Tag Archive for: China

Making the Indo-Pacific

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The Indo-Pacific is an idea with a crucial purpose: avoid war.

It’s a lot to ask of a geographic construct that barely existed a decade ago.

‘Indo-Pacific’ has shifted from a way to look at the map to become an arena for mounting contest—and the label for a US strategy (the ‘free and open Indo-Pacific’).

The journey from construct to competition has been short and sharp.

‘Asia–Pacific’ was the understanding that dominated for roughly 30 years (1980 to 2010). In a swift remaking, Indo-Pacific has become the replacement vision for the US, Japan, India, Australia, the 10 ASEAN states of Southeast Asia, and major European powers.

The significant absence in that list is China.

Beijing charges that the Indo-Pacific is a device to contain and constrain China. That’s true. An equal truth, though, is that China reaps what it sows; its behaviour made pushback inevitable.

The Indo-Pacific is pushback aimed at achieving balance. The Indo-Pacific isn’t just the joining of two oceans—it’s loaded with ambition and driven by power.

The rise of China and its ambition to dominate Asia, India’s arrival as a major player, the need to stabilise a multipolar system (and avoid war), and the geoeconomics and geostrategy of the two joined oceans, webbed by the shipping lanes that are the Indo-Pacific’s veins, all crowd the new moniker.

An Australian apostle of the Indo-Pacific, Rory Medcalf, says that in the decade of its arrival and ascendancy, the idea heralded a new era of power rivalry, a world away from the optimism of globalisation:

The Indo-Pacific had become the global centre of gravity, in wealth and population, but also the heartland of military might and latent conflict. Confrontation was trumping cooperation. From the Gulf of Aden to Papua New Guinea, the board was uncomfortably set for a great game with many layers and many players.

Medcalf’s book on this great gravitational shift, Contest for the Indo-Pacific: why China won’t map the future, is being released tomorrow. His hope is that the Indo-Pacific becomes a metaphor for collective action. If diplomacy fails, he writes, it’ll be the theatre of the first general war since 1945.

One of Medcalf’s many strengths is that he’s an intellectual who writes like a journalist; he started in hackdom, getting a Walkley commendation in 1991 for his reporting for the Northern Star newspaper in the New South Wales town of Lismore.

From journalism, he became a diplomat (postings to New Delhi and Tokyo and truce monitor in Bougainville) and an Australian intelligence analyst, then went on to think-tank duty at the Lowy Institute. Now he’s the professor heading the National Security College at the Australian National University.

Many moons ago, introducing him as a speaker, I read out his CV and asked if he’d ever had a real job. It’s the jibe of one journalist to another, because all hacks are plagued by the question of what they’ll do when they grow up (happily, after 49 years of hackdom, I’m still to decide). In Medcalf’s case, the jest is a tribute to someone from that nebulous place where diplomats, strategists and analysts try to pin down what’s happening in the world and imagine what’ll happen next. It’s a job you hold in your head, not your hands.

Medcalf has scored a notable intellectual achievement: helping to bring into being the realm where the hard-edged realists and practical types will do duty seeking balance or fighting the battle.

The book offers an origin story for today’s Indo-Pacific, and some fine thinkers step from the pages. The first modern academic article to mention the Indo-Pacific as a geopolitical term was in 2004, by the Canadian naval scholar James Boutilier (a bon vivant who savours the joys and jousts of strategy).

In 2005, the term Indo-Pacific was used by the New Zealand strategist Peter Cozens (who also championed Kiwi wine as ‘liquid sunshine’). Catching an idea arriving with the times, a great Australian journalist in Asia, Michael Richardson (The Age and International Herald Tribune) wrote an article for the Australian Journal of International Affairs in 2005 about what Australia should aim for as a founding member of the East Asia Summit:

The economic and geopolitical landscape of Asia has changed dramatically in recent years, providing Australia with an unprecedented opportunity to become an integral and significant player in a wider Indo-Pacific region as it charts its future and seeks to manage tensions while shaping a new architecture of cooperation.

Medcalf explains why he was an early adopter: ‘The logic that Australia’s region was changing to a two-ocean system, with China turning south and west and India turning east, accorded both with the evidence and the need to define Australia’s place in the world.’

He is a thinker who has helped redefine Australia’s region and the scope of that region. The driving geostrategic purpose of the construct is the book’s subtitle, ‘why China won’t map the future’.

The China dimension of the Indo-Pacific—the rise, the pushback and the quest for balance—will be the subject of next week’s column.

Canary in a coalmine: what Australia looks like from afar

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By any reasonable standard, Australia is a long way away from most other countries. Sydney is closer to the South Pole than it is to Singapore. Direct flights from Washington or Brussels to Canberra remain beyond our technical capabilities; there is always a layover somewhere.

For better and worse, geography is less important than it used to be. Australia may be remote, but it is already on the front line of two global challenges that will shape the international agenda in the decades ahead. Spend a few days in the country and you’ll quickly realise that its politics are all about China and climate change—and sometimes a combination of the two. Pretty soon, the same will hold true for many other countries around the world.

Among the world’s democracies, Australia is perhaps the most dependent on China economically. It is the world’s largest net coal exporter, and its biggest customer is China. It is thus also more dependent on fossil-fuel exports than many other countries; and yet it stands to lose more than others as the real-world costs of climate change come due.

Still, the Australian economy is unique among industrialised countries in that it has grown continuously for almost three decades without a recession. Australian governments implemented reforms to open up the economy just when China was embarking on its meteoric rise. For 30 years, Australia, with its abundant supply of energy and other resources, has been able to surf on a growing wave of Chinese demand.

This arrangement was nothing if not convenient. Given the two countries’ relative proximity, Chinese tourists and immigrants started to flock to Australia. Chinese students became mainstays at its universities. The money just kept rolling in, and Australian property prices duly rose.

But then China became more assertive in its economic and foreign policies. Journalists started to expose what looked like attempts by Chinese actors to buy political influence in Australia. And these revelations led to questions over whether Australian university curriculums are avoiding topics that could irritate China (and Chinese students).

In any case, Australians suddenly realised that their close dependence on China had made their country vulnerable. Australian policymakers have since been addressing the threat. In August 2018, Australia became the first Western country to indicate that it will not allow Chinese vendors to supply its 5G network (though the government’s statement doesn’t mention any country explicitly, its meaning is clear).

The Chinese leadership was not amused. High-level bilateral contacts have since been frozen, though economic links have remained intact. Australians are becoming increasingly nervous about the future. Will Chinese money keep rolling in freely, or will the Chinese regime start to use Australia’s economic dependence as a weapon, as it has done previously against Japan and South Korea?

Confronted with these new pressures, Australia has become increasingly dependent on its security relationship with the United States. But with Sino-American relations deteriorating, it is unclear whether Australia can manoeuvre the gap between the 21st century’s Scylla and Charybdis. Were it to incur the wrath of either power—or of both at the same time—its long economic honeymoon would probably come to an end.

Complicating matters further is the climate policy challenge. Whereas previous Australian prime ministers fell on their swords in an effort to develop a realistic energy and climate agenda, the current Australian government has been accused of dragging its feet on the issue. Indeed, when he was treasurer, Prime Minister Scott Morrison famously waved around a lump of coal in parliament to show that it was nothing to be afraid of. After a long ‘black summer’ of unprecedented bushfires, he is unlikely to repeat that stunt.

Just as Australia must address its dangerous dependence on China, so must it start taking climate change seriously. Neither problem admits of easy policy solutions, and other Western democracies that depend on China economically will not be spared similar dilemmas.

Australia’s experience offers valuable lessons for us all. It is the proverbial canary in the coalmine. Policymakers and political leaders everywhere need to engage in an honest assessment of the risks posed by a rising China and a warming planet, and we all must start phasing out fossil fuels.

Australia now finds itself on the front line of these two major issues. The rest of us will join it there soon enough.

Tindal air base expansion shows the way to a more secure region

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The government’s decision to significantly expand the Royal Australian Air Force’s key northern base near Katherine, around 300 kilometres southeast of Darwin, is a giant strategic step forward and will deliver a firmer deterrent posture and a closer alliance with the US.

A stronger defence posture in our north could also be the basis for a greater Australian leadership role in the region, where we can work with our key Southeast Asian partners—Indonesia, Singapore, Malaysia, and hopefully Vietnam—in a shared strengthening of the region.

Especially valuable is that the enhancements at RAAF Base Tindal are planned to be finished by 2027. In contrast, on current plans, the first of our Attack-class submarines will still be nine years from entering service by then.

The importance of the new submarines should not be underestimated, but the security situation in the region is changing so fast that Australia needs to urgently boost its military strike power and strengthen its deterrence capability. There is no better or quicker way to do this than through air power and the US alliance.

I’m very positive about this military strengthening, not least because a decade ago I led the Defence Department effort to expand cooperation with the US in northern Australia.

There were three reasons for establishing a US Marine Corps presence in the north and planning for increased cooperation between our air forces and navies.

First, it added a new dimension of closer cooperation with the US, deepening American engagement in, and commitment to, Australian security. This is a hugely valuable deterrent asset for Australia, one that complicates the planning of any potential adversary.

Second, this cooperation will modernise the alliance and make it better suited to handle emerging threats. The northern focus will be on having the ability to rapidly disperse and deploy forces over large distances, extend the range of combat hitting power and bring our military forces into more effective high-technology cooperation.

Third, enhanced northern cooperation is a strong signal of American and Australian interest in the security of Southeast Asia.

Geography doesn’t change. Southeast Asia was the strategic fulcrum around which the Pacific War was fought, and it is the region most sharply in Beijing’s sights as the Chinese Communist Party seeks to weaken America’s security leadership in the Asia–Pacific.

A much sharper strategic competition for influence is building in Asia between the US and China. Australia can’t opt out of this reality. Washington and its key allies in the Indo-Pacific—Japan and Australia—need to give the wider region some confidence that collectively we can push back against Beijing’s bullying.

The bones of the enhanced northern defence cooperation plan were shaped in early 2011 and announced in November of that year in Darwin by US President Barack Obama and Prime Minister Julia Gillard. We should have done a better job of bringing Indonesia into the discussion, and Indonesia’s president at the time, Susilo Bambang Yudhoyono, did Canberra and Washington an enormous favour by graciously accepting what he knew to be a positive strategic development for the region, notwithstanding the lack of consultation.

Learning from that mistake, Prime Minister Scott Morrison should brief President Joko Widodo quickly. He must surely have been given a heads-up about the Tindal development on his recent Canberra visit.

Jokowi’s speech to the Australian parliament, in which he said ‘Australia adalah sahabat paling dekat Indonesia’, meaning ‘Australia is Indonesia’s closest friend’, is not an expression of friendship so much as a statement of shared strategic risk.

In contrast to the strategic outlook of two decades ago—when East Timor’s independence loomed large and trust between Canberra and Jakarta was abysmally low—this new stage of defence interest in Australia’s north can involve Indonesia as a vital partner.

Of course, the most dramatic difference between the strategic situation at the time of the Obama–Gillard announcement and today is China.

In 2011, Xi Jinping had yet to become president, and was yet to assume permanent personal control of the CCP and purge its and the military of his rivals. China had not yet annexed the vast bulk of the South China Sea, where it built three substantial military bases that have brought Chinese air and maritime power into the heart of Southeast Asia.

In 2011, China was well down the track of modernising its military forces but few Western analysts at that time would have imagined how far and how quickly the People’s Liberation Army would develop in less than a decade.

China’s reaction to the expansion of Australian and American air power out of RAAF Base Tindal and Darwin will take two forms—one public and one private.

Publicly, Beijing’s diplomats, PLA senior colonels and editorial writers will berate Australia for ‘Cold War thinking’, for failing to appreciate the benign intent of the Belt and Road Initiative and for misrepresenting China’s honourable and defensive cyber espionage operations.

In Australia, a variegated collection of China boosters, US alliance haters and people determined to see in our modest defence companies a ‘mini-me’ military–industrial complex, will complain about the government’s initiative and, indeed, about ASPI’s gall in talking frankly about the strategic risks posed by an assertive, authoritarian China.

Can Beijing’s response and its domestic echoes be completely unconnected? China’s palpable decision to turn the diplomatic dial to ‘loud and angry’ has been noted around the world.

It seems that any national expression of independence not completely aligned with ‘Xi Jinping thought’ will be aggressively refuted. Any attempt to enhance Australian and American military cooperation—which has been at the core of our defence policy since before the communist take-over in China—will be treated as an affront by Beijing.

None of that should matter to Scott Morrison. A more private Chinese leadership reaction will be to regard the Tindal announcement as a logical strategic response to China’s influence-building in Southeast Asia.

Beijing’s strategic planners are opportunistic realists. They understand how to make tough judgements based on national interest and they will see the Tindal announcement in that light.

China views Australia’s defence alliance with the United States with a mix of envy and puzzlement. Beijing is envious because the alliance gives Australia access to a trove of technology and information that China could never source through willing partnerships. Its puzzlement is about how countries can cooperate so effectively based on trust, strategic interest and shared values. China does not have these types of relationships.

What should happen next in Australia–US defence cooperation in northern Australia? There’s certainly scope to expand the Marine Corps’ footprint from its current level of around 2,500 personnel annually.

Australia is also well placed to offer sophisticated air-training ranges in the north to countries that, like us, are buying the F-35—Japan, South Korea and Singapore.

At the heart of all these trends is the increasing need for weapons with extensive range. Finding a weapon that can push the Australian Defence Force’s strike power and deterrent effect well north of the Indonesian archipelago is the next essential task for defence planners.

Finally, there’s the Port of Darwin, which is now in year five of its 99-year lease to a Chinese company. How long will that odd deal last in an emerging regional order which makes northern Australia more strategically significant to us, our allies and our neighbours?

China’s ‘overseas delegates’ connect Beijing to the Chinese diaspora

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Imagine if the US Congress, in addition to the 535 elected members that fill its halls, also included a few dozen unelected representatives each year who were citizens of foreign countries. These foreign representatives, milling about the Capitol, would be invited not to represent the countries they came from but rather to do the opposite—to offer advice to Congress about how to more effectively expand US influence in their home countries, and then return home with a promise to help carry out the US mission abroad.

Congress, of course, doesn’t have such a system.

But China does. Since 2001, one of China’s two pseudo-legislative bodies has invited special ‘overseas delegates’ from countries around the world to attend its annual two-week legislative session. The Chinese People’s Political Consultative Conference (CPPCC) is a political advisory body that, along with the National People’s Congress, meets during the ‘two sessions’ each March. There are around 2,200 members in the current body, though that number can vary.

These overseas delegates are a way for Beijing to draw on the talent and connections of overseas Chinese to help expand the party’s influence and popularity abroad.

Activities under the united front system have risen in both scope and importance under President Xi Jinping. Between 2015 and the end of 2018, the centre of the united front system, the United Front Work Department, was restructured and several new bureaus were created. Overall, the reorganisation reflects a greater emphasis on united front work relating to religion, ethnic affairs and overseas Chinese.

The CPPCC is a bedrock institution of the united front. Its delegates are taken from different groups in society, including minority political parties, religious groups, ethnic minorities, the sciences, the arts, agriculture, industry, business and technology. The CPPCC has one national body, but there are also bodies at lower levels of government, from the provinces to prefectures to townships. About two-thirds of delegates are members of the Chinese Communist Party.

The benign way to state the purpose of the CPPCC is that it works to give every part of society has a voice in governance. A more strategic interpretation of the CPPCC’s role, however, is that it co-opts emerging leaders from every part of society to make sure that no group is ever outside the guidance of the party.

The united front’s emphasis on exercising influence over Chinese abroad is also manifested in a unique feature of the CPPCC—its ‘overseas delegates’ (海外代表).

Most CPPCC delegates comes from China. But since 2001, the CPPCC has included around 35 delegates each year from among the Chinese diaspora. On the national level, unlike regular CPPCC delegates, they can’t vote, and each overseas delegate only serves in that role for a single annual session. (On local-level CPPCCs, it seems that overseas Chinese with foreign nationality can sit as regular CPPCC delegates and hold those positions year after year.)

The criteria the party uses to select these delegates, and their purpose, aren’t a secret. Xu Guanghua, who in 2014 served as the deputy head of the Committee of Hong Kong, Macao, Taiwan and Overseas Chinese Affairs of the CPPCC National Committee, explained how overseas delegates are chosen: ‘There are several standards we consider. They need to have expertise in a certain sphere, have the capability to participate in politics, stay influential among overseas Chinese, and most importantly, love China.’

Excerpts from a 2014 Global Times article about overseas delegates provide a clear picture of how the party views the role of CPPCC overseas delegates—as a way to win over and to influence overseas Chinese communities.

Influential overseas Chinese selected to give advice at CPPCC session

Among the approximately 2,000 members of the Chinese People’s Political Consultative Conference (CPPCC), one group is quite special. It was a group of 35 Chinese-looking ‘foreigners.’ Initially from China, they had all acquired foreign nationalities.

This overseas delegation consisted of 35 Chinese elites from 21 countries, who were invited to offer advice and suggestions during the 2014 CPPCC session …

Chen Xiongfeng, deputy director of the Consular Protection Center under the Foreign Ministry and former consul general of [the] Chinese embassy in the US, participated in the recommendation process.

‘There are 60 million Chinese living overseas. This is a group of people who do have clout in the mainstream societies of the countries they live in,’ Chen said …

‘Chinese elites abroad increasingly know how to use local platforms to deal with problems and exert their own sway, and they truly know what China should do to build its “soft power” while going global,’ he added.

Overseas delegates aren’t mindless vectors of the Chinese government’s expansive political desires; they are often well-known members of overseas Chinese communities who hope to improve the lives of Chinese abroad by bringing their perspectives to Beijing. They may have no intention to expand party influence, and may accept the invitation purely for the rarity of the experience, or for other reasons.

One overseas delegate, Chen Zhuogang, has lived in the US for 39 years, according to a March 2019 interview with the California-based pro-Beijing newspaper Qiao Bao. He carefully prepared for his time as a delegate by speaking with numerous members of his community in Texas, where he lives. According to Qiao Bao, Chen ‘communicated with the major local overseas Chinese communities before the trip, listened to suggestions and requirements, and prepared to bring these voices to the conference’. The issues most frequently raised among those he spoke with included difficulties in securing the necessary paperwork to visit China and concerns about the availability Chinese-language education for their children while living abroad.

These are perfectly legitimate concerns for any group of expats. But another top concern among those in Chen’s community was ‘preserving the rights and interests’ of Chinese abroad. This vague phrase has been used to refer to the Chinese government’s ability to protect overseas Chinese who may be in harm’s way due to war or natural disaster—but also as a justification for behaviours by Chinese companies or individuals abroad that could be interpreted as aggressive or even abusive. In February 2019, for example, Chinese foreign ministry spokesperson Geng Shuang denounced US security warnings on Huawei and other Chinese telecom companies as a violation of ‘Chinese companies’ legitimate rights and interests of development’. The phrase has also been used to justify the sometimes violent or obstructive demonstrations on Western campuses staged by patriotic Chinese international students, such as during the Hong Kong–related protests in Australia in August.

Overseas delegates tend to fall into one of two categories: people who are leading members of overseas united front–linked organisations, such as peaceful unification societies; and overseas Chinese who have made outstanding accomplishments in their fields, and who may or may not have had any previous links to the united front. The latter category includes scientists, people with government connections, and successful businesspeople.

Overseas delegates from the US have included an award-winning scientist in California, a local community and political organiser in Maryland, and even one senior adviser to the US Federal Reserve Board.

Gerry Groot, head of the department of Asian studies at the University of Adelaide, told me in an interview that being chosen as a CPPCC delegate grants prestige.

‘The United Front Department has seen these people as being influential and important in their communities, and is seeking to increase or deepen their ties to China, as the ancestral land’, said Groot.

‘In rewarding them, those people get status in their communities back home, and in many cases it increases their influence back home. And that means that these people go back much more committed to supporting the party than they were.

Policy, Guns and Money: Hacking and threats to the West

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In this episode, Executive Director Peter Jennings discusses the recent ASPI report How the geopolitical partnership between China and Russia threatens the West with former opposition leader and Governor of Western Australia Kim Beazley and the report’s author, Professor Paul Dibb.

Tom Uren and Elise Thomas from our cyber team discuss the misinformation and hype that surrounded reports Amazon boss Jeff Bezos’s phone was hacked by Saudi Arabia and the alleged Russian hacking of Ukrainian gas company Burisma.

Social credit and the Chinese military: counting the PLA’s troubles?

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‘If you’re a soldier in China, applying to leave the army is likely to leave a black mark on your social credit score.’ This was the striking opening line of a Sixth Tone article from April 2018 reposted on the Chinese military’s official website. The article was about the use of a social credit system by the People’s Liberation Army. However, it garnered surprisingly little attention for such a hot topic.

Excellent research has already been done on the various prototype social credit systems in China, but a big gap in that research is the question of how a social credit system might be applied to the PLA, particularly at a time when President Xi Jinping and the Chinese Communist Party are increasingly concerned about the military’s loyalty to the party.

The 2015 Chinese defence white paper stated that the PLA is enjoying a period of strategic opportunity and can therefore modernise through ongoing reforms. However, China has faced growing domestic and international criticism and pushback in recent months. The CCP is trying to put out fires on multiple fronts: continued freedom-of-navigation operations in the South China Sea; a slowing economy; crises in Hong Kong, Xinjiang and Taiwan; and the coronavirus outbreak.

The PLA is being pushed to be combat-ready as soon as possible, but military reforms haven’t been welcomed across the board. Changes in promotion structures, preferences for highly skilled labour and a new focus on high-tech joint operations have challenged the ways in which the PLA has operated for decades. However, the party’s longstanding battle to ensure that its army is loyal to it is an increasing priority under Xi, and the CCP continues to emphasise that the party controls the gun: 党指挥枪 (dang zhihui qiang). Under Xi, disloyalty to the party has been made illegal in order to protect the CCP’s power.

In the light of that threat perception, the PLA version of a social credit system seems to be a new tool for punishing betrayal, dissuading dissent and rewarding allegiance to the military.

The Sixth Tone article reports that 17 military personnel were ‘blacklisted’ in China’s social credit system in Jilin City and restricted from travelling by air and rail and from seeking civil service employment. Their names and addresses were posted in Chinese news articles and on the WeChat account of the Jilin City military recruitment office. They apparently ‘lacked the willpower to adapt to military life’. According to the article, they were prohibited from taking out loans and insurance policies and banned from enrolling in educational institutions for two years.

Similar examples have been reported in other provinces, where one-off punishments such as fines have been accompanied by permanent ones. For instance, two men in Fujian Province were punished by having their registration documents permanently marked with a note that read, ‘refused military service’.

More recently, in March 2019, Weihai City prefecture in Shandong published its own ‘Implementation Plan for the Evaluation of Personal Credit Scores in the Field of National Defense Mobilization’, which outlined how a social credit record could be used as both a carrot and a stick in domestic military matters. Punishments were listed for those deemed to be acting against national defence interests.

China’s 2019 defence white paper and other government documents state that ‘China’s national defense is the responsibility of all Chinese people’, so punishments for disloyalty aren’t directed solely at soldiers but also at civilians.

Until Xi’s reforms, the PLA was left to set and manage its own institutional priorities, but now it has to address corruption and tackle vested interests to take the military modernisation program forward. It seems that the application of a social credit system in the military is a potential additional measure to enforce strict compliance with new military guidelines.

The social credit system, which both co-opts and coerces, might also be used as a recruitment tool as the PLA competes against China’s private sector for highly skilled graduates. Weihai City’s system not only rewards those who join or extend their service in the military with bonus social credit points for them and their families, but also punishes those who do not.

Weihai’s military-related social credit system is integrated into the city’s ‘credit joint disciplinary mechanism’. Those who contribute positively or negatively to national defence have points added to or deducted from their personal records. Credit records are reportedly correlated with overall credit ratings, from AAA (integrity model) to D (dishonest). The repercussions of dissent extend beyond the soldier to his or her immediate family members. The naming and shaming is also becoming ever more public: transgressions are announced not just on government websites (such as the local military recruitment offices and the prefecture’s Credit China website), but also on social media accounts.

The link between Weihai’s social credit score and national defence suggests that the PLA is also more concerned about its ability to mobilise the military in a national crisis than previously thought. If Xi’s anticorruption campaign was also a tool to address the CCP’s control over the military, then the targeting of those in PLA logistics roles further suggests a concern in the military’s leadership about the force’s ability to mobilise when needed.

Just as a civilian social credit system might be used by the party-state to incentivise or force individuals, companies and other entities to ‘act in line with policies, directions and will of the CCP’, the military equivalent could be used to similar effect in the PLA.

It’s important to note that the PLA’s experience with social credit is based on isolated pilot projects and not a complete institution-wide program. However, the published examples indicate that those projects might be a strong indicator of a future system by which the PLA’s leadership ensures that the PLA remains the party’s army.

US–China trade deal could be bad news for Australia

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US President Donald Trump’s ‘phase one’ trade deal with China has set unrealistically high targets for Chinese purchases of US goods and services that can only be met by savage reductions in its imports from everyone else, particularly Australia.

Although the heart of the US administration’s complaint about the Chinese economy is the role of the state in subsidising and directing economic activity, the terms of the trade deal could lead to a much stronger assertion of state direction over the trading practices of its firms.

Some aspects of the trade agreement could be achieved easily. China is already strengthening its intellectual property protections, opening its economy to greater foreign investment and providing greater scope for the market to dictate its exchange rate. The Financial Times economics writer Martin Wolf describes these elements of the trade deal as ‘pushing on an open door’.

However, the requirement that China lift its purchases of US goods by US$200 billion over two years, relative to 2017 levels, bringing a corresponding reduction in the US trade deficit, looks unachievable.

The deal says that China will lift its purchases from the agricultural, manufacturing, energy and services sectors from the 2017 base of US$134 billion to US$211 billion this year and US$258 billion in 2021.

As analyst Chad Brown of the Peterson Institute for International Economics points out, the task is actually bigger than that. Because of the tariff war, US exports to China have dropped by US$20 billion since 2017. Meeting the target would require a doubling of US exports to China in the space of two years.

Brown comments that even during the halcyon years of the China boom from 2000 to 2007, when its annual economic growth rate topped 10%, US exports to China averaged growth of little more than 20% a year.

The deal specifies targets for each sector. For example, US farm exports are expected to rise from a 2017 level of US$21 billion to US$40 billion by 2021. However, because of the trade war, US farm exports have actually dropped to only US$10 billion, so the target implies a four-fold lift in just two years.

With a slowing Chinese economy, sales growth of this magnitude could only be achieved by taking market share from others. For example, China imported US$5.8 billion in wheat and other grains in 2017, of which 21% came from the United States, 25% from Australia, and a total of 39% from Vietnam, Thailand and Ukraine.

There has been no growth in China’s grain imports since 2015–16 (the country is 95% self-sufficient), so a doubling of imports from the US would likely see it taking a 40% share of the market, with the growth coming from existing suppliers.

The story is the same for meat (the US had 13% of Chinese imports in 2017 compared with Australia’s 11%*) and cotton (the US had 43% and Australia 22%); in both cases, Australia’s share would be squeezed.

The trade deal includes two pages of detailed guidance for how China must open its infant formula market to US producers—a field in which Australia has been the dominant supplier.

The largest losses for Australia would come from energy markets if the US deal were to be fulfilled. It dictates a rise in Chinese imports of US energy products from US$6.8 billion in 2017 to US$18.5 billion this year and US$33.9 billion in 2021. That five-fold increase would have to be delivered through LNG and oil sales.

Australia accounts for 42% of China’s LNG imports, followed by Qatar with 23% and Malaysia and Indonesia with a combined 18%. The US accounted for just 4% of China’s LNG imports in 2017. Commonwealth Bank commodities analyst Vivek Dhar says that while much of Australia’s export volume is on long-term contracts, about 10% of sales are on short-term contracts and could be switched to the US.

Achieving the increases spelled out in the agreement assumes the Chinese authorities have the ability to dictate where firms direct their business. The reality is that even Chinese state-owned enterprises are loath to follow Beijing’s dictates, and the central government has negligible influence over private-sector purchasing.

China’s biggest snackfood manufacturer, Shanghai Laiyifen, was quoted in the Financial Times saying that it was easier to import from Australia and New Zealand, where business is underwritten by a free trade agreement. Companies that used to buy from the US have redirected their business because of the uncertainty over tariffs of the last few years and will be reluctant to make the switch back.

Under the trade deal, average tariffs on each other’s goods will remain at around 20% on both sides. The US has said China will use temporary ‘tariff exclusions’ to achieve its purchasing targets.

China’s economy is much more market driven than the trade deal seems to assume. World Bank analysis shows the state-owned companies only account for about 25% of China’s economy while private enterprises account for more than 60%.

Critics of the deal say it represents a shift away from the free market principles that underpin the World Trade Organization towards ‘managed trade’ in which the strongest nations dictate outcomes to their benefit. Certainly, it is a one-sided deal, with nearly all the obligations resting on the Chinese side. The current US administration has little time for the multilateralism that drove US foreign and trade policy throughout the seven decades following World War II.

However, the unrealistic targets in the deal suggest that it is better understood through the lens of political strategy than trade policy. It marks a ceasefire while the US gears up for an election. It doesn’t bring an end to the economic conflict between the two superpowers which can be expected to resume once the votes are counted in November, almost regardless of who wins.

 

* The director of trade consultancy ITS Global, Jon Berry, says these estimates from the PIEE exaggerate US beef sales to China in 2017, noting the US was banned from exporting beef to China until the middle of that year. The US Meat Export Federation reported sales of only US$31 million in 2017. [Note added at 1150 AEDT on 3 February 2019—Eds.]

How long can Singapore walk the tightrope between the US and China?  

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Speaking at the Shangri-La Dialogue in May 2019, Singapore’s Prime Minister Lee Hsien Loong called on China and the United States to reach a strategic accommodation amid their festering dispute over trade, technology and other issues.

The US, Lee stressed, needed to forge a ‘new understanding’ that would integrate China’s aspirations within the ‘current system of rules and norms’. Both would need to work together to revise the world system.

Lee’s keynote was widely followed around the world, given the nature of the Sino-US impasse and the need for smaller countries to adapt and evolve their policies amid the growing schism between China and the United States.

Singapore’s policy position is also worth watching because the island republic is a major strategic partner of the United States and a close economic partner of China.

The strategic conundrum mapped out by Lee underscores a deeper malaise in the Asia–Pacific. To paraphrase W.B. Yeats, the regional order is falling apart. As Gideon Rachman put it the Financial Times, America’s military pre-eminence and diplomatic predictability can no longer be taken as a given; at the same time, China is no longer willing to accept a secondary role in the region’s evolving security system.

One of the roots of the contestation arises from the fact that Washington refuses to cede primacy.

Indeed, the new-fangled ‘free and open’ Indo-Pacific strategy—with the enshrined principles of freedom of navigation, respect for international law and maritime security—is seen by many as a euphemism for maintaining the US-led regional order.

China is not working to upend the US-led system, which has worked to its benefit, particularly in the areas of liberalisation of trade and global supply chains.

One assessment is that China’s proposal of an ‘Asia for Asians’ formulation is an indirect way of keeping the US out of the region. Put differently, China’s strategy is to weaken US alliances, erode American centrality in China’s periphery and eventually create a new regional order with China at the core.

The festering geopolitical competition between China and the US has only increased the pressure on Singapore to ‘choose a side’.

As founding prime minister Lee Kuan Yew used to say, when elephants fight, the grass is trampled; yet, when they make love, the grass also tends to suffer.

In fact, Singapore’s inclination not to take sides between the two major powers has a long history. Speaking to the Asahi Shimbun in 2010, Lee Kuan Yew said Singapore had never sought to conscribe (zhiheng) China.

Rather, Singapore sought to effect a balance (pingheng) in the Pacific, based on the presence of American power.

To paraphrase Lord Palmerston, Singapore doesn’t deem itself to have permanent friends in the US and China; it only pursues pro-US and pro-China policies when such policies are judged to be in the republic’s interests.

In 1978, the US Navy used Tengah Air Base for long-range flights over the Indian Ocean. After the US military was booted out of Philippine bases in the early 1990s, Singapore offered the US access to naval facilities at Changi Naval Base—a direct recognition that the US military presence is beneficial for regional stability.

In September last year, the US and Singapore renewed a 1990 memorandum of understanding which allows US military aircraft and naval vessels to use facilities on the island.

The two countries signed a landmark free trade agreement in 2003 and were partners in the Trans-Pacific Partnership (until US President Donald Trump withdrew the US from the pact).

Singapore–US ties are so close that one US official noted that the Philippines, a formal US ally, acts more like a partner, while Singapore is a partner that acts like an ally.

At the same time, Sino-Singapore relations have never been better. Singapore is China’s top foreign investor and a firm supporter of the Asian Infrastructure Investment Bank and the Belt and Road Initiative. The two governments have formed partnerships to develop three projects in China: Suzhou Industrial Park, the Chongqing Connectivity Initiative and Tianjin Eco-city.

Unsurprisingly, Singapore doesn’t want to be caught in any countervailing coalition, led by the US or otherwise, against China.

Speaking to the Washington Post in September, Lee Hsien Loong noted that US allies and partners are so ‘deeply enmeshed’ with China that forcing them to dissociate from Beijing would be a ‘challenging strategic stance to make’. That doesn’t mean that Singapore can avoid making a choice indefinitely.

The renewal of the 1990 Singapore–US agreement could lead to China’s asking for formal access to Singaporean facilities by Chinese warships. In a Taiwan Strait contingency, Singapore might be asked by the US to provide resupply and access to US naval ships going from the Persian Gulf towards the strait. That would put it in a quandary.

As a US Navy admiral has described it more vividly, Singapore is walking on a narrowing tightrope between the two powers. In the meantime, however, kicking the can down the road makes strategic sense.

Australia’s defence department calls time out on TikTok

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The news that Chinese-owned video-sharing app TikTok is not approved for use on devices owned by Australia’s Department of Defence, as the ABC reported today, is hardly a surprise.

Defence’s default position on what apps it allows on its work phones is, in effect, that all apps are banned unless there’s a need for them and they pass a security test. Unsurprisingly, seeing how our defence personnel put their own spin on the ‘Haribo Challenge’ is not a top priority for the department.

The news follows a warning in mid-December from the Pentagon to various US military branches to remove the popular app from their phones. The Australian decision, as with the ban on the use of Chinese-owned app WeChat almost two years ago, is a no-brainer.

Like most social media apps—or any other app, for that matter—TikTok and WeChat require their users to agree to a startlingly invasive list of permissions. A recent analysis of TikTok’s privacy and data-collection policies revealed that it demands a worryingly high level of access to systems and information on both Android and Apple devices.

These include requiring full access to the device’s camera and microphone (hardly surprising for a video-sharing app) and its contact list, as well as detailed location data using GPS. The GPS tracking is ‘surprising’, say the researchers at security company Proofpoint who analysed the app, ‘especially as TikTok videos don’t obviously display location information’.

The metadata harvested from these apps can paint a vivid picture of what military personnel are up to, as the 2018 Strava app debacle uncovered by my ASPI colleague Nathan Ruser showed. The Strava case demonstrated, too, that an app doesn’t need to be owned by a foreign adversary for it to inadvertently pose a serious risk to military operational security.

But when the app is owned by a company operating in an authoritarian country, as TikTok’s owner ByteDance is, there are added risks to users, whether they’re military personnel or not. It’s those risks that prompted a full-scale pushback from US authorities as TikTok’s popularity rose in America.

The committee on foreign investment there has said the app could pose national security risks for Americans and possibly be used to influence or monitor them. In November, the New York Times reported that the US government ‘had evidence of the app sending data to China’. In a recent lawsuit in California, the plaintiff has alleged that TikTok transferred vast quantities of her private and personally identifiable data to servers in China.

TikTok has denied that its data is being sent back to Beijing, stating that all US user data is stored in the US, with backup redundancy in Singapore. But, as Proofpoint’s researchers pointed out, there’s no information on TikTok’s website about where data on users from other countries, including Australia, is stored.

Even if Australian users’ data is being stored in Singapore, ByteDance’s engineers, who are based in Beijing, would still need to access that data in order to continue to improve the app, as David Carroll, an associate professor of media design at Parsons School of Design, has argued.

Once it’s there in Beijing, it could be easily accessed by the authorities. After all, as is now well known (thanks in part to the Australian government’s decision to ban Huawei from taking part in the rollout of the national 5G mobile network), China’s National Intelligence Law from 2017 requires organisations and citizens to ‘support, assist and cooperate with the state intelligence work’.

The pushback against TikTok, which this Australian Defence ban has now played a small role in, has reportedly prompted internal discussions at ByteDance as to their best course of action. The options being canvassed at the moment, according to Bloomberg, range from an ‘aggressive legal defense and operational separation for TikTok’ to ‘sale of a majority stake’.

ByteDance, it seems, is determined to put as much daylight as possible between the company and Beijing. TikTok CEO Alex Zhu says he would turn down a request from President Xi Jinping himself to censor content on the app—an entirely meaningless claim, given that’s not even remotely how China’s censorship system works in practice.

A recent TikTok transparency report tested out another bit of sophistry. The report claimed there were zero takedown requests from China, but five from Australia. However, given that the version of TikTok that Australia has doesn’t work inside the Great Firewall of China, that’s hardly surprising at all.

Defence has clearly not been fooled by such obfuscations. That the company is now entirely captured by Beijing’s censorship and surveillance apparatus is beyond doubt. Only months ago, for example, Uyghurs in Xinjiang were using Douyin, the version of TikTok used within the Great Firewall, to shine a light on the brutal surveillance state. Now, chillingly, those videos of despair have been expunged and replaced with shiny happy people holding hands.

Editors’ picks for 2019: ‘Espionage or interference? The attack on Australia’s parliament and political parties’

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Originally published 21 February 2019.

It doesn’t get much bigger than attacking the home of democracy—parliament house—and a country’s major political parties only months out from a federal election.

In his statement on these attacks, Prime Minister Scott Morrison said there was no evidence of ‘electoral interference’. But elections aside, there is a much broader question here about what these attacks might mean.

By being caught with its hands squarely in the cookie jar, this ‘sophisticated state actor’ guaranteed that its actions would garner global media attention. It has also, likely unintentionally, placed itself smack in the middle of an ongoing public debate about ‘foreign interference’ in Australia.

Let’s cut to the chase: Chinese state intelligence was probably involved in the breach. This was a sophisticated attack that used a suite of new malware and techniques that—at the time—weren’t detected by almost all malware-detection software. Building a new toolset of this type takes considerable time and effort, and although Russia, North Korea, Iran and Israel undoubtedly have the capability, Australia is simply not a high enough priority for those countries to expend their finite cyber espionage resources on this kind of advanced attack. The Chinese state, however, has the motive, the capability and an extensive track record.

But we will only know who is responsible for the attacks if the government chooses to tell us, and that’s where things get tricky.

The Australian government has been reluctant to ‘name and shame’ states engaged in cyber operations—what is known as ‘attribution’. It has formally blamed Russia several times for malicious cyber behaviour that hasn’t involved obvious Australian interests, but has named China only once. In that December 2018 attribution, which occurred after Chinese hacking in Australia that affected industry, universities and think tanks, the government focused on the theft of intellectual property for commercial gain and was drawing a distinction between ‘acceptable’ intelligence that seeks to uncover government or military secrets and ‘unacceptable’ intelligence for commercial advantage.

It is also notable that this formal attribution was conducted collectively with many other affected countries. Safety in numbers matters when China’s approach to international engagement is taking an increasingly coercive and vengeful tone. And let’s face it, while it may not be effective in dissuading further attacks, remaining silent is often the more palatable option from a political and diplomatic perspective.

So the first prerequisite for the Australian government to formally name the attacker would be for its purpose to have been ‘unacceptable’ espionage. In parliament and political parties there wouldn’t be much commercially valuable intellectual property at stake, but perhaps this attack could be a form of foreign interference?

It’s clear that this act of cyber espionage isn’t, in and of itself, an act of foreign interference. Intelligence, at least in Western countries, is typically used to gain insights and to inform our government positions and plans. From this perspective, the highest priority targets would be government departments and ministers, but it’s not hard to imagine how information about the powerbrokers and personalities of parliament could be used to refine and hone a foreign government’s posture and diplomatic approach.

Another possibility that doesn’t involve foreign interference is that the hacker was after our political parties’ campaign databases. There is already good evidence that Chinese state intelligence is hoovering up large datasets to enhance its intelligence-gathering and counter-intelligence efforts. If Chinese state intelligence was behind this attack, it’s possible that these comprehensive campaign databases could be a useful addition to the data they have already collected.

It is worrying, however, that the Liberal, Labor and National parties were targeted. The more that intelligence-gathering extends beyond government and parliament, the less likely it is that any intelligence gained will provide any insight into official government positions, and the more useful it would be for interference activities.

One way this espionage could be used for foreign interference is—as seen in the 2016 US presidential election—through the release of stolen campaign emails to damage a particular party or candidate and sway public opinion. But this tactic is now embedded in the public consciousness and our political parties and media could well respond in a way that is detrimental to the attacker.

But a far subtler, more covert, and much more difficult to detect form of foreign interference could be the use of the stolen information to identify politicians and staffers who may be susceptible to influence, enable future relationships with them and find points of leverage that might convince, cajole or coerce them into a supportive position. An in-depth understanding of our political parties and the machinations of parliament—the exact targets of this hack—would be far more helpful in enabling this kind of interference than it would be in illuminating our official decision-making processes.

Forensic investigation of these breaches is difficult and time-consuming, and the attacker took active steps to hide its tracks. The investigation is in its early stages, and the culprit may never be officially identified, but knowing what was stolen will be key to formulating a response and preparing for any interference that may occur in the future.

This attack may never be classified as electoral interference, but the very public statements made by Morrison in parliament—the scene of the crime—make it unlikely that it will be brushed under the carpet. While the short-term focus is on securing the systems in parliament and our political parties, we also need to face the far more difficult, long-term task of protecting our political systems and democracy from undue influence.