By Geoff Raby
Published on 30 October 2020 on Australian Financial Review
Australian diplomacy must be recalibrated to cope with the world as it is, not how we would wish it.
How did it get like this? The Australia–China relationship is at its lowest point since diplomatic relations between the two countries began in 1972.
This is something the Australian government doesn’t wish to discuss. Its diplomats are paid to put a positive spin on things. Just when it seemed the situation could not get any worse, China took umbrage at Prime Minister Scott Morrison’s initial unilateral proposal for an international inquiry into the Chinese origins of, and responses to, the COVID-19 pandemic. China invoked trade measures against Australian exports of barley and beef without senior government-to-government contact occurring.
Chinese students and tourists have been warned by the Chinese government to avoid travelling to Australia because it is said to be unsafe – they may face racist attacks. The Australian government, meanwhile, warned companies and government organisations that they were under unprecedented cyber-attack, with China clearly the unnamed culprit. Some commentators now argue that Australia–China relations will never recover.
Ever since prime minister Bob Hawke embraced China’s vision of reform and opening itself up to the outside world, imagining what it could mean for Australia’s future prosperity and security, China and Australia have endeavoured to maintain annual high-level exchanges. But three years ago, Australia was denied access to the highest levels of the Chinese political system, and official, national level contact remains frozen by China.
It was in March 2017 that the last senior bilateral visit occurred, when Premier Li Keqiang came to Canberra. At the state reception held in his honour in the Great Hall of the Federal Parliament, he made light-hearted, off-the-cuff jokes in English about how he thought he’d come to Australia to be sold beef, only to be served rubbery chicken at lunch. He did, however, have a pointed message to deliver. Using the analogy of flying through turbulence on his way to Australia, he said the Australia-China relationship had been going through some bumpy patches, but skilful pilots found ways to navigate into smoother air. Then it was all smiles again. The nosedive was still ahead.
Fears about China’s challenge to the existing order derive largely from a historical view that its rise will trace a similar trajectory to that of the US.
Within the small, tight Canberra policy circle, in the years since the Abbott government was elected in 2013, the security-intelligence-military establishment had come to lead on China policy. The emerging dominant view of China was that it was seeking to overturn the US-led order in the region.
As China’s power grew, maintaining constructive positive relations came to be seen as less important than resisting what is believed to be China’s ambition to build a Sino-centric order. The bilateral relationship was a second order concern, and if it was in trouble, this might even be a badge of honour. Australia need do nothing to restore normal, constructive relations with China. Australia was getting tough with China.
China also overreached through its United Front Work Department’s attempts to influence domestic politics and interfere on university campuses in Australia, and it did so internationally too, especially with its unilateral assertion of sovereignty over disputed islets, reefs and rocky atolls in the South China Sea, culminating in a backlash. China’s bad behaviour invited pushback.
Following the US, the terms of the relationship with China were to be redefined. Businesspeople who urged the government to do more to improve relations were casually dismissed as self-serving, as if concerns about the economic impact of a dysfunctional relationship were somehow illegitimate.
Fears about China’s challenge to the existing order derive largely from a historical view that its rise will trace a similar trajectory to that of the US. Just as the US established hegemony over the western hemisphere before challenging Great Britain as the leading global power, it is argued that China will establish hegemony in the Asia-Pacific region before eclipsing the US as the sole dominant global power. Hence, so much discussion about a shifting power balance is also couched in terms of values and norms: Do you really want to live in a world dominated by the values of the Communist Party of China?
Based on the expected economic trajectories pre-COVID-19, one could be excused for thinking that certain historical parallels may exist between the rise of China and the earlier rise of the US from the end of that country’s civil war.
From a position of weakness, not strength
Yet the reality is that China’s geopolitical circumstances, and its strategic strengths and weaknesses, are far removed from those of the US during its ascendancy.
China’s grand strategy derives from a position of weakness, not strength. China is constrained by its geography, its history and, most of all, its resource endowments.
The third-largest country in area globally, it must defend more than 22,000 kilometres of land borders that it shares with 14 countries; it has been in conflict with most of its neighbours and has ongoing hot disputes with India in several places along their border, most recently in Ladakh involving the first fatalities of troops in more than 50 years. China is also still an empire with significant unresolved internal territorial issues – Xinjiang, Tibet, Taiwan and, more recently, Hong Kong.
Most importantly of all, China, unlike the US, is utterly dependent on international markets and foreign suppliers for all the energy and resources it needs for its continued prosperity.
All of these vital inputs travel via strategic choke points, especially the Straits of Malacca and the South China Sea. In return, China’s exports, so essential to its economy, mainly travel through those same choke points, as well as the Suez and Panama canals. In a conflict, the US could readily control any of these and disrupt the flow of China’s trade in both directions.
While China already has become the dominant power in east Asia, it is far from becoming the local hegemon; in fact, it faces formidable obstacles in doing so. The US presence in the region will continue, as it has massive interests, both economic and geopolitical, to defend. These interests require the US to continue to underpin regional stability.
Significantly, China is also constrained by an absence of soft power. As Henry Kissinger writes in On Order, states need both power and legitimacy. China has increasing, almost unchallenged economic power. Post-COVID-19, it is possible that, with China’s early recovery from the pandemic, it will restart its commercial motors before others do and the economic gap between it and other nations will widen further.
But China struggles for legitimacy, which is supported and reinforced by soft power. China is structurally constrained in the exercise of soft power because of its party-state system of government. Its soft power must ultimately conform to the Communist Party’s ideological narrative, which is intended to legitimise, at every turn, the party’s hold on power.
As can be seen from the COVID-19 crisis, while the party’s narrative may resonate loudly within China, it usually does not work outside of the country. China’s standing in global polling on measures of favourable attitudes towards it have been falling steeply since Xi Jinping assumed power in 2012 and took China in a more authoritarian direction, accompanied by a more muscular foreign policy.
China is decades away from matching the US militarily, and even when it does, armed conflict is most unlikely as neither side would risk nuclear conflict. As in the Cold War, the doctrine of mutually assured destruction will deter direct conflict between the superpowers.
Meanwhile, China has developed substantial force-denial capabilities that will dissuade US adventures closer to China’s shores. Without either hard power (coercion) or soft power (persuasion without force) as an advantage, China has sought a strategic edge through various forms of sharp power using its economic strength. This has ranged through political interference; overseas investments; the acquisition of technology, whether legitimately or illegitimately; cyber warfare, in which it is only one of many participants; and its grand strategy of the Belt and Road Initiative.
China’s statecraft depends on geo-economics – pursuing national interests through economic instruments, such as the BRI, trade and aid – and institutional entrepreneurship, as represented by the Shanghai Co-operation Organisation, Asia Infrastructure Investment Bank, Silk Road Fund, New Development Bank (formerly the BRICS Development Bank) and others.
It now has the world’s greatest number of diplomatic missions and, assisted by the Trump administration stepping back from multilateral institutions, it has strengthened its influence in and over these forums. The debates over the role and behaviour of the World Health Organisation and its director-general in the early days of COVID-19, in particular the WHO’s tardiness in declaring a global pandemic, reflect a growing unease over the success of China’s statecraft multilaterally.
The exact shape of the new international order is rapidly coming into sharper focus, and China’s rise has been the principal catalyst in its remaking. This has been accelerated by the "black swan" event of the election of Donald Trump with his Make America Great Again policies, under which the US has withdrawn from its accustomed role of providing global leadership of a unipolar international order.
It was inevitable that if China developed into a major global economy, which it has, it would change the world order in view of its absolute size, it being largely homogenous (95 per cent of its population is Han) and the sheer scale of its economy. As a "civilisation state" with a continuous language and culture of about 3000 years, it has a strong sense of cultural identity, purpose and destiny.
China’s economy has been the world’s great over-achiever under the reform and open-door policies first introduced in 1979. The world has benefited enormously from China’s growth, not least Australia. For many years now, China’s economy has been the biggest when measured using the economists’ favoured metric, purchasing power parity, which tries to adjust for relative price differences between economies. Since 2009, it has been the second biggest on the more popular measure that uses current prices. Even on the latter measure, China will overtake the US to be the biggest economy in the world within a decade. This is an "uncomfortable truth".
No one should be surprised that we are where we are. The biggest or second-biggest economy in the world will want the global order to reflect its interests and needs for security. It will define these in its own way based on its historical experiences, anxieties – real or imagined – and its cultural norms and assumptions.
Engagement with China served the West’s interests as well as China’s. The West wanted to integrate a poor, backward, inward-looking, fearful China into the international system. China’s massive population meant that this offered big economic benefits for the West, which have been realised on a scale vastly greater than could have been imagined when engagement began.
It was believed that a more prosperous, politically stable, confident and internationally oriented China would also be less of a threat to regional stability, a notion that has generally been correct. The economic collapse and political disintegration of a country with a vast population and a strategic geographic location could have seen waves of politically destabilising immigration across east Asia, and armed conflict that would have overwhelmed neighbouring states.
The decade-long Cambodia–Vietnam war ended in 1991, the last major conflict in this historically war-torn region. The US military presence in east Asia plus China’s drive for economic development have largely secured peace in the region for more than 30 years, despite the tremendous potential for conflict. On all metrics, engagement with China can be judged an overwhelming success.
The Communist Party very nearly did disappear at the time of the countrywide demonstrations in 1989 that ended with the military’s violent crackdown.
China has also shown that it can be a responsible actor during regional and global economic crises. During the 1997 Asian financial crisis that badly shocked east Asian economies, China resisted the temptation to engage in tit-for-tat competitive devaluations of its currency, which would have been the logical but irresponsible response to protect its export industries.
In those days, China was far more dependent on its export sector than it is today. During the global financial crisis in 2008, China implemented a massive stimulus package that supercharged its economy and contributed to global economic recovery. It also contributed significantly to Australia avoiding a recession.
The West also largely assumed that China, as a major beneficiary of an increasingly open, rules-based, multilateral trading system, would support the US-led global order in all its dimensions. This was articulated most explicitly by the US deputy secretary of state in the George W. Bush administration, Bob Zoellick, in an important speech to the National Committee on US-China Relations in September 2005.
Zoellick envisaged China signing up to support the existing order as a "responsible stakeholder". The speech was influential, shaping policy thinking in Western capitals at the time. When he became prime minister in 2007, Kevin Rudd was still using Zoellick’s notion of a responsible stakeholder to frame Australian foreign and security policies towards China.
Many in the West, particularly in the US, believed that the introduction of market reforms and foreign trade and investment in a state run by a Leninist communist party would inevitably see the political transformation of China from an authoritarian dictatorship to a competitive political system, or "democracy".
For those who held this view, it was to be another great civilising project in China, akin to the sending of Christian missionaries in big numbers in the 19th century – even though that was, in fact, one of the most unsuccessful of such foreign ventures.
Biggest middle-class society
South Korea and Taiwan’s remarkable democratic transitions in the 1990s and, earlier, Japan’s adoption of a democratic postwar constitution, created a sense of inevitability in Western policy circles: markets and private property would beget political liberalism. This optimistic assumption unhelpfully overlooked the preponderant role of the US within, and influence over, these states. Authoritarian Singapore even had enough of an approximation of the rule of law and a market economy for it to be seen as another win for democracy.
Indeed, China has grown rapidly to create the biggest middle-class society in the shortest time in world history. It has all the attributes of the global middle class – never-satisfied material expectations; high-quality suburban housing; healthy, well-functioning families; children in private schools, or subject to aspirations for them to be there; great value placed on university education, with an eye to the best colleges within China and, even better, in the US; expensive household pets such as dogs that are exercised twice a day; digital connectedness, albeit with politically determined restrictions; and holidays in far-flung places within China and overseas.
This is how the great civilising project was supposed to end, except that by now, at these levels of material living standards, the Communist Party should have long ago disappeared into the dustbin of history, and China should be a democracy. It didn’t and now across the political spectrum in Washington and some capitals in Europe, a sense of buyer’s remorse has set in.
The Communist Party very nearly did disappear at the time of the countrywide demonstrations in 1989 that ended with the military’s violent crackdown. It might have gone the same way as the old Soviet-dominated Eastern Bloc, which fell to pieces in that year. As we know, it survived. Not only that, it has prospered.
An implicit social compact between the party and the people promised rising living standards and greater personal space, with the party withdrawing from managing the details of ordinary people’s lives, while in return its rule would be unchallenged.
Economic growth surged on the back of renewed reforms following Deng Xiaoping’s "Southern Tour" in 1992, and substantial personal freedoms were quickly accumulated. Complex and difficult to sustain as it has been over three decades – with external economic shocks such as the Asian financial crisis, the GFC and its sustained aftermath, the SARS epidemic of 2003 and the COVID-19 pandemic; the digital revolution of smartphones together with social media; and rising incomes, expectations and travel abroad by ordinary people – the social compact has held fast and given China the political stability and internal cohesion for it to grow to the point where it has now changed the global order, as some, like Martin Jacques, author of When China Rules the World: The End of the Western World and the Birth of a New Global Order. over a decade ago, predicted it would do.
From the late 1990s, then president Jiang Zemin fought hard inside the party to allow "red capitalists" to join it, a struggle he eventually won. This was a significant achievement because it allowed the party to modernise along with the rest of society as the economy grew and as the private sector, the agency of growth and social change, expanded.
Red capitalists were wealthy individuals who had made their fortunes virtually overnight in the burgeoning private sector, but who sought party membership less for ideological fidelity and more for the favours that membership could bestow to aid their businesses.
With over 92 million members, the Communist Party is by far the largest political party ever to have existed. Putting to one side the anachronistic 19th-century European labels and slogans inherited from the Soviet Union, with its clunky propaganda, it has continued to grow and adapt as China’s economy and society have changed.
All of this underpinned an extraordinary economic take-off during the 2000s. The decade was transformative for China. The country rapidly progressed through a series of tipping points to shift from being largely self-sufficient in all the energy and resources it needed to sustain high rates of growth, to becoming at first an importer, then a substantial net importer, and then, regarding some critical commodities such as crude oil and iron ore, the world’s single biggest importer.
This changed Beijing’s thinking about its security, highlighting its massive and unanticipated dependence on foreign sources of supply and on congested and contested shipping lanes. Suddenly, China’s leaders had to respond to these new vulnerabilities.
Under Hu Jintao, the "going out" policy was launched, encouraging Chinese enterprises to invest overseas and put a foot on commodities to ensure resources security. Subsequently, this was supplanted by Xi Jinping’s BRI. In addition to resource security, it also sought, among other things, to reduce strategic transport vulnerabilities via routes that avoided maritime choke points.
A decade or so ago, the idea of a Group of Two was ventilated within think tanks both in the West and China. This was naively conceived of as having the US and China providing leadership of the existing order by co-operating across a range of common issues.
It did not gain much traction in part because China itself 10 years ago was not ready to put up its hand and take on a leadership role and the US was not ready to share it.
A reformulation of the G2 suggests a multipolar order, with China and the US being by far the two most powerful states, but neither being capable of providing, nor willing to provide, leadership and costly global public goods. This will weaken multilateral institutions as the two major states will prefer to deal with each other bilaterally, as can be seen with the US-China trade deal agreed in December 2019.
It marks a return to managed trade, thereby undermining the World Trade Organisation’s founding principle of non-discrimination, which was intended to prevent such arrangements. Lesser states will seek coalitions among themselves, such as the Trans-Pacific Partnership, to which neither the US nor China belong. The parallel orders will intersect at many places, but they also have their own institutions and arrangements between states to support co-operation within each bounded order, led by one of the two superpowers.
From a liberal perspective, the new world order will be dystopian. It will not, however, be Hobbesian, as the powers will generally regard the pursuit of stability and balance as being in their own interests, so as to continue to raise living standards and thus ensure domestic political steadiness.
Foreign policy based on realism
Lesser powers such as Australia will need to learn to work with states on specific issues of national interest, even where they are not like-minded in terms of adherence to liberal values, including respect for human rights. The Philippines under President Rodrigo Duterte is a case in point.
Australian foreign policy in the new order must be based on realism. As its starting point, Australia should take the world as it finds it, not how it may wish it to be. The most immediate and complex foreign policy challenge is China.
Central to understanding the emerging world order is to comprehend China’s strategic intentions and potential. The question of whether China is an expansionary power or not becomes crucial in understanding how the new order will unfold.
This book argues that China will not be an expansionary power that seeks to establish global hegemony. This is not because of lack of intent or ambition, nor is it because historically China has not been an expansionary power – as it was when ruled by the Manchus – but rather because China is a constrained superpower.
China is invariably seen as thrusting outwards, its imperial ambitions now stretching far and wide. Like any state, China seeks security, influence and recognition of the legitimacy of its interests. More peculiar to China is the perceived need – rightly or wrongly – to defend the party-state from external attack.
Few other countries’ political systems are subject to sustained attack and criticism from other governments, such as when Australian foreign minister Julie Bishop said China’s political system made it unfit for leadership in the Asia-Pacific, or when Vice-President Mike Pence effectively called for regime change.
Australia will need to demonstrate that it wishes to pursue an independent foreign policy towards China. It is a long road back to how things stood at the start of the decade, when relations were in a constructive phase. There was no frothiness but rather a clear understanding of the mutual benefits to be had from a co-operative relationship.
Australia then still spoke the language of strategic co-operation and engagement, and, importantly, acted on that basis. Foreign policy towards the region was still directed at promoting greater integration, not division. The pursuit of a free trade agreement with China was not just about selling more beef and wine. It was also about higher levels of economic integration around services, investment and intellectual property.
It will be argued that China was different then, and that things changed appreciably after Xi Jinping took over as leader in 2012. That is true up to a point, as Xi adopted a more muscular foreign policy and began to change course on economic policy in a less market, more statist direction.
A more assertive foreign policy from China should have been anticipated as its economy and power grew commensurately. In fact, Beijing has not given up on economic reform and still continues its policy of opening up, but as it has become richer, it has become less needy of foreigners. Nevertheless, reforms in the financial sector, such as permitting majority ownership by foreigners of domestic securities companies continue.
China post-COVID-19 may attempt a partial decoupling from the international economy, pursuing domestic consumption-led growth and seeking higher levels of self-reliance, especially in technology.
Had China’s threat to the old order been understood more widely, would the correct policy response have been to thwart China’s economic rise? Certainly not, just as policies to try to contain China today are not appropriate. Australia and the US, and the West more generally, have no option but to accept China as it is – for better or for worse – and work out how to respond in ways that avoid war and maximise benefits.
It is also necessary to recognise that, no matter how overweening a leader’s ambitions may be, China is a constrained power and all its grand schemes, from the Belt and Road Initiative to a global soft power effort at great expense, will always over-promise and under-deliver. It is important not to jump at shadows but to assess Beijing’s initiatives and actions on their merits.
When Beijing’s actions challenge the interests of states, it will of course be necessary and legitimate to push back against it both individually and collectively. Beijing needs to understand that its bad behaviour has a cost for itself. Ultimately, an inclusive framework of norms, rules and habits of consultation which include China and of which it is an author, will be the best means of constraining bad behaviour.
The new world order is here. While uncongenial to the West, it is not obviously threatening to Australia’s security. To hedge against a dominant China, Australia needs to work within constantly changing coalitions of states, forming around specific issues and then dissolving when no longer required. Australian diplomacy must be creative, flexible, resolute and consistent. It must also be well resourced and led.
This is an edited extract from China's Grand Strategy and Australia's Future in the New Global Order by Geoff Raby, published on November 3 (Melbourne University Press, $34.99).