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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.

Late last year, Indian Prime Minister Narendra Modi made his first visit to the Andaman and Nicobar Islands. The union territory, far from the Indian mainland and often forgotten in its history, is the location of the Andaman and Nicobar Command (ANC), India’s first and so far its only tri-service command. Modi’s visit highlighted steady security developments in and around the Andaman Sea, reflecting the revival of those waters’ strategic value.

For much of India’s post-independence history, the remote waters of the Andaman Sea remained undisturbed. Now, however, maritime competition in the Indo-Pacific is reversing that status. China and India are jostling for influence in the Indian Ocean. The US, Japan, Australia and ASEAN are in the mix, too.

Subzones such as the Bay of Bengal and the Andaman Sea are important theatres of action. Flanked by littorals to its north and east and the Malacca Strait to the southeast, the Andaman Sea contains strategically indispensable sea lines of communication critical for energy and trade. It’s indubitably a keystone for maritime influence and security in the Indo-Pacific. Consequently, it’s lately become a focus for security developments.

In securing the Andaman Sea, Delhi’s attention has naturally focused on enhancing the capacities of the ANC. Since taking office, the Modi administration has shown a pronounced intent in this regard. In late January, the Indian Navy commissioned its third naval base, INS Kohasa, on North Andaman Island, after a slew of earlier developments there. Last year, the navy established a ‘joint logistics node’ at the ANC to organise tri-service activities, procurement and movement. It also inaugurated a second floating dock at Port Blair to assist in ship repairs for different classes of ships.

In 2017, the navy upgraded the Baaz naval station at Campbell Bay with an extended runway and operating bases. In November 2017, the ANC conducted the five-day ‘Defence of Andaman and Nicobar’ exercise. The operation, involving multiple forces and resources, sought to test the defence response of the ANC through cross-service simulations and drills. The government also gave environmental clearance for a long-range-missile testing facility to be set up at Rutland Island, close to South Andaman Island, in 2018.

However, India doesn’t intend to go it alone. Modi’s first visit to Jakarta in May last year yielded a bilateral ‘Shared Vision for Maritime Cooperation in the Indo-Pacific’. The comprehensive document earmarks Andaman and Nicobar for enhanced connectivity with Indonesia’s Sumatra Island and the port of Sabang in particular. Shortly after Modi’s visit, INS Sumitra, an Indian Navy ship, made a port call at Sabang. More recently, an Indian Coast Guard vessel, INS Vijit, visited Sabang as well. A pending Indo-Japanese acquisition and cross-servicing agreement is also expected to include provisions for the ANC to host Japanese warships.

India is also continuing existing maritime exercises in the zone and looking to develop new ones. The ANC currently carries out the multilateral MILAN exercise in the region, along with annual bilateral ‘coordinated patrols’ in the sea with Thailand, Myanmar and Indonesia. The Singapore–India Maritime Bilateral Exercise (SIMBEX) takes place there as well. The silver jubilee of SIMBEX last year involved the largest participation yet from both sides, including ‘multidimensional drills’ involving several types of ships and aircraft and live weapons firing.

A new trilateral exercise in the Andaman Sea, involving India, Singapore and Thailand, is set to begin in 2019.

India isn’t the only major power paying attention to the Andaman Sea. The presence of the sea lines of communication has long engendered Beijing’s strategic interest in the region. Chinese activities in the zone are notable. There are reports of submarines of the People’s Liberation Army Navy being seen near the Andaman and Nicobar Islands.

Concurrently, Beijing has invested in strategic infrastructure projects in littoral states to project influence. One such undertaking is the Kra Canal, which is a means of bypassing the Malacca Strait by a waterway between the South China and Andaman seas. In 2018, Thailand began feasibility studies for the canal, and Chinese investors have reportedly committed US$30 billion towards the project. Under a bilateral agreement signed in 2017, Thailand is also procuring submarines from China to ‘protect [its] natural resources in the Andaman Sea’.

Further north, China is assisting Myanmar in developing Kyaukpyu port. The two sides concluded an agreement to develop the port in November 2018, and China is committing over a billion dollars in investment. Although the objective of these developments is ostensibly to promote trade and commerce, their implications for security in the Andaman Sea are hardly obscure.

The Andaman Sea’s rising profile is also important for countries outside the littoral basin. Australia is a case in point, having thrown its weight behind the Indo-Pacific strategic concept. Experts have already stated that Australia’s Indo-Pacific efforts should be focused in the Bay of Bengal, and Canberra has participated in Indian-led maritime ventures such as MILAN and, from time to time, the Malabar exercises.

Given the increasing strategic value of the Andaman Sea, Australia could look to include it as an area for cooperation under existing mechanisms such as the multilateral Indo-Pacific Endeavour and bilateral AUSINDEX maritime exercises.

Speaking about his politically embattled company’s chances to build national 5G networks, Huawei founder and CEO Ren Zhengfei recently told the BBC, ‘If the lights go out in the West, the East will still shine. And if the North goes dark, there is still the South.’

He’s right. Unless something changes in the near future, Huawei is going to win the fight for 5G in the developing world.

It will win not on political strategy, or on diplomacy, or on bizarre public communications campaigns, but for the same reasons that Chinese companies have come to dominate so many other industries—because it can produce at huge scale for a cheaper price than its competitors.

Huawei isn’t just undercutting its competitors on price; it’s also a leader in the field in 5G research and is playing a central role in setting global standards for the technology. China invested early and deeply in 5G development, and is rapidly moving ahead of other nations in its domestic implementation of 5G networks.

Building 5G networks is extraordinarily expensive. 5G networks are significantly denser than their 3G and 4G predecessors and require the construction of a huge number of additional base stations, particularly in urban environments (because 5G operates at a higher frequency bandwidth which often cannot pass through obstacles such as buildings, for example). It will also require the rollout of massive multiple-input multiple-output (MIMO) antennas and a range of other changes to existing infrastructure, at a cost ranging from the billions to the hundreds of billions depending on the size of the network.

Price, not politics, will be the decisive factor for many nations when deciding which companies will be permitted to tender for their national 5G networks.

Huawei claims that its equipment is smaller, lighter and cheaper than its competitors’ and has 30% lower energy consumption, making it both easier to deploy and less expensive to maintain.

Even some of the wealthiest nations in the world, and the US’s closest allies, are clearly factoring cost into their decisions on whether to follow the US and Australia in banning Huawei from their 5G builds. Germany’s telco companies have been pressuring the German government, which is reportedly seeking a ‘no spy’ deal with China, to allow Huawei to participate in Germany’s national 5G networks.

Meanwhile, Huawei is trumpeting at least 30 5G contracts around the world, from Turkey to Iceland, and from Monaco to South Africa.

If nations as wealthy as Switzerland and Saudi Arabia are picking Huawei (and their bank accounts) in the face of US displeasure, we cannot realistically expect developing countries without such deep pockets to choose differently.

It’s important to avoid making the same mistakes that surrounded the ‘debt-trap diplomacy’ debate, which at times has taken on patronising, paternalistic undertones based on the barely veiled implication that developing nations somehow either don’t know or don’t understand that China’s loan largesse comes with strings attached.

It’s entirely possible, and rational, for governments in developing states to recognise the risks associated with Huawei, and decide that a 5G network which the Chinese government knows a little too much about is still preferable to no 5G network at all. If their budget allows for Huawei or nothing, then it will be Huawei, and no amount of huffing and puffing from the US and its allies will make a difference.

Exactly what action they should take is up for debate. Any option, whether it’s conditional development aid or boosting Huawei’s competitors, will inevitably come with drawbacks as well as benefits, including the risk of further splintering the global internet.

If the US and its allies, including Australia, are serious about trying to limit the global spread of Huawei’s 5G dominance, they need to move beyond simply telling other nations to say ‘No’ and find ways to promote affordable alternative options.

Scott Morrison’s shock announcement in parliament that the three major political parties have had their computer systems hacked by a ‘sophisticated state actor’ will have impacts long after the federal election.

There’s a lot that we don’t know, including the identity of the attacker, although it’s likely that the agency with the lead role in ‘protecting Australia from cyber adversaries’, the Australian Signals Directorate, will be able to identify the perpetrator.

Here’s what we can say with certainty. This cyberattack comes hot on the heels of a widespread hack of the parliament’s IT system that is used by members and senators and their staff.

It is a sophisticated, sharply targeted operation that is clearly looking for political information rather than industrial intellectual property or financial information.

We also know that state-based cyberattacks on key Australian agencies, universities and businesses are increasing.

As ASIO’s 2017 annual report clearly stated: ‘The threat from espionage and foreign interference to Australian interests is extensive, unrelenting and increasingly sophisticated.’

We don’t yet know if the attackers were successful in exfiltrating information, but they have been able to get into the Liberal, Nationals and Labor computer networks, infecting those systems with computer codes, presumably to steal information and potentially corrupt data.

The major parties have large databases of information about voters based on the electoral roll and information gleaned through phone calls, doorknocking and other contacts.

These databases shape campaign plans down to individual households. Information on hundreds of thousands of people is ­recorded.

Political databases would offer intelligence-collection gems every bit as useful to cyber spies as, for example, the 500 million hotel registration records stolen from the Marriott hotel chain last year.

Beyond electoral data, political party IT systems will contain emails between senior officials and politicians, election plans, the files parties maintain about their opponents—all the things that intelligence agencies would want to collect from target countries.

Which country is responsible for this interference in our political system? Finding out is difficult, but there is no agency better placed to forensically identify the attacker than the ASD.

One can speculate about potential perpetrators by applying the well-tried indicators of suspicion in criminal investigation: which country has the means, motive and opportunity to commit the crime?

There are 193 member countries of the UN. Fewer than 10 would have the smarts and scale of cyber-intelligence capability to mount an attack as sophisticated as this. We can discount our allies, the US, Britain, New Zealand and Canada. The Five Eyes partners don’t spy on each other—they have no need to, ­because our political systems are largely open books to each other.

We know the Russians hacked the Democratic National Committee during the US presidential election in 2016. Russia’s broader intention seems to have been to weaken Hillary Clinton’s campaign and to favour that of Donald Trump.

Canberra has been a vocal critic of the Russian invasion of Crimea and of Moscow’s culpability in shooting down Malaysia Airlines flight MH17.

It’s just possible that Russian intelligence might be engaging in target practice, but the reality is that Russia doesn’t have any substantial stake in the outcome of the Australian election.

The attack is probably beyond the capabilities of the Iranians and North Koreans, nor again is there a motive.

China is the one country with the means and the motive to take on the risk of attacking Australia’s political parties.

We know Chinese intelligence services were responsible for attacks on parliament in the early 2000s, as well as on the Bureau of Meteorology and the Australian National University more recently.

Chinese intelligence tradecraft seeks out big-data holdings such as the Marriott booking records, and Beijing has a pressing interest in trying to halt the international contagion after Australia’s decision to block Chinese companies from the 5G mobile network.

More broadly, agents of the Chinese Communist Party have been seeking to suborn Australian political parties through donations and otherwise engaging in bullying tactics to shut opponents up.

This is the cyber equivalent of a smoking gun. Once the forensic work is done, the prime minister should make public the identity of the cyber attacker and then take steps to secure our political system against any further attempts by the Chinese Communist Party to influence it.

Bill Shorten’s reply to Morrison’s statement had an interesting sting in the tail, by suggesting that the national cyber coordinator role should be taken out of the Department of Home Affairs and report solely to the Australian Signals Directorate.

However it is organised, cybersecurity is a critical priority, including to protect the integrity of our voting systems at state and federal levels.

This attack is intolerable to a democracy and will surely have repercussions for relations with Beijing if, as I think is very likely, China’s Ministry of State Security is the cyber culprit.

One of the proudest boasts of the Coalition government is that it takes national security seriously, and it does. Over the next 10 years, Australia will spend $200 billion on defence in the nation’s largest ever peacetime rearmament program. As the federal election looms, it is fair to ask why we are doing it and what are we getting for it.

In simple terms, we are rearming because the strategic environment has changed dramatically, especially in the maritime domain. Almost half of that $200 billion is earmarked for the navy, $90 billion of which will go to building 56 warships in Australia. Unfortunately, the build won’t be complete until the mid-2050s.

Geography means that Australia’s livelihood is tied to the sea, with our security and prosperity dependent on access to the Pacific and Indian Oceans. Our exports must travel by ship to reach their destinations, and we rely on the sea lanes to import liquid fuel and other vital goods.

Australians tend to pay little attention to this simple fact because we have seldom had reason to. We have always allied with ‘great and powerful friends’ that could be counted on to keep our sea lanes open. Initially, the Royal Navy was Australia’s guarantor. Then the US Navy took its place—and in the 75 years since World War II, it hasn’t faced a peer competitor. But the strategic environment has changed. The US Navy, by its own admission, is not the globally dominant force we have long assumed it to be.

Both warship numbers and capabilities are important, especially if you accept global responsibilities. In 1989, the US Navy had 594 combat ships. Now it has 275. The US plans to rebuild to 355 ships, but admits that this can’t be achieved within 30 years and that the overall cost will be a third higher than that of today’s navy. And recent US defence budget increases are unlikely to last.

The US considers that the West is being challenged by four nations: China, Russia, Iran and North Korea. Both Australia and the US describe our regional geostrategic environment as the Indo-Pacific. Three of those four challengers are in our region. If things go bad, this has major implications for our region, our prosperity and our security.

The biggest challenge for our region and the world is the emergence of China as a great power.

China’s military is being restructured into one with a greater balance between its land, sea, air and rocket components, and we all know how good China’s cyber forces are.

A major part of the restructure is the priority given to the People’s Liberation Army Navy. Recently, Chinese President Xi Jinping declared that ‘the task of building a powerful navy has never been as urgent as it is today’ and urged the PLAN to ‘prepare for war’. Chinese military leaders talk often and openly about the PLAN’s ambition ‘to gain an ability like the US Navy so that it can conduct different operations globally’, and about how to defeat the US in the Pacific by sinking its aircraft carriers. China is investing massive resources into the PLAN, which is growing rapidly in its size and sophistication.

Analysis from the Center for Strategic and International Studies shows that the PLAN already has more deployable vessels than the US Navy. In the past five years, China launched more new vessels than the entire Royal Navy has. It was able to do that through large-scale investment in dual-use shipbuilding facilities as the world’s largest commercial shipbuilder.

China is also developing larger, more advanced vessels capable of longer-range operations. China’s second—and its first domestically built—aircraft carrier will enter service soon. It’s been suggested that the PLAN could eventually field up to six increasingly sophisticated carriers. China is also commissioning new amphibious assault ships capable of transporting marines and helicopters. A new line of cruisers, similar to the US Navy’s Ticonderoga-class Aegis-equipped cruisers, is being launched, as are new models of destroyers, frigates, corvettes and submarines. These are all ‘comparable in many respects to most modern Western warships’. We are witnessing the birth of a Chinese ‘blue water’ navy that will be able to conduct operations far from China’s coastline.

This is not about the South China Sea or other territorial waters claimed by the PRC. It is driven by a desire to project power on a global scale.

While he acknowledges that war is not inevitable, Graham Allison cautions that ‘war between the US and China in the decades ahead is not just possible but much more likely than currently recognized’, and that ‘by underestimating the danger … we add to the risk’. Over the last 500 years, there have been 16 occasions when a rising power has overtaken the dominant power. In 12 of them, war was the result.

It is dangerous to think that the US still dominates the world as it once did, given its global responsibilities, its diminished defence capability, its unpredictable national decision-making and the increasing strength of those that challenge it. This has monumental implications for Australian security when the US is still seen as the ‘centre pole’ of our defence.

The Coalition government’s spending on defence is wise, but a root-and-branch analysis resulting in an Australian national security strategy is the only way that Australia can assess whether our spend is enough, whether what we are buying is appropriate, and if we can afford to wait decades to rearm our military to deter conflict. The last thing we need is a new defence white paper. That would merely delay important decisions that are required now.

Given that anything in Australian defence takes decades to mature, an upcoming election is the perfect time to talk about the issue of defence and security.