Pearls and Irritations

All of us here can probably agree that we are currently living in a time of greater strategic uncertainty and challenge than at any time since the end of World War II, and certainly since the end of the Cold War in the late 1980s. China is seen as being at the epicentre of this.

Every day we see reports of China’s greater global and regional presence. Most of these are presented as ominous and threatening. Talk of military conflict is commonplace. China’s close relationship with Russia and its failure to condemn the latter’s invasion of Ukraine, and its ramped-up pressure on Taiwan, along with its growing military strength, are a part of the narrative.

And, of course, the United States’ relations with China are also at the epicentre of this uncertainty. Relations between the two are bad – the worst they have been since the 1960s, with no real sign of improvement.

My professional background was as a diplomat. The first thing in diplomacy, when you’re dealing with other countries with which you have differences, is to gain as much information as possible about their position – what are their aims, what domestic and external pressures are weighing on them, and what courses of action will these lead them to take.

So, what I would like to do today is provide a broader picture than we usually see in public discourse about China in this country, which tends to be simplistic and one-dimensional and therefore distorted. To be sure, there are many things to be concerned about with China, but we should keep our assessments of it balanced and objective. So many of the hostile views about China are expressed with super-confidence that they are right but with very little actual knowledge or experience with the country. This is not helpful to developing our policies for managing our relations with it.

China, the complex country

China is full of paradoxes: for example, for those who believe Western-style democracy and capitalism is the only system that can generate prosperity, China’s growth story can be perplexing. How can a system with so much state intervention running counter to free market ideas be so successful?

After more than 40 years living and working in, and dealing with China, what strikes me every day almost, is the enormous complexity of the country, the seeming never-ending layers of complexity in a country of 1.4 billion, 33 provincial-level regions, 334 prefectures, 2,862 counties, 41,034 townships and then, at the most basic level, 704,382 residential and village committees; there are 55 ethnic minority groups, land borders with 14 countries (four of which have nuclear weapons) and seven maritime borders. The Communist Party of China has 98 million members and hundreds of thousands of branches. It has a strong organisation and is set up throughout the country in all walks of life. It has a highly effective machinery for ensuring Party control through these branches; it can change rules overnight if it wishes. But its power is not limitless and it would be unrealistic to think that it is a monolith that can fully and uniformly control every aspect of life throughout such a complex country.

Many people outside China believe it does. But the old saying in China, “the mountains are high and the emperor is far away”, has much application today. Ways in which provincial and local authorities can find ways to work around or circumvent central party edicts are legion. Of course, the CPC can control the key policy issues of national importance – such as macroeconomic policy, defence, foreign policy, national security. And, since 2012, Xi Jinping has undoubtedly imposed stricter Communist Party control over important sectors of the country, especially the economy, and cracked down on dissidence. But to see the whole of China as a single monolith totally controlled by a single dictator, Xi Jinping, needs to be qualified. And even Xi Jinping needs to take into account public opinion; the Party has well-developed machinery to gauge public views. Social media provides an important platform for people, especially the young, to express views, often ones critical of actions taken by governments at all levels. Of course, if these become too politically controversial, they are quickly taken down.

This is an important point worth having in the back of our minds as we try to make judgements about the country.

The China challenge

One of the most fundamental questions I constantly grapple with, revolves around the fact that no other country in history has so rapidly transformed its economy from being amongst the world’s poorest and most isolated, to one of the world’s largest economies, at the heart of the global supply chains, and a leading source of international investment capital.

Its success has been extraordinary. It has been respected around the world for this, and for the enormous benefits its trade and investment has brought to many countries – Australia, of course, included. So, why are we in the situation in which we now find ourselves – China and the United States in serious strategic competition, threats of war constantly mentioned, new pacts such as the Quad and AUKUS being formed to counter China, and so on. Why hasn’t China just gone on growing its economy, improving the livelihoods of its people, addressing its significant domestic challenges such as environmental degradation and inequality, and living in peace and harmony with the US and others?

The US will argue that it’s because China has changed and become aggressive, and a threat to regional and even global security, by subverting the international rules-based order. China says it’s the US’s fault because it seeks to “contain, encircle and suppress” China, and to force the world to abide by a rules-based order that the US established after 1945 for its own benefit.

Can one side be right and the other wrong, can both sides be wrong or both sides right?

In trying to unpack this puzzle, I’d like to give some context to current global uncertainties. What we are now seeing is a dramatic and substantive changing world order. What we had got used to in the aftermath of the Second World War is no longer with us.

It’s clear that China and the US are contending at a time when global trends are shifting markedly. Since the global financial crisis of 2008, we have seen heightened concerns over the distribution of global wealth, giving rise to loss of confidence, the undermining of authority, populism and protectionism. We’ve seen this occurring in the United States, along with the fear that its global dominance is being challenged by China. And in China the CPC has been stoking feelings of patriotism and nationalism as it highlights the 100 years of humiliation from foreign encroachments of its sovereignty beginning with the Opium Wars in 1839.

In both China and the US, domestic pressures have contributed to each of them focusing on, even blaming, the external adversary. This has led, dare I say, to a certain irrationality in the way each country approaches the other. This leads to an unsettling situation for many, and often to alarming misconceptions.

This not to say that we don’t face serious security challenges – we do. The risk of a catastrophic military conflict cannot be entirely ruled out.

Under-estimating and over-estimating China

We need to avoid either under-estimating or over-estimating China’s strengths and power. Each risk carries dangers. To under-estimate carries self-evident risks such as simply not being prepared to meet China challenges that might arise and impact on our interests. To overestimate runs the risk of viewing everything China does as a potential existential challenge; too much of the ill-informed opinion about China presents the CPC and its organs as super-powerful, even omnipotent.

Constraints on China

Many people cast China as an expansionist state that will threaten the sovereign and territorial integrity of other countries. We’ve heard plenty about the threat China poses to Australia’s sovereignty. There are, however, significant constraints on China that will influence how it deals with the world. China under Xi certainly displays a confidence and cockiness we haven’t seen in the past. But China also has deep insecurities.

In this context it is worth considering China’s geo-strategic position. It’s often said that geography is destiny – and China’s neighbourhood is a tough one. Unlike the US and Australia which are large continental masses surrounded by seas and non-threatening neighbours, China is a land-based power. This produces a vastly different strategic outlook. China, has 14 land borders with other countries (four of which have nuclear weapons) and 7 maritime borders. Traditionally, the military threat to China always came from the north and west across land borders, over which nomadic tribes invaded China. Different dynasties in Chinese history – for example the Yuan (1271-1368) and the Ming (1636-1912) – were led by foreign invaders.

And, to this day, it still fears terrorism from Islamic countries across its borders.

Later, the threat came from the sea, from which China had traditionally felt safe through its network of tributary relationships with neighbouring states, which received economic benefits from China in return for them accepting China’s hegemonic role in a Sinocentric world order. But the arrival of British and other European powers with powerful navies for which China had no match, led to the Opium wars, and China’s 100 years of humiliation (which I mentioned earlier), which are still etched into the Chinese psyche.

Not only does China have external insecurities. Like many authoritarian regimes, the CPC has an abiding fear of domestic unrest and turmoil. Insecurity is part of China’s DNA. Ingrained in the Chinese approach to governance, after millenia of experience, is the traditional belief that China is successful when it has strong central leadership and unity.

This incidentally is a good illustration of how traditional Chinese principles of government align closely with the more recent Leninist principle of a single, controlling party. There are reports that China actually spends more on domestic security and surveillance than it does on national defence. Obviously, the CPC sees a need to keep a tight rein on people.

The CPC no doubt has good reasons for concern here. The Chinese economy, which has brought massive improvements in the living standards of millions, and established the party’s legitimacy, is hitting significant headwinds (the overhang of the ongoing property sector debacle, insufficient consumer spending, over-investment in non-economic infrastructure projects, especially at the local government level, an ever increasing debt-to-GDP ratio, and a drop-off in foreign investment). These require not just short-term fixes, but deep structural change that will bring dislocation to many if not handled carefully. Maintaining strong rates of economic growth to meet the material ambitions of Chinese people is becoming more difficult.

It is reported that over 20 per cent of people between the ages of 16 and 24 in urban areas are unemployed. These are people who have only known the good times and who have high expectations for the future. A large disillusioned and frustrated cohort such as this is not good for the CPC. And yet, at this time, the government is giving higher priority to national security than to the economy, which is not to say it is ignoring the economy; they’re just not yet giving it as much focus as they should. The problem is, I believe, they simply don’t know what to do at this stage. Muddling through seems to be one option. If this doesn’t change, there will be domestic unrest and dissatisfaction with the CPC that could lead to troubling disruptions.

In short, Xi Jinping and the CPC have much to deal with inside China itself, let alone face external pressures. So, let me turn to the external situation.

China’s military build-up and global partnerships

One of the most common concerns we hear, especially from Defence Minister Marles, including at last week’s ALP National Conference, is that China’s military build-up in recent decades has been the biggest anywhere in the world since 1945. This is no doubt is true and is certainly an extremely important development. But what is not often mentioned is the other part of the equation, namely China’s massive economic growth in recent decades. China’s GDP is now 50 times larger than 30 years ago; that’s a 5,000 per cent increase! During this time, China’s defence spending has increased at around an average 1.7 per cent per annum, and is 26 times greater (half the GDP increase). It’s still a huge increase but, in perspective, not so surprising compared to growth in the overall economy. And China is still spending less on the military than the United States.

The US has 800 military facilities around the world; China has one naval base in Djibouti. China has traditionally avoided military alliances. Currently its only one is with North Korea, although in recent times it has developed more strategic partnerships and expanded military exchanges with other countries, including Russia and Pakistan, but none of these involves mutual defence clauses or troop basing agreements.

China is of course using its economic power to expand its ties with many countries, especially developing countries (now known as the Global South) as it attempts to drive wedges between these countries and the United States.

China was active in creating the Asian Infrastructure Investment Bank (of which Australia is a member), which offers an alternative funding vehicle to the IMF, World Bank and Asian Development Bank, all dominated by the US, European and Japanese interests. It was also instrumental in forming the Shanghai Cooperation Organisation, which groups nine central Asian countries, including India, Russia, Pakistan and Iran; and covering 60% of Eurasian territory and 40% of world population; and has been key in forming the BRICS (Brazil, Russia, India, China and South Africa – all significant global players – and which another 40 countries have either applied to join, or expressed interest in doing so).

And it has the staggeringly ambitious, trillion dollar infrastructure Belt and Road Initiative, which despite some difficulties and criticisms, is providing funding for infrastructure projects around the world. To date 147 countries have signed on to projects or indicated an interest in doing so.

It also has so-called strategic partnerships with over 100 countries including Australia. Many of them, such as the one with Australia, are pretty meaningless. Nonetheless, China has worked hard to build up a global network based on its economic strength.

So, China is not as isolated on the world stage as many would have us believe.

The other concern expressed about China’s military build-up is that it has been done without transparency and reassurances to other countries. I find this a little unconvincing. What exactly is China expected to say or do? China’s rhetoric, including by Xi Jinping in his speeches, has always – as you might expect – professed China’s peaceful intentions. Xi himself at the Bo’ao Forum in 2015 said that no country that has tried to achieve its goals through force has succeeded. It would of course be more reassuring if Xi stated this view in relation to Taiwan and Ukraine, but at least he said it.

Xi’s Global Security Initiative, launched in early 2023, that Chinese representatives now tout at every international meeting, highlights China’s peaceful and collaborative approach to global relationships. It’s still quite a vague concept but China obviously believes it will resonate with Global South countries who have little sympathy for Western ideas and values, and which many see as hypocritical. It is very much aimed at these countries as an alternative to the US-led system of treaties and alliances.

One can be cynical and dismissive of China’s rhetoric but it is their publicly stated position, and as such can be regarded as sincere and as genuine as any pronouncements by major powers – which is probably not saying much! My point, though, is in terms of providing transparency, what more realistically can China do while at the same time convincing the world that it is a global force to be reckoned with.

And, of course China does point to the very large number of military actions around the globe that the US has taken since 1945 – China’s military actions during this time have been miniscule in comparison.

Past actions can, of course, be no guarantee of future actions. China is now more assertive internationally than it was a decade ago, and is flexing its muscles more. This is what major powers do. But being assertive doesn’t necessarily lead to direct military aggression. The principles of China’s strategist Sunzi, recorded in “The Art of War” 2,500 years ago, still have resonance in China’s military strategy: “to win one hundred victories in one hundred battles is not the acme of skill; to subdue the enemy without fighting is the acme of skill”. There are grounds for believing that China would much prefer to use means of statecraft other than military force to achieve its goals, namely its economic power.

A final point to make is this: given the huge growth in a very short time of China’s economy, and the massive spread of its global economic interests – it’s the major trading partner with over 120 countries, and with investments in every part of the world – what would be most surprising, indeed ahistorical, would be if it hadn’t built up its military force to ensure that it can meet any challenge to these widespread interests. That’s what a major and great power does, whether we like it or not.

China’s aims

Let me now turn to what I believe are China’s ambitions – or, put simply, what does it want?

To answer this question, the best we can do is to look at China’s own stated aims. There is no lack of transparency here. China has made it clear that it aspires to be an economic and technology super power.

Many people say China’s first and foremost aim is the preservation of the Communist Party of China. I think this is the wrong way to frame the answer. There is no question – Xi Jinping has made it clear – that the regime sees that China can only prosper and remain united as a single entity if the CPC is strong, united and in full and undisputed control. But to see this as the paramount aim misses the point: Xi is a princeling whose vision is to make China a great and influential power, respected by other major powers. For him, a strong and united CPC is the only way to achieve this – and to keep the party strong and united requires improving people’s livelihoods, keeping the economy strong, meeting the challenges of climate change and environmental degradation, and ensuring that China is respected in the world and able to meet any external challenges that might arise.

Territorial expansion and military adventures through an invasion of neighbouring countries are not on China’s agenda. Such actions, and their consequences, would totally undermine all of China’s other ambitions, both domestic and global. For this reason, securing unification with Taiwan by military force will not be China’s preferred course.

Even the recent (13 July 2023) report by the Intelligence and Security Committee of the British Parliament, which didn’t pull any punches in setting out in stark terms the challenge China poses to Western values and security interests, it was noted that, unlike Russia, China in its attempt to be viewed as a great power, does not appear to intend to carry out a catastrophic attack; it wants to be a technological and economic superpower. The report also noted that “China does not want a disrupted international order; it wants an international order that is more aligned with its interests and priorities”.

This leads me to the observation that the changing world order we are currently experiencing is going to be first and foremost a competition for technology supremacy. China has recognised this for some time. Hence its relentless focus on acquiring technological intelligence, either overtly or covertly, from the West.

China, under Xi Jinping, sees achieving superiority in the next technology revolution – AI, quantum computing and high-end semi-conductors – as its number one priority. The United States has now woken up to this, as we can see from recent policy pronouncements by the US Administration, and such initiatives as the CHIPS Act to build the US’s semi-conductor capabilities, and export controls to prevent China’s access to high-end chips. The Biden Administration also announced this month further restrictions on US companies investing in certain high-tech sectors in China.

More likely than a kinetic military conflict between China and the United States, which neither country wants, but which many commentators in Australia frequently talk about, the future strategic struggle will be over dominance in high-end technology.

The US-China rivalry is therefore far more complex than a traditional great power struggle for supremacy, or a battle between ideologies, or “democracies versus autocracies”, as Biden seems, unsuccessfully, to be trying to do by convening his conferences of selected democracies. At the heart of this struggle is the entanglement of both the US and China in the current global technology revolution. A changed world order will evolve – we just don’t quite know what it will look like.

These uncertainties are reflected in the somewhat confused mantras that western countries are now articulating as they try to explain policies to constrain China, but at the same time derive benefits from economic engagement with it. Most of them are trying to have a bet each way. The US mantra is “to be competitive when we should be, collaborative when we can be, and adversarial when we must be”. For its part the EU has declared: “China is a partner, competitor and systemic rival”. And, not to be left out, Australia has its own mantra: “cooperate where we can, disagree where we must and engage in our national interest.” All very broad and vague, and open to interpretation!

Australia and China

Let me now turn to Australia and China, and where we fit into this complex scenario. We see here many of the trends I described earlier. Public discourse, certainly in the media, is often based on ignorance, misinformation, and fear-mongering, leading to over-drawn assessments about China’s threat to our security. This is not to say that there aren’t many aspects about China that should cause us concern. But we need to look at the country, and Australia’s relations with it with greater sophistication and balance, that will enable us to make clear-headed judgements about how we should move forward.

In recent years, Australians have been conditioned to view China as a military strategic threat by a pretty relentless coverage in the media, from politicians, academics and other commentators, the like of which we haven’t seen, for example, in neighbouring regional countries where, because of their geographic proximity, history and border issues, you would think would feel much more threatened by China than we in Australia. The Lowy Institute’s 2023 poll showed that 75 per cent of Australians think it likely China will become a military threat in the next 20 years.

There are many things about China with which we disagree – human rights, Hong Kong, Taiwan, the treatment of Uighurs in Xinjiang and China’s assertiveness in the South China Sea, to mention a few. China’s economic coercion against Australia, in which it placed sanctions on certain of our exports, was unwise and heavy-handed, and has actually backfired against China (which it has no doubt come to recognise). Even with the trade sanctions our exports to China in the past year increased to a record level.

But we should draw a distinction between those things about China that we don’t like and those that actually might threaten in a real way our national security and sovereignty. While there are many of the former, there aren’t actually many of the latter.

Australia’s decision to join with the US and the UK in AUKUS, including the eventual acquisition of nuclear-powered submarines, and the recent Defence Strategic Review have been justified as a response to China’s military modernisation, with the military objective of defending Australia and deterring threats by holding an adversary (read China) at distance. Obviously, Australia would not do this alone but in partnership with the United States in the event of a military conflict. We have intensified our security relationship with the United States in recent years, clearly in response to the perceived China threat. China now sees us as part of the US effort to “contain, encircle and suppress” it.

At last week’s ALP conference, speakers declaimed that the submarines, which would enable projection of military force into the South China Sea, will actually promote peace.

Strengthening Australia’s defence capability is certainly justified – who would argue against any sensible country developing a capable and effective defence force to meet potential challenges?

But the rhetoric about building our military forces – at huge expense – has been done without adequate public discussion and informed debate about the real challenge to Australia’s national security posed by China. There has been too much nebulous talk of the China threat, and not enough analysis of China’s strategic position and objectives. Views expressed at last week’s ALP conference were, in my view, a case in point.

Defence Minister Richard Marles has referred to the “shrill and fundamentalist” debate over China prior to last year’s federal election, and has spoken of the China-Australia relationship as not one suited to “simplistic platitudes.” These are sensible words, but unfortunately the current government, while it has certainly toned down the over-heated rhetoric about China that we had heard in the past, has not done much to ensure a measured and balanced public discourse about China.

At the same time, Australia also has to be mindful of the need to keep in step with our regional neighbours in South East Asia, who want at all costs to avoid the region becoming one of big power competition and possible military conflict, and who want to reap the benefits of economic relations with China. They have long histories of dealing with China and while they are concerned about Chinese influence, they take a more nuanced approach to China than Australia. Some are concerned – and baffled -about Australia’s hard line on China.

Conclusions

To conclude, I hope I’ve given some food for thought as to how we might view China going forward. It’s a massive, complex, multi-layered issue that doesn’t lend itself to simple judgements. No-one can predict where the current situation of big power contestation between China and the US will lead. For its part, the US is often criticised for not having a clear strategy or end-game with China, other than the mantra I mentioned earlier. Australia, I suggest, is in much the same position. We simply do not know where we are headed other than the idea that China has to be somehow blocked or blunted. If this is our “strategy”, for want of a better word, we should, as I have argued today, at least proceed with as clear and balanced an understanding of China’s position that we can get, and not fall back on fear and ignorance.

Doing this would also help keep Australians on board with government policies and approaches towards China as we potentially move into more troublesome times.

As the Albanese government seeks to stabilise our relations with China after years of difficulties, it faces the difficult balancing task of explaining to Australians an inconvenient truth: namely, how we can build a prosperous economic relationship with our major trading partner, which is also seen by the Government, and many Australians, as a serious threat to our national security – and at the same time ensuring we are not too far out of alignment with our near regional neighbours. This is a gargantuan diplomatic task. I hope we are up to it. We are embarked on a course which, if things go wrong, could bring us into direct military conflict with China. This makes it all the more imperative to understand what is driving the events around us.

The Albanese government is clearly alert to the domestic political risks of this challenge. The hesitation over announcing whether the PM’s visit to China will actually take place this year is symptomatic of this. The problems in the relationship, not the least of which are the deplorable and unexplained detentions of Australian citizens Cheng Lei and Yang Hengjun, are important considerations for the Government as it weighs the benefits of a visit.

One thing is for sure, as one writer recently put it, “a Chinese nation intent on its relentless pursuit of a prominent place in the developed world is one of the realities the rest of the world must recognise and come to terms with” (Keyu Jin, “The New China Playbook”).

I think we are a long way short of reaching this position.

 

Transcript of a speech delivered August 23, 2023, at the Savage Club in Melbourne, Australia.