Tag Archive for: China

Permitting aggressive tactics in the South China Sea is in no one’s interests

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Canberra, we have a problem. It’s the public diplomacy around Australia’s relationship with the Chinese state—in particular, the People’s Liberation Army and the civilian and militia elements that operate with it in the South China Sea.

The Royal Australian Navy has just finished its largest task force deployment in recent years, called Indo-Pacific Endeavour 2019. Four RAN ships visited 13 ports in seven countries and covered approximately 16,000 nautical miles. The naval flotilla, which embarked air force and army personnel, together with Seahawk, MRH-90 troop transport and Tiger armed reconnaissance helicopters, travelled from Sri Lanka right through Southeast Asia and into the South China Sea.

A ream of ‘public affairs’ material was produced for Australian and international media over the three- month deployment—more than 800 images, 100 articles and 40 videos covering a range of activities including disaster assistance planning, community engagement, multinational naval manoeuvres and military training with regional partners in India, Sri Lanka, Indonesia, Malaysia, Singapore, Thailand and Vietnam.

No doubt, the deployment achieved much good in deepening Australia’s relationships in the region. It’s been a fine exercise in regional presence and showcasing of Australian capability, along with building the capacity to work closely with regional militaries in an increasingly difficult part of the world. Let this deployment become the new normal and be part of a persistent operational presence working closely with regional partners’ forces.

But in all the words and images that were produced by what was apparently the largest public affairs team ever deployed on a RAN ship, there was not a word about one of the biggest things that happened during the three months at sea: the crews of fishing vessels used lasers against Australian helicopter pilots operating in international waters in the South China Sea, causing them to have to land their aircraft for precautionary reasons.

That’s a dangerous set of acts against Australian service personnel. Affecting the vision of helicopter pilots in the difficult environment that defines seaborne operations exposes them to additional risks.

The story was revealed in The Strategist yesterday by Euan Graham, an academic who travelled on the task force command ship, HMAS Canberra, with the navy as part of Indo-Pacific Endeavour. We don’t yet have confirmation that the fishing vessels were Chinese. However, no other fishing fleets have a track record of doing this in the South China Sea, and no other nation has the motive to do so there when it comes to the presence of the Australian navy.

We do know that Chinese fishing fleets, along with militia and coastguard vessels, are core elements of the Chinese state’s successful strategy of seizing disputed parts of the South China Sea and exerting its control.

But, maybe as disturbing as the danger that those who lasered Australian helicopter pilots created, we also know that when it came to public comment about the task force’s time in the South China Sea, we heard a lot of positive things, and not a word about the reality of the lasering incident.

The task force commander, Air Commodore Richard Owen, told ABC Radio:

As we normally are, we were engaged by other navies; it wasn’t just Chinese, the Indonesian navy hailed us.

I’ve figured out in my three months’ journey with the navy, they’re quite a friendly bunch. They will get hails as they go past from different ships. They’ll want to know who we are, where we’re going and what our intentions are.

The Chinese were no different. They were friendly, they were professional and said g’day.

Either he was actively avoiding mentioning the dangerous behaviour of fishing vessels and the risks it posed to Australian service personnel, or pointing lasers at helicopter pilots is just another way of saying g’day.

The idea that the task force commander simply didn’t know about the actions can be ruled out. This kind of operational incident would certainly have made its way to him rapidly, and then from him to the defence force’s operational command at Bungendore near Canberra. In fact, every activity of the Australian task force in the South China Sea would have been managed and run with the risks of engaging with Chinese vessels—military, coastguard, militia and fishing vessels—uppermost in the minds of naval planners.

What I don’t get about the way this has been handled to date is whose interests it serves to hide what happens when Australian service personnel operate lawfully in the waters of the South China Sea.

I know it’s in the interests of the Chinese state to have those subject to its aggressive behaviour keep silent—that helps portray those who do speak up, notably the US, as isolated on this issue.

However, part of the rationale for the task force going through the South China Sea is to affirm international law and maintain free international waterways. That’s necessary because of the aggressive militarisation of that body of water by Chinese forces in recent years.

Clearly, working with the Vietnamese navy in the South China Sea was part of this—and according to Euan Graham, again, this required the task force to go out of its way to include Vietnam in the activity.

But to have the strategic communications effect that you would hope would be at the heart of the deployment, it seems essential to publicise the aggressive and dangerous behaviour of these fishing vessels—and to make every effort to identify the nation operating them so that the incidents can be raised formally to prevent a recurrence.

I would be surprised if imagery and other information from the deployment at the time of the incidents can’t show this right now.

Pretending that none of this happened, and that it was an entirely problem-free and friendly time in the South China Sea, is self-defeating. It leaves the Australian public out of the loop when it comes to the risks our service personnel are running to preserve freedom of navigation and push back against aggressive on-water tactics that are licensed by the highest level of national leadership in China.

It also downplays the commitment of our defence force in protecting national and international interests in the security and openness of the waters of our region.

Lastly, this episode raises questions about what else might have happened on this deployment, and whether there were any other actions by Chinese fishing vessels—or militia, coastguard, aircraft or even PLA Navy vessels themselves—that we have yet to hear about. Maybe there are other ways they said g’day.

Australian pilots hit with lasers during Indo-Pacific exercise

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I recently sailed onboard the landing helicopter dock and Royal Australian Navy flagship HMAS Canberra from Vietnam to Singapore, as one of several academic sea-riders invited to observe Indo-Pacific Endeavour 2019 (IPE 19), which has now concluded after three months at sea.

A key question about this operation was what did the People’s Liberation Army Navy make of so much Australian activity in waters that China claims? Sailors tend to have a healthy professional regard for each other. The good news is that interactions between the RAN and PLAN remain cordial.

But we were followed at a discreet distance by a Chinese warship for most of the transit, both on the way up and back, despite the fact that our route didn’t take us near any feature occupied by Chinese forces, or any obviously sensitive areas. Bridge-to-bridge radio communications, I was told, while courteous, included requests for Australian warships to notify the Chinese in advance of any corrections to their course—something the RAN was not about to concede while exercising its high-seas freedoms.

The presence of our ‘trailing escort’—HMAS Parramatta apparently received similar attention from the PLAN—had no obvious effect on HMAS Canberra’s activities, including maintaining a brisk pace of flight operations. The army’s Tiger attack helicopters practised night flying and deck landings, as they start to develop a maritime role.

Some helicopter pilots had lasers pointed at them from passing fishing vessels, temporarily grounding them for precautionary medical reasons. Was this startled fishermen reacting to the unexpected? Or was it the sort of coordinated harassment more suggestive of China’s maritime militia? It’s hard to say for sure, but similar incidents have occurred in the western Pacific.

Since its first outing in 2017, IPE has become established as Australia’s roving vehicle for regional defence engagement, though it more closely resembles a set of separate port-based engagements than a rolling exercise at sea. The aim is to shape Australia’s strategic environment, with a heavy emphasis on defence diplomacy, to strengthen relations. Although delivered by a naval task group, the joint aspect of IPE 19 was emphasised by the fact that it was led by an air commodore.

Although IPE 19 was primarily focused on South Asia, for me this was an opportunity to experience a naval transit of the South China Sea (SCS), in the hope of demystifying that most commented-upon body of water. I’m grateful to the RAN for making that possible. While the transparency and openness I experienced onboard was impressive, the SCS remains something of an enigma.

The fact that IPE 19 incorporated a spur into the SCS is itself significant. Australia was literally going out of its way to include Vietnam in the activity.

The ADF’s military-to-military engagement with Vietnam was less evolved than with more familiar partners along the IPE route—but more interesting for being unfamiliar. One of Vietnam’s six Kilo-class submarines based at Cam Ranh Bay was conspicuously on hand to witness our departure. We then conducted a passage exercise with two Gepard-class frigates, the Vietnam People’s Navy’s largest warships. The Vietnamese went out of their way to engage in broader respects, including a rock-star welcome to ADF personnel on a school visit (many onboard ranked this as their personal highlight of IPE 19).

In addition, a small contingent of US Marines based in Darwin had embarked in Thailand. My first significant moment of IPE 19 came in Nha Trang (a popular recreation spot for US servicemen during the Vietnam War), where I witnessed probably the first US Marines, out of uniform but on active duty, to walk along that beachfront in nearly 50 years. Historical value aside, this was surely a significant defence diplomacy ‘effect’, sharpened by the fact that it was delivered, benignly, from an Australian amphibious assault ship.

It also says something that the US Marines were welcomed in Vietnam but didn’t go ashore in either Malaysia or Indonesia. Sensitivities—not only on the hosts’ part—can hopefully be salved so that the marines can in future interact with more regional partners, under an IPE aegis. It will take time for all concerned to become accustomed to US forces ‘plugging in’ to an Australian operational and diplomatic lead. But this kind of role reversal is in the long-term interests of the alliance, as Canberra steps up strategic engagement in the region.

My short time embedded with the RAN also made me reflect on how an inordinate academic and media focus on freedom-of-navigation operations, something I’ve contributed to, has distracted from more fundamental questions about Australia’s naval presence and willingness to operate in the SCS.

For a modest-sized navy, the RAN has been remarkably active across the SCS. HMAS Canberra transited from Cam Ranh to Singapore, accompanied by HMAS Newcastle (its final voyage before decommissioning). Meanwhile, HMAS Success (also about to be paid off) was participating in multinational ASEAN Defence Ministers Meeting (ADMM)-Plus exercises to the south. On our way to Singapore, we crossed paths with the Anzac-class frigate HMAS Parramatta, which was headed on a northeasterly track. HMAS Melbourne had passed through the SCS and Taiwan Strait only a few weeks earlier, on its way up to Qingdao and points east.

The ubiquity of PLAN vessels shadowing other warships in the SCS suggests that China’s surface force has grown big enough to be able to ‘close mark’ at will. Our transit coincided with multinational naval activity elsewhere in the South China Sea, including a US FONOP close to Scarborough Shoal. The PLAN was simultaneously participating in ADMM-Plus exercises to the south, alongside HMAS Success.

The fact that Chinese warships are shadowing their marks for longer distances suggests that the PLA’s over-the-horizon surveillance capability is also maturing. The large facility at Fiery Cross Reef sits at a prime gatekeeper location in the Spratly Islands, from which PLAN ships on ‘picket’ stations can be sent to intercept other vessels.

Although IPE embodies non-warlike missions, including humanitarian assistance and disaster relief, our transit through the most hotly contested body of water in the Indo-Pacific brought home the contrast between a naval task group operating under peacetime conditions, scattering and then reforming, and the more challenging scenario of sailing a naval task force into harm’s way, in a decreasingly permissive environment like the SCS.

Australia’s navy has gamely demonstrated its willingness to remain present in the SCS, operating in several locations at once. China has equally underlined that it can detect foreign warships and has the capacity to deploy screening forces across the SCS. That’s a sobering development.

If Australia continues to operate in the SCS in the long term, as I hope it will, its ability to do so will depend increasingly on the support of its allies and partners. This is not a job to do alone. IPE represents a head start on developing the defence and security partnerships that Australia needs to invest in for a less benign future.

Australia should look to US bill to stop the transfer of sensitive technology to the Chinese military

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A bill introduced to the United States Congress is an important step towards limiting the transfer of sensitive technology to China’s People’s Liberation Army. The PLA Visa Security Act would ban the issuing of student and visiting scholar visas to individuals affiliated with the Chinese military. This comes after a report ASPI’s International Cyber Policy Centre published last year, Picking flowers, making honey, found that the PLA has sent more than 2,500 officers and cadres to study science and engineering abroad, some of whom actively hid their military ties.

The issues raised here are global—large numbers of PLA scientists have been sent to Australia, Canada, Germany and the United Kingdom—so the bill recommends that all Five Eyes countries pursue similar measures to address the problems posed by PLA scientists working and training in the West.

The growing recognition of the Chinese Communist Party’s global ambitions has had major implications for the use of technologies like 5G—just look at the recent controversies over Huawei in Europe, Australia, New Zealand and North America. While they scrutinise Chinese companies and their products, many countries are also exploring better ways to prevent sensitive technologies from being exported to and used by China. In November, the US government announced a review of export controls for emerging technologies like artificial intelligence, hypersonics and advanced materials. Australia also conducted an independent review of defence trade controls that was released in February.

While recent discussions on export controls have focused on emerging technologies, the new US bill makes a valuable contribution by emphasising the end user of a technology, emerging or not. Focusing on the intentions of end users as well as the sensitivity of technologies is a more comprehensive way of determining the risks associated with an export. If the Chinese military is interested in a technology, you can be pretty confident that it wants to use it for military applications. A more nuanced framework helps build better risk management for engagement with China—showing that countries don’t need to take an all-or-nothing approach to collaborating with Chinese researchers.

In the case of the PLA’s overseas research collaboration, the intention is clearly to improve its ability to develop and access cutting-edge technologies with military value, in line with the CCP’s policy of military–civil fusion. Both Australian and US export-control legislation include instruction or training necessary to develop, produce or use a good in their definitions of ‘technology’. These elements, and not just the physical product, must be taken into account when individuals and organisations engage with the Chinese military.

Australia’s export-control regime has gaping holes. At the moment, it’s legal to train Chinese military officers in technologies that we couldn’t export to them, as long as the training happens on Australian soil. US legislation, on the other hand, regulates technology transfer to foreign nationals regardless of their location. While the US and Japan publish lists of end users that are subject to greater export restrictions—mostly entities like Iranian nuclear facilities and the PLA National University of Defense Technology that are involved in developing weapons of mass destruction and missiles—Australia does not. It’s therefore little surprise that over a hundred scientists from the National University of Defense Technology have trained in Australia, including some involved in projects linked to China’s nuclear weapons program.

However, there are a few reasons why not many countries publish end user lists as the US and Japan do. First, as relations with China are a sensitive issue for many countries, there’s concern that similar moves will draw Beijing’s ire. China often denounces US decisions to add Chinese organisations to its list. Second, additional resources would be required for the relevant parts of the bureaucracy to build, maintain and ensure compliance with such a list, which can require painstaking research into links between organisations and weapons research. Third, discriminating against specific entities encourages them to use cover institutions and proxies. Export-control legislation and measures like the PLA Visa Security Act would make doing so illegal, creating greater disincentives and room for law enforcement to act.

It can be difficult to know where to draw the line when discriminating against end users. Chinese government policy is entangling civilian and military activities, making it harder to determine whether collaboration with a Chinese civilian university, for example, could be used to directly benefit the PLA. The new bill will likely attract debate for this reason—it applies not just to scientists in the Chinese military but also to individuals who are or have been affiliated with the PLA and PLA-funded institutions, which could have jarring effects on the scientific community.

Regardless of precisely where the line should be drawn, the unsupervised and direct transfer of technology with military applications to the PLA clearly crosses it. This bill offers an important precedent to countries like Australia that should be concerned by collaboration on technologies that can be used to expand the Chinese Communist Party’s military power and oppressive social control in regions like Xinjiang.

For Australia, a clear policy statement that it is not in Australia’s interest to increase the warfighting capability of the Chinese military, and the militaries of any other potential adversaries, would be common sense. This guiding principle would provide a strong basis for future decision-making.

5G, Xi and Huawei: looking beyond Trump and the ‘China price’

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There’s a right way and a wrong way to think about 5G networks in a nation-state. Right now, according to Bloomberg, 40% of the world seems to be thinking the wrong way.

The debate on 5G and Huawei has descended into a simple binary choice: ‘Do you want to “follow the US” and ban Huawei?’ or ‘Do you want cheap 5G from Huawei, while sending comforting messages about trade and investment to Beijing?’

The second of these ideas has been stoked at telco-world events such as Barcelona’s Mobile World Congress, where corporate CEOs like Vodafone’s said banning Huawei will bring higher costs (and disturb commercial relationships).

This sets up an attractive rationale for national leaders who want to show their independence from Donald Trump’s America, and get plaudits from companies that have commercial relationships with Huawei—all while signalling a desire for more Chinese investment. Nationalism and cash: what a delightful result.

If only it were that simple and that attractive. It’s not, as the 30 nations’ representatives at the recent security discussions in Prague are no doubt thinking.

The national security issues involved in 5G are fundamental, and the commercial implications from the combination of national decisions on it will shape global communications technology development and markets.

None of this has anything to do with liking or not liking Trump. And, as is often the case with economics, what looks like a low-cost option on its face may well turn out to be the opposite.

On national security, there’s a larger story around the broad and rapid expansion of Chinese tech companies across the globe, but 5G is central to that effort.

A country’s 5G network will be the nervous system that connects its economy, carries its data and for the first time bridges the gap between internet-connected systems and ‘operational technology’ (in places like factories, power stations, utilities, railways and airports) that right now is mainly air-gapped from the internet. That’s what the long-promised ‘internet of things’ is about. It will also enable telemedicine, driverless cars and drone delivery systems to become realities, with all the economic and security implications this will bring.

So, who can control, distort, disrupt or harvest data from your 5G network becomes more important than for any prior telecom network—4G or fixed line.

As has been said many times, the Chinese state’s security agencies have the inside running to do this when it comes to their national 5G champion, Huawei. These agencies also have form when it comes to large-scale cyber intrusions and data theft.

So, on national security grounds, not having Huawei as a provider of your country’s future critical digital infrastructure makes sense, regardless of who the US president is and what he or she does.

What’s been less talked about, though, is that the commercial arguments are equally compelling.

Normally, purchasing decisions take price and quality into consideration. There’s been a lot of talk about price. But there’s been very little mention of the longstanding design and engineering quality problems that the UK’s Huawei evaluation centre continues to find in Huawei network products and software. A more critical eye is needed on the product itself.

Beyond this, it’s not just the US that understands that the Chinese state laws, policies and practices that protect and enable Chinese companies’ growth and pricing, along with forced technology transfers, are core problems for the global economy. The EU has a long, sorry history of negotiating with China over these issues, and it’s now in the midst of a WTO action as a result.

Huawei has been a beneficiary of market-distorting Chinese state policy and practice. It has grown because it has had the luxury of operating in a protected home market in China.

As Rick Umback noted in a recent ASPI report, the company’s executives have longstanding ties to China’s security apparatuses. And, since its formation in 1987, Huawei has benefited from Chinese government contracts, a protected domestic market, financial support from state-owned banks, and diplomatic support for its overseas expansion. In Huawei founder Ren Zhengfei’s words, ‘If there had been no government policy to protect [Chinese enterprise], Huawei would no longer exist.’

These protections are set to continue under President Xi Jinping’s signature ‘Made in China 2025’ plan, designed around his desire for strategic and economic dominance from future internet and communications technologies including 5G. The one area that’s least likely to be resolved in the US–China trade dispute is real access to China’s high-technology market, along with an end to Chinese global cyber espionage and talent cultivation to get hold of others’ high-tech intellectual property.

It’s laughable in this context to hear telecommunications companies that are Huawei’s commercial partners saying Huawei needs to be included in national systems to enable market competition. It’s an even more Through the Looking-Glass experience to hear Huawei claim that it is ‘encouraged by the emphasis on the importance of research and development, open markets and competition, but would urge policymakers to avoid measures that would increase bureaucracy and costs and limit the benefit that 5G can bring’.

The home-market protection provided by the Chinese state to Huawei is a major explanation for the ‘China price’ offered by Huawei for 5G. On simple competition policy grounds, this must be taken into account when national decision-makers outside China think about competitive bidding involving Huawei—or any other Chinese ‘national champion’ firm.

A further contributor, though, flows from classic economic theory: because Xi and Huawei see 5G as one of the keys to strategic and economic dominance, it’s worth pricing low now to buy global market shares.

Of course, economic theory and history tell us what happens next if companies succeed in cornering markets: they exploit their monopoly position to charge ‘rent’ on top of costs and profits, with supernormal profits a usual by-product. A study by the International Monetary Fund on market power validates this effect in both advanced and developing economies, finding ‘a positive relation between firm markups [over costs] and other indicators of market power’.

Many of Europe’s telcos are probably reluctant to make the big up-front investments 5G requires while they’re wringing profits out of existing fixed-line and low-margin 4G investments. So, there will be bulls and bears when it comes to 5G—slow and fast adopters.

Decision-makers in Europe, the Middle East, Asia and Latin America must think beyond any eagerness to get low ‘entry level’ prices from Huawei. To help here, the EU and NATO can both still do the work to get some important things like harmonised standards on 5G security—and competition policy—right and inform national decisions across Europe and elsewhere.

Rather than rushing into decisions based on Huawei’s cheap and ubiquitously marketed offers, nations need to think a few steps ahead and consider the wisdom of handing global market power to Xi’s national 5G champion, for the health of both their own telcos and their citizens. Getting the framework and decisions right on 5G will also help them deal with the other technology investment decisions they’ll face as China’s tech expansion continues.

On top of this, for those of you who remember the TV detective Columbo, played by Peter Falk, ‘there’s just one other thing that bothers me’. As Xi’s ‘Made in China 2025’ plan makes clear, the Chinese state sees strategic power as coming from dominating 5G and other communications and internet technologies. Having 5G from Huawei in your nation’s network is a key step here, bringing Xi’s ‘Digital Silk Road’ into being.

If a nation wants its future core digital infrastructure to be one of Xi’s tools of strategic power, then by all means let your telcos sign those cheap Huawei deals. But do it knowing that the ‘China price’ won’t last, and that Xi has already given ample demonstration that he’s happy to use all the global, strategic and economic power he can muster for his own ends.

Indonesia–Vietnam maritime clash a sign of rising Indo-Pacific tensions

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A ramming incident on 27 April involving a Vietnamese fisheries surveillance vessel and an Indonesian naval vessel near Indonesia’s Natuna Islands highlights the risks of escalation in competition over fisheries in the South China Sea. But it should also be understood in the context of broader strategic dynamics in the Indo-Pacific, where ASEAN unity is being tested and tolerance for ‘grey zone’ maritime operations appears to be lessening.

The level of tension evident in footage taken by the Indonesian Navy of the ramming is palpable and highlights the potential for such incidents to escalate into an armed clash. Indonesian personnel can be heard yelling a series of expletives as the Vietnamese vessel deliberately runs into the port side of Indonesian corvette KRI Tjiptadi to deter its seizure of Vietnamese fishing boats.

During the first term of President Joko Widodo, Indonesia has taken a much harder line on illegal, unreported and unregulated fishing in a policy led by Maritime Affairs and Fisheries Minister Susi Pudjiastuti. In a hierarchical and male-dominated political culture, Susi isn’t known for her deference to more senior cabinet colleagues or, indeed, members of the judiciary.

In a tweet following the collision, Susi challenged both the attorney-general and the head of the supreme court to dispense with the auctioning of seized vessels and called for their mandatory destruction. She then proceeded with the destruction of 51 vessels, most of them Vietnamese, on 4 April.

Susi’s uncompromising position on Indonesia’s territorial and resource sovereignty has made her very popular with the Indonesian public, likely securing her another cabinet position in the second term of a Jokowi-led government. Indonesia’s tough approach to defending its maritime sovereignty looks set to continue and will possibly be strengthened, with a significant increase to the country’s defence budget also mooted.

Although Vietnamese fishing vessels account for more than half of all illegal fishing vessels seized and destroyed in Indonesia’s territorial waters, in recent years the more provocative actions by foreign fishing fleets in Indonesia’s exclusive economic zone have involved Chinese maritime militia.

A series of incidents in 2016 led to rare public condemnation of Beijing by a number of Indonesian ministers and an official diplomatic protest. In the months following, Jokowi led a cabinet meeting aboard Indonesia’s fast missile corvette KRI Imam Bonjol, which had been involved in the ‘visit, board, search and seizure’ of a Chinese fishing vessel near the Natuna Islands. In a symbolic confirmation of Indonesia’s resolve to safeguard its territorial integrity, the corvette’s weapon’s systems were displayed prominently in media coverage.

The aggressive conduct of Chinese vessels in Indonesia’s EEZ, followed by new claims of Chinese ‘traditional fishing rights’ in the Natuna Islands area alarmed Jakarta, leading the government to rename the maritime area around Riau Islands province as the ‘North Natuna Sea’ (Laut Natuna Utara).

The wider significance of the Indonesia–Vietnam ramming incident, however, lies not so much in the bilateral relationship between Indonesia and Vietnam as in the broader implications for ASEAN cohesion and changing rules of engagement between military and paramilitary vessels in the Indo-Pacific.

Maritime clashes between two key ASEAN member states—Indonesia and Vietnam—that have official and unofficial territorial disputes with China only serve to further undermine ASEAN’s ability to present a unified position against Beijing on critical South China Sea issues. Indeed, the provocative actions of the Vietnamese surveillance vessel appear to be straight out of Beijing’s playbook. It’s not a good look for ASEAN. If member states are at odds with one another at sea they risk further losing leverage in their negotiations with China over a South China Sea code of conduct, the objective of which is to secure Beijing’s agreement to abide by established rules and norms in the maritime domain.

In examining the video evidence of highly agitated Indonesian Navy personnel responding to what they perceive as a hostile act, the implications of a recent US announcement that it will apply military rules of engagement to Chinese paramilitary vessels involved in coercive acts has greater resonance. The warning by US Chief of Naval Operations Admiral John Richardson to his Chinese counterpart in January conveyed the Pentagon’s resolve to treat coastguard and maritime militia the same as the Chinese Navy: ‘I made it very clear that the US Navy will not be coerced and will continue to conduct routine and lawful operations around the world in order to protect the rights, freedoms and lawful uses of sea and airspace guaranteed to all’, Richardson said.

The announcement reflects a hardening of the US’s policy position on China generally. But if emulated by other Indo-Pacific states, it has the potential to raise on-sea tensions markedly. The Jokowi government, distracted as it is by the post-election hiatus, will face critical decisions about the rules of engagement it should follow in defending its maritime sovereignty. Indonesia will require strong diplomatic leadership backed by effective interagency coordination to ensure that such maritime clashes, which are likely to become more frequent, don’t exacerbate tensions within ASEAN and undermine its ability to moderate major power tensions more broadly.

The Strategist Six: Mike Rogers

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Welcome to ‘The Strategist Six’, a feature that provides a glimpse into the thinking of prominent academics, government officials, military officers, reporters and interesting individuals from around the world.

1. It appears that the United Kingdom has decided to allow the Chinese company Huawei to build part of its 5G network. Does that present a security problem for Britain? And how seriously is that decision likely to be viewed by the other members of the Five Eyes intelligence-sharing network?

The official British position is that this is still a matter under deliberation. I’ve always said it’s up to each nation to determine the right answer for itself. What’s right for one may not be for another.

This is an issue that almost every nation, particularly industrialised nations, is coming to grips with. Australia has concluded that there’s a level of risk it isn’t comfortable with and Huawei will not be part of its 5G infrastructure. In the United States, we’re still working our way through this.

As a director of the US National Security Agency and the commander of US Cyber Command, I said this boils down to the level of risk we were comfortable with and I’d make it less about a specific nation or company and much more about how a nation ensures its economic competitiveness in the digital age. It is certainly a security issue, but with 5G you need to look through the prism of not just traditional national security, but national security in a much broader sense.

As 5G is going to be such a fundamental aspect of a nation’s economic competitiveness, I’d be worried about something that could call that into question. There are some areas where I think you could take some level of risk, but there are others where I would say the risk is very high. And I’d be very concerned about any entity if you didn’t have complete confidence that you knew what it had provided and some measure of control or oversight over it. That becomes very complex with 5G because so much of the capability is not centralised but is spread out across the network. It becomes much more difficult to mitigate the risk.

2. Former Australian prime minister Malcolm Turnbull said recently that he’d raised with US President Donald Trump his concern that 5G technology was available from a limited number of providers, none of which were in the United States. Can the US catch up in that field and provide the sort of technology that countries like Australia need?

I think the challenge is to create an environment where there are commercial options that Australia, the US, the UK, Japan and others would feel comfortable with. Part of the economic challenge is that Huawei has positioned itself with a price that US firms and other nations can’t match. We need to ask ourselves how and why that happened and whether we’re comfortable with it.

I’d hope governments could come together to work out how to generate alternatives. It seems possible to have vendors that provide a good price without the high level of risk posed by vendors like Huawei and ZTE. Can you trust a particular vendor? What’s the relationship between that vendor, that company, and its nation-state? Is that company from an authoritarian state where the legal regime and nature of the state mean the government can access data purely upon request?

It’s not just the laws on China’s books, it’s the fact that the Chinese Communist Party decides what the law is as and when it likes. It doesn’t have to go through a court or any kind of independent verification or justification. It can just tell the company, ‘You’re a corporate entity from our nation. The law says I can have access to whatever data I want. This is what I want.’ We need to spend some time, the US, Australia and others, on what we need to do to develop a viable alternative, and how can we help industry. Alternative 5G technology providers like Nokia, Qualcomm and Ericsson exist, and telcos like Telstra here in Australia are bringing 5G solutions to market.

3. Turnbull also raised concerns that the threshold for response to cyberattacks on Western nations is very high. Before you left Cyber Command, you put in place a different approach to offensive cyber operations, including the concept of defending forward. How important is that, and how can it be done? And what impact can it have on criminals and other nations’ agencies?

One of the greatest challenges we face is to change the risk calculus of actors out there to get them thinking that perhaps stealing intellectual property on a massive scale, interfering with democratic elections, and penetrating infrastructure and other areas, such as power, water, petroleum and financial that are a huge concern to any nation, are not worth the risk.

How can we convince them to step back and think, ‘While I could do this, the risk is pretty high and maybe it’s not in my best interest to do so.’

If we continue to just respond passively, to wait for people to come after our networks and to steal our intellectual property, then we’re just responding, which is a reactive strategy, a losing strategy. My experience as a military leader taught me that you want to shape the behaviour of any potential adversary, to drive them to make choices that benefit you, not them.

We need to talk about cyber as one of a broad set of capabilities we have at our disposal. We’re prepared to use that range of capabilities in the right place and at the right time within an international legal framework, with a sense of proportionality—being very discrete and very specific. It was important that adversaries knew the US had cyber capabilities and that it was prepared to use them at the time and place of our choosing if they insisted on engaging in this risky behaviour.

I think you’ve seen a shift in the past 18 months to this idea that we just can’t sit outside the network waiting for somebody to penetrate before we respond.

4. How does an offensive cyber capability work in response to an attack, how important was the elevation of Cyber Command to a combat command, and what did that signify about the US defence establishment’s level of concern about cyber threats?

There’s a full range of possibilities. Just because someone comes at us in cyber, doesn’t mean we’re going to do always the same thing.

My argument was, let’s look at the full range of capabilities that we enjoy as a nation and which of the tools we have makes the most sense in this scenario, given the target they went after and the impact they had. It shouldn’t be one size fits all.

We need to fundamentally change the risk calculus of nation-state and criminal actors because this is costing the US, Australia and others billions of dollars in the theft of intellectual property. It’s potentially placing some of our critical infrastructure at risk as opponents penetrate that infrastructure, study it, and look at changing it, degrading it, denying it over time. It’s providing intelligence and insights that can be used to disrupt and undermine policy- and national decision-making over time, including through cyber intrusions into political parties’ information systems.

We don’t want that to happen. One of my biggest concerns was that this should be based on a structure and a system that everybody understands. In the US system, combatant commanders, as the senior operational commanders, are a key part of discussions about strategy, resources and prioritisation. That’s how important cyber is. Cyber Command needs to work at that level, needs to be part of those discussions. It’s also a real positive in terms of speed of decisions and reaction.

5. How serious will cyber threats become, and how will the world deal with them?

While states such as China, Russia, North Korea and Iran attract considerable attention, the greatest activity out there doesn’t involve nation-states—it’s criminal. Criminals use cyber as a vehicle to generate money and a tool to penetrate systems, steal credit card information and identities, and run scams.

For most citizens outside authoritarian states like China and Russia, the greatest impact cyber will have in their lives is if someone steals their identity or their credit card number. Will we see cyber criminals link with terrorist groups or forming partnerships, sharing people and tools, going after common sets of targets? Will we see nation-states turning to criminal actors as a way, for example, to hide attribution?

Do you see criminal actors telling a nation, ‘If you give me protection so I’m not thrown in jail, I’m not extradited, I’ll apply my criminal activities, capabilities and cyber skills to support you’? We need to pay attention to that.

6. When the internet was established, it was generally seen as a very positive institution and a way to spread knowledge. It’s certainly done that. But it’s also been a vehicle for hate speech and promotion of terrible brutality. Is the system beyond control, or can it still be a force for good?

The average person with internet access can gather more information than anyone in the past and that can be a force for good in terms of personal growth, economic growth, sharing of information and the ability of widely dispersed individuals to coalesce around issues of concern.

The positives far outweigh the negatives. But there are some negative aspects to this unfettered connectivity (the model in large parts of the world) and the ability to move information and to coordinate around the world.

It goes back to when the internet was started in the late 1960s by the US Department of Defense to move information within the department over great distances without being stuck with using faxes and mail. Nobody was going to steal unclassified stuff, and we knew who the users were, so security wasn’t a big deal. So, we’ve built this global engine but we really didn’t think about how to defend it, how to work out if someone was real or not.

One of the questions we’re dealing with now is how do we create something totally new and build in defensibility, reliability, redundancy, and a means to ensure identity? Do you rebuild it with something new or do you keep it where it is?

But the sunk capital costs in the structure are so high, I can’t see us totally replacing it anytime soon.

That’s only possible in authoritarian states—not in truly open, market-driven economies. Again the Chinese precedent seems to show that you can shift the structures to enable high levels of social control over your population—and this system of authoritarian control through internet technologies is what they’ve been keen to export, with some success.

So how can you attempt to address some of these issues using this existing framework and how do we change it over time? You’re seeing how we do domain control, naming infrastructure, all those things continue to evolve. So it’s manmade, it’s global, but it’s going to be a changing dynamic.

Belt and Road forums are ‘lovely when friends get together’

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The second Belt and Road Forum, hosted by China’s President Xi Jinping in Beijing last week, attracted 37 world leaders and delegates from 150 countries and 90 international organisations. There were also some conspicuous absences, with no high-level representatives from the US, Canada, India, Australia and New Zealand, though some of them sent officials. Japanese PM Shinzo Abe, who was in North America at the time, sent a special envoy.

The massive scale of this diplomatic gathering reflected the extent to which the BRI is viewed with both hope and suspicion around the world. For developing economies, it represents an unparalleled opportunity to acquire something they really need—infrastructure. There’s wariness, especially among China’s neighbours that have worked with Beijing before, about the risks of being overstretched by high-interest-rate loans, questionable investment returns, and sometimes low safety standards. But the lack of other opportunities on such a scale—perceived or real—is making them brave it out.

Being invited to participate in the forum—or not—has diplomatic significance, but a country’s decision to attend doesn’t mean that it completely acquiesces to Beijing’s vision of the BRI. Most participants see the BRI as a set of offers from Beijing and its partners that can be negotiated and tailored in each case. Participation in the summit and the BRI gives them a sense of having options.

Xi welcomed his guests with a Chinese proverb: ‘Spring and autumn are lovely seasons in which friends get together to climb up mountains and write poems.’

The summit came as global concerns mounted over the nature and implications of this grand Chinese plan. For Xi it was an opportunity to demonstrate his responsiveness to recent criticism of the BRI and the challenges BRI signatories have faced. His promises included a debt-sustainability framework, an emphasis on green development, wider access to Chinese markets and a step-up of intellectual-property protections.

Xi declared that the BRI would make the world a more beautiful place with initiatives such as the Sustainable Cities Alliance and International Green Development Coalition, green investment principles for BRI projects, and a commitment to sustainable development. The host painted a rosy picture of the benefits that would flow from realising a community of common destiny.

But Xi didn’t have to do all the talking; many other leaders stood up in support of the BRI. They ranged from good friends of China, such as Pakistan’s Prime Minister Imran Khan and Russia’s President Vladimir Putin, to global voices of multilateralism like United Nations secretary general Antonio Guterres and International Monetary Fund chief Christine Lagarde.

Pakistan was one of the earliest supporters of the BRI and it’s no surprise that its prime minister strongly endorsed Xi’s efforts. He said that in a world of geopolitical uncertainty, rising inequality and barriers to trade, the BRI offers a model of collaboration, partnership, connectivity and shared prosperity. Khan added, ‘We chose hope over despair, cooperation over confrontation’—a clear indicator of where he’d stand if he were pushed to make a choice.

Even higher praise came from Guterres, who noted China’s ‘central role as a pillar of international cooperation and multilateralism’ and added that the gathering reflected that commitment in turbulent times.

Guterres praised the increasing investment that China is making in developing sources of renewable energy—up last year by 25% to US$125 billion—and for its support for global action on climate change. He also said the BRI had assumed ‘remarkable and urgent importance’ by offering ‘a meaningful opportunity to contribute to the creation of an equitable, prosperous world for all’.

Guterres said the world would benefit from the BRI and highlighted its potential to further the UN’s Sustainable Development Goals. ‘Let’s work together to restore trust’, he said, perhaps alluding to efforts to discredit the BRI.

The summit provided an opportunity for everyone to learn more about China’s intentions for the BRI and even for sceptics like Malaysia’s Prime Minister Mahathir Mohamad to be converted. Previously he’d spoken of the BRI as an example of China’s ‘unequal treaties‘ and a ‘new version of colonialism’.

At the summit Mahathir said he was fully supportive of the BRI. He explained that he now understood it better and believed that the BRI was ‘not a domination plan by China’ but a policy developed by all the countries involved. He also welcomed Beijing’s plans to set up a one-stop centre in BRI member countries to facilitate external investments.

In the Philippines, just before the summit, resentment about China’s violations of territorial waters in the West Philippines Sea triggered protests. President Rodrigo Duterte, who is gearing up for mid-term elections, used harsh language towards Beijing and even referred to the 2016 Permanent Court of Arbitration ruling, a topic that he’s previously said was ‘better left untouched’.

But in his meeting with Xi last week on the sidelines of the forum, Duterte’s tone appeared to soften as he reportedly secured US$12 billion worth of BRI projects that are predicted to generate some 21,000 jobs and further Chinese support for his anti-drug campaign.

Nine heads of ASEAN member states were present. Indonesia’s President Joko Widodo, who had just emerged from a campaign for re-election, sent Deputy President Jusuf Kalla.

Singapore’s PM Lee Hsien Loong, who was not invited to the first summit because of tensions with Beijing, was there this time and took advantage of the occasion to engage in a successful sideline dialogue with Vietnam’s Prime Minister Nguyen Xuan Phuc—yet another opportunity beyond the many ASEAN-centric meetings.

The scale and structure of the summit facilitated numerous other talks on the sidelines, highlighting the vast potential for delegates to hold bilateral and multilateral meetings with other attendees, an exercise in global consultation with Chinese characteristics.

Maybe enthusiasm for the event relegated caution to the background for the time being, but no alarm was raised about challenges to ASEAN’s centrality in this situation.

Summits are about diplomacy and power displays; by those measures, US$64 billion in deals and 283 ‘pragmatic outcomes’ would suggest that this one worked well. Beijing achieved what it wanted—praise and a vote of confidence from many world leaders. How long those good feelings can be sustained depends on the realisation of those grand promises. Sometimes ‘the mountains are low and the expectations high’.

The role of soft power in China’s influence in the Pacific islands

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Just why the concept of soft power has become such an accepted explanation for the spread of Chinese influence in the Pacific islands is something of a conundrum. (The term ‘Pacific islands’ is used here with the narrow meaning of the small member states of the Pacific Islands Forum.)

There seems to be little evidence that regional states have the sort of admiration for, and desire to emulate, China’s political or economic systems in the way Joseph Nye framed his idea about the attractive power of non-coercive influence.

It was the geopolitics of the Cold War that motivated China to seek a place in the Pacific island sun, not some soft-power pull from regional states seeking to a model to follow. And, for nearly two decades afterwards, Beijing scarcely made a ripple in the regional lagoon, which ended with a flurry of ‘dollar diplomacy’ competition with Taipei for recognition.

A main motivator for applying the soft-power lens in this case appears to be the need to find some rationalisation for China’s dramatic emergence to the centre of the regional stage as an economic, developmental and social influence and the consequential diminishing of the region’s reliance on its traditional ties.

A just-released ASPI special report, Chinese influence in the Pacific islands: the yin and yang of soft power, finds that the concept of soft power is overrated as an explanation for Chinese influence in the Pacific islands.

The apparent fragility of Australian soft power in the region has less to do with the strength of Chinese soft power than a perception that Canberra has drifted away from the regional consensus on climate change, development priorities and economic relations.

This is not to deny Beijing’s interest in developing its soft-power imprint. China reportedly has been spending an estimated US$10 billion annually for over a decade to promote its soft-power message globally. Yet, despite this effort, international indices of soft power show that China is making little headway statistically.

The report supports this broader conclusion, noting that China’s current soft-power influence in the Pacific island region ‘lacks breadth and depth’. There are some significant caveats, however, to this assessment.

The metrics of soft power tend to favour liberal images of the state, so people-to-people attitudes and public diplomacy figure prominently, as do measures of civic influences on foreign policy. By contrast, China has tended to focus its public diplomacy on elites who can deliver pragmatic results for China in achieving its international relations objectives.

China’s approach to soft power is very much in evolution. It has varied over the two decades since the state made a political decision to pursue it as an avenue for foreign policy influence.

President Hu Jintao advanced the narrative of a ‘peaceful rise’ as a soft-power approach to promote acceptance of growing engagement with the rest of the world. President Xi Jinping has taken a more overtly demonstrative approach to securing admiration and respect internationally.

Thus, international incidents, including some well-documented examples in the Pacific islands, reported in Western media as setbacks for Chinese soft power appear less important to Xi than establishing that respect for China is non-negotiable—almost no matter how small the slight.

The economic miracle of China excites approbation in the Pacific islands as it has in other parts of the developing world. However, there’s no public support for adopting the Chinese economy as a model for economic reform in the Pacific. The same is true for China’s political system.

The lack of democratic accountability and transparency serve as soft-power deficits for China. The recent 2019 Belt and Road Forum exposed these as significant soft-power weaknesses that are undermining, it’s claimed, Xi’s important message of reassurance to participants that he was dealing with their concerns about the debt and risks associated with his signature Belt and Road Initiative.

A key advantage of having soft power is the inherent trust between states that it embodies. The ‘debt trap’ meme is far more publicly understood in the Pacific islands than any of the putative ‘win–win’ benefits of participating in the BRI.

Indeed, Papua New Guinea’s Prime Minister Peter O’Neill, who was the only head of government from the Pacific islands states at the BRI forum, appears to have been a victim of the so-called debt trap. Five government party members resigned from the party while O’Neill was in Beijing, in part over concern that he was there to acquire more debt.

Overemphasising the role of soft power in the spreading reach of Chinese influence across the Pacific islands comes at a cost. It seems to have been embraced by some policymakers as a challenge to be neutralised. The ASPI report argues that this would be an error.

To attempt to pursue such a course would raise tensions in the region by suggesting to long-time regional friends that they should choose sides. As Pacific Islands Forum Secretary-General Dame Meg Taylor has argued, the region does not want to be asked to make a choice between China and its traditional friends.

Rather, as outlined in the report, Australia will be better served to keep the soft-power balance in its favour by leveraging its much more extensive and well-established soft-power strengths in the region to secure the mutual benefits our neighbours expect from us.

Huawei and Telefunken: telecommunications and rising powers

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Huawei is perhaps the most enigmatic company on the planet. The Chinese communications firm is not publicly listed, and despite being one of the world’s largest firms, basic information about its structure, ownership and business activities is difficult to unearth. It is not simply opaque from the outside; secrecy also pervades its internal culture. Most of the company’s own employees are reportedly unaware of the details of its inner workings, which are highly centralised within its Shenzhen headquarters.

Huawei’s notorious lack of transparency contrasts with a growing interest in the company throughout the West. Despite the attention the company has drawn, there’s no consensus on its nature. Many in the business sector emphasise its role as a major commercial player and, increasingly, as a technological innovator. In the wake of the government’s August 2018 pronouncement effectively excluding Huawei from Australia’s 5G mobile network, Vodafone’s Dan Lloyd condemned the decision as one that ‘fundamentally undermines Australia’s 5G future’. Other commentators stressed that the decision would increase the costs of developing 5G, which would only result in higher consumer prices.

Some observers downplay the commercial side and instead stress other, non-commercial, characteristics of the company. These analyses tend to emphasise the historical linkages between Huawei and China’s security apparatuses, as well as the capacity for the Chinese Communist Party to influence the company’s activities.

The truth is that Huawei has both commercial and strategic dimensions. It is a huge participant in the global market for communications hardware and of increasing importance in the field of technological innovation. No analysis of the company can neglect this aspect. At the same time, focusing unduly on its commercial characteristics misses a vital feature of Huawei: its function as an instrument of Chinese national strategy. Huawei is a private company that has been nurtured by the Chinese party-state for strategic purposes. Its capabilities, honed in commercial operations, are assets that can be (and in some cases already are) channelled towards China’s strategic goals.

The duality of Huawei’s business may appear novel or contradictory to the liberal West, accustomed as it is to clear lines of demarcation between commerce and government. However, it is not without historical precedent. As ASPI’s latest Strategic Insights paper, published today, demonstrates, Huawei’s development has strong parallels with that of Telefunken—a 20th century German company dedicated to wireless telegraphy.

The most fundamental similarity concerns the companies’ relationship with the state. Though they’re both private enterprises, Huawei and Telefunken received considerable support from the state during their initial growth phase. Hardware sales to the military provided vital early customers and the opportunity to gain practical experience. Protection of the domestic market shielded the infant companies from established overseas competitors, giving them the opportunity to grow. Once they were established, diplomatic support facilitated the opening up of emerging foreign markets not yet captured by international competitors. State support proved essential in boosting the competitiveness of these national firms against foreign competition.

Most importantly of all, both companies emphasised innovation from their inception, and were able to establish themselves at the leading edge of technological sophistication through indirect support from the state. In Telefunken’s case, it was able to access Germany’s national research networks—its world-class university system and the research divisions of electrical giants Siemens and AEG. This gave it an advantage in research and development over its foreign competitors in wireless, which didn’t have access to resources on a national scale. In Huawei’s case, the company’s intense focus on R&D has been facilitated by party-state connections, which kept the company afloat. It has also been able to access international expertise to boost its technological capabilities, particularly in Europe, where it has invested heavily in collaborative R&D facilities.

State support to boost both commercial competitiveness and technological innovation has proven instrumental in the rise of Huawei to global prominence, as was the case with Telefunken in the early 20th century. In both companies’ cases, this served the strategic goals of the state by promoting national capabilities in communications in order to escape dependence on other powers in this vital area.

The paper argues that national communications development for Wilhelmine Germany and contemporary China has two key strategic implications. One is geostrategic, pertaining to the deployment of communications infrastructure as an instrument of control over particular geographic areas. In Germany’s case it was its small and far-flung empire, whereas in China’s case it is an emerging sphere of influence, centred on Eurasia and the Indian Ocean, under the Belt and Road Initiative.

The other strategic implication relates to capacity-building, wherein commercial and technological progress increases national capabilities that can be steered towards non-commercial, particularly military, ends. In Telefunken’s case, the capacity developed during peacetime was a major asset for the German war effort from 1914, facilitating the innovative tactical and operational use of wireless communications on the battlefield. Today, Huawei is heavily involved in ‘civil–military fusion’, designed to facilitate the transfer of technologies between the commercial and military sectors of Chinese society. It is also a major participant in initiatives to develop dual-use technologies that will have significant implications for warfighting, including 5G, quantum cryptography and artificial intelligence.

Historical analysis has strong relevance for contemporary policymakers. Some may be tempted to dismiss it as a luxury or indulgence, of little relevance to the rapidly evolving technologies and circumstances of the 21st century. But historical analysis has an important role to play in relation to comprehending contemporary challenges. It provides a vantage point from which to examine our own times. By analysing past historical dynamics, it’s possible to identify parallels in the contemporary world. These suggest possible outcomes based on how similar situations played out in the past. A relevant historical example can provide hints of what might be around the corner. A heightened awareness of the past can place us in a better position to understand the present and anticipate the future.

The point is encapsulated in an aphorism often misattributed to Mark Twain: ‘History does not repeat itself, but it often rhymes.’ Familiarity with historical precedents can empower policymakers to anticipate the rhymes, and only strengthen policy responses to contemporary challenges.

Does China have feet of clay?

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Chinese President Xi Jinping seems to be on a roll. He has sent a rocket to the dark side of the moon, built artificial islands on contested reefs in the South China Sea and enticed Italy to break ranks with its European partners and sign on to China’s Belt and Road Initiative. Meanwhile, US President Donald Trump’s unilateralist posture has reduced America’s soft power and influence.

China’s economic performance over the past four decades has been truly impressive. It is now the main trading partner for more than a hundred countries compared to about half that number for the United States. Its economic growth has slowed, but its official 6% annual rate is more than twice that of the US. Conventional wisdom projects that China’s economy will surpass that of the US in size in the coming decade.

Perhaps. But it is also possible that Xi has feet of clay.

No one knows what China’s future holds, and there is a long history of faulty predictions of systemic collapse or stagnation. While I don’t think either is likely, the conventional wisdom exaggerates China’s strengths. Westerners see the divisions and polarisation in their democracies, but China’s successful efforts to conceal its problems cannot make them go away. Sinologists who know much more than I do describe at least five major long-term problems confronting China.

First, there is the country’s unfavourable demographic profile. China’s labour force peaked in 2015, and it has passed the point of easy gains from urbanisation. The population is ageing, and China will face major rising health costs for which it is poorly prepared. This will impose a significant burden on the economy and exacerbate growing inequality.

Second, China needs to change its economic model. In 1978, Deng Xiaoping wisely switched China from Maoist autarky to the East Asian export-led growth model successfully pioneered by Japan and Taiwan. Today, however, China has outgrown that model and the tolerance of foreign governments that made it possible. For example, US Trade Representative Robert Lighthizer is focusing on the lack of reciprocity, subsidies to state-owned enterprises (SOEs), and coerced intellectual property transfer that have allowed China to tilt the playing field in its favour. Europeans are also complaining about these issues. China’s intellectual property policies and rule-of-law deficiencies are discouraging foreign investment and costing it the international political support such investment often brings. And China’s high rates of government investment and subsidies to SOEs disguise inefficiency in the allocation of capital.

Third, while China for more than three decades picked the low-hanging fruit of relatively easy reforms, the changes it needs to make now are much more difficult to introduce: an independent judiciary, rationalisation of SOEs, and liberalisation or elimination of the hukou system of residential registration, which limits mobility and fuels inequality. Moreover, Deng’s political reforms to separate the party and the state have been reversed by Xi.

That brings us to the fourth problem. Ironically, China has become a victim of its success. The Leninist model imposed by Mao in 1949 fit well with Chinese imperial tradition, but rapid economic development has changed China and its political needs. China has become an urban middle-class society, but its ruling elites remain trapped in circular political reasoning. They believe that only the Communist Party can save China and that any reforms must strengthen the party’s monopoly on power.

But this is exactly what China does not need. Deep structural reforms that can move China away from reliance on high levels of government investment and SOEs are opposed by party elites who derive tremendous wealth from the existing system. Xi’s anti-corruption campaign can’t overcome this resistance; instead, it is merely discouraging initiative. On a recent visit to Beijing, a Chinese economist told me that Xi’s campaign cost China 1% of GDP per year. A Chinese businessman told me real growth was less than half the official figure. Perhaps this can be countered by the private sector’s dynamism, but even there, fear of losing of control is increasing the party’s role.

Finally, there is China’s soft-power deficit. Xi has proclaimed a ‘Chinese Dream’ of a return to global greatness. As economic growth slows and social problems increase, the party’s legitimacy will increasingly rest on such nationalist appeals. Over the past decade, China has spent billions of dollars to increase its attractiveness to other countries, but international opinion polls show that China has not gained a good return on its investment. Repressing ethnic minorities, jailing human-rights lawyers, creating a surveillance state and alienating creative members of civil society such as renowned artist Ai Weiwei undercut China’s attraction in Europe, Australia and the US.

Such policies may not hurt China’s reputation in some authoritarian states, but modern authoritarianism is not ideologically based the way communism was. Decades ago, young revolutionaries around the world were inspired by Mao’s teachings. Today, although ‘Xi Jinping thought on socialism with Chinese characteristics’ has been enshrined in the party constitution, few young people in other countries are carrying that banner.

China is a country with great strengths, but also important weaknesses. American strategy should avoid exaggerating either. China will increase in importance, and the US–China relationship will be a cooperative rivalry. We must not forget either part of that description. No country, including China, is likely to surpass the US in overall power in the next decade or two, but the US will have to learn to share power as China and others gain strength. By maintaining its international alliances and domestic institutions, America will have a comparative advantage.