In this Issue
1. US-China Relations after the Presidential Election
2. Transatlantic Cooperation on China
3. European Sovereignty and Strategic Autonomy
4. Trade and Investment
5. Technological Competition
6. China's Rise, Ambitions and Weaknesses
1. US-China Relations after the Presidential Election
In short: Demonization of China fortifies barriers that we can ill afford in today’s interdependent world.
Throughout his campaign president-elect Joe Biden has promised to take a tough stance against China. He has already committed to convening a “summit of democracies” during his first year in office to take on the global challenge of authoritarian states. This approach is walking a geopolitical tightrope, argues Nathan Gardels, editor-in-chief of Noema, a magazine published by the Berggruen Institute. There is plenty to be tough about when it comes to China, which is just as responsible for the breakdown in relations as the U.S. But any missteps could consolidate a new Cold War already in the making. To create a forum of democracies, not unlike the G7, seems a sensible idea. Such a forum could gather when necessary to call out and constrain China. “But to institutionalize systemic conflict in a permanently established league as a kind of incipient NATO of the Indo-Pacific region risks once again perilously dividing — and militarizing — the world at a time, unlike the Soviet period, when the paramount challenges such as health and climate security cross all borders and political orders.”
In short: Joe Biden’s victory offers an opportunity for a more productive relationship with China, but it will be a long and arduous journey.
Relations between the U.S. and China have deteriorated at an astonishing rate during the presidency of Donald Trump. The trade war has been the most conspicuous example of friction, but larger strategic tensions have also heightened the risk of conflict. China’s foreign policy establishment is, therefore, wary but cautiously optimistic about better relations with a Biden administration, writes Cheng Li, Director of the John L. Thornton China Center and Senior Fellow at the Brookings Institution. Still, many of the conditions that shaped Trump’s China policy still exist and resetting relations between the world’s greatest powers will not be easy.
In short: The challenges in US-China relations are huge – so is this monograph with plenty of food for thought.
The incoming Biden administration will inherit a bilateral relationship with China in which areas of confrontation have intensified, areas of cooperation have shrunk, and the capacity of both countries to solve problems or manage competing interests has atrophied. The new administration will need to develop new thinking on how most effectively to address the myriad challenges of the U.S.-China relationship. The Paul Tsai China Center at Yale Law School and the John L. Thornton China Center at Brookings have drawn upon the expertise and experiences of their scholars and other outside experts to compile a monograph geared toward providing policy recommendations for the next administration. It offers array of affirmative and pragmatic proposals for how the United States should adapt its policy toward China to respond to current realities in a manner that best protects and promotes America’s security, prosperity, interests, and values.
In short: Closer co-operation with like-minded countries would help the U.S. keep ahead in the race for tech dominance, which is the key battlefield of “the second cold war”.
In this editorial, The Economist discusses the rivalry between the U.S. and China, which it refers to as “the second cold war”. America’s rivalry with the Soviet Union during the first cold war was focused on ideology and nuclear weapons. The battlefield today is information technology: semiconductors, data, 5G mobile networks, internet standards, artificial intelligence and quantum computing. All those things will help determine whether America or China has not just the military edge, but also the more dynamic economy. Donald Trump’s instinct has been for America to fight this battle single-handed. Old allies were henchmen, not partners. Joe Biden should choose a different path. If America is to stay ahead, it needs to strike a grand bargain with like-minded countries to pool their efforts. Such an accord would help focus competition with China on tech, potentially enabling detente in areas where collaboration is essential, such as curbing global warming, health and arms control.
In short: U.S. State Department released blueprint for response to China.
This lengthy policy paper was written by the U.S. State Department's Policy Planning Staff. In the spirit of George Kennan's “Long Telegram,” it examines the challenges presented by China to the United States and the current world order and how the U.S. and its allies should respond to them. The document is widely seen as a blueprint for America’s response to China’s rise as an authoritarian superpower. It states pointedly on the first page that China is a challenge because it has triggered a new era of great-power competition. The Chinese Communist Party (CCP) “aims not merely at preeminence within the established world order […] but to fundamentally revise world order, placing the People’s Republic of China (PRC) at the center and serving Beijing’s authoritarian goals and hegemonic ambitions”.
2. Transatlantic Cooperation on China
In short: Neither side of the Atlantic can respond to the China challenge alone. The only successful path forward is to work together.
This majority report by the U.S. Senate Committee on Foreign Relations lays out a number of areas to advance greater collaboration between the United States and Europe on the challenges posed by China. Legislators and parliamentarians on both sides of the Atlantic have played an active and leading role in shifting approaches to meet these challenges. According to the report, the next step is to turn this growing agreement into a constructive and concrete transatlantic agenda to defend shared interests and values. This report puts forward concrete ideas for collaboration in six key areas: 1) Fending off malign political influence; 2) Protecting the integrity of international organizations; 3) Addressing anti-competitive trade and economic practices; 4) Investing in future technologies and shaping how they are used; 5) Confronting the security implications of the PRC’s strategic investments in energy, transport, and digital infrastructure through the “Belt and Road Initiative”, and 6) Invigorating partnerships in Africa and the Indo-Pacific.
In short: The EU proposes a new, forward-looking alliance with the U.S. in face of China challenge.
The EU has put forward a proposal for revitalizing the transatlantic partnership in different geopolitical arenas, working together to enhance coordination, pursue common interests, and leverage collective influence. The policy paper, produced jointly by the commission and the EU’s high representative for foreign policy, says the EU-U.S. partnership needs “maintenance and renewal” if the democratic world is to assert its interests against “authoritarian powers”. China is explicitly mentioned in this context: “As open democratic societies and market economies, the EU and the U.S. agree on the strategic challenge presented by China's growing international assertiveness, even if we do not always agree on the best way to address this. The new EU-U.S. Dialogue on China will provide a key mechanism for advancing our interests and managing our differences.”
In short: Macron makes a powerful plea for European sovereignty and strategic autonomy against China and the U.S.
The EU must assert strategic autonomy in face of U.S.-China dominance, says French President Emmanuel Macron. In this long interview with the journal Le Grand Continent he urges European leaders not to let up on efforts to build a strong and autonomous Europe that is capable of resisting the Chinese-American duopoly: “I think it is vital that our Europe finds the ways and means to decide for itself, to rely on itself, not to depend on others, in every area, technological, […] health, geopolitics, and to be able to cooperate with whomever it chooses”, Macron declares. “Europe must rethink itself politically and act politically to define common objectives that are more than merely delegating our future to the market. In concrete terms, this means that when it comes to technology, Europe needs to build its own solutions in order not to depend on American or Chinese technologies.”
In short: The EU has to become an independent global player on a par with the U.S., China, and Russia.
The EU should stick to its objective of strategic autonomy, which was formally introduced in June 2016, when everybody still thought that Hillary Clinton would comfortably win the elections. It was not adopted in reaction to Trump’s victory and should not be abandoned because of his defeat, argues Sven Biscop, Director of the Europe in the World Programme at the Egmont – Royal Institute for International Relations in Brussels, in this commentary. Strategic autonomy remains crucial because the EU cannot count on any other player to defend the European interest in its place, not even on the U.S. In a world of continent-sized great powers, as the U.S., Russia and China, the only way for the Europeans to defend their own interests is to integrate and achieve the same scale, and that is only possible through the EU.
In short: How much is Europe economically dependent on China? Probably less than you think.
China’s rapid development and its central role as a driver of globalization have resulted in expanding economic ties with the EU over the past two decades. Beijing is now the EU’s second-most important trading partner behind the United States. The country’s increasing innovation power and dynamic market shape corporate decisions in Europe – and amplify their exposure to Chinese pressure. However, overall economic dependence remains limited as markets in Europe and the U.S. are as or even more important than the Chinese market for European corporations, Max J. Zenglein points out in the new Merics China Monitor. The EU’s China policy, therefore, should not be constrained by an overblown perception of economic vulnerability and build on its relative strengths. Economic dependence cuts both ways: China has much to lose from deteriorating relations with the EU and the Europe has little to fear when speaking in one voice.
In short: France and Germany need to closely collaborate in developing an EU China policy.
Facing a fast-growing and assertive China, European governments and the EU have increasingly acted with realism, adapting to China’s “new normal” with what is often called “the end of naivety” in the last 4-5 years. Despite this important shift, however, the EU still has to agree on priorities that are necessary to defend its values and norms and pave the way for effective European policies. The policy paper, written by François Godement, Senior Advisor for Asia to Institut Montaigne, and Gudrun Wacker, Senior Fellow in the Asia Division at the German Institute for International and Security Affairs (SWP), explores the differences between French and German policies within the EU and makes the case for accepting the need for leveraging strategies towards China.
In short: Europe should refocus on its connectivity agenda in order to enhance its capacity to act in and with Asia.
Enhancing Europe’s capacity to act in Asia is critical to the future of the European economy. It is also critical to the long-term survival of a rules-based international order underpinned by the norms and values that Europe stands for. The continuing rise of China and the onset of the pandemic have made asserting European strategic sovereignty in Asia ever more complex and difficult. Both developments mean that economics, security, and technology issues in Asia are becoming ever more intertwined. Against this backdrop, Europe should upgrade its security activities, and seize the moment to push multilateral institutions up the agenda, argue Janka Oertel and in this ECFR Policy Brief. In their view, “it will be Europe’s connectivity agenda that provides the golden thread running through its foreign policy and its environmental, industrial, trade, development, values, and security objectives in the region.”
4. Trade and Investment
In short: The RCEP is not so much a victory for China as a victory for Asia as a whole.
On November 15, 2020, fifteen countries in the Asia-Pacific region, including China, Japan, and ASEAN members, signed a major new trade agreement, the Regional Comprehensive Economic Partnership (RCEP), which covers thirty percent of global GDP. Beijing will likely claim victory upon the signing. It has been a promoter of RCEP since day one. But to describe RCEP as a China-led trade initiative misses broader trends in Asia, where countries are focused on diversifying trading partners, solidifying supply chains, and achieving economic and job growth through trade agreements, writes Wendy Cutler, Vice President and Managing Director of the Asia Society’s Washington D.C. Office, in this commentary. „By signing the RCEP agreement, the member countries made a forceful statement in favor of trade liberalization, open markets, and the importance of rules to govern flows of goods and services.”
In short: The RCEP is unambitious in scope but marks a win for China and a setback for India and America.
The Regional Comprehensive Economic Partnership (RCEP) is the world’s largest plurilateral trade agreement. It would have been bigger still had India not withdrawn a year ago. Opinions vary wildly as to the significance of that achievement. Some see RCEP as so unambitious as to be largely symbolic. Others see it as an important building block in a new world order, in which China calls the shots all over Asia. The truth lies somewhere in between. RCEP does not herald a dramatic liberalization of Asian trade. But it does break new ground in harmonizing the disparate rules-of-origin provisions in ASEAN’s various FTAs. As a result, RCEP is expected to have a noticeable economic impact. China will gain in other ways, too. In joining its first plurilateral trade agreement, it can present itself as committed to trade liberalization at a time when America seems relatively disengaged from the region, and when it is still pursuing a trade war with China.
In short: Despite its rather modest economic impact, the RCEP is a wake-up call not only for the U.S. but also for the EU.
Although the economic implications of the Regional Comprehensive Economic Partnership (RCEP) for the EU are modest, the geopolitical and strategic implications are not, explains Uri Dadush, a non-resident scholar at Bruegel, in this blog post. With the arrival of a new US administration and the central role of China in the bloc, the EU needs to outline an Asian commercial strategy that reconciles the importance of China and the transatlantic relationship.
5. Technological Competition
In short: Crucial capabilities in science and technology are at the core of the U.S.-China relationship and will feature both intense rivalry and necessary cooperation.
This policy report is the product of the bipartisan Working Group on Science and Technology in U.S.-China Relations. It sets forth broad policy objectives as well as specific recommendations for the new U.S. administration in four domains of science and technology: fundamental research, 5G digital communications, artificial intelligence and biotechnology.
The Working Group is organized by the 21st Century China Center at the UC San Diego School of Global Policy and Strategy and the Asia Society Center on U.S.-China Relations. It operates under the auspices of the Task Force on U.S.-China Policy. It comprises twenty-nine leading experts on China and science and technology issues from the academia, industry and think tanks in the U.S. and is chaired by Dean Peter Cowhey, a leading technology policy expert.
In short: Democratic states need to collaborate in order to build a China-proof technosphere.
America has long dominated the world in information technology (IT). But China is on the move. It is investing billions in emerging technologies, from ai and chip fabrication to quantum computing and 5G, a new generation of mobile networks. And if democratic countries cannot agree on common rules in the digital realm, China could end up setting the rules for large swathes of the IT world. The result would be a technosphere engineered for the comfort and support of autocracies. To prevent this scenario from becoming reality, democratic countries should form a “technology alliance” to build a China-proof technosphere. It could be like the G7, which consists of America, Britain, Canada, France, Germany, Italy and Japan, and could one day, perhaps, include India and other countries from the Global South.
In short: Now is the moment for creating a transatlantic alliance for democratic technology governance.
With the incoming Biden administration, the U.S. and EU have a window to set a joint agenda toward an international democratic order for the digital world, argue Marietje Schaake, international policy director at the Cyber Policy Center of Stanford University and Tyson Barker, head of technology and foreign policy at the German Council on Foreign Relations, in this blogpost. U.S. and European sentiments on tech governance are converging. On both sides of the Atlantic, growing numbers of citizens want to confront the twin challenges of surveillance capitalism and techno-authoritarianism. Both are reaching a sense of urgency around China’s digital governance model as it uses mass surveillance to hold more than a million Uighurs captive, suppress democratic descent in Hong Kong, pilfer private data and bully critics worldwide.
In short: China has become a strong competitor for new-energy vehicles.
China has staked much of its transportation future on the new-energy vehicle (NEV) sector. Massive state support is meant to drive this industry forward and help the country address three problems: reliance on the West for technology, dependence on oil imports, and air pollution. Yet progress in achieving these goals has been halting, slowed by technical challenges, investment by too many players, and insufficient consumer enthusiasm. China’s NEV sector still faces substantial roadblocks, writes Scott Kennedy, senior adviser and Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies (CSIS). Yet there can be no doubt that China is accelerating its efforts in NEVs. If the U.S. and Europe are going to win this competition, they must develop and execute on their own effective playbook. And the sooner they do so, the better.
6. China's Rise, Ambitions and Weaknesses
In short: Even as China has become more influential on the international stage, political and economic problems have festered at home.
One familiar narrative about China centers on its growing power and influence, and warns that liberal democracies remain ill-prepared for the long-term competition it poses. This story is true but incomplete. China is indeed a formidable rival, but its Communist Party faces deep problems and possibly even decay. And it is precisely because of its weakness that China presents so complex a challenge, Daniel Blumenthal, Director of Asian Studies at the American Enterprise Institute argues in this article. “It is not only China’s strengths that make it so dangerous, but also its weaknesses, a fact that tempts the CCP to escalate tensions and increases the possibility of conflict.”
In short: The credibility of government guarantees to support a wide range of China’s financial assets and companies is hanging in the balance.
China’s financial markets have been spooked by a rise in corporate bond defaults, which are undermining faith in the implicit guarantees investors have come to expect from state-owned enterprises and local governments. China’s central bank has sent investors indirect messages that they must manage credit risks on their own, even as the People's Bank of China (PBOC) has provided some short-term liquidity to the banking system. The problem for authorities is that the declining credibility of local governments is an entirely new form of financial risk, and the market is now struggling to price it, explains Logan Wright, Director at Rhodium Group. The credibility of government guarantees has been the most important bulwark against a financial crisis so far. Now we are seeing signs that this credibility is eroding.
In short: It is time to soberly rethink the democratic world’s policy responses to the China challenge.
The year 2020 witnessed a paradigm shift in the world’s understanding of China. Beijing has emerged as the most powerful authoritarian state in history and the major challenger to the liberal world. To help democracies address the challenge that China poses around the world, Halifax International Security Forum (HFX) has published this handbook. It was authored by Robin Shepherd, HFX Vice President, in cooperation with a team of colleagues who conducted in-depth interviews with more than 250 global experts and policy- and decision-makers between February and October 2020. The handbook seeks to contribute toward building a common strategy among the world’s democracies with regard to China.
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