NPT because it sets a bad precedent.
  • It could fuel a regional arms race.

To be sure, AUKUS does not violate the NPT. In the IAEA Safeguard Glossary (2001 Edition), section 2.14, on the use of nuclear material in a non-proscribed military activity which does not require the application of IAEA safeguards, it is stipulated that “[n]uclear material covered by a comprehensive safeguards agreement may be withdrawn from IAEA safeguards should the State decide to use it for such purposes, e.g. for the propulsion of naval vessels” (emphasis added). This, in other words, excludes nuclear-powered submarines from IAEA safeguarding requirements. As such, then, China’s attack on AUKUS is that it violates the spirit of the NPT, but not its letter.

Potential responses

Given the impact of AUKUS is not immediate, Chinese reactions will take time to manifest. At present, China appears to prioritize understanding the scope and details of AUKUS and attacking its legitimacy for geopolitical and nonproliferation reasons. Still, in retaliation, some have proposed additional economic sanctions on Australia through trade. Hu Xijin, chief editor at Global Times called for “no mercy” to Australia if Canberra dares to “assume it has acquired the ability to intimidate China now that it has nuclear submarines and strike missies.” He has also proposed that China should “kill the chicken to scare the monkey” if Australia takes any aggressive military moves. In the event of perceived attacks from Australia, this could mean that China will retaliate militarily.

The most important challenge for China

For Chinese strategic thinkers, the real danger and core challenge of AUKUS (and the United States’ overall coalition-building in the region) lies in the intensification of the arms race in the Indo-Pacific. Although Beijing considers that the goal of its military buildup is to offset, or undermine US military dominance in the region, rather than targeting any regional countries, Chinese officials seem to be coming to the painful realization that their military modernization has led regional players to seek new (or more) weapons. Plainly, Beijing is realizing that its actions have contributed to a regional arms race. What’s more troubling for China is that this arms race is between China on one side and the United States and its allies and partners on the other. Beijing, then, must counter multiple countries at the same time.

Equally upsetting for China is that this arms race is created, fueled, and supplied by the United States. Starting with nuclear-powered submarines to Australia, China believes that the United States will receive—and deliver on—rising demands from allies and partners in the region for newer and more advanced weapon systems, even if they are not nuclear-powered submarines; South Korea, for one, has made this request for a decade.

Beijing must decide if it should “fold,” “call,” or “raise.” “Calling” or to “raising” vividly reminds China of the fall of the Soviet Union, and how Moscow exhausted its resources in its arms race with the United States. “Folding” does not appear to be an option—Beijing is unlikely to give up its regional ambitions. Beijing could call for arms control dialogues, but that will require compromises, and it is unclear that there is an appetite for this in China at the moment. Still, AUKUS might force China to make tough decisions.

Yun Sun (ysun@stimson.org) is a Senior Fellow and Co-Director of the East Asia Program and Director of the China Program at the Stimson Center.

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.

PacNet #49 – Xi Jinping’s top five foreign policy mistakes

Xi Jinping’s aggressive foreign policy is stimulating increased international opposition to the Chinese Communist Party’s (CCP) agenda, undoing years of effort by Chinese officials to assure regional governments that a stronger China will be peaceful and non-domineering. Here are five examples of Xi’s self-defeating decision-making in the People’s Republic of China’s (PRC) foreign relations.

Wolf Warriorism

Xi has ordered his diplomats to demonstrate “fighting spirit” and to “dare to show their swords.” Accordingly, over the past two years Chinese diplomats have aimed jarring insults and threats at various countries, not just Western democracies, but also Brazil, Kazakhstan, Iran, Pakistan, Venezuela, Thailand, and South Korea. The result is unsurprising. Public opinion surveys by the Pew Research Center and other pollsters show a marked increase in negative feeling toward China since 2019 in Europe, Australia, Japan, the United States, and other countries. Former Singaporean senior foreign ministry official Bilihari Kausikan said “China’s ‘Wolf Warriors’ are doing a better job than any American diplomat of arousing anti-Chinese feelings around the world.” Chinese diplomats could defend their country’s actions differently. Instead, Wolf Warriorism acts as an extension of domestic politics, with little regard for harm done to China’s international prestige and relationships.

Galwan Valley skirmish

According to Indian sources, this June 2020 battle on the disputed Sino-Indian border began when Chinese troops ambushed and killed an Indian colonel who had approached the Chinese unarmed and in good faith to negotiate de-escalation. Whether or not Beijing ordered this particular act, a PRC policy of creeping expansionism made an eventual confrontation almost inevitable absent a tacit Indian surrender. For years the Chinese have built infrastructure to facilitate quick military mobilization in disputed areas. The Chinese government found it intolerable when the Indian side started to do the same in response.

The clash caused a long-term hardening of Indian attitudes and policy toward China. The Indian government cancelled several infrastructure construction deals with China, halted the purchase of Huawei information technology equipment, and sought to economically decouple from China in other important sectors. New Delhi re-committed itself to blocking Chinese expansion into disputed areas. India has signaled a deeper commitment to the Quad, was quick to express support for the AUKUS agreement, and now sends warships into the South China Sea—acts that Beijing finds threatening.

South China Sea policy

Having already distinguished itself as the most aggressive of the South China Sea claimants, Beijing started building sizeable artificial islands in 2013. China has now installed military facilities, including runways, docks, barracks, and missile batteries, on at least three reefs in the Spratly group. The PRC’s South China Sea policy highlights Beijing choosing to impose its will upon weaker neighbors rather than seeking a mutually acceptable compromise. It is also another example of the Chinese government disregarding an international agreement to which China was a signatory. Beijing has argued that China’s “historic rights” to the South China Sea take precedence over the United Nations Convention on the Law of the Sea (UNCLOS), and contemptuously rejected the 2016 ruling against China by the Permanent Court of Arbitration.

The upside of these outposts, located far from mainland China, is uncertain. They might be more liability than asset to the PRC in a time of conflict. As for the downside: more than any other single Chinese policy, the new bases convinced international observers that PRC foreign policy under Xi was taking an aggressive turn, with more emphasis on winning rather than managing strategic disputes, and less effort to avoid alarming other governments in the Indo-Pacific.

Taiwan

Rather than blazing a creative new solution to the cross-Strait dispute, the man celebrated for “Xi Jinping Thought” has simply doubled-down on his predecessors’ demonstrably failed policies. Xi maintains that unification is essential to China’s “rejuvenation,” although the PRC is abundantly prosperous and secure without controlling Taiwan. He has continued to insist that Taiwan’s destiny is “one country, two systems” (1C2S). Taiwan’s people, however, never supported 1C2S, and the destruction of Hong Kong’s liberties has thoroughly discredited the concept. That Xi would still speak of 1C2S in a message to Taiwan as recently as Oct. 9 indicates a stunning intellectual and political sclerosis.

Finally, Xi has increased military pressure on Taiwan. This has deepened resentment on the island toward China and bolsters support for the pro-independence Democratic Progressive Party, which now holds both the presidency and a legislative majority. The heightened sense of danger has prodded Taiwan to implement asymmetric defense, which will make it more capable of fighting off an attempted PRC invasion. The Biden administration has reaffirmed US support for Taiwan as “rock solid.” Even Japanese leaders are now openly discussingthe increasing likelihood that Japan would help defend Taiwan.

Xi’s Taiwan policy works to eliminate possible solutions other than a war that, even in the best-case scenario, would be disastrous for China.

Economic coercion against Australia

In April 2020, Canberra displeased Beijing by calling for an inquiry into the origins of the pandemic. The PRC retaliated by cutting importsof 10 Australian products. As in previous cases, Chinese officials implausibly denied that the restrictions were politically motivated, a gratuitous show of duplicity.

The consequences of this Chinese policy were worse for China than for Australia. Canberra did not accommodate the 14 political demandsmade by the Chinese embassy in November 2020. Australia suffered little from the import bans, finding other buyers for much of the supply turned away by China. Australian Treasurer Josh Frydenberg recently described the damage done to Australia’s economy as “relatively modest.” In addition to the reputation cost to Beijing, the Chinese government’s campaign against Australia drew greater international attention to the dangers of doing business with China. Power shortages in China during autumn 2021 are partly due to a coal shortage, worsened by the sanction against Australian coal imports. The attempt to punish Australia has increased momentum for addressing China’s systematic violation of both the spirit and the letter of its World Trade Organization obligations. Canberra’s refusal to capitulate may serve as an inspiration for other governments under Chinese economic pressure over a political disagreement, diminishing the usefulness of this tactic.

What drives Xi? First, he has relied heavily on pandering to Chinese nationalism. Appearing to defend China’s interests against challenges by foreigners makes the Xi regime more popular and implicitly makes opposing Xi seem unpatriotic.

Second, Xi rules during a period of Chinese hubris. By 2012, when Xi assumed leadership, China was the world’s second-largest economy and on track to surpass the United States for the top spot. Beijing had hosted the Olympic Games in 2008, China’s coming-out party as a world power, while the financial crisis in 2007-2008 convinced Chinese observers that America was in rapid decline even as China surged ahead.

A third contributing factor is hyper-authoritarianism. Xi has concentrated numerous decision-making powers in himself, built up a personality cult, and prioritized political correctness over pragmatic analysis. The resulting political climate is not conducive to advisors warning Xi that he is making mistakes.

Xi’s goals include increasing China’s international stature and quashing international criticism. He says he wants to cultivate the image of a “credible, loveable and respectable China.” Xi seeks to maximize China’s access to global markets and technology. He wants to hasten the withdrawal of US strategic influence from the region. He wants the world to believe “China will never seek hegemony, expansion, or a sphere of influence.”

Xi’s major foreign policy errors, however, have undermined these goals. The PRC government under Xi has indulged nationalistic domestic public opinion at the risk of sabotaging the important longer-term national objectives that Xi has specified as central to his “China dream.”

A PRC that other states perceive as aggressive is engendering coordinated strategic opposition. This will make it harder for China to become a regional and global leader. If other governments believe China is expansionist, they will believe every strategic gain by China emboldens Beijing to strive for more. During Xi’s tenure this logic has become commonplace in discussions about Beijing’s designs on Taiwan and the South China Sea. There is also an important economic and technological cost to China, as worried trade partners decouple to reduce their vulnerability to PRC coercion and to avoid selling China the rope that China might hang them with.

Chinese remember Mao’s leadership as 70% good. Xi may have difficulty reaching even that modest standard.

Denny Roy (RoyD@EastWestCenter.org) is a senior fellow at the East-West Center, Honolulu. He specializes in strategic and international security issues in the Asia-Pacific region.

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.

PacNet #40 – Comparative Connections Summary: September 2021

COMPARATIVE CONNECTIONS SUMMARY- SEPTEMBER 2021 ISSUE

 

REGIONAL OVERVIEW
EUROPE “DISCOVERS” ASIA AND WASHINGTON “DISCOVERS” SEA, AMID AFGHAN ANXIETY
BY RALPH COSSA, PACIFIC FORUM & BRAD GLOSSERMAN, TAMA UNIVERSITY CRS/PACIFIC FORUM
Joe Biden pledged that the US would resume its traditional role as leader of US alliances, supporter of multilateralism, and champion of international law and institutions. Throughout its first nine months, his administration has labored to turn those words into reality, and for the first six months the focus was on Asia, at least Northeast Asia. During this reporting period, Biden himself worked on multilateral initiatives and while the primary venues were Atlanticist–the G7 summit, NATO, and the European Union–Asia figured prominently in those discussions. Chinese behavior loomed large in European discussions as NATO allies conducted ship visits and military exercises in the region to underscore these concerns. Meanwhile, a number of senior US foreign policy and security officials visited Asia, and Southeast Asia in particular, amidst complaints of neglect from Washington. Concerns about Chinese pressure against Taiwan also grew in the region and beyond. The impact of the US withdrawal from Afghanistan, messy at it appeared to be, has thus far not resulted in a crisis of confidence regarding US commitment to the region.

US-JAPAN RELATIONS
SUMMER TAKES AN UNEXPECTED TURN
BY SHEILA A. SMITH, COUNCIL ON FOREIGN RELATIONS & CHARLES MCCLEAN, UNIVERSITY OF MICHIGAN
By the end of spring, the US-Japan relationship was centerstage in the Biden administration’s Indo-Pacific diplomacy. From the first Quad (virtual) Summit to the visit of Prime Minister Suga Yoshihide to Washington, DC, relations between Tokyo and Washington could not have been better. A full calendar of follow-up meetings for the fall suggested even further deepening of the partnership. And on Aug. 20, President Joe Biden announced that he intended to nominate Rahm Emanuel, former mayor of Chicago and chief of staff for President Obama, as ambassador to Japan. Throughout the summer, the US and Japan continued to deepen and expand the global coalition for Indo-Pacific cooperation. The UK, France, and even Germany crafted their own Indo-Pacific visions, as did the EU. Maritime cooperation grew as more navies joined in regional exercises. Taiwan featured prominently in US-Japan diplomacy, and in May the G7 echoed US-Japan concerns about rising tensions across the Taiwan Straits. Japanese political leaders also spoke out on the need for Japan to be ready to support the US in case tensions rose to the level of military conflict.

US-CHINA RELATIONS
THE DESCENT CONTINUES
BY BONNIE GLASER, GERMAN MARSHALL FUND OF THE US
The downward slide in US-China relations continued as the two countries wrangled over Hong Kong, COVID-19, Taiwan, the South China Sea, Xinjiang, and cyberattacks. US Deputy Secretary of State Wendy Sherman and Chinese officials met in Tianjin but appeared to make no progress toward managing intensifying competition between the two countries. The US rolled out a series of measures against alleged Chinese forced labor practices and strengthened the prohibition against US investments in the PRC’s military industrial complex. Deteriorating freedoms in Hong Kong prompted the Biden administration to impose more sanctions on Chinese officials and issue a business advisory warning US companies of growing risks to their activities in Hong Kong.

US-KOREA RELATIONS
STIR NOT MURKY WATERS
BY MASON RICHEY, HANKUK UNIVERSITY & ROB YORK, PACIFIC FORUM
US relations with both South and North Korea were—with a few notable exceptions—uneventful during the May-August 2021 reporting period. If US-Korea relations displayed some excitement, it was largely along the Washington-Seoul axis. An inaugural leader summit between Presidents Joe Biden and Moon Jae-in took place in Washington, producing significant deliverables for the short, medium, and long term. Biden and Moon then participated in the June G7 summit in Great Britain. The US withdrawal from Afghanistan in August also provided South Korea with challenges and ponderables. Washington-Pyongyang communication was subdued, aside from standard North Korean criticism of US-South Korea joint military exercises. Even when the US and North Korea addressed each other with respect to dialogue, it was usually to underline for the other party how Washington or Pyongyang is willing to talk under the right circumstances, but capable of waiting out the other side. Late August added some spice, however, as the IAEA issued a credible report confirming what many had expected: North Korea has likely re-started fissile material production at the Yongbyon complex. Finally, outside the reporting period, Pyongyang tested a potentially nuclear-capable land-attack cruise missile on Sept. 11. Are these signs that sleeping dogs are stirring?

US-SOUTHEAST ASIA RELATIONS
WASHINGTON FINDS ITS FEET IN SOUTHEAST ASIA
BY CATHARIN DALPINO, GEORGETOWN UNIVERSITY
In the months immediately following Joe Biden’s inauguration, Southeast Asia was on the backburner in US foreign policy, but in May the administration heeded calls for a stronger voice and more active role in the region with a succession of visits by high-level officials, culminating in Kamala Harris’s first trip to the region in her role as vice president. The cumulative impact remains to be seen, but one key “deliverable”—the renewal of the US–Philippines Visiting Forces Agreement (VFA) during Secretary of Defense Lloyd Austin’s visit to Manila—was enough to label the summer strategy a success. More broadly, the administration responded to the surge of the COVID Delta variant in Southeast Asia with donations of vaccines, making considerable strides in the “vaccine race” with China and Russia.

CHINA-SOUTHEAST ASIA RELATIONS
PUSHING REGIONAL ADVANTAGES AMID HEIGHTENED US RIVALRY
BY ROBERT SUTTER, GEORGE WASHINGTON UNIVERSITY & CHIN-HAO HUANG, YALE-NUS COLLEGE
China’s recognition of the strategic challenge posed by close Biden administration relations with the Quadrilateral Security Dialogue (Quad) powers Australia, India, and Japan reinforced Beijing’s strong efforts to preserve and expand its advantageous position in Southeast Asia in the face of rising competition with the United States. Beijing used uniformly critical coverage of US withdrawal from Afghanistan to highlight US unreliability, and attempted to discredit Vice President Kamala Harris’ Aug. 22-26 visit to the region, the highpoint of Biden government engagement with Southeast Asia. It also widely publicized evidence of China’s influence in the competition with the United States in Southeast Asia, even among governments long wary of China, like Vietnam. That effort underlined the lengths Vietnam would go to avoid offending China in reporting that Hanoi allowed the Chinese ambassador to publicly meet the Vietnamese prime minister and donate vaccines, upstaging Vice President Harris, who hours later began her visit and offered vaccines.

CHINA-TAIWAN RELATIONS
CROSS-STRAIT TENSION INCREASING BENEATH A SURFACE CALM
BY DAVID KEEGAN, JOHNS HOPKINS SCHOOL OF ADVANCED INTERNATIONAL STUDIES & KYLE CHURCHMAN, JOHNS HOPKINS UNIVERSITY
Cross-Strait tensions intensified between May and August 2021, despite the superficial calm that generally prevailed after the dramatic confrontations earlier in the year. China again blocked Taiwan’s participation at the World Health Assembly (WHA), and Xi Jinping reaffirmed the Communist Party’s commitment to the peaceful reunification of Taiwan at the Party’s 100th anniversary. Chinese military flights into Taiwan’s Air Defense Identification Zone were almost routine until China launched 28 sorties in a single day to protest the G7 summit’s endorsement of Taiwan’s participation in the WHA. The Biden administration announced its first arms sales to Taiwan. Several countries, most notably Japan and Australia, made their strongest statements ever in support of Taiwan. Lithuania announced it would permit the opening of an unofficial “Taiwanese” representative office. Beijing withdrew its ambassador from Lithuania and told Lithuania to withdraw its ambassador from Beijing. The US dismissed fears that its withdrawal from Afghanistan might portend abandonment of Taiwan. In coming months, Taiwan faces three potential turning points: Taiwan’s opposition Nationalist Party will elect a new chair; a referendum could overturn the opening of Taiwan’s market to US pork; and the US has signaled it will invite Taiwan to President Biden’s democracy summit despite threats of military retaliation by China.

NORTH KOREA-SOUTH KOREA RELATIONS
SUMMER FALSE DAWN: ON/OFF COMMUNICATIONS
BY AIDAN FOSTER-CARTER, LEEDS UNIVERSITY, UK
Summer 2021 saw a false dawn on the Korean Peninsula, hardly the first, but surely one of the shortest. On July 27 both North and South announced the reconnection of inter-Korean hotlines, severed for over a year. In Seoul, hopes were high—aren’t they always?—that this signalled a fresh willingness by Pyongyang to engage, not only with South Korea but also the US. Yet this “breakthrough” lasted barely a fortnight. When the US and ROK began their regular August military exercises—albeit scaled back and wholly computer-based—North Korea snarled and stopped answering the phone. Inter-Korean relations remain frozen, as they have been ever since early 2019. With Moon Jae-in’s presidency due to end next May, any real melting of the ice looks increasingly like a challenge for his successor.

CHINA-KOREA RELATIONS
ALLIANCE RESTORATION AND SUMMIT COMMEMORATIONS
SCOTT SNYDER, COUNCIL ON FOREIGN RELATIONS & SEE-WON BYUN, SAN FRANCISCO STATE UNIVERSITY
South Korea President Moon Jae-in’s meeting with Joe Biden and his participation in the G7 summit during May and June focused attention on Seoul’s strategy of balancing relations with China and the United States. While Beijing disapproved of the US-ROK joint statement released after the May summit, Chinese state media praised the Moon administration’s relative restraint in joining US-led coalition building against China. Official remarks on core political and security issues, however, raised mutual accusations of interference in internal affairs. US-China competition and South Korean domestic political debates amplify Seoul’s dilemma regarding its strategic alignment ahead of the country’s 2022 presidential elections.

JAPAN-CHINA RELATIONS
A CHILLY SUMMER
BY JUNE TEUFEL DREYER, UNIVERSITY OF MIAMI
China and Japan continued to vie over a wide variety of issues including economic competitiveness, jurisdiction over territorial waters, World War II responsibilities, representation in international organizations, and even Olympic and Paralympic medals. The Japanese government expressed concern with the increasingly obvious presence of Chinese ships and planes in and around areas under its jurisdiction, with Chinese sources accusing Japan of a Cold War mentality. Nothing was heard of Xi Jinping’s long-planned and often postponed official visit to Tokyo. Also, Chinese admonitions that Japan recognize that its best interests lay not with a declining United States but in joining forces with a rising China were conspicuous by their absence.

JAPAN-KOREA RELATIONS
UNREALIZED OLYMPIC DIPLOMACY
JI-YOUNG LEE, AMERICAN UNIVERSITY
In the summer months of 2021, the big question for many observers was whether Prime Minister Suga Yoshihide and President Moon Jae-in would hold their first summit meeting during the Tokyo Olympic Games. Cautious hope was in the air, especially on the South Korean side. However, by the time the Olympics opened in late July, any such hope was dashed amid a series of unhelpful spats. Seoul and Tokyo decided that they would not gain much—at least not what they wanted from the other—by holding a summit this summer. With Suga’s announcement of his resignation as head of the Liberal Democratic Party (LDP) at the end of September, barring any sudden turn of events, his tenure as Japanese prime minister will be recorded as one that did not have a summit with a South Korean president.

CHINA-RUSSIA RELATIONS
AFGHAN ENDGAME AND GUNS OF AUGUST
BY YU BIN, WITTENBERG UNIVERSITY
The summer of 2021 may be the best and worst time for Russia-China relations. There was much to celebrate as the two powers moved into the third decade of stable and friendly relations, symbolized by the 20th anniversary of both the Shanghai Cooperation Organization (SCO) and the “friendship treaty” (The Treaty of Good-Neighborliness and Friendly Cooperation Between the People’s Republic of China and the Russian Federation). This historical moment, however, paralleled a hasty and chaotic end to the 20-year US interlude in Afghanistan with at least two unpleasant consequences for Beijing and Moscow: a war-torn Afghanistan in their backyard with an uncertain future and worse, a United States now ready to exclusively focus on the two large Eurasian powers 30 years after the end of the Cold War. As the Afghan endgame rapidly unfolded in August, both sides were conducting large exercises across and around Eurasia. While Afgthanistan may not again serve as the “graveyard of empires” in the 21st century, but then end of the US engagement there, however, will usher in an era of competition, if not clashes, between rival empires.

AUSTRALIA-US/EAST ASIA RELATIONS
COVID AND CHINA CHILL, ALLIANCE ANNIVERSARY AND AFGHANISTAN
BY GRAEME DOBELL, AUSTRALIAN STRATEGIC POLICY INSTITUTE
Australia closed its borders to confront COVID-19 and rode out recession, while China shut off key markets to punish Australia. The short recession caused by pandemic ended Australia’s record run of nearly three decades of continuous economic growth; Beijing’s coercion crunched the optimism of three decades of economic enmeshment. However, Australia’s economy rebounded while the China crunch continues, causing Australia to question its status as the most China-dependent economy in the developed world. The Canberra–Beijing iciness has built over five years, marking the lowest period since the establishment of diplomatic relations in 1972. In 2021, the language of “strategic partnership” died and the “strategic economic dialogue” was suspended by China. The Biden administration promised not to abandon Australia, saying that US–China relations would not improve while an ally faced coercion. Australia embraced Washington’s assurance, along with the elevation of the Quad with the US, Japan, and India.

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PacNet #32 – China: The Forgotten Nuclear Power No More

New evidence has surfaced that China may be expanding its nuclear arsenal much more and much faster than previously assumed, as experts from the James Martin Center for Nonproliferation Studies obtained satellite images showing work underway on the construction of well over 100 new missile silos near Yumen. The evidence, which dropped June 30, has since focused the minds of US national security experts, as expected given Washington’s description of China as America’s “pacing threat.”

The discussion is still fluid, but two interpretations are emerging. One offers that China is reacting to US actions and that Washington should pursue arms control with Beijing—negotiate to get both sides to limit their forces and avoid an arms race. The other interpretation holds that the new discovery means that there is a nuclear dimension to Chinese President Xi Jinping’s promise that China will have “the dominant position” in the world by 2049, and that Washington should double down on deterrence, including by fully modernizing its nuclear arsenal and more.

Yet neither negotiating arms control nor strengthening deterrence are straightforward solutions, nor are they necessarily mutually exclusive. The Chinese nuclear arsenal, like other facets of Chinese power, is going to be an enduring problem for the United States. As Adm. John Aquilino, the new Commander of the US Indo-Pacific Command, put it during his confirmation hearing earlier this year: “China is a long-term challenge that must be ‘managed’ rather than ‘solved.’”

The Arms Control Response

Anyone with a cursory knowledge of US-China strategic relations is aware that the United States is a major driver of China’s nuclear modernization program. Beijing is concerned by Washington’s nuclear superiority and its improved ability to find and destroy Chinese forces, or to intercept them with missile defenses. China, plainly, fears that the United States might become capable of putting it in checkmate, achieving what Chinese diplomats call “absolute security.”

To solve that problem, Beijing has been expanding and perfecting its arsenal. In addition to building more nuclear weapons, it is investing in road-mobile missiles and sea-based platforms because these systems make it more difficult for Washington to target its forces, and it is adding multiple independent reentry vehicles to its missiles to penetrate US missile defenses. Of late, Beijing also seems to have embraced tactical nuclear use and nuclear warfighting options. In unofficial dialogues, Chinese strategists make clear that China’s modernization program is directed at the United States and, by extension, its allies.

Countering the United States and its allies is not the sole driver, however. In private discussions, Chinese strategists confess that Beijing is increasingly motivated by nuclear developments in India; as one such strategist explained, “Beijing now regards India as a deterrence problem, not as a proliferation problem.” Chinese strategists are less forthcoming when asked whether Beijing considers Russia when it does defense planning, but some admit that it is a factor. While it is unclear if North Korea impacts Chinese calculations, it would be foolish to assume that defense planners in Beijing do not also contemplate conflict with their nuclear-armed neighbor given their complicated relationship. Finally, analysts have explained that domestic and organizational factors are driving the Chinese modernization program as well.

The idea that a US push for arms control with China could solve the problem, then, is not obvious. It’s also not as if the United States has never tried. Since the 2000s, Washington has sought to jump-start bilateral nuclear dialogue with Beijing for that purpose. Yet neither Washington’s initial “patient” approach nor, from the mid-2010s, its more confrontational stance has yielded results. Beijing has declined to engage.

The United States could try harder. Chinese strategists have long insisted that a US statement recognizing that the United States and China are in a situation of mutual vulnerability would help establish a foundation upon which US-China strategic stability can be built, despite the asymmetry of forces between the two countries. Put differently, a US “vulnerability acknowledgement” could entice Beijing to engage in dialogue and arms control.

Research currently conducted by this author, however, suggests that it is not a given and that, in any case, an agreement would not emerge quickly. So, deterrence will play an important—and possibly growing—role in US-China relations regardless of whether there is movement on arms control.

The Deterrence Response

The deterrers, unlike the arms controllers, think that engaging China is pointless. They believe that the latest news makes clear that China seeks nuclear parity with, perhaps even dominance over, the United States, and they argue that Washington should counter with a major nuclear update.

Without minimizing the problem, maintaining perspective about China’s nuclear build-up is essential. The US Department of Defense estimates that China’s stockpile is in the low hundreds—a fraction of the US and Russian stockpiles, which are in the low thousands. So, neither a doubling, tripling, or even quadrupling of China’s stockpile would come close to US and Russian stockpile levels.

It is also unclear whether China seeks nuclear parity or dominance. Some analysts have opined that the latest evidence may show Beijing playing a “shell game,” i.e., move a small number of missiles across a big matrix of silos to prevent its adversaries from locating the missiles. It is a possibility worth considering, especially given that the United States has systematically over-predicted the future size of the Chinese arsenal.

More problematic, focusing on the quantitative growth of China’s arsenal risks coming at the expense of its qualitative improvement, where Beijing has made the most progress. Beijing has not only strengthened the survivability of its forces, but it also seems to have developed new missions. With its new intermediate-range, dual-capable missiles, Beijing is now capable of limited nuclear counterforce use. Beijing is also improving the readiness of its force, including by mating warheads with missiles (a first for China), and possibly moving towards a launch-on-warning posture. Moreover, Beijing has been increasing its cyber and space power, and it is developing an integrated deterrence posture, notably through its Strategic Support Force.

This overview suggests that China poses little risk of nuclear aggression against the United States, and that this will remain unchanged in the foreseeable future. That risk was high in the US-Soviet context during the Cold War, and it has not disappeared in US-Russia relations today. It is low in the US-China context because the Chinese arsenal is and will remain limited in comparison to the US arsenal. China will simply not have a first-user advantage against the United States.

The risk, however, is one of nuclear escalation in a conflict. With a more sophisticated arsenal, Beijing could become more aggressive at the conventional level, which could lead to wars and nuclear use. One pathway to such use is a situation in which China is losing a war (for instance over Taiwan) and launches limited nuclear strikes to force the United States to give up the fight. Another is a situation in which, again during a war, the United States hits Chinese nuclear forces with conventional weapons, prompting Beijing to go nuclear with its remaining forces. This is not far-fetched given the increasingly entanglement between Chinese nuclear and conventional forces.

To be sure, the open-ended nature of China’s nuclear build-up raises legitimate questions for the United States about nuclear policy, strategy, and force planning, especially given that Washington, for the first time, faces two major nuclear-armed adversaries—Russia and China—that are growing their forces (and deepening their strategic cooperation). US nuclear deterrence is also important because it provides an essential backstop to out-of-control escalation.

But doubling down on nuclear deterrence will do little to address the rising risk of conflict and limited nuclear escalation with China. This problem is best solved with stronger conventional deterrence and tighter alliance relationships—to deter Chinese adventurism below the nuclear threshold—and, if there is a conflict, good crisis management with Beijing—to prevent nuclear escalation, at least inadvertent escalation. So, even from a deterrence perspective, there is a role for engagement with China. This is important, and worth noting that the 1963 US-Soviet “hotline” agreement—a crisis management mechanism—was a prelude to arms control.

Just over 20 years ago, a few analysts lamented that China was a “forgotten nuclear power.” Today, Russia is still the United States’ primary nuclear problem, but China is taking center stage. Addressing nuclear China will be challenging, and neither arms control nor deterrence will, alone, be enough. The United States needs a more sophisticated approach, one for which it can—and should—lay down markers in the next US Nuclear Posture Review.

David Santoro (david@pacforum.org) is President and CEO of the Pacific Forum. He is the editor of a new volume on US-China Nuclear Relations: The Impact of Strategic Triangles (Lynne Rienner, May 2021). Follow him on Twitter @DavidSantoro1

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.

PacNet #31 – The Structural Limits of the Supply Chain Resilience Initiative

As a hub of global economic activity and great power tensions, the Indo-Pacific is home to an increasing number of minilateral arrangements shaping the future of the region. Groupings like the Quadrilateral Security Dialogue (Quad), as well as the Japan-America-India, Australia-Japan-India, and France-Australia-India trilaterals demonstrate this trend. The Supply Chain Resilience Initiative (SCRI), launched in April 2021 and complementing the Australia-Japan-India trilateral, is the latest such venture.

China’s deep integration in the international financial system and status as “factory of the world” make global supply chains unsustainably China-centric. COVID-19 revealed many states’ over-dependence on China-centered value chains, and the SCRI seeks to reconfigure global supply chain networks to overcome such vulnerabilities.

The SCRI seeks to ensure global supply chains remain resilient to future “black swan” events, such as pandemics and geopolitical tensions. With several states prioritizing supply chain risk diversification, the SCRI can also further Indo-Pacific economic security dialogue between like-minded nations. Importantly, the SCRI can help balance against China’s rapidly expanding influence, including through the Belt and Road Initiative.

Yet, despite its merits, the SCRI faces considerable structural limitations.

Firstly, although primarily a geo-economic mechanism, the SCRI risks losing focus amid the intensifying regional power rivalry. The initiative is a product of strategic necessity brought about by the pandemic, yet this emphasis on supply chain management is frequently ignored in media and scholarship in favor of strategic positioning vis-a-vis China. Yet, like Japan’s Expanded Partnership for Quality Infrastructure and India’s Act East Policy, the SCRI is not necessarily an anti-China venture.

China-dependent supply chains are a major concern for both smaller and major powers across many critical sectors, including essential pharmaceutical products, food, and industrial raw materials. However, the SCRI does not aim to entirely re-route existing supply chains; this would require complete economic decoupling from China, an unfeasible (and undesirable) goal considering Beijing’s economic clout. Instead, it seeks to build alternative, resilient supply chains to reduce over-dependency, diversify risk, and enhance ability to absorb future market disruptions. Rather than isolating China, the aim is to ensure national economies can withstand adversity. The focus on enhancing cooperation with like-minded nations is drawn on the imperative of building “a free, fair, inclusive, non-discriminatory, transparent, predictable and stable trade and investment environment.” The focus on inclusivity implies openness to dialogue (or participation) with all nations committed to similar ideals—even China.

Secondly, the SCRI remains far-fetched, even overly ambitious. Despite their broad-based synergy on China (or matters relating to China), the main proponents of the SCRI—Australia, India, and Japan—have gaps in their global multilateral practices, including trade and economic outlooks. This will limit the progress of the SCRI. For instance, Japan’s reluctance to support the expansion of the G7 to include India and Australia highlights how national interest considerations supersede any prospects of regional cooperation. Japan is a trading economy, and supply chains are critical to its growth. This is not true for India, which prioritizes manufacturing and innovation, even while aspiring to enhance integration with other economies before it can emerge as a trading nation. These differences could impact the SCRI’s direction and the importance each state gives it.

Thirdly, no clear vision currently exists among SCRI founders on how to shape their initiative. To succeed, a clear plan or charter is vital. The lack of a guiding document risks hampering cooperation, as has been the case with the Quad and Quad-plus, which has only picked up steam over the past year amid increased tensions with China. A similar problem emerged with the Asian Infrastructure Investment Bank and Regional Comprehensive Economic Partnership. Although India and Australia became AIIB members, Japan and the United States opposed it. With RCEP, Japan and Australia could not continue engaging (or supporting) India, displaying a lack of coordination and resulting in New Delhi’s withdrawal from this mega-trade deal.

These examples show the need for a common understanding, agreed framework, and concentrated dialogue to shape and implement the initiative. A charter would be useful in laying down expectations and requirements for the SCRI. As founding members consider the SCRI’s expansion “based on consensus” and acknowledge the importance of business and academia in further developing it, a charter could be critical in coding and committing to an “inclusive” outlook. A formal document would also mitigate criticisms that the initiative is a cartel or “anti-China,” potentially opening the door to induction for Beijing (or even to countries aligned strongly with Beijing) and allowing the Australia-Japan-India trilateral a rulebook to regulate China’s actions.

Fourthly, the SCRI remains limited to its founding members. With its focus on recalibrating global supply chains, expansion to include the United States must be explored. This would make the SCRI a derivative of the Quad, strengthening the Indo-Pacific concept and furthering their supply chain goals. President Biden’s recent comprehensive supply chain review outlined Washington’s need to build “resilient, diverse, and secure” supply chains; SCRI integration could be a productive move forward.

Similarly, the SCRI must consider full/partial participation of key economies and economic blocs—including ASEAN, the European Union (especially France, given its Indo-Pacific focus), and the United Kingdom. Several such entities, including the United States and ASEAN, have sought to reconfigure supply chains to reduce dependence on China and increase resiliency, but made no concerted effort in this direction. While the SCRI might be an Asian exercise, its ambition to create diverse, expansive, inclusive, and resilient supply chains mandates involvement by other major and middle-ranked economies everywhere. Moreover, the participation of technologically advanced actors beyond Asia would prove crucial given the SCRI’s focus on digital technologies. 

The SCRI’s success will depend on inroads it can make with ASEAN. With Australia-Japan-India at its core, the SCRI promotes inclusivity and multipolarity, but also seeks to build Asia-driven (or Indo-Pacific-driven) supply chains. Japan and India are key East Asian and South Asian economic powers; Australia is a major Indo-Pacific actor closely connected to Asia. In relative comprehensive national power, the Lowy Institute’s 2020 Asia Index placed Japan third in the region, India fourth, Australia sixth, and the United States first (with China a close second). Connecting with ASEAN will be economically lucrative and promote the SCRI’s “Asian” vision.

Despite its merits, the SCRI is structurally limited right now. Yet with economic transformation and post-pandemic recovery shaping regional power distribution, the expectations for the SCRI are immense. To meet expectations, the Australia-Japan-India trilateral must acknowledge the challenges and shape the initiative adequately to overcome them.

Dr. Jagannath Panda (jppjagannath@gmail.com) is a Research Fellow and Centre Coordinator for East Asia at the Manohar Parrikar Institute for Defence Studies and Analyses, New Delhi. Dr. Panda is the Series Editor for “Routledge Studies on Think Asia.”

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PacNet #30 – “Moderate” Strategies on China Put Necessary Defense Measures at Risk

A broad policy consensus in Washington, now entering its fourth year, has directed the Biden administration and bipartisan majorities in Congress regarding China. This has resulted in unprecedented legislative initiatives and broad-ranging systematic policies targeting the challenges posed by Chinese behavior at home and abroad. The stakes are seen as high and the need for effective action urgent. A strong perception of danger and need for prompt countermeasures has been at the center of determinants explaining the policy consensus on China since 2018, despite the acute partisanship in the capital.

The challenges involve:

  • Chinese military advances to counter and, if needed, destroy American forces
  • closer collaboration with Vladimir Putin’s Russia targeting US interests
  • continuing state-directed development polices to plunder foreign intellectual property rights and undermine international competitors
  • building and exploiting economic dependencies via the Belt and Road Initiative and other means
  • fostering corrupt and authoritarian governments against the West
  • coercing neighbors to defer to China’s demands
  • using hidden influence operations for subversive ends, and
  • disregarding international law and accepted diplomatic practices.

If successful, the Chinese efforts are predicted to undermine and replace the existing world order with one dominated by an authoritarian party-state focused on advancing Chinese wealth and power at the expense of others. A sense of urgency prevails in Washington, as Beijing has reached “peer competitor” capacities, threatening to dislodge the United States from Asia and overtake it as leader in high-technology industries of the future, thereby establishing China as the world’s economic leader with the most modern and capable military forces.

Strategies Emphasizing Nuance and Moderation

A number of specialists argue that existing US countermeasures have gone too far; they favor a more moderate and nuanced approach in carefully crafted strategies that would avoid exaggerating the threat posed by China and allow for easing of potentially dangerous tensions, and resuming or enhancing US-China collaboration. Unfortunately, these well-crafted policy proposals give little attention to what this writer sees as a more important objective: continuing strong efforts to develop effective American defenses to the challenges posed by China. Without such defenses, Chinese authorities will outmaneuver existing US efforts to deal with China from a position of strength, setting the stage for policy failure.

Flaws in Current Policy

While much has been done in recent years, there are flaws in existing US countermeasures defending against Chinese challenges, especially in two areas:

  1. Chinese authorities are resorting to unprecedented efforts to outmaneuver US-led restrictions on high technology exports to, and acquisitions by, Chinese firms in semiconductor and related software industries. Indirectly or directly cooperative with Chinese authorities in these efforts are a range of US and international firms, advocacy groups, and highly trained specialists pursuing their respective interests. In the process, these groups are assisting Chinese government-led efforts to undermine existing US restrictions and to emerge dominant in this field. US policy has yet to come to a clear judgment on what the US government should do in response as China raises the stakes in this arena of US-China competition. Chinese abilities to influence US and foreign firms, advocacy groups, and experts remains strong, and the latter in turn are essential constituencies in US politics, and important for US economic growth and other interests.
  2. Many US firms, universities, and experts that will be recipients of the tens of billions of dollars being proposed for US high-tech competition with China are often well-integrated with Chinese entities and fellow specialists. Many of their high-tech achievements come through cross-border collaborations that, if stopped, are predicted to reduce their capacity for innovation. How US government policymakers can be secure, under existing circumstances, that the advances they fund will not come into the hands of Chinese authorities remains to be seen.

The problem for US policymakers in these two areas is how to develop and sustain effective defenses in the acute rivalry with China over semiconductors and high-tech industries of the future, while taking into account the interests of US advanced technology companies and experts, as well as those from other developed countries allied with the United States. Right now, there remain important flaws, and they appear important in determining the success or failure of current US policy.

Addressing these flaws in ways that influence the firms and experts to seek their interests in ways that align with US national interests appears unlikely if, as recommended by the specialists, the political atmosphere in Washington plays down the danger China poses and reduces the sense of urgency for effective countermeasures. A prevailing sense of danger and urgency may thus be what is needed to get the firms and individuals benefiting from collaboration with China to adjust their actions.

To conclude, one could use an analogy from American football. The highly nuanced US strategies urging a more relaxed and moderate posture toward China without adequate treatment of important defensive measures resemble an overconfident, well-planned passing game without adequate attention needed for an effective defensive ground game.

Robert Sutter (sutterr@gwu.edu) is Professor of Practice of International Affairs at George Washington University, USA.

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