CHINAMacroReporter

How to Meet the China Challenge

How the Biden administration characterizes the China – strategic competitor, rival, enemy, and the like – and how it develops strategies – containment, confrontation, competition, cooperation, or some combination of these - will have an impact, to a greater or lesser degree, on most every industry and every market.
by

|

CHINADebate

March 17, 2021
How to Meet the China Challenge
Council on Foreign Relations headquarters, circa 1930
How the Biden administration characterizes the China – strategic competitor, rival, enemy, and the like – and how it develops strategies – containment, confrontation, competition, cooperation, or some combination of these - will have an impact, to a greater or lesser degree, on most every industry and every market.
  • So, while the President and his team are working toward what is promised to be a comprehensive, all-of-government approach to China, it’s time to begin considering the broad nature of the possibilities that could emerge.
  • Here are some ideas to help you understand the Biden China policies as they evolve.

1 | The Briefing

The Council on Foreign Relations is celebrating its 100th anniversary.

  • Conspiracy theorists will tell you that for all that time U.S. foreign policy has been secretly directed from the CFR, not from Foggy Bottom or the White House.
  • A more credible view is that one of the CFR’s sources of influence is as a resource for policymakers.

One of its activities to support policymakers is the briefing.

  • A policymaker asks for a briefing on an issue or region, and the CFR invites its members with expertise on the subject to brief him or her on it.

On Tuesday, I joined a small group of CFR members, all distinguished China specialists, to brief a member of Congress on how the U.S. should think about China and how to approach U.S.-China relations.

  • This was an off-the-record meeting, so I can’t comment much on the discussion itself.

But I can tell you about one of the issues that the group felt was especially crucial.

  • That is, how should we characterize U.S. policy responses toward China?

This sounds like the kind of useless, arcane debate only pointy-head, academic-type, foreign affairs wonks would enjoy. But how you define something informs how you handle it.

  • If you are getting ready for a race, you will train differently for a marathon than for a ‘fun run.’
  • And so it is with foreign policy: How you characterize an issue suggests the strategy or strategies for dealing with it.

The classic example of this is George Kennan and his ‘Containment Doctrine.’

2 | Kennan & the 'Containment Doctrine'

At the beginning of the Cold War, the U.S. was still groping for a strategy for how to counter the threat from the Soviet Union,

  • Then in 1947 State Department Russian expert George Kennan, writing anonymously as ‘X,’ published ‘The Sources of Soviet Conduct’ in the CFR’s journal, Foreign Affairs. Here’s how he characterized the situation:

‘It is clear that the United States cannot expect in the foreseeable future to enjoy political intimacy with the Soviet regime.’

  • ‘It must continue to regard the Soviet Union as a rival, not a partner, in the political arena.’
  • ‘It must continue to expect that Soviet policies will reflect no abstract love of peace and stability, no real faith in the possibility of a permanent happy coexistence of the Socialist and capitalist worlds, but rather a cautious, persistent pressure toward the disruption and weakening of all rival influence and rival power.’
  • ‘Balanced against this are the facts that Russia, as opposed to the western world in general, is still by far the weaker party, that Soviet policy is highly flexible, and that Soviet society may well contain deficiencies which will eventually weaken its own total potential.’

It’s a little eerie how Mr. Kennan’s characterization of the USSR echoes the situation with China today.

  • You could almost substitute China for Russia or Soviet Union throughout his essay and be on the mark.

Here are a few examples using the excerpts above:

  • ‘It is clear that the United States cannot expect in the foreseeable future to enjoy political intimacy with the Soviet Chinese regime.’
  • The U.S. ‘must continue to regard the  Soviet Union China as a rival, not a partner, in the political arena.’
  • The U.S. ‘must continue to expect that  Soviet Chinese policies will reflect no abstract love of peace and stability, no real faith in the possibility of a permanent happy coexistence of the Socialist and capitalist worlds, but rather a cautious, persistent pressure toward the disruption and weakening of all rival influence and rival power.’
  • ‘Balanced against this are the facts that  Russia China, as opposed to the western world in general, is still by far the weaker party, that  Soviet   Chinese policy is highly flexible, and that  Soviet  Chinese society may well contain deficiencies which will eventually weaken its own total potential.’

Let me add one more:

  • ‘The Soviet Chinese concept of power, which permits no focal points of organization outside the Party itself, requires that the Party leadership Xi Jinping remain[s] in theory the sole repository of truth.’

Based on his analysis, Mr. Kennan concluded:

  • ‘In these circumstances it is clear that the main element of any United States policy toward the Soviet Union must be that of a long-term, patient but firm and vigilant containment of Russian expansive tendencies.’
  • ‘This would of itself warrant the United States entering with reasonable confidence upon a policy of firm containment, designed to confront the Russians with unalterable counterforce at every point where they show signs of encroaching upon the interest of a peaceful and stable world.’

This was Mr. Kennan’s 'Containment Doctrine,' which informed U.S. strategy throughout the Cold War.

  • Edward Luce of the Financial Times calls Mr. Kennan ‘the architect of a doctrine that won the cold war.’

3 | China Isn’t the Soviet Union

Unfortunately, this conclusion, even drawn from the same broad circumstances, does not apply to China: Containment alone won’t work.

  • China’s economy is not only massively larger than the Soviet Union’s was, its interconnections with the global economy are vastly greater.
  • Because of those interconnections and the economic interests, many nations are reluctant to oppose China on an issue.
  • And when they do challenge China, China punches back. Look at Australia.
  • Thus replicating the 'two blocs' of the Cold War is just about impossible

Instead, in our briefing of the Congressperson, we discussed four strategies the Biden administration might adopt:

  • Containment, confrontation, competition, or cooperation.
  • The general feeling was that Mr. Biden would adopt one or the other or a combination of these depending on the issue at hand.

4 | Approaches to U.S. Policy Toward China

Ian Bremmer of the Eurasia Group takes up this theme in his recent essay, ‘US must grasp China's different set of values’:

  • ‘Three distinct approaches have begun taking shape.’

‘The first approach is containment, championed by more hawkish elements within the White House and the national security establishment.’

  • ‘This group believes that a Cold War with China is unavoidable given just how many zero-sum issues there are between the two countries, including but not limited to: the South China Sea, Taiwan, Hong Kong, Uighurs and most crucially, technology.’
  • ‘Under this view, it is critical for the U.S. to meet China toe-to-toe in all aspects of great power competition.’

Just as George Kennan suggested of the Soviet Union:

  • ‘Underpinning this approach is the belief that it will not be aggressive actions from the U.S. or its allies that brings Beijing to its knees, but rather China's own policies of state-capitalism and authoritarianism, which they view as unsustainable over the long run given massive Chinese debt and continued risky investments into developing countries.’

Echoing 'cooperation': ‘The second option is one of interdependence, primarily being pushed by the economic policymakers in the Biden administration.’

  • ‘Rather than lumber into a Cold War, they want to constructively engage with the Chinese using existing multilateral architecture, reforming it to accommodate China where possible, and creating new institutions where necessary to get China to act more multilaterally.’

Also, sort of suggested in the CFR briefing as ‘cooperation,’  but clearly distinct from that, is ‘the wild-card option being spearheaded by Presidential Climate Envoy John Kerry and those in the administration who view climate change as the greatest single threat to the U.S., China included.’

  • ‘Rather than pursue a policy of either containment or interdependence, they want the U.S.-China relationship to be in service to the fight against global warming, a battle that needs to include China, the world's largest emitter.
  • ‘For supporters of this approach, the U.S.-China relationship will evolve along with the way the climate change threat evolves.’

In asking, ‘which approach will Biden choose?’ Dr. Bremmer agreed with the CFR briefing group.

  • ‘Knowing the consensus-building Biden, it will likely be some combination of all three.’ Or all four.

5 | The 100-Day Review

The Biden administration is in the midst of a 100-day review of China policy.

  • Whatever the outcome the one thing not to expect is an elegant Kennan-esque doctrine from which all U.S. strategies and policies follow.
  • Perhaps the U.S. and the world’s relationship with China is too different from that of the Soviet Union and too complex.
  • Or perhaps we just haven’t found the George Kennan of our age.

In any case, the outcome of the 100-day review will not be framed in any of the terms proposed in the CFR briefing.

  • Instead the review will discuss specific challenges and proposed policy responses.
  • But underlying each of these responses will be either containment, confrontation, competition, cooperation, or some mix of these.

Those who are able to discern which of these applies to a specific policy and how that impacts business and markets will be a step ahead of everyone else.

More

CHINAMacroReporter

February 3, 2021
'A Conversation with Politburo Member Yang Jiechi'
‘History and reality have shown time and again that these issues concern China's core interests, national dignity, as well as the sentiments of its 1.4 billion people. They constitute a red line that must not be crossed.’
keep reading
February 3, 2021
'National Security Advisor Jake Sullivan on U.S. Policy Toward China'
‘Being prepared to act as well to impose costs for what China is doing in Xinjiang, what it’s doing in Hong Kong, for the bellicosity of threats that it is projecting towards Taiwan.’
keep reading
February 3, 2021
'Coup Puts Myanmar at the Center of the U.S.-China Clash'
‘Chinese oil and gas pipelines snake across Myanmar from China’s landlocked Yunnan province to the Bay of Bengal—a route that Beijing wants to transform into a broader economic corridor with road and rail connections.’
keep reading
June 24, 2021
'Hong Kong’s Apple Daily newspaper folds under government pressure'
Apple Daily was much more than a newspaper. To its fans, it was a defender of freedoms. To its foes, it was the defiler of national sovereignty.’
keep reading
June 24, 2021
The End of 'Apple Daily' - and Freedom of the Press in Hong Kong
Through arrests and freezing of assets, Beijing has forced the closing of Hong Kong’s last pro-democracy newspaper, the Apple Daily.
keep reading
June 20, 2021
‘Why do business and political leaders in the West persist in getting China so wrong?’
From that I suggested that to invest successfully in China, you have to understand – and be aware of - what those differences are.
keep reading
June 20, 2021
‘Why do business and political leaders in the West persist in getting China so wrong?
‘Why do business and political leaders in the West persist in getting China so wrong?’
keep reading
June 17, 2021
'Back-to-Back Rebukes of China Mark a Turning Point'
‘The one-two punch of public criticism smacks directly into Mr. Xi’s assertion that China won’t stand for lecturing by other nations, suggesting anxiety in key capitals is prompting governments to seek alignment with the U.S. over attempting to manage the relationship with Beijing on their own.’
keep reading
June 17, 2021
'Meet the New Chinese Economy, Same as the Old Chinese Economy'
If a recovery led by investment in real estate and industrial production, with consumption lagging behind, sounds familiar, it may be because the same could be said of the makeup of China’s growth before Covid-19.’
keep reading
June 17, 2021
Part 1 | 'Is China exporting inflation?'
‘Beijing is moving swiftly to protect its factories and workplaces from rising costs.’ ‘Still, rising prices in China, by far the world’s biggest manufacturer and exporter, could be felt around the world.’
keep reading
June 17, 2021
Bernie Sanders: 'Don’t Start a New Cold War With China'
‘The pendulum of conventional wisdom in Washington has now swung from being far too optimistic about the opportunities presented by unfettered trade with China to being far too hawkish about the threats posed by the richer, stronger, more authoritarian China that has been one result of that increased trade.’
keep reading
June 17, 2021
Part 2 | 'Is China exporting inflation?'
“Is China exporting inflation? In renminbi terms, it’s not so obvious. But in U.S. dollar terms, it starts to get more sizable.” ’
keep reading
June 13, 2021
'Forget about China': Clyde Prestowitz
Clyde Prestowitz has influenced U.S. foreign trade and investment policy for many decades, both inside and outside government.
keep reading
June 9, 2021
'Joe Biden Worries That China Might Win'
‘Biden worries that China is in competition for America, and not only that—they might win. This belief underpins the Biden doctrine.’
keep reading
June 9, 2021
'From the G7 to a D-10: Strengthening democratic cooperation for today's challenges'
‘A “Democratic-10” or “D-10” is aimed at rallying the world’s most powerful democracies around a common cause— advancing a rules-based democratic order based on shared values and common interests.’
keep reading
June 9, 2021
Biden Worries China Might Win
‘Biden has taken the vital first step of correctly diagnosing the strategic challenge facing the country.’ ‘Like Harry Truman at the start of the Cold War and George H. W. Bush at its end, the president now has an opportunity to create a framework for a new era.’
keep reading
June 9, 2021
Joe Biden: 'My trip to Europe is about America rallying the world’s democracies'
‘This is a defining question of our time: Can democracies come together to deliver real results for our people in a rapidly changing world?’
keep reading
June 9, 2021
'NATO & China's Challenges to Europe'
‘Even though China does not pose a direct military threat to NATO, contrary to Russia or terrorist groups, Beijing’s growing economic influence and diplomatic assertiveness in Europe coupled with its growing military relationship with Russia do have major implications for the transatlantic economy as well as its security.’
keep reading
June 3, 2021
5 | Two Caveats
‘Highlighting the strategic questionability of China’s policies doesn’t mean that Beijing’s fears of the outside world are completely unjustified.’
keep reading
June 3, 2021
1 | 'Wolf Warriors Killed China’s Grand Strategy—and We'll All Come to Miss It'
‘The predominant feature of Chinese conduct today is not grand strategy but a belligerent, defensive nationalism that lashes out without heed of consequences.’ Sometime in 2020, China came unmoored from its grand strategy.
keep reading
June 3, 2021
4 | Why China Abandoned Its Grand Strategy
‘The most persuasive explanation is that China has poisoned itself through its own rhetoric.’
keep reading
June 3, 2021
6 | The Risks & the Dangers
‘The real danger is that once toxin has spread through the system, there is no knowing where it will end.’
keep reading
June 3, 2021
2 | Blame It on Xi
‘In China’s case, the Xi era has seen the accumulation of somewhat counterproductive policies that catalyzed a breakdown.’
keep reading
June 3, 2021
3 | Enter the ‘Wolf Warriors’
‘What changed in 2020 was that nationalism for its own sake became the predominant motif of Chinese conduct.’
keep reading
June 3, 2021
Killing China's Grand Strategy
Trend: Under the Xi Jinping administration, China has amped up abrasive ‘Wolf Warrior’ diplomacy; cracked down within its borders, despite protests and criticisms from other countries; become increasing bellicose in responding to those protests and criticisms, and any other pushback it doesn’t like; and increased its aggressive rhetoric and actions against neighbors. Risks: If this sounds like a problem just for the world’s Ministries of Foreign Affairs, think again – the impact extends deep into business and finance.
keep reading
May 30, 2021
'Final Thoughts'
'Just as Brzezinski foresaw the two new contending blocs –– requiring greater “geostrategic skill” –– that are forming today, Kissinger has emphasized the unprecedented dangers that AI could introduce into a divided world.’
keep reading
May 30, 2021
China's ‘Anti-Hegemonist Bloc’
‘To counter U.S. coalition building, China has enhanced its diplomatic, economic, and military relationship with both Russia and Iran in recent months, resulting in the closest ties these countries have had in the post-Cold War era.’
keep reading
May 30, 2021
Postscript: China Doubts U.S. Allies Support
'Chinese leadership is also cynical about the effectiveness of a U.S.-led Cold War-style bloc.’
keep reading
May 30, 2021
Biden’s ‘Anti-China Bloc’
‘Throughout President Joe Biden’s first 100 days in office, his administration has largely continued the Trump administration’s hawkish approach toward China.’ ‘President Biden has also made international coalition building to confront the growing power and influence of China his primary foreign policy initiative.’ ‘Chinese leaders and the public are not convinced by the statements recently made by President Biden that these U.S.-led alliances are “not anti-Chinese” and that the United States is “not looking for confrontation” with China.’
keep reading
May 30, 2021
What China Thinks About Biden's China Policy
And that is what makes Cheng Li’s ‘Biden’s China strategy: Coalition-driven competition or Cold War-style confrontation?' so valuable. Cheng has decades of close relationships with China’s leaders and high officials. They trust him not to attribute their comments and so speak freely and honestly to him. Cheng is the person I rely on most to convey China’s positions.
keep reading
May 30, 2021
Worse for China than Trump
‘Many Chinese now believe that the Biden administration could be more detrimental to U.S.-China relations than the Trump administration.’
keep reading
May 30, 2021
'Biden’s China strategy: Coalition-driven competition or Cold War-style confrontation?'
‘Senior officials on the foreign policy team have frequently emphasized three “C” words: competition, cooperation, and confrontation.’
keep reading
May 30, 2021
The Trump Legacy
‘From Beijing’s perspective, the hawkish approach to China in the final year of the Trump administration revealed that the Trump team sought to defeat and destroy China in much the same way that the United States defeated the Soviet Union in the Cold War.’
keep reading
May 27, 2021
'China Bets on Productivity Over Population to Drive Its Economy'
‘Beijing has a two-pronged approach to maintaining economic growth as its population shrinks.’ ‘First, it intends to slow the decline of the urban workforce by raising the retirement age and encouraging migration of more of the country’s 510 million rural residents to cities.’ ‘Second, it plans to raise productivity -- a measure of economic output per worker -- with the latest five-year plan emphasizing better vocational education and more investment in scientific research, automation and digital infrastructure.’ [see second chart above]
keep reading
May 27, 2021
'Why Demographics is (Close to) Destiny'
‘Demographics may not be destiny, but for students of geopolitics, they come close.’
keep reading
May 27, 2021
'Lousy demographics will not stop China’s rise'
‘The old maxim ‘demography is destiny’ no longer holds in the same way that it used to.’ ‘A shrinking and ageing population may not have the same gloomy implications in the 21st century.’
keep reading
May 27, 2021
'Sex and the Chinese Economy'
‘A rise in China’s male-female ratio may have contributed to between one-third and one-half of the increase in its trade surplus with other countries.’ ‘The sex imbalance thus likely underpins an important source of tension between China and the US. Yet bilateral engagement has paid scant attention to this linkage.’
keep reading

Heading

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.