A massive economic ecosystem centred on China is evolving in the region. Yet Australia is playing itself out of the game. It dug itself into a hole when it humiliated China by calling for an international inquiry into Covid-19. All of Asia is watching to see who will blink first, and it is unlikely to be Beijing.
Australia, India, Japan and the US have legitimate concerns about China. It will be uncomfortable living with a more powerful China. And it’s equally legitimate for them to hedge by cooperating in the Quadrilateral Security Dialogue, informally known as the Quad.
The Quad will not alter the course of Asian history for two reasons. First, the four countries have different geopolitical interests and vulnerabilities. Second, and more fundamentally, they are in the wrong game. The big strategic game in Asia isn’t military but economic.
Australia is the most vulnerable. Its economy is highly dependent on China. Australians have been proud of their remarkable three decades of economic growth, only broken by the pandemic. The success happened because Australia became, functionally, an economic province of China: in 2018-2019, 33 per cent of its exports went to China; only 5 per cent went to the US.
This is why it was unwise for Australia to publicly slap China in the face by calling for an international inquiry into China and Covid-19. It would have been more prudent to make such a call privately. Now Australia has dug itself into a hole. All of Asia is watching intently to see who will blink in the current Australia-China standoff. In many ways, the outcome is pre-determined. If Beijing blinks, other countries may follow Australia in humiliating China. Hence, effectively, Australia has blocked it into a corner.
And China can afford to wait. As the Australian scholar Hugh White said: “The problem for Canberra is that China holds most of the cards. Power in international relations lies with the country that can impose high costs on another country at a low cost to itself. This is what China can do to Australia, but Scott Morrison and his colleagues do not seem to understand that.”
Significantly, in November 2019, former prime minister Paul Keating warned his fellow Australians that the Quad would not work. “More broadly, the so-called ‘Quadrilateral’ is not taking oﬀ,” he told the Australian Strategic Forum.
“India remains ambivalent about the US agenda on China and will hedge in any activism against China. A rapprochement between Japan and China is also in evidence … so Japan is not signing up to any program of containment of China.”
While India has clearly hardened its position on China since Keating spoke in 2019, it is unlikely to become a clear US ally.
Japan is also vulnerable but in a different way. Australia is fortunate to have friendly neighbours in the Association of Southeast Asian Nations. Japan only has unfriendly neighbours: China, Russia, and South Korea. Japan has difficult, even tense, relations with all three. It can manage difficult relations with Russia and South Korea; both have smaller economies. But the Japanese are acutely aware that they now have to adjust to a much more powerful China again. Yet this is not a new phenomenon. With the exception of the first half of the 20th century, Japan has almost always lived in peace with its more powerful neighbour China.
As the East Asia scholar Ezra Vogel wrote in 2019, “No countries can compare with China and Japan in terms of the length of their historical contact: 1,500 years.”
As he observed in his book China and Japan, the two countries maintained deep cultural ties throughout much of their past, but China, with its great civilization and resources, had the upper hand. If for most of 1,500 years, Japan could live in peace with China, it can revert to that pattern again for the next 1,000 years.
However, as in the famously slow Kabuki plays in Japan, the changes in the relationship will be very slight and incremental, with both sides moving gradually and subtly into a new modus vivendi. They will not become friends any time soon, but Japan will signal subtly that it understands China’s core interests. Yes, there will be bumps along the way, but China and Japan will adjust slowly and steadily.
India and China have the opposite problem. As two old civilizations, they have also lived side by side over millenniums. However, they had few direct contacts, effectively kept apart by the Himalayas. Unfortunately, modern technology has no longer made the Himalayas insurmountable. Hence the increasing number of face-to-face encounters between Chinese and Indian soldiers. Such encounters always lead to accidents, one of which happened in June 2020. Since then, a tsunami of anti-China sentiment has swept across India. Over the next few years, relations will go downhill. The avalanche has been triggered.
Yet China will be patient because time is working in its favour. In 1980, the economies of China and India were the same size. By 2020, China’s had grown five times larger. The longer-term relationship between two powers always depends, in the long run, on the relative size of the two economies. The Soviet Union lost the Cold War because the US economy could vastly outspend it.
Similarly, just as the United States presented China with a major geopolitical gift by withdrawing from the Trans-Pacific Partnership (TPP) trade agreement in 2017, India did China a major geopolitical favour by not joining the Regional Comprehensive Economic Partnership (RCEP).
Economics is where the big game is playing. With the US staying out of the TPP and India out of the RCEP, a massive economic ecosystem centred on China is evolving in the region.
Here’s one statistic to ponder: in 2009, the size of the retail goods market in China was $1.8 trillion compared with $4 trillion for that market in the US. Ten years later, the respective numbers were $6 trillion and $5.5 trillion. China’s total imports in the coming decade will likely exceed $22 trillion. Just as the massive US consumer market in the 1970s and 1980s defeated the Soviet Union, the massive and growing Chinese consumer market will be the ultimate decider of the big geopolitical game.
This is why the Quad’s naval exercises in the Indian Ocean will not move the needle of Asian history. Over time, the different economic interests and historical vulnerabilities of the four countries will make the rationale for the Quad less and less tenable.
Here’s one leading indicator: No other Asian country — not even the staunchest US ally South Korea — is rushing to join the Quad. The future of Asia will be written in four letters, RCEP (Regional Comprehensive Economic Partnership), and not the four letters in Quad.
This article has been republished from Foreign Policy, 27 January 2021.