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In an age of escalating tension between the United States and China, will the European Union still have room to manoeuvre in pursuit of its own interests? That will be a key question for EU policymakers in the years ahead.

The Sino-American conflict has already become a central issue in the run-up to the US presidential election in November, because President Donald Trump’s administration has clearly decided that bashing China is one way to divert attention from its own failings. But even if Trump loses to his presumptive challenger, Joe Biden, the bilateral confrontation will continue to escalate. Within the US political and foreign-policy establishment, actively looking for ways to curtail, stop, or even reverse China’s geopolitical rise is a bipartisan pursuit.

Yet, even with the most aggressive policies, it is doubtful that the US—or anyone else—could achieve that goal. China’s per capita GDP (adjusted for purchasing power parity) is roughly one-third that of the US or most European countries. But in terms of the overall size of its economy, it is quickly catching up to the US and the EU.

Nobody can know for certain how China’s economic story will unfold in the decades to come; but current trends suggest that it will continue to grow much faster than either the US or the EU. If it can close even half the per capita GDP gap with Taiwan, its economy will have grown (by dint of population) to twice the size of the US or the EU economies.

Despite the Covid-19 pandemic, the International Monetary Fund and the World Bank both expect China’s economy to register positive growth this year. Meanwhile, the US and Europe are both experiencing a deep contraction, with no end in sight. The upshot is that the pandemic will further increase China’s relative weight in the global economy.

To be sure, with an ageing population, a massive, loss-making state sector, and growing debt, China will face strong economic headwinds in the coming years, especially if structural reform continues to rank low on Chinese President Xi Jinping’s list of priorities. China’s political system is woefully unsuited for managing a modern society.

Before dying of Covid-19, Li Wenliang, the Wuhan-based physician who was silenced after trying to sound the alarm about the coronavirus outbreak, pointed out that ‘a healthy society should not have just one voice’. By that unimpeachable standard, the Chinese political system is in poor health indeed. It will remain susceptible to all kinds of morbid and unpredictable maladies.

Still, there is no denying that China will be an increasingly important part of the global economy in the years ahead. Its expanding presence will bring new challenges for everyone, but particularly for Europeans. Because Europe can no longer count on the US as a reliable, like-minded partner, it will have to develop its own approach.

The new European strategy toward China should be based on two pillars. On the one hand, engagement on issues of common concern can and must continue. China accounts for nearly 30% of global greenhouse-gas emissions. Because one of Europe’s chief policy objectives is now to pursue a green-energy transition—achieving net-zero emissions by 2050—spurning dialogue with China is not an option.

The same applies to other supranational issues such as trade and public health. Both Europe and China have a strong interest in preserving the global trading system, and that will require cooperation to reform the World Trade Organization. The US’s disengagement from the WTO and the World Health Organization is deeply counterproductive and places an even greater burden on the EU to reform and strengthen these necessary multilateral bodies. The WHO’s latest World Health Assembly showed that the EU can indeed play an important, constructive role in this regard, even as the US continues to marginalise itself.

On the other hand, the EU increasingly sees China as a ‘systemic rival’ whose values and interests will inevitably clash with its own. There is clearly a need for stronger mechanisms to screen Chinese investment in sensitive European sectors and to ensure fair competition between European firms and Chinese state-subsidised corporations. Across a range of issues, European policymakers and diplomats will need to do more to ensure that China lives up to the commitments it has undertaken.

There is little doubt that European public opinion is starting to swing against China and that this will have an impact on policy. With the Chinese regime cracking down on Hong Kong, threatening Taiwan and maintaining its repression in Xinjiang and other regions, it will become much harder for countries like Hungary to block EU actions in defence of human rights and the rule of law in China.

The EU’s task will be to strike a balance between these two pillars. Though Europe will stand together with the US on many issues, it will not abandon its engagement with China on issues of mutual concern. And while Europeans must be realistic about China’s increasing capacity to throw its weight around on the world stage, China’s leaders would do well to remain realistic, too. A violent clampdown in Hong Kong, for example, would force the EU to take a much harder line when devising its new strategic approach.

Chinese diplomats have long had a reputation as well-trained, colourless and cautious professionals who pursue their missions doggedly without attracting much unfavourable attention. But a new crop of younger diplomats are ditching established diplomatic norms in favour of aggressively promoting China’s self-serving Covid-19 narrative. It’s called ‘wolf warrior’ diplomacy—and it’s backfiring.

Shortly before the Covid-19 crisis erupted, Chinese Foreign Minister Wang Yi instructed the country’s diplomatic corps to adopt a more assertive approach to defending China’s interests and reputation abroad. The pandemic—the scale of which could have been far smaller were it not for local Wuhan authorities’ early mistakes—presented a perfect opportunity to translate this directive into action.

And that is precisely what Chinese diplomats have been doing. For example, in mid-March, the foreign ministry’s newly appointed deputy spokesperson, Zhao Lijian, promoted a conspiracy theory alleging that the US military brought the novel coronavirus to Wuhan, the pandemic’s first epicentre.

Similarly, in early April, the Chinese ambassador to France posted a series of anonymous articles on his embassy’s website falsely claiming that the virus’s elderly victims were being left alone to die in the country. Later that month, after Australia joined the United States in calling for an international investigation into the pandemic’s origins, the Chinese envoy in Canberra quickly threatened boycotts and sanctions.

But, unlike the fictional special-operations agents after which they’re named (from a popular Chinese action movie), China’s wolf-warrior diplomats haven’t been rewarded for their recklessly confrontational style. Far from burnishing China’s international image and placating those who blame the country for the pandemic, their actions have undermined China’s credibility and alienated the countries it should be wooing.

Why change tack in the first place? One reason is China’s current combination of historical insecurity, rooted in its so-called century of humiliation, and heady arrogance, fuelled by its immense economic clout and geopolitical influence. So keen are China’s leaders to gain the respect they feel their country deserves that they have become highly sensitive to criticism and quick to threaten economic coercion when countries dare to defy them.

Another reason is the current regime’s emphasis on political loyalty. Under President Xi Jinping’s highly centralised leadership, Chinese diplomats are evaluated not on how well they perform their professional duties, but on how faithfully and vocally they toe the party line. This is exemplified by the appointment last year of Qi Yu, a propaganda apparatchik with no foreign policy experience or credentials, as party secretary of the Ministry of Foreign Affairs—an important post traditionally held by an experienced diplomat.

If aggressively pushing the Chinese Communist Party’s preferred narrative is a matter of professional survival, diplomats will do it, even if they recognise that it’s counterproductive (as many probably do). They certainly won’t try to persuade their political masters to change course. Whereas diplomats risk paying a heavy price for conscientious dissent, they seem to suffer no consequences—from criticisms in official media to demotions or dismissals—for destructive loyalty. When pushing the CCP-approved narrative produces negative results, it is, in party parlance, an issue of tactics, not the ‘political line’. Punishing loyal diplomats for ‘tactical errors’ would make them more reluctant to do the CCP’s dirty work in the future.

By removing any incentive for diplomats to temper their approach and offering a convenient excuse for setbacks, this logic entrenches bad policy. It doesn’t help that China lacks a free press and political opposition to highlight the failures of the wolf-warrior approach. Unlike Western diplomats, those in China don’t have to fear public ridicule or criticism. All that matters is what their bosses say—and their bosses want wolf warriors.

This is a mistake. At a time when China’s reputation is suffering and its relationship with the US is in freefall, the country’s diplomats should be focused on differentiating China’s foreign policy from that of US President Donald Trump.

It is Trump who recklessly promotes conspiracy theories and aggressively responds to any perceived slight with threats and sanctions. It is Trump who foolishly alienates friends and partners, rather than cultivating mutually beneficial relationships. And it is Trump whose belligerent insistence on his country’s superiority has eroded its international reputation and undermined its interests.

China’s leaders should know better.

As China’s communist leaders prepare to impose a draconian new national security law on supposedly autonomous Hong Kong, officials in Beijing and locally are trying to assure the city’s anxious and angry residents that nothing much will change.

The legislation, approved by the National People’s Congress (NPC) on Thursday, will only apply to a tiny number of ‘terrorists’ and their foreign backers, they say. Local police and courts will still be in charge. The new restrictions, they say, will actually make Hong Kong safer and more stable for overseas investors. And besides, every Western country has its own version of a national security law, so criticism from foreign capitals amounts to hypocrisy and fearmongering.

But Hong Kong’s elected pro-democracy politicians, academics, lawyers, journalists and overseas business groups believe precisely the opposite is true. Everything will change.

After steady erosion, they say—the kidnapping of five Hong Kong booksellers, the expulsion of a Financial Times journalist, China weighing into local court decisions—the law will mark the death of Hong Kong’s autonomy, and of the unlikely dream of ‘one country, two systems’.

The remaining question for many now is how long this freewheeling, capitalist enclave can thrive as a global financial centre and multinational business hub once it becomes just another Chinese city, subject to the controls used to stifle dissent on the mainland.

While Hong Kong’s political future is being dictated from Beijing, its economic future might be decided in Washington.

Hong Kong’s international standing could be further eroded now that the United States poised to implement new sanctions. Secretary of State Mike Pompeo has indicated that the White House could revoke its special trade status. President Donald Trump could then impose on Hong Kong punitive tariffs on exports and controls on sensitive technology as he has on China.

One prominent American businessman in Hong Kong predicted that trade, technology and the overall business climate could diminish rapidly. He said the financial sector could be less immediately affected given the strength of the Hong Kong stock exchange, the world’s third largest behind New York and London with over 2,000 listed companies. But that could change, too, if overseas talent becomes harder to attract, if faith in the legal system wanes and if the market manipulation common on the mainland takes hold here.

Hong Kong is already less vital to China than it was 23 years ago at the time of the handover, when its economy accounted for nearly 16% of mainland China’s GDP. Now its barely 3% and ships bypass Hong Kong for mainland ports in Shenzhen and Shanghai.

But the city remains important. Most of China’s foreign direct investment comes through Hong Kong, contracts are signed there because of its reliable legal system, information—vital to capital movements—still flows freely, and Hong Kong’s dollar is a convertible currency pegged to the US dollar. All of that could now be in danger. An immediate rush to the exits is unlikely, but Singapore is likely to be perceived as a safer and more stable long-term bet.

There are too many unknowns to be certain of any outcome. The new law is still being written in Beijing, and will not likely be implemented here for several months. And Pompeo’s statement decertifying Hong Kong only begins a process, leaving Trump with many options depending on how hard he wants to try to punish Beijing.

Jittery residents are waiting to see the fine print of the law that, as expected, won overwhelming support from the NPC, China’s rubber-stamp parliament, with 2,878 votes and only one against, with six abstentions. Now it goes to the more powerful NPC Standing Committee, charged with crafting the precise wording. That will take several weeks.

Will people arrested in Hong Kong for violating the law be tried in local courts, where defendants enjoy more rights, including under international human rights covenants? Or could they be shipped to mainland courts where prosecutors have a 99% conviction rate? Will the law be enforced primarily by the local police, or by agents of China’s feared Public Security Bureau?

And will it be retroactive so that someone can be prosecuted for a statement or a tweet made last year before it was in force? That has many trying to scrub their social media accounts, and downloading virtual private networks, which are illegal in China, though commonly used to bypass censors.

The only template suggesting how the law might be implemented in Hong Kong is the way it’s used in mainland China. That paints a terrifying picture.

Journalists, scholars, lawyers, human rights activists and workers with non-government organisations have all been detained under the mainland’s national security law, usually charged with the catch-all crime of ‘subverting state power’ or ‘inciting to subvert the state’. Trials are typically closed if they involve ‘national security’. Many documents, from mundane economic statistics to the number of people executed for capital crimes, are classified as ‘state secrets’ and reporting them, or possessing them, can lead to prison. Criticism of the one-party state or calls for multiparty democracy amount to crimes of incitement.

Backers of the law say it will only be applied to crimes like treason, subversion, foreign interference and secession, but there are unlikely to be clear legal signposts to what those vague terms mean.

Can Hong Kong academics researching mainland trends run afoul of the law? Can a university hold a symposium on Tibet or Taiwan and invite all sides to participate? Could publishing an interview with the Dalai Lama, or Taiwanese President Tsai Ing-wen, be deemed a crime? And how broadly will the new law define ‘foreign interference’, which could mean the normal activities of American or Australian NGOs, like human rights or labour groups, providing funding or training for local partners?

In China, attacks on the communist party and its symbols are not tolerated. But in Hong Kong, slogans and banners mocking the party, the Chinese flag and Xi Jinping are common. Will they be outlawed? Already, the local legislature, controlled by pro-Beijing forces, is trying to ram through an unpopular bill to make it a crime to disrespect the Chinese national anthem, ‘March of the Volunteers’.

Local pro-China figures have already hinted that the annual vigil commemorating the 1989 Tiananmen Square massacre of hundreds of pro-democracy students could be outlawed.

Little is known about Washington’s next steps.

Despite its divided and divisive politics, there’s a strong and unusually bipartisan consensus in the US to hold China to account for its human rights abuses and for rolling back Hong Kong’s freedoms. Congress has sent to the White House a bill to sanction Chinese officials for their brutal suppression in Xinjiang, where more than a million ethnic Muslim Uyghurs have been sent to concentration camps for ‘re-education’.

Trump has been agitating to punish China for its early lack of transparency over the initial outbreak of the deadly coronavirus in Wuhan, most likely at a wildlife and seafood market not far from a secretive virology laboratory. But Hong Kong’s economic fate could also be tied to the US–China trade war. If Hong Kong loses its special trading status and becomes subject to punitive tariffs, the economic blow to a city reeling from months of protests and the pandemic could be devastating.

The anti-subversion law, and the crackdown it presages, is the result of a collision between Hongkongers’ aspirations for genuine autonomy and the Chinese Communist Party’s imperative to impose control over a restive former British colony that never fully accepted being incorporated into the mainland.

After months of protests, many Hong Kong activists and outside observers were hoping, optimistically, that China’s rulers would not risk tarnishing this city’s global brand as a financial centre, or the approbation from the wider world, with a complete crackdown, and that some compromise might be reached. But it now appears that for China’s leadership, it’s most important to control Hong Kong through force and to crush dissent that might spill over the border.

Before 1997, when Britain handed over the colony, Hong Kong’s fate was decided in London and Beijing, with its people having no say.

History appears to be repeating itself. Hong Kong’s future is now being shaped in Beijing and Washington. And once again, Hongkongers are on the outside looking in.

China’s decision to crack down on Hong Kong with a new security law has shocked the world. But to those who read the resolution issued last November by the Central Committee of the Chinese Communist Party, it comes as no surprise. In that document’s section pertaining to Hong Kong, the CCP signalled its intention to assert full control over the former British colony. Tighter national security laws and the establishment of unspecified new enforcement mechanisms would be just two components of a much larger, more comprehensive strategy.

Now that China is pursuing this strategy in earnest, we should expect it to follow through with the additional measures announced last November. Besides bypassing the Hong Kong legislature with a new national security law, the CCP also intends to change the procedures for appointing the city’s chief executive and principal officials. It will strengthen Hong Kong’s law enforcement capabilities and conduct a campaign to inculcate ‘national consciousness and patriotic spirit’ among Hong Kong’s civil servants and young people. The goal is to integrate the city’s economy much more closely with that of the mainland. As if the much-feared security law wasn’t bad enough, the worst is yet to come.

In any case, implementation of the security law will likely be enough to end the so-called one country, two systems governance model that the city has maintained since returning to Chinese rule in 1997. According to remarks from a deputy chairman of the standing committee of the National People’s Congress, Article 4 of the proposed law will authorise ‘relevant national security agencies of the central government’ to establish permanent operational branches in Hong Kong.

Although we don’t yet know which ‘relevant national security agencies’ this applies to, we can be certain that it will include the Ministry of State Security, the Ministry of Public Security and the People’s Armed Police. Officials from the Cyberspace Administration, which enforces cybersecurity and online censorship, may also be dispatched to Hong Kong.

Worse, the proposed law will give these agencies a sweeping mandate. According to Article 7, each agency will have a duty to ‘prevent, stop and punish any activities that split the country, subvert the power of the state, organize and engage in terrorism, and activities by foreign and external forces that interfere in the affairs of Hong Kong Special Administrative Region.’

If the law is strictly enforced, one should anticipate Chinese security agents engaging in surveillance, intimidation and arrests of not only Hong Kong residents, but also foreign nationals deemed to pose a threat to national security. The People’s Armed Police may well be deployed to suppress the large demonstrations and riots that are sure to follow. Although it remains unclear how individuals accused of subversive activities will be prosecuted, there’s a strong possibility that they will be transferred to Chinese courts, where securing convictions for trumped-up charges will be easier than in Hong Kong’s courts, which remain largely independent.

The people of Hong Kong will not submit to China’s police state without resistance. In the near term, the new law’s passage will only escalate tensions in the city, as demonstrated by a recent clash between protesters and Hong Kong police. As Chinese security agents begin their enforcement activities in the coming months, they will likely encounter fierce resistance from local pro-democracy activists. Spiralling violence will precipitate an economic meltdown as capital and talent flee Asia’s global financial hub.

Meanwhile, China hawks in the United States will view this looming catastrophe as a godsend. Last November, Congress passed the US Hong Kong Human Rights and Democracy Act, which requires the US Department of State to certify on an annual basis that Hong Kong ‘continues to warrant treatment under United States law in the same manner as United States laws were applied to Hong Kong before July 1, 1997’. If Chinese security agents start arresting pro-democracy activists and their Western supporters in Hong Kong, it’s impossible to imagine that US Secretary of State Mike Pompeo would allow the department to recertify the city’s status.

Decertification would bring an end to all or most commercial and travel privileges that the US has maintained for Hong Kong since 1997, possibly dealing a fatal blow to the city’s economy. And the US won’t be the only Western country to make China pay a price for its aggressive gambit. For US allies that have been hesitant to take sides in the unfolding Sino-American confrontation, China’s latest move will make their decision much easier. Whatever doubts they may have harboured about plunging the world into another cold war will have been assuaged. China will have left them with no alternative but to join a US-led anti-China coalition.

One can be confident that China’s leaders have considered these calamitous consequences and calculated that imposing the new security law on Hong Kong was worth the risks. The international community must prove them wrong.

A major disruptive crisis can force countries to adapt in ways that are deeply uncomfortable to the authors of the old order. That is what is happening with the Covid-19 pandemic.

The world is being pushed into a deep economic depression. Political systems everywhere are struggling to cope with a medical emergency but have yet to grapple with the second-order and third-order effects of the pandemic that could reshape the global strategic balance.

For Australia, it’s a wonderful outcome that we have—so far—‘flattened the curve’ and can start to plan for a slow return to normality, but that’s unlikely to be the story in our region. Who knows what Covid-19 will do to Papua New Guinea or Indonesia?

So, to say that national security is ‘not a first-order priority’ for government, as Dennis Richardson told Paul Kelly in the Weekend Australian last Saturday, is a failure of strategic imagination. There will be no snapback to the previous, more comfortable order.

A brief historical detour will help explain my point. As the head of the Department of Defence’s strategic policy branch in 1998, I was given the job of writing a classified assessment of regional security. This was in the aftermath of a murderous civil war on Bougainville Island, the Sandline crisis, which came close to triggering a coup in Port Moresby, and rising violence in East Timor.

I wrote in the assessment that Australia was facing the consequences of a deterioration in regional security. That judgement was set upon by others. The Department of Foreign Affairs and Trade took it as a criticism of its diplomatic skills, and the intelligence agencies saw it as a negative judgement about their predictive abilities.

As 1998 turned into 1999, it became clear that the assessment would never see the light of day. The Canberra bureaucracy could not conceive that the world was changing faster than its pragmatic incrementalism could handle. The report was shelved. Soon after, I was helping to run a new group called the East Timor policy unit in the weeks before Australia’s biggest military operation since the Vietnam War. Some deterioration!

The Timor crisis looks like a mosquito bite compared with the strategic changes now underway. Richardson dismisses as far-fetched the idea that ‘Australia’s circumstances are so dire, almost at the point of war, that we need a national security focus dominating the totality of what the government does’.

The risk of conflict is not far-fetched. The Chinese Communist Party is pushing the boundaries of acceptable international behaviour in the skies and seas around Taiwan, Japan and South Korea, and in the South China Sea. This is not a state secret. It’s readily observable by reading Chinese newspapers that the party is stoking nationalist sentiment, diverting attention away from its mismanagement of the virus, and setting the groundwork for a crisis over Taiwan.

I hope a military crisis doesn’t happen, but it is the responsibility of national security agencies in Australia to think through the consequences of high-risk scenarios.

This is why Australia needs a national security strategy. Even if it were possible for Australia to avoid direct military involvement in a Taiwan crisis (a big if), we would certainly feel the impact of fuel supply chains from north Asia shutting down. Would China be supplying us with medical equipment as normal? If China is locked in a hostile standoff with the US over Taiwan, will we still be welcoming the PRC’s purchasing of our critical infrastructure?

These questions point to the inadequacies of current policy approaches that were designed for a more benign era, when more people bought the fiction that a wealthier China was going to become a more open country to deal with. We do indeed have ‘a muddle of policies that don’t align with one another’, as Richardson puts it. But don’t expect many in Canberra to acknowledge that, because they own the muddle.

In calling for a national security strategy, I am not saying that we should put a ‘national security umbrella over the totality of government’—whatever that means. Australia still will trade, take foreign investment, train overseas students and establish research links with other countries, but we need to understand what these actions mean from a national security perspective.

I agree with Richardson when he says the national security community lacks the skill set to handle these wider tasks. The deficit comes about because we have failed to take these broader challenges seriously.

Nowhere is that more apparent than in our failure to manage foreign investment with greater attention to national security. When I was in Defence, the line was ‘Treasury never says no’ to foreign investment.

The Foreign Investment Review Board has toughened its stance somewhat, meaning appalling stuff-ups such as leasing the Port of Darwin to a Chinese company for 99 years hopefully will never happen again. But it persists in claiming that investment from communist China is no different to investment from democracies. After Covid, does anyone still believe that?

I will happily accept Richardson’s mantle of being a ‘national security cowboy’. Right now, Australia needs more cowboy and less kowtow, more principle and less of the ‘pragmatism’ that has brought us to this sorry point.