Tag Archive for: China

Beijing’s anti-corruption drive: what’s at stake? (part 1)

18th CPC Congress Beijing

The Chinese Communist Party’s (CCP) anti-corruption drive is of staggering scale, reach and audacity. From the powerful ‘tigers’ to the low-ranking ‘flies’, the anti-corruption policy of Xi Jinping’s leadership has targeted and frightened multiple segments of the party, government, military, and state-owned enterprises.

Many have since wondered about the motivation and nature of the wide-ranging and ambitious anti-corruption policy unleashed by President Xi and carried out by Wang Qishan, who is Secretary of the powerful CPC Central Commission for Discipline Inspection (CCDI) and one of the seven members in the Politburo Standing Committee.

On 9 September, I attended a now-annual conference co-hosted by the International Department of the CCP Central Committee and the Central Commission for Discipline Inspection of the CCP Central Committee. This year’s theme was To Discipline the Party: Responsibility of the Party. It was appropriate that Wang—who’s in charge of the party’s anti-corruption drive and the broader strategy of ‘comprehensively disciplining the party’—agreed to offer his views to a select group of scholars and officials from China and abroad.

As I listened to Wang’s remarks at the Great Hall of the People, I realized that he was making a revolutionary statement in the history of the CCP. Wang raised an extremely provocative and hitherto taboo idea in CCP political discourse: he spoke of the legitimacy of CCP rule. Never before has the CCP leadership openly raised and even questioned the legitimacy of its own rule. Moreover, Wang actually set out to explain the legitimacy of CCP’s long one-party rule in China, which he pointed out to be the key distinguishing characteristic of Chinese politics. The legitimacy of CCP rule, Wang explained, is based on the ‘endorsement of the people’ and the ‘choice made by the people.’ He elaborated that the CCP depends on the people being satisfied and happy.

Through his comments, Wang was trying to imply that the anti-corruption effort was much more than a short-term expedient for the new leadership to win favor from the public or to establish political authority through factional or interest-groups-related struggles—just some of the hypotheses offered by outside observers for the push. He pointed out that anti-corruption isn’t a political campaign or movement—Mao’s Cultural Revolution taught the CCP that campaigns and movements eventually cease to exist. Anti-corruption, this time, will ‘always be on the road’, and ‘there is only a beginning, never an end’.

Those remarks, together with the invocation of the all-important concept of CCP legitimacy, suggest that Wang is seeing anti-corruption as a long-term strategy to maintain and enhance the legitimacy of CCP rule in China; it’s not just a temporary device for consolidating the rule of the new Xi leadership. Such an explanation would refute many existing hypotheses about anti-corruption. According to this view, what’s at stake in anti-corruption is nothing less than the legitimacy and survival of the CCP as the sole ruling party in China—something much more significant than the survival of the current Xi leadership, which, after all, has an implicit two-term limit of 10 years.

But is that explanation credible? Wang struck many of us in attendance at the meeting as a deeply impressive political leader and as an intellectual. His remarks on the many issues of dissatisfaction the Chinese people have with CCP rule left the impression that the current generation of CCP leaders face significant governance challenges in China. He spoke of the difficulties and complexities of CCP rule in today’s ‘extraordinary difficulty’ period, and he even said that the new leadership hasn’t taken rest for a single day since it took office.

His legitimacy-based explanation of the anti-corruption strategy would be readily comprehensible to a Western audience. The term ‘legitimacy’—Wang used the Chinese translation of hefaxing—is, after all, of Western origin. The difference between Wang’s narrative and many existing explanations for the anti-corruption effort comes down to the timeline: one takes a short-term tactical perspective, the other a long-term strategic view. While many Western analyses focus on the short-term interest maximization and political survival of the new Xi leadership, Wang takes a strategic view geared toward the long-term legitimacy of CCP rule beyond the expediencies of the current leadership.

A second, and final, instalment will look at CCP rule and legitimacy in the context of the party’s new ‘four comprehensives’ governing strategy advanced early this year.

Is China ready to resume its imperial glory?

Chinese Soldiers in The Forbidden City - Beijing, China

Since assuming the Chinese Communist Party (CCP) leadership in November 2012, Chinese president Xi Jinping’s great ambitions have become well known. Domestically, he’s advanced the grand goal of what he calls the China Dream: ‘the great rejuvenation of the Chinese people’. He has surprised virtually every observer by the speed and efficiency with which he’s consolidated power in the party and military. Xi is now seen as China’s most powerful leader after Deng Xiaoping, if not Mao Zedong.

The two major pillars of Xi’s assertive foreign policy—security activism predominately in the maritime domain, and economic diplomacy by way of the so-called ‘one belt, one road’ policy—suggest that Xi isn’t content with making China a great power in the region and beyond; he also wants to make China a leading and even dominant power in key areas of Asia–Pacific regional relations. Indeed, as a keen student of history, Xi may be trying to restore the role of China in the contemporary East Asian system to its historical height during the era of the Chinese empire (221BC–1911AD).

Is Xi’s China ready to resume the glory of its imperial predecessor? We may compare China today with China during the early Ming dynasty (1368-1424), which achieved an incomplete regional hegemony in East Asia. By GDP, the economic position of Ming China at the height of its power was stronger than that of the US today. But hegemony is about more than material capabilities—it’s the conjunction of material primacy and social legitimacy; the ability to control important international outcomes and some degree of consent and acceptance from other states in the system.

Early Ming China’s neighbours adopted four principal strategies in their response to and dealings with the Ming imperial court. Ranked from the most to the least cooperative, these four strategies are identification, deference, access, and exit. Almost all of Ming China’s neighbours adopted a strategy of deference, whereby they deferred to, but didn’t necessarily accept as legitimate, imperial China’s hierarchical scheme of foreign relations embodied by the tribute system.

Ming China thus only achieved an incomplete hegemony in East Asia. But that’s hardly surprising: every hegemony is incomplete, even in the case of contemporary US hegemony. Ming China never had to confront a systemic, anti-hegemonic response in the form of, say, a counterbalancing coalition characteristic of modern European politics. On the whole, early Ming China’s material primacy in East Asia was also a Chinese hegemony accepted by its neighbours to varying degrees.

An important criterion for measuring Chinese influence today is the type and nature of regional responses to China’s rise. None of China’s neighbours are developing a strategy of identification, not many states are adopting one of deference either. The main strategy adopted by most states today is in fact access, an instrumental attempt to maintain relationships with China in order to obtain economic benefits from China’s rise. Some are also adopting a strategy of exit by downgrading their relationships with China or by switching to closer relationships with other countries, including China’s archrival, the US.

The contrast with early Ming China is thus clear and striking. Whereas Ming China succeeded in making deference the major regional strategic response to its power, with a nice addition of identification from Korea, today’s China has only achieved the level of an access strategy, and it is in fact struggling with a number of countries even at that level. Moreover, whereas Ming China never had to face a counterbalancing coalition from its neighbours, such balancing is a constant spectre for today’s China. Current Chinese foreign policy leaves much to be desired, and the PRC still has a long way to go before reaching the glory of its imperial predecessor—if indeed it can ever reach such heights.

The problem isn’t with the trajectory of China’s development, which is still largely sound and positive, but rather,  it’s with the ways in which some Chinese policymakers and analysts perceive China’s strengthening position in the international order and how that power should now be used. A palpable sense of triumphalism emerged in some segments of the Chinese policy and intellectual community after the country’s success through the Global Financial Crisis. Yet, as a senior scholar in Beijing pointed out to me, overestimation of China’s power is much more harmful to China’s interests than underestimation. China faces serious economic headwinds and the constraints on Beijing’s foreign policy have consequently tightened over the past few months. President Xi’s foreign policy remains in search of a foundation, a purpose and an effective strategic approach.

Chinese foreign policy has now entered an important stage of multiple changes and adjustments, and is open to be shaped by a variety of domestic and international factors. It will be wise for Chinese leaders to take a long-term historical perspective when considering the potential of Chinese influence in the region and the limits of current approaches. If they are really historically minded, the strategic goals of China’s Asia–Pacific policy should include both a positive and negative goal—a positive goal of encouraging a new kind of deference from regional states appropriate to the norms and conditions of 21st century world politics, and a negative goal of preventing an implicit or explicit counterbalancing coalition forming against China. Whether they can achieve those goals will depend heavily on their strategic wisdom and foresight.

ASPI suggests

Australia’s Defence Minster Kevin Andrews was in India this week, where he met with his Indian counterpart Manohar Parrikar as well as Foreign Minister Sushma Swaraj. Andrews contributed an op-ed to The Hindu and delivered a speech to the Institute for Defence Studies and Analyses (excerpted here). It was in the Q&A session of his address to IDSA that the Defence Minister raised the possibility of the Quad 2.0, which made the front page of The Sydney Morning Herald this morning (and is likely to have been well-received in India—at least in Modi’s office).

Yesterday saw China celebrate its role in the WWII defeat of Japan 70 years ago. As expected, Beijing put on a massive display of military muscle, with 12,000 troops goosestepping through Tiananmen Square alongside a veritable heft of tanks, choppers, drones and missiles. Head over to The Atlantic to check out photos of the parade. Chinese President Xi Jinping took the occasion to announce that military personnel would be cut by 300,000. Over at CSIS Anthony Cordesman and Steven Colley have released for feedback a draft of their 600+ page study on Chinese strategy and military modernisation, which you can access here.

IHS has this week estimated that China’s defence budget would swell to approximately US$260 billion in 2020, which is around double the amount spent by Beijing in 2010. The analysis comes as Japan’s Ministry of Defense requests its biggest defence budget yet, which if approved in December would mark the fourth increase in as many years. Both can be taken as signs that the temperature continues to rise in the Asia–Pacific.

The UK Ministry of Defence is currently soliciting options for their surface fleet of the future. The push is being led by Starpoint, a tech-focused procurement group in the MoD, under the title ‘Dreadnought 2050’—a nod to the UK’s 1906 battleship that completely disrupted naval warfare by outclassing all vessels then in the field.

US President Barack Obama this week secured enough votes to prevent a veto of his nuclear deal with Iran, effectively ensuring that it will pass Congress. While a DefenseOne survey found that only 26% of serving US military and civilian government employees think the deal is good for America, Michael Krepon of Arms Control Wonk thinks the deal is about as good as the US is going to get right now. CSIS’s Jon B. Alterman is thinking beyond the deal.

Bookmark this one for the weekend: A few days back, Brookings published William McCants’ longform piece charting the life and transformation of the man who now goes by the name of Abu Bakr al-Baghdadi, ISIL’s self-proclaimed Caliph. The essay is accompanied by a range of photos, videos, maps and recordings. Beyond that commendable effort, two pieces on the Islamic State caught our eye this week. A piece in The New Yorker looks at life after ISIS, drawing particularly on the experience of some former foreign fighters in Europe; and War on the Rocks asks which devil we need to dance with in order to deal effectively with ISIL.

And what is it about ISIL and Twitter? Beyond the erudite think tank contributions to our understanding of ISIL’s social media strategy, there’s a different, lighter side to the various online efforts to counter the group: first, the conversation between a BuzzFeed journo and an Australian official running the @Fight_DAESH Twitter account; second, a run-down on ISIS-chan, the kawaii anime character waging a meme-and-melon war on ISIL; and finally, @ISIS_karoke, which attaches well-known song lyrics to photos of jihadists. Of course, any effort to counter the potent #catsofjihad hashtag should be commended.

Podcast

With China’s weakening economy bringing more bad news for financial markets across the world this, Colm Quinn and Matt Goodman discuss China’s role in the global economy and its relationship with the US.

Videos

Brandon Valeriano, author of the new book Cyber War versus Cyber Realities, recently skyped-in to Robert Farley’s Foreign Entanglements program over at BloggingHeads.tv. The pair discussed deterrence, resiliency, restraint and the psychology of overhyped cyber fears.

Last weekend marked the 10th anniversary since Hurricane Katrina devastated New Orleans. Vox speaks to some survivors about their experience, and the ABC has a striking set of now-and-then photographs.

20 years ago tomorrow, then-First Lady Hillary Clinton gave her famously forceful ‘Women’s Rights Are Human Rights’ speech in China, against the advice of some in the White House and many in Beijing. Watch it here.

Finally, Donald Trump on ‘China’ (h/t Daniel).

Events

Canberra: What’s there to learn from Australia’s efforts to support peace through the Pacific Islands? Head to the ANU’s College of Asia and The Pacific to find out, as Associate Professor Bob Breen examines our interventions between 1980 and 2006.                       

Melbourne: This Tuesday, the University of Melbourne will host Sir David King, the UK Foreign Secretary’s Special Representative for Climate Change, to discuss a recent report out of Cambridge which recommended climate risks be assessed in the same way as risks to national security, public health or financial stability. See here to access the report, and here to register for the event.

Sydney: The NSW branch of the Australian Institute of International Affairs will soon host Carlyle A. Thayer for a discussion on the implications of China’s land reclamation efforts in the South China Sea. Mark your calendars for 15 September.

ASPI suggests

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All eyes have been on Beijing this week as signs of a slowdown in the Chinese economy have been felt across the globe. With Chinese President Xi Jinping set to visit Washington DC next month, The Washington Post asks how Obama can help to get China’s economic prosperity back on track without making Xi feel vulnerable and weak. For a useful breakdown of how the 14.6% rate of decline in Chinese imports could impact on the rest of the world for another year, check out The Guardian’s interactive graphic. Experts estimate that Australia alone stands to lose $25.2 billion in export sales—the equivalent of 1.7% of our GDP.

As China’s Victory Day parade draws closer, Vice Minister Zhang Ming of the Chinese Foreign Ministry has revealed the guest list for the event. Some notable absentees from the list include US leaders and their Western allies, as well as top-level representation from Brunei, Indonesia, Malaysia, the Philippines and Singapore. Meanwhile, J. Michael Cole at The Interpreter argues that Taiwan’s KMT is making a big mistake by sending its honourary chairman, Lien Chan, to the festivities next week, a move that could potentially shake the faith that young Taiwanese have in their military establishment.

What’s the purpose of US power? As part of its 30th anniversary symposium, The National Interest asked 25 experts their thoughts. William J. Burns, president of the Carnegie Endowment, says that while US global preeminence mightn’t last forever, it’d be a bad idea to bet on its decline any time soon. Read Burns’ response, and others, here.

Refugee crises from Syria to Austria have made headlines this week. Over at Project Syndicate, Anne-Marie Slaughter has looked at the four factors that are leading to US policymakers’ change of heart about implementing a no-fly zone over Syria. While the positive strategic implications of the zone are plenty, it could also serve to alleviate some of the pressures associated with the refugee crisis, which has reached ‘almost biblical proportions’. On a side note, check out CFR’s Global Conflict Tracker for an in-depth look at US engagement in Syria—along with a detailed examination of other hotspots around the world, and they’re likelihood to impact on US interests.

The Economist has also weighed in on what could be done to deal with the enormous influx of Syrians to the EU: ‘let them work’. By keeping migrants in the workplace, both locals and newcomers learn to adjust to the change—a policy that’s been effective in London, New York and Vancouver. After the horrific discovery of the bodies of up to 70 migrants in the back of a truck parked by an Austrian highway this week, pressure will be on the EU to ‘step up and provide protection to more, share responsibility better and show solidarity to other countries and to those most in need’, stated Amnesty International’s Gauri van Gulik.

Heading north, CSIS has released a new publication on Russia’s arctic ambitions, The New Ice Curtain. Looking at the future of bilateral and multilateral relations in the region, the report focuses on Russia’s military modernisation as it aims to maintain the economic viability of its natural resources, as well as the Northern Sea Route.

And finally, North Dakota has become the first state in the US to allow its law enforcement officers to fly drones armed with weapons, ranging from tasers to tear gas. The amended bill was originally designed to prohibit law enforcement officials from weaponising drones, but after an industry lobbying firm got involved, North Dakotan police can now outfit their UAVs with anything deemed ‘non-lethal’.

Podcasts:

The ABC’s The World Today program recently hosted Peter Singer, strategist and senior fellow at the New America Foundation, who gave a brief outline of the vulnerabilities that the US defence system will likely face in the near future (9 mins).

The always-reliable CSIS CogitAsia podcast this week hosted Michael Green for a run down on Japanese Prime Minister Shinzo Abe’s statement on the 70th anniversary of the end of WWII. Take a listen here.

Videos:

The Hon Bill Shorten was the keynote speaker at ASPI’s recent 2015 National Security Dinner. For an overview of the Opposition’s take on the security issues faced by Australia in the near future, watch the video of the event here.

Events:

A big week coming up for Canberrans: next Monday 31 August, Adjunct Associate Professor James Brown of the US Studies Centre will speak at the ANU on Australia’s need to increase its efforts in space to match those of the US’s. Also be sure to mark 1 September in your diaries to catch Sheila A. Smith discuss her new book on how the Japanese government is coping with China’s growing regional influence.

Joining the long list of excellent events run by the University of Sydney’s China Studies Centre, on 10 September, Professor Christine Wong of the University of Melbourne will discuss the structure, organisation and potential reforms of China’s fiscal system.

Our warrior elite: an expanding role for Australian Special Forces

Exercise Diamond Strike 2015

The rise of ISIS allied with the seemingly inevitable mass migration caused by climate change is confronting Australia’s military and intelligence leaders with a devilish conundrum. No one yet has a plan to meet the approaching tumult but one thing is certain: in solving the dilemma the role of our Special Forces will be increasingly central to our future defence and security.

These conclusions were borne upon me during the two years of research and writing that produced my Warrior Elite, the history of our Special Forces incorporating our intelligence agencies just published by Hachette. It involved scores of interviews with the planners behind the political scenes who develop our defence policy.

In the last two decades the military and the intelligence agencies have coalesced into a Special Forces cohort unlike anything that preceded it. And it incorporates an ever increasing proportion of our defence preparedness. The planners know that the technological genie is out of the bottle. Today, an SAS squadron, for example, has at its command a firepower exceeding a WWII battalion. An extraordinary research effort in 47 military and civilian facilities in the US and others in Europe, Japan and China is producing an astonishing array of protective battle suits, advanced weaponry, communications, telemetry and real time HQ support and direction. These are either in use now or on the verge of deployment to the Special Forces of most advanced countries, Australia included. They are the instruments of a radical transformation of military strategy and tactics.

As our Commando regiment increases its battlefield capacity, the SAS in close cooperation with ASIS is expanding its capabilities in potential trouble spots in the region, the Middle East and even the African continent. But here the planners run up against a strategic quandary. Both units are closely affiliated with the US. And while this brings substantial technical advantages, in the bigger picture these are offset by strategic liabilities which defence leaders realise they must overcome.

America’s imperial superpower assertions have created serious complications in Australia’s relations with China and arguably affected the development of open-hearted, neighbourly relations with the largely Muslim nations of Indonesia and Malaysia. Both Indonesia and China are themselves deeply vulnerable to ISIS—Indonesia through its 95% Muslim population and corrupt governance; China because of its 160 million Muslims and their alienation from an unyielding single-party government. Both countries are facing much bigger problems than Australia in controlling their internal threat.

Indeed, were it not for Australia’s enthusiastic embrace of the Five-Eyes alliance which has traditionally been directed against China and Indonesia, among others, it would be perfectly possible to envisage a regional arrangement encompassing Australia and its two most populous neighbours in a cooperative Special Operations counterforce to the jihadists.

Then comes the second strand of the conundrum: climate change. Heavy Weather, an ASPI Special Report published in March 2013, warned that global warming:

 ‘has generated little interest in either the ADF or the Defence Department, [yet] climate change is transforming the conventional roles of security forces. As a threat multiplier, it has the potential to generate and exacerbate destabilising conditions that could reshape the regional security environment.’

That now seems inevitable. And the planners are aware that our response must involve international alliances with the great forces who would underwrite—with force if necessary—the right of nations like Australia to decide (in John Howard’s immortal phrase) ‘who comes to this country and the circumstances in which they come’.

When climate change produces uncontrolled mass migration—the forerunner of which we now see in the Mediterranean—the support and cooperation of regional governments, particularly Indonesia and China, will be essential to any Australian effort to retain its territorial integrity. Yet once again our ‘Five-Eyes’ alliance with the Anglosphere which targets Indonesia and China as potential threats stands as an impediment to the development of the cooperation  and support required.

While the American alliance will no doubt remain in place, it may well be that Australia needs to loosen the ties to its Anglophile past before a genuine regional integration can be secured. An innovative 2014 ASPI/ADF study might well point the way to the future. It proposes the posting of Special Forces liaison officers in Indonesia, Malaysia, Singapore and the Philippines ‘of which Indonesia is the most important’. It recommends increased Special Forces engagement with Southeast Asian nations leading to the establishment of a Special Forces Regional Training Centre in Australia. And in a ground-breaking proposal, it advocates an ‘intensification’ of cooperation with Chinese Special Forces. ‘This would be a confidence-building exercise,’ it says, and would develop through joint humanitarian and military exercises.

In this rearrangement of forces, as our Special Forces add a diplomatic cutting edge to their arsenal, we might well find that our future security—in Paul Keating’s words—is ‘in Asia’ and not ‘from Asia.’

China’s economic outlook: the end of certainty?

China’s economic outlook: the end of boom times?

As everybody now knows, the Chinese economy has a big impact on Australia. Chinese demand for Australian commodities influences our rate of economic growth, the value of our currency and—critically for the government—our tax revenues. Over the past decade, we’ve ridden the roller coaster from the good times to the bad. At the same time, cheap manufactured goods from China have benefited consumers while simultaneously putting pressure on local manufacturers.

Treasury and the Reserve Bank, not to mention the resource sector, are surely keeping a close eye on current developments. There’s a lot at stake; unemployment levels, tax revenues, corporate profits and Australia’s overall prosperity all depend upon the Chinese economy.

China’s long-term economic prospects remain favourable. The latest forecast (paywall) from the Economist Intelligence Unit is for the Chinese economy to overtake the US economy in 2026 and to be 50% larger by 2050. The strategic consequences of this long-term shift in economic weight have been explored many times; my most recent contribution is here. In comparison, far less attention has been paid to the near-turn strategic consequences of China’s economic performance. I think that’s a mistake.

As best I understand from discussions with Chinese counterparts and China experts, the Communist Party’s hold on power rests on two things; nationalism and growth. Whatever remnants of Communist ideology remain have been rendered irrelevant by China’s embrace of capitalism. Of greater contemporary relevance, though of much earlier origin, is the notion of the Mandate of Heaven, which links the historical rise and fall of Chinese dynasties with their ability to deliver competent government. Whereas democratic countries punish incompetent governments at the ballot box, more drastic measures are required in a one-party system—no different from when China was ruled by hereditary dynasties.

Although the current Chinese system seems stable, the Chinese Communist Party (CCP) doesn’t take its position for granted. A regime confident of popular support doesn’t control information and suppress dissent to the extraordinary extent the CCP does. We should have no more confidence in the stability of present arrangements in China than its architects.

What happens if the Chinese economy suffers a serious setback in the next several years and how would the Chinese people respond to a recession that saw the economy contract and unemployment rise to double digits? Perhaps the party would explain the need to tighten belts and people would do what was necessary to get things back in order—think Iceland and Ireland following the 2008 financial crisis. However, even under this favourable scenario, it could take years to put things right; economic output can decline quickly but is painfully slow to re-establish.

A less benign scenario is also possible. The Party could fall back on the remaining pillar of its domestic legitimacy—nationalism. Chinese nationalism is remarkably heartfelt, and in many ways understandable given the country’s diverse achievements. But a strong theme of historical grievance also runs through Chinese nationalism. The ‘century of humiliation’ has been kept alive in Chinese popular culture, resulting in widespread anti-Japanese sentiment and a strong resolve to never again be put upon by external powers.

It’s impossible to foresee how nationalism might manifest in an economically weakened China. But it surely wouldn’t make China easier to deal with over issues such as the South China Sea. More assertive behaviour than what we’ve already experienced is possible, and the prospects for compromise are likely to diminish. Don’t mention Taiwan. Even setting aside strategic matters, an economic downturn could see tensions rise over exchange rates and trade—especially with competing US-led and China-endorsed trade pacts under development.

So what do the economists say? Back in 2011, the IMF forecast future Chinese growth of around 9.5% a year. By April this year the medium-term forecast had been revised down to around 6.3%. That’s hardly the end of the world—most countries would be satisfied with 6% growth—but it’s still a substantial drop. More importantly, it shows that things are happening that the IMF didn’t (or couldn’t) anticipate. That’s not a swipe at the IMF; global macroeconomics in the post-financial crisis era has defied prediction and is even difficult to explain ex-post. Nonetheless, within the broader context of uncertainty, there are reasons to be concerned about what comes next for China.

There’s a risk that, like many that came before, China will fall into the middle-income-trap and see its growth stagnate. The trick will be to capture higher value-add export markets while expanding domestic demand. At the same time, China has to unwind the mountain of debt that’s accumulated in its economy over the past decade. With total debts amounting to 282% of GDP, China is a middle-income economy with an advanced economy’s level of debt. Moreover, because Chinese authorities manipulated bank interest rates to provide artificially cheap lending (at the expense of household savers), borrowers showed little discipline in their investments over the past decade. In a haunting echo of the 2008 financial crisis, almost half of China’s debt (US$9 trillion) is related to real estate.

In theory, it’s possible for China to switch from credit driven growth to more sustainable domestic demand—but it’s hardly assured. As always in economics, there’ll be winners and losers. Reforms are needed to put more money in the hands of Chinese households at the expense of those who currently benefit from cheap credit. Taking from the rich to give to the poor isn’t easy, even in a one-party state like China.

ANZUS, China and the Prisoner’s Dilemma

Prisoner's Dilemma

The recent ANU–CSIS paper The ANZUS Alliance in an Ascending Asia is a welcome addition to contemporary thinking on the Australia–US alliance and its prospects over the next couple of decades as China looms ever larger. The even more recent release of the Economist Intelligence Unit’s Long-term Macroeconomic Forecasts: Key Trends to 2050 offers a challenging counterpoint to the comfortable policy prescriptions of the ANU–CSIS study.

While it might suit some to dismiss China’s capacity to realise its leadership ambitions, as did the Secretary of PM&C at the Crawford School’s Australian Leadership Forum at the end of June, its growing economic dominance is already affecting the regional strategic balance. And when the relative economic strength of the major global economies is viewed through the lens of demographic change, workforce participation rates, greater capital use efficiency in R&D and adjustments in immigration policies, the mid years of this century look even murkier.

Then there’s the fashionably ignored problem of global warming, which may bring with it significant and adverse security effects, particularly in the riverine deltas and archipelagoes of Asia, with entire communities moving to higher and drier ground. And as the large emerging economies of China and India move away from carbon-intensive energy production, Australia’s relative economic position and associated political throw-weight will decline.

Those combined forces could well stress the alliances that the US already has in place with Japan, Taiwan, Korea, the Philippines and Thailand, and may well impact on its alliance with Australia. The ANU–CSIS paper ignores these factors.

The ANU–CSIS paper does, however, provide a useful overview of the ANZUS Treaty, identifying the key political and military developments that have served to support the continuing relevance of the alliance. Curiously, it overlooks what was probably the most profound change to the operation of the alliance— the re-engineering of the operating arrangements at Pine Gap and Nurrungar—which happened on Kim Beazley’s watch as Minister for Defence. Although that was three decades ago, it inaugurated the integrated cooperation paradigm that continues to define the alliance to this day.

The paper correctly acknowledges that the ANZUS alliance, like most defence treaties, was initially threat-based: Australia and New Zealand needed US military assurances if Japan were to rebuild an independent self-defence capability. It doesn’t, however, come to grips with the significance of how the ANZUS alliance has changed since 1951, as shared strategic aims and values have replaced threat as the driving force of the treaty. AUSMIN communiqués since the mid-90s have reflected this fact.

Sadly, what might have worked in the past is no guide to what might work in the future. The paper’s curious language of hubs, spokes, pivots and rebalances suggests a mindset that remains entrenched in the linear strategic concepts of the past. While the US, Australia and New Zealand will continue to coalesce around human, social and political values as the foundation of their long-term strategic relationship, these values are not readily transferable to strategic associations that might be established elsewhere in Asia.

This seems to have escaped the authors of the ANU–CSIS study, especially as they considered the prospective place of both Indonesia and Japan in the evolution of Australian and US strategic interests in Asia. The idea that Indonesia and/or Japan might in some way replace Australia as the US’s preferred strategic partner is ludicrous. What isn’t ludicrous is the interest that the US (and Australia if it can replace a transaction-based Indonesian relationship with an outcomes-based diplomacy) should have in engaging Indonesia and Japan more constructively in the strategic affairs of Asia.

Australia, Indonesia and Japan each bring quite different strengths and benefits to the US as it seeks to secure and manage its global strategic interests. These strengths and benefits are complementary rather than competitive.

The joint US–Australia approach to the emergence of China as a global strategic power cannot rest on some kind of latter-day containment doctrine, or even a policy of constraining China. Nor are the US and Australia in a position to ‘shape’ China’s expectations or ‘permit’ it to take a larger leadership role.

Our joint ability to condescend extends only so far!

Rather, the US and Australia are well positioned to construct a network of intersecting and differentiated relationships that capitalise on the opportunities now on offer in Asia to strengthen and extend a rules-based strategic architecture that engages China, not corrals it. Our collective aim should be to exploit and leverage complexity and ambiguity rather than engage in a form of linear reductionism that misrepresents multi-dimensional strategic opportunities as competitive binary options.

The ANU–CSIS paper questions whether US–China and Australia–China relations might be diverging, but without recognising that difference isn’t necessarily divergence. While the paper implicitly resolves this artificial dichotomy by proposing a return to first principles—what is the regional and global order we seek, and what are the ways and means we have to achieve and sustain that order—it doesn’t answer those questions.

In Australia’s case, the suggestion that some kind of ‘strategic choice’ between Washington and Beijing is inevitable is just another form of the prisoner’s dilemma. Because the nature and dynamics of Australia’s relationships with the US and China are so different, the management of those relationships is much more a question of ‘both/and’ than of ‘either/or’.

The effect of the ANZUS alliance on the strategic evolution of the Asia–Pacific region will ultimately depend on the skill shown by Washington and Canberra in fostering a rules-based regional security architecture supported by economic and trading arrangements that generate prosperity, build resilience and enhance political and social stability. The ANU–CSIS paper has made a start by identifying some of the problems that need to be addressed. But it also reminds us just how much further our joint policy development needs to go.

South China Sea: options and risks

USS Fitzgerald transits the South China SeaThe venerable Centre for Strategic and International Studies in Washington DC is hosting its fifth annual conference on the South China Sea on Wednesday, Australian time. It’s my privilege to be speaking at the conference on the theme of the international community and the strategic balances in the South China Sea.

I propose a number of steps which the US and like-minded countries might act upon to develop a more effective shared strategy towards the South China Sea. Five immediate actions stand out as offering a more promising way forward.

First, the US should seek to extract value from President Xi Jinping’s proposed visit to the United States in September 2015. As with past presidential visits, the Chinese will put an exceptionally high priority in delivering a trouble-free and successful visit which will no doubt aim to strengthen domestic perceptions of the exceptional nature of US–China relations. Washington should make it clear to Beijing that the success of this visit will require a substantive discussion on stability in the South China Sea and a willingness to agree that the interests of regional powers must be accommodated.

There’s no prospect that China will concede ground on their sovereignty claim to around 80% of the region, but there may be a possibility that China would agree to a complete halt on land reclamation and of ‘militarising’ current sites if other countries in the region do the same. Going into the Xi visit, the US should start negotiations from the position that no unilateral concessions should be made in an effort to modify Chinese behaviour.

Second, the US should open avenues for dialogue with Asia–Pacific countries and other parties with interests in the South China Sea. This should especially include countries with substantial trading interests with China, like the Europeans and oil-producing Middle East countries, whose economic life-line depends on unfettered access to the South China Sea. A Washington ‘Summit of the friends of the South China Sea’ would help to strengthen the consistency of government-to-government dialogue on the issue just as the Shangri-La Dialogue has done in Singapore. China would, of course, be a welcome participant but the effect of this will be to demonstrate that more pluralist countries are better able to negotiate and share interests.

Third, a key point of discussion in Washington and with like-minded countries should be to anticipate responses that might be necessary to handle a Chinese announcement of an Air Defense Identification Zone (ADIZ) across the South China Sea. The need is to learn from what was a poorly coordinated and unsustained reaction to the East China Sea ADIZ announcement in November 2013. There are signs that Beijing will hold back from an announcement of a new ADIZ before President Xi’s September visit, but after that time and as the US begins to focus on its presidential election campaign, it’s possible that China might seek to take this next step aimed at consolidating its control of movement through the region. Care must be taken to ensure that initial responses aren’t allowed to fade, giving way to a form of de-facto acceptance that China exercises a form of sovereign control over the region. It may be worth exploring the idea of declaring an international ADIZ, where ship and aircraft movements are pooled in a shared and openly available platform for situational awareness.

Fourth, Washington and regional countries should take time to re-think the current language which is often deployed to respond to Chinese behaviour. For example, calls for greater Chinese transparency in defence planning continue to be made, long after the strategic purpose of gaining tight control in the South China Sea is readily apparent. China has long since learned to use the artifice of policy statements as a way to describe its actions. The idea of transparency has lost practical utility as a way of trying to force a more realistic discussion with China on its intensions.

Finally, some degree of international coordination should take place to sustain a pattern of military overflights and ship passage into disputed areas in the South China Sea. One P-8 flight, no matter how welcome, doesn’t serve to ‘prove’ sustained international interest in the region. In fact the opposite is true: if there are no follow-up flights from countries that claim strategic interests in the region, this only serves to show the relative absence of deep engagement in the security of the South China Sea. It follows that Australia, Singapore, EU countries, Japan and others with a strategic interest in free access to the South China Sea need to exercise that interest in the form of actual overflights and ship transits on the principle of ‘use it or lose it.’ What may be difficult to do today will only become harder in the future if a pattern of de-facto Chinese control is established over the region.

China respects strategic realism, not flattery

Getting China right is a key challenge for Australian foreign policy. It’s not easy to do given  our tendency to scare ourselves witless with overblown assessments of Chinese power.

Foreign observers who know China well puzzle about Australian views of the country. Every foreign policy move is assessed for the apparent distress it might cause in Beijing. An Aussie military exercise with America. Won’t the Chinese see that as a provocation? Our Navy needs submarines. Surely that will enrage the People’s Liberation Army? Academics seriously warn us not to get close to Japan and to reduce US alliance ties because these might not play well in Beijing.

In The Australian on Monday Bob Carr warned that we should only ’emphasise the positive’ about China so as not to rouse the dragon.  That was certainly how Carr played his brief time as Foreign Minister.  His diary recounts how he sought to underplay growing defence cooperation with the US at the 2011 AUSMIN meeting in Perth, precisely out of concern that China might object to Marines in Darwin.

The Chinese are astute enough not to regard a few hundred visiting Marines as a dagger pointed at the heart of the Middle Kingdom. But China isn’t beyond toying with our mistaken view that the world hangs on Australian policy decisions.  So it is that every utterance by ambitious PLA senior colonels or reference in People’s Daily editorials is combed by Australian commentators looking for signs that we may have transgressed some Chinese boundary.

The concern to not poke the dragon produces a form of inverse critique of Australian policy moves. For example, at a time of significantly raised tension between China and Japan in 2014, Beijing unilaterally declared an Air Defense Identification Zone (ADIZ) over the East China Sea. Julie Bishop sensibly said this hurt Australian and regional interests in freedom of air transit. But it’s the Australian reaction rather than the Chinese action that is said by Carr and others to be the miscalculation.

Similarly Tony Abbott is chided for saying that Australia has no better friend in Asia than Japan. He talks of Japan as an ally, an often used description of close partners rather than implying a formal treaty relationship.  In both cases this is criticised by Australian rather than Chinese observers, not because Abbott’s statements are incorrect—he’s right on both counts—but because they might generate negative reaction in Beijing.

After some years of participating in and leading senior Defence talks with PLA counterparts my observation of dealing with Chinese leaders is that they understand very well Australia has a strong alliance relationship with the US and that it won’t be broken by Beijing’s preference that such ‘Cold War alliances’ wither away.

The Chinese understand that the US strategic presence in Asia has been the basis of post-war stability and therefore of Chinese economic growth.  To the extent China has any interest in defence cooperation with Australia it’s because they think our substantially US-sourced technology and intelligence engagement makes the Australian Defence Force a more valuable partner.

Beijing pragmatically acknowledges the value the US alliance delivers to Australia’s role in the  Asia–Pacific.  But as an opportunistic actor, China won’t hesitate to play up to the instincts of Australian commentators always looking for ways to make Canberra rather than Beijing the problem in regional security.

To be clear on this latter point, it’s Beijing (not Canberra) that is constructing artificial islands in the South China Sea. It’s Beijing (not Canberra) that has built a 3000 metre, military-grade runway on one of these islands, located artillery and sensors there and persists in playing risky games of chicken with the ships and aircraft of other countries transiting the region.

Australia’s foreign policy approach to China should articulate and then hold to our view of Australian strategic interests. That will be respected more by Beijing than emphasising only the positive or turning a blind eye to Chinese actions—like declaring the ADIZ or building artificial islands—which raise regional tensions.

An Australian approach based on arguing for our strategic interests has not yet, and is unlikely to damage bilateral ties with Beijing. On the contrary, it makes us look like a country which is predictable, open and knows its own mind.

Contrast this with New Zealand’s approach. Although John Key has done a lot to return New Zealand closer to the US and Australia as defence partners, Wellington’s public diplomacy studiously tries to balance between Chinese and American interests as though there is no meaningful difference between the two countries. New Zealand’s uncomfortable silence when China declared its ADIZ bought it no extra credit in Beijing, beyond a rather contemptuous view that ‘small countries’ should keep their mouths shut on big strategic matters.

It’s pointless to pretend that Chinese interests in the  Asia–Pacific align to the interests of other countries in the region or indeed globally; that’s what makes the ‘disputes’ in the South China Sea so intractable. ASEAN and other countries including Australia failed to identify that Chinese island construction was rapidly moving the problem from one of international legal positions to a far grittier fight over expanding strategic control.

To have any hope of limiting further Chinese opportunistic attempts to create reality on the ground in the South China Sea and elsewhere, we need to take a hard-eyed assessment of our strategic interests. Preemptive capitulation or false attempts to emphasise the positive won’t help in the tough minded contest for power in the region.

Cyber wrap

Hillary Clinton

Cyber security has impacted on the US Presidential race this week, with Hillary Clinton condemning Chinese hacking at a campaign event. Her commentary—that the Chinese are ‘trying to hack into anything that doesn’t move’—was part of a longer discussion on US–China competition in the Asia–Pacific, which indicates that cyber security and foreign policy will likely be linked on the campaign trail. China has dismissed Clinton’s claims and drew attention to last week’s agreement with Secretary of State John Kerry to cooperate on cybersecurity threats. The US and Brazil have also agreed to recommence cyber policy dialogues after the Snowden-induced freeze.

Meanwhile, US and British security agencies have wrapped up a three week long cyber war game in Virgina. They invited representatives from the banking and energy sectors to participate in scenarios that affected their industries. They probably should have invited Home Depot and Walmart too, as US defence contractors scored lower than financial institutions and retailers on BitSight’s ranking of US corporate cyber defence capabilities. On the west coast, the FBI are trying to solve a series of fibre optic cable cutting incidents that have blacked out internet and phone services from Sacramento to Seattle.

China has continued its legislative efforts to protect itself from cyber threats through the new National Security Law on 1 July. The law calls for secure and controllable information architecture in critical sectors and a national security review and supervision system to examine foreign investments and technology that may impact national security. This has renewed concern among tech firms that they’ll be forced to hand over intellectual property before being authorised to operate in China. Chinese officials have defended the law on the basis that internet sovereignty is an extension of national sovereignty. Similarly, the Chinese ambassador to the UN has opposed the perceived marginalization of governments in internet governance at the expense of NGOs and corporations.

Australia’s banking, insurance and superannuation regulator APRA has written to its industry charges about the risk of outsourcing shared computing services—including cloud services—as banks seek to reduce costs through complex IT outsourcing arrangements. APRA noted that weaknesses in outsourcing arrangements exposed institutions to financial risk, and has urged prudence and appropriate consideration of IT risk and assurance mechanisms when engaging these services. In the Australian mining sector, concern about cyber security threats is also growing, with some resource company executives now taking extra precautions with personal electronic devices when travelling, especially to China.

Tech firm lobby group BSA released their inaugural Asia–Pacific Cybersecurity Dashboard this week, evaluating ten regional countries’ cyber security policy frameworks and how well they enable public and private actors to cope with cyber threats. Australia compared favorably to most of the region, although the lack of a formal public-private partnership or sector specific cyber security plans was notable when compared with pack-leader Singapore.

Proving that even the best cyber security skills aren’t a sure guarantee of security, controversial Italian company Hacking Team has become the latest victim of a data spill. Listed as an enemy of the internet by Reporters Without Borders for its ‘no questions asked’ cyber surveillance and espionage exports, it appears that Hacking Team has been selling its wares around the globe including unlikely destinations such as Sudan, and US security agencies including the NSA and the DEA.

And finally, the Irish Government has released their National Cyber Security Strategy this week, which will see the Irish CERT transformed into a National Cyber Security Centre by 2017.