Country Report: China (August 2019)

In the middle of 2019, Chinese experts assessed Sino–US relations under the Trump administration and explored the implications of the United States’ competitive approach to China for China’s regional interests. They also evaluated the improvement in Sino–Indian relations following the Doklam incident and analyzed recent Sino–Japanese third-party market cooperation efforts. Apparent in many publications is the image of improving Chinese ties to neighbors in all directions even as relations with the US remain problematic. Not acknowledging China’s decisions to accommodate other countries in the face of either troubling US ties or a slowing domestic economy, authors insist that it is these neighbors who are hedging against the US—not to the degree of a sharp break but enough to influence economic dynamics if not security ones.

Sino–US Relations

In Guoji Wenti Yanjiu, No. 3, 2019, Wu Xinbo assesses the shift in US policy toward China from a balance between cooperation and competition during previous administrations to the Trump administration’s competitive approach. Despite the Obama administration’s Asia-Pacific rebalance, the role of competition in US policy toward China during that period was limited. By contrast, the Trump administration’s approach is dominated by a competitive outlook across political, economic, and security dimensions.

Wu argues that the Trump administration’s competitive approach is evident in its efforts to “disconnect” the two countries in areas such as technology and defense and by its growing restrictions on Chinese-linked individuals and organizations. He also points to the administration’s pressure on China over trade and security issues (regarding Taiwan and the South China Sea), and its effort to introduce the “Indo-Pacific concept” as a way to challenge the influence of the BRI. Taken together, Wu argues that the Trump administration’s China policy exhibits a number of key characteristics: the competitive approach has been embraced by the entire administration; it results in strong and crude actions; it emphasizes economic competition over security and diplomatic relations; and it employs multilateral measures to pressure China (despite the Trump administration’s generally unilateral approach),

Wu’s depiction of this new policy as resulting from the transition from the Obama administration to the Trump administration implies that the next US administration might revert to a more balanced approach to China. However, the emergence of what might well be a generational divide between experienced diplomats, policy analysts, and academics who wrote, in a July 2019 open letter, that “China is not an enemy,” and their younger colleagues, many of whom express a far more skeptical view of China, calls into question Wu’s assumptions. While a post-Trump administration (whether Republican or Democratic) will likely adopt a more measured, nuanced approach toward China, the extent to which the view of China as a strategic competitor marks a generational shift, rather than a political shift between two administrations that could swiftly be reversed, remains an open question.

Wu contends that the Trump administration’s competitive approach has severely damaged Sino–US relations. In his view, the negative atmosphere has produced increasingly anti-Chinese sentiments among US officials, analysts, and members of the media. Mutual trust has deteriorated: Chinese officials worry that they cannot trust the US government not to go back on its word while both the US government and public, in Wu’s analysis, distort the realities of Chinese domestic and foreign policies in ways that further reinforce their negative views. Although Wu acknowledges some structural challenges in the bilateral relationship, he argues that the Trump administration has deliberately exaggerated the challenges of a shifting power balance, the future of the world order, and ideological differences between the two countries. Important dialogue mechanisms have begun to break down: the administration formally terminated the decade-long US–China Comprehensive Economic Dialogue in 2018, while neither the Law Enforcement and Cybersecurity Dialogue nor the Social and People-to-People Dialogue, announced with much fanfare in 2017, has been repeated. Meanwhile, Wu argues that the trade war has also decreased Chinese investment in the United States, while restrictions on Chinese students and academics, and pressure on American academics of Chinese descent, have increased. These bilateral tensions have spilled over into multilateral settings, such as the WTO, APEC, and the G20.

In the short term, Wu argues that whether Sino–US relations remain rocky will depend on domestic US political and economic trends, the relative strength of various factions within the Trump administration, and whether the trade war can be resolved. Nevertheless, security tensions will remain, even if economic differences are resolved. In the long-term, the key question is how permanent the shift toward a competitive approach will turn out to be. Wu does not describe a generational shift; rather he sees a number of different competing US interests that show no sign of reaching a consensus. In particular, he argues that the debate between economic nationalists, economic realists, and economic liberals over the appropriate approach to trade and economic policy will greatly influence the bilateral relationship. In addition, he argues that China’s role is far from passive. China can play a significant role in creating a space to achieve common interests and persuading Americans to adopt more positive views of China. Consequently, while Wu is pessimistic about the short-term relationship, he sees no reason to assume that these negative trends will continue.

In Guoji Zhengzhi Kexue, No. 2, 2019, Yan Xuetong assesses US opposition to Huawei’s sale of 5G technology as a microcosm of the two countries’ competition for the right to set international rules and for influence in the global system. Yan argues that the right to create standards has always been linked to power and interests. Now, the United States’ technological superiority is being challenged for the first time since the Cold War. Huawei’s leading role in communication technologies has made it a target for the United States.

Yan argues that the country that is able to provide the highest quality technology at the best price will obtain the greatest influence over global rules. As China’s innovation capacity meets, and then exceeds, that of the United States, he contends, China’s comprehensive national power will also exceed that of the United States. Just as the United States seeks allies to balance against China in global affairs, Yan argues that it is now seeking allies to counter Huawei by refusing to adopt its 5G equipment. This places a great amount of pressure on small and medium countries, like those of ASEAN, Eastern Europe, and now even Japan and the countries of Western Europe, which are attempting to balance between China and the United States.

Crucially, Yan argues that various countries pick sides not based on their ideological affinity for one country or the other, as during the Cold War, but based on their determination of which country offers superior technology at a reasonable cost. Yan argues that the different positions of the various developed countries reflect the decline of the liberal value system since 2016. He argues that the narrowing gap between the comprehensive power of China and the United States has caused members of the developed states to doubt the effectiveness of the liberal world order. He further contends that younger generations value democracy less than their older counterparts, and are less likely than their predecessors to ask their elders for policy advice because they see them as technologically out-of-date. In Yan’s view, network technology has replaced ideology as the key factor in policy decision-making. For this reason, Yan is not worried about the emergence of a “new Cold War.”

Yan argues that the differences among various countries’ positions on 5G technology mean that “Western states” is no longer a useful category for analyzing international politics. With the rise of populism and anti-establishment politics, Yan contends, liberalism is losing its gloss. Liberal states no longer automatically align: for example, Yan argues that China, Japan, and Europe oppose the United States on climate change (although these policy differences would largely disappear were a Democratic candidate to become president). On other issues, such as Iran, liberal and illiberal states align against the United States. Today, Yan believes, the crucial difference is not between the West and the East, or liberal and illiberal states, but between those countries that are technology innovators, technology commercializers, and technology users.

Yan’s article raises important questions. The first is the extent to which one can generalize about broader trends in international relations from the Huawei/5G case. The second is whether the Trump administration’s policies should be seen as those of the United States in the long-term. A key question is whether the next US administration will reassert its support for the liberal world order after Trump leaves office (whether in 2021 or 2025).

In Xiandai Guoji Guanxi, No. 5, 2019, Sun Xuefeng and Zhang Xikun evaluate the relationship between the Trump administration’s foreign policy and China’s improving relations with its neighbors since the second half of 2017. In Northeast Asia, Sun and Zhang note improved relations with North and South Korea and attribute warmer relations with Japan to the Abe administration’s decision to step back from its previous, more antagonistic policy. In Southeast Asia, they cite the first joint Sino–ASEAN maritime exercise, held in October 2018, and progress on establishing a Code of Conduct for the South China Sea as evidence of stronger relations. In South Asia, they argue that many countries welcome the BRI and note warmer relations with India despite its concerns about the BRI. In sum, they argue that China’s neighbors have adopted more positive policies toward China in recent years.

Sun and Zhang attribute these policy shifts, in part, to changes in US foreign policy under Trump that have eroded US strategic credibility and antagonized the countries of Asia. The Trump administration has demonstrated a disinterest in global leadership and emphasized that US allies and partners should bear more of the financial burden for their shared projects. In particular, the United States has asked South Korea and Japan to increase their cost-sharing, while also threatening to withdraw US troops. The United States has also withdrawn from the TPP. Unable to rely on the United States, many countries have sought stronger ties with China. Likewise, the Trump administration’s erratic foreign policies have further weakened US strategic credibility. The US policy toward Southeast Asia is ill-defined, while its efforts to improve relations with India have been hampered by Trump’s trade war. In order to manage the negative effects of US policies, many Asian countries have sought more productive relations with China.

China has also played an important role in improving relations with its neighbors by adopting a policy of strategic reassurance. As various countries have signaled to China that they are open to a warmer relationship, China has actively responded. For example, China has taken advantage of the opportunity posed by Japan’s regional difficulties and its challenging relationship with the United States to pursue an improved relationship. With regard to India, China interpreted India’s conciliatory measures regarding the Dalai Lama as an opening to rebuild relations in the wake of the Doklam incident. By adopting a gradual, patient approach, Sun and Zhang argue, China has been able to appropriately manage its regional relations. In addition, China has taken deliberate steps to mitigate its neighbors’ security concerns, which are the ultimate stumbling block to fundamentally improving cooperation. China has taken special care to carefully manage concerns regarding the South China Sea, the East China Sea, and the North Korean nuclear crisis. By doing so, China reassures its neighbors that it is a trustworthy partner.

Although the Trump administration’s “America First” policy has provided China with an opportunity to strengthen its relations with its neighbors, Sun and Zhang caution that China’s relations with its neighbors will face serious challenges once the United States adjusts its policy and rebuilds its strategic credibility (in other words, they attribute much of the current US foreign policy to the Trump administration, as opposed to long-term shifts in US priorities). When the United States provides security assurances to its allies, it incentivizes them to adopt more confrontational policies toward China and undermines Chinese efforts at strategic reassurance. Given the overall superiority of US strength, they argue, countries will tend to gravitate toward the United States, even if they are equally displeased by Chinese and US policies. Therefore, they urge China to continue to actively engage in strategic reassurance and to resolve fundamental security tensions with its neighbors, in order to build the basis for positive regional relations and allow it to better manage its strategic competition with the United States.

Sino–Indian Relations

In Taipingyang Xuebao, No. 6, 2019, Lin Minwang evaluated the prospects for efforts by India and China to “restart” their bilateral relationship in the aftermath of the 2017 Doklam crisis. Lin is hopeful that the positive trend will continue in the short-term but cautions about a number of factors that make the long-term trajectory uncertain.

Lin first documents the careful diplomatic process that led up to the informal leadership summit between Modi and Xi in Wuhan in April 2018, which marked the key turning point in the bilateral relationship. According to Lin, the summit was successful because it focused on achieving mutual understanding, rather than attempting to achieve particular concrete results. The summit created the conditions necessary for a restart by fostering a constructive relationship between the two countries’ leaders, advancing mutual trust, and enabling the two countries to envision how to link their respective development plans. The positive atmosphere created by the summit also led to stronger coordination on a variety of regional and international concerns and strengthened the two countries’ ability to manage difficulties in their bilateral relationship.

Since the Wuhan meeting, Chinese and Indian officials have continued to meet regularly. In addition, a number of working-level cooperation mechanisms have restarted. For example, China has resumed its policy of providing data on water levels in Tibet’s Yarlung Tsangpo River to India; in August 2018, it provided India with early warning of an impending flood. China also agreed to reopen the Nathu La pass to official groups of Indians making pilgrimages to Tibet. Meanwhile, the two countries have restarted their mechanisms for managing border officials, while developing new communication mechanisms to address military issues and maritime security. In Lin’s view, these efforts, further supported by increased military exchanges and cooperation on internal security and anti-terrorism efforts, are gradually easing mistrust among bureaucrats.

As the two sides restart their relationship, they have taken particular care to strengthen cooperation on issues of specific concern to each side. China has tried to ease Indian concerns over its trade imbalance with China by increasing imports from India. Key sectors include pharmaceuticals and, in the wake of the US–China trade war, agricultural products. China has also sought to smooth over differences with India regarding the BRI. According to Lin, Chinese officials recognize that, given political concerns, India cannot directly support the BRI. Consequently, Chinese officials are focused on achieving concrete results, rather than pushing for explicit statements of support. Lin points to the two countries’ strengthened cooperation on regional and economic affairs as evidence that India’s attitude toward the BRI has changed in practice, even if the official position remains the same. China has similarly tried to reach an understanding with India over the “Indo-Pacific strategy” promoted by the United States. Lin interprets the Indian statement in Wuhan that it will continue to pursue strategic autonomy and peaceful development as an indication that it will not join the United States in seeking to contain China. Since early 2018, India has begun to improve its relations with both China and Russia, while divisions with the United States have appeared. Nevertheless, Lin cautions that India is not about to abandon the Indo-Pacific strategy.

Although Lin is heartened by the recent improvements in Chinese–Indian relations, he remains concerned about the fundamental weakness in the two countries’ levels of mutual trust. Lin worries that the two countries suffer from a lack of shared strategic interests. At the international level, India and China do not have the benefit of experience cooperating on important issues; at the regional level, they compete for influence. While in the past, the two countries maintained a stable policy of “international cooperation, regional competition, and bilateral management [of challenging issues],” Lin is concerned that the recent trend has shifted toward weak cooperation on global issues and increasing regional competition, which makes management of bilateral challenges far more difficult. In Lin’s view, the Doklam incident is evidence of this weakness in the two countries’ relations.

Lin is skeptical that Modi’s recent adjustment of India’s China policy marks a strategic recalculation; instead, Lin argues that this was a tactical move designed with India’s spring 2019 elections in mind. Although there are positive signs for China—including the recent appointment of India’s former ambassador to China as foreign secretary and India’s entrance into the SCO—Lin cautions that the “restart” in bilateral relations remains fragile. The Indian government has not repudiated its actions during the Doklam incident. Meanwhile, Lin argues that advisors to the Indian government have encouraged officials to take advantage of the US–China trade war to push China for concessions and to follow the US lead in taking a more supportive position toward Taiwan. He points to India’s decision to establish an Indo-Pacific division in its foreign ministry as evidence of its commitment to the Indo-Pacific concept.

Despite these concerns, Lin concludes that the current leaders’ commitment to productive relations and the numerous bilateral dialogue mechanisms are likely to stabilize relations in the short-term. He urges policymakers to seek common strategic interests that can form the basis for more durable cooperation between the two countries, and to maintain reasonable expectations about the future of the bilateral relationship.

Sino–Japanese Economic Cooperation

In Guoji Wenti Yanjiu, No. 3, 2019, Wang Jingchao explores recent efforts by China and Japan to cooperate in third-party markets in countries along the BRI path. As Japan has adopted a generally warmer policy toward China since 2017, it has also become more willing to participate in China’s BRI. During Li Keqiang’s May 2018 visit to Japan, the two countries signed a memorandum on third-party cooperation. To support these efforts, the two countries have established an intergovernmental, interagency working-level mechanism to coordinate the two countries’ policies toward third-party markets and a specialized third-party market cooperation forum to provide a voice to industry and manage concrete challenges. They have also established priority areas for regional cooperation, particularly including Southeast Asia. They envision the Eastern Economic Corridor in Thailand as a starting point for further joint projects.

In Wang’s view, since 2018, the Abe administration has engaged in a deliberate effort to eliminate the political hurdles to stronger Sino–Japanese relations by weakening Japan’s commitment to the “Indo-Pacific strategy,” increasing its support for the BRI, and accommodating China’s concerns. Wang sees this as a strategic response to Japan’s long-term domestic and international needs. Although the US–Japan alliance remains foundational to Japan’s foreign policy, Japan seeks to implement a policy of “limited independence” that will provide it with more autonomy from the United States. This has become increasingly important under the Trump administration as bilateral trade tensions have risen and the United States has adopted decisions, such as its withdrawal from the TPP, that run counter to Japanese interests. In the context of these trade tensions, China and Japan have found shared interests. Dissatisfied with the United States, Japan has demonstrated its resistance by aligning itself more with China, as demonstrated by its newfound enthusiasm for BRI projects. In addition to demonstrating some autonomy, this policy allows Japan to avoid harmful competition with China in third-party markets. Japan’s cooperation with the BRI also reflects the demands of domestic interest groups who stand to benefit financially. Furthermore, Japan is engaging in third-party projects in an effort to maintain its economic influence in the Asia-Pacific. Having long been the dominant regional economy, Japan is not willing to simply cede its position to China. In Wang’s view, Japan’s cooperation on third-party markets is best seen as a strategic measure, in line with its support for the CPTPP, the anticipated China–Japan–South Korea FTA, and an anticipated agreement on regional comprehensive economic partnership relations.

Although Japan has been enthusiastic in its support for third-party market cooperation, there are still substantial hurdles. The Japanese government places limits on domestic participation in third-party country agreements when they touch on sensitive issues. The government recommends that companies not cooperate with China on security-related projects, which can include the construction of ports, railroads, and airports. In addition, Japan has mixed feelings about the BRI, which is connected to third-party market cooperation. On the one hand, Japan is concerned that the BRI marks a Chinese attempt to change the regional world order and therefore only wants to cooperate in limited areas. At the same time, however, Japan sees the BRI, as well as third-party market cooperation, as a form of economic cooperation. With the Trump administration dismantling the postwar liberal world order, Japan is more concerned than ever about preserving global economic cooperation. A third hurdle is the undependability of Japanese capital, which relies on government banks. Wang criticizes JICA and JBIC for being overly cautious about risk and making it difficult for companies to obtain loans. Finally, Japan is still subject to pressure from the United States, especially as the US continues to push the Indo-Pacific strategy.

Wang concludes that cooperation is beneficial for China and Japan. Instead of competing for projects in third-party countries, the two countries can pursue complementary interests. Furthermore, developing functional cooperation is beneficial for healthy, stable development and for mitigating the cycle of improving and worsening relations that has long plagued the bilateral relationship. Positive economic cooperation is likely to have positive spillovers into other aspects of the relationship. Consequently, Wang urges China to prioritize third-party cooperation with Japan.