August is over and the leaders of the big powers are back from the summer resorts of former emperors — the G7 leaders from their gathering at Biarritz, China’s leaders from Beidaihe, and presumably Vladimir Putin from Sochi.
But it might be too early to declare an end to the northern hemisphere’s silly season. The Americans and Chinese may have agreed to resume trade talks this month, but the latest round of tit-for-tat tariff hikes remains in place, and plaintive calls for a wind-back from Scott Morrison and others at the G7 summit won’t have weighed heavily on Donald Trump, who sees trade machismo as a way to re-election in 2020.
In the meantime, American farmers have seen their exports of soybeans and pork to China plummet, an inversion of bond yield curve has revealed that US investors see a recession on the horizon, and Trump looks ever more detached from rational advice, either on trade or Iran.
By contrast, Xi Jinping looks like the calm adult. But beneath Beijing’s monolithic front are problems, notably the need for an already debt-laden financial system to do more to stimulate growth, the political challenge from Hong Kong’s savvy bourgeoisie, and increased US military support for Taiwan.
In this atmosphere of impending meltdown, talk in Australia about whether we must choose between the United States and China is beside the immediate point.
It’s true that Beijing has been playing the international order in a cynical way, stealing commercial secrets or forcing their transfer as the price of market entry, and trawling the West’s universities and research institutes for information it can use, all to seize control of the commanding heights of the future economy in areas like artificial intelligence and quantum computing.
At home, Xi has punctured any notion that China is converging politically with the Western world, or that his show of Red orthodoxy was a “turning left so that he could turn right.” He has junked the distinction between the Communist Party and the state, replaced law with doctrine, and inserted party controllers into major private-sector corporations.
“Today’s China is not just a geopolitical challenge to the West,” says the Lowy Institute’s Richard McGregor in his new book, Xi Jinping: The Backlash. “It is a real-time empirical experiment challenging the West’s post–cold war ascendancy. Far from being a premodern throwback to discredited authoritarian ways, Xi’s project is taking shape as a postmodern phenomenon, a surveillance state with a fighting chance of success at home and the potential to replicate its core elements abroad.”
This is no cause, though, for the kind of defence–security panic that has swept Canberra. As signalled by the title of McGregor’s book, the outside world has woken up to Xi’s game and many of its biggest players — not just the United States — are pushing back. Xi’s foreign supporters, meanwhile, are mostly mendicant states.
McGregor reports seething resentment within elite Chinese circles over Xi’s clampdown, and some cheering that Trump’s bull-in-a-China-shop tactics might force a return to the path of opening up society and the economy. Among the party nomenklatura, Xi has made millions of enemies through his selective anti-corruption campaign.
The threshold for any attempt to depose Xi or clip his wings is very high, McGregor notes, but Xi has given himself little scope for retreat. And his timelines are shortening. Throwing money at every problem, including bailing out cash-strapped local government, “will only get harder,” writes McGregor. “By the time of the next party congress, due in late 2022, the issue of succession should return with a vengeance.”
All this is an argument for strategic patience. McGregor takes aim at Hugh White’s thesis that the era of American primacy in Asia is ending, and that China will soon be the dominant power. “This worst-case scenario makes sense for a defence planner, once White’s profession,” he says. “Diplomatically, however, the opposite is true. If Australia concedes, in effect, that it is game over and China will win, then policy-making becomes no more than a series of cascading concessions to the new hegemon.”
Complicating the picture are the current US administration’s self-inflicted wounds. Trump has driven a truck through the free-trade architecture. His withdrawal from the Trans-Pacific Partnership weakened efforts to instil respect for intellectual property and online transparency — attributes he is now trying to extract from China using the tariff bludgeon. By vetoing appointments of new judges to the World Trade Organization’s dispute panels, he is crippling a trade system the United States itself sponsored, under which it regarded China’s accession in 2001 as a great advance. Since long before Trump, the US Senate has refused to ratify the same UN Convention on the Law of the Sea that Washington routinely urges China to observe.
According to Brad Glosserman, an Asia strategic specialist at Japan’s Tama University, calling this a “Thucydides Trap” — an inevitable conflict between a status quo power and a rising power — falsely treats these tensions as a binary dispute. “It is ironic that this reductionism is occurring as the US is being eclipsed as the most stalwart defender of the existing international order,” he writes. Historically, the United States has been the most prominent voice in defence of the status quo, but other governments, notably Japan, Australia and the European Union, have also assumed leading roles.
McGregor doesn’t believe we should prioritise preparations for an all-out war with China or create our own deterrence to avoid one, as White advocates in his recent book How to Defend Australia. Instead, Australia and other middle powers, as well as bigger players like Japan, Germany and South Korea, should push back together when China overreaches, well before the possibility of armed conflict arises.
“That does not mean replacing cooperation with confrontation at every turn,” McGregor writes. “It simply means competing with China, speaking openly about its actions and standing up to it when necessary.” He acknowledges that these policies might come at a cost. “But to do otherwise will allow Beijing to pick off smaller nations such as Australia one by one. That would leave not just regional nations isolated. Eventually the United States would be on its own as well.” •