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 7, 2021
'In Search of Today’s George Kennan'
‘Kennan provided a framework to break through the bitter divide between those who believed America should return to its prewar isolationism, and those who believed the USSR was itching for a dramatic showdown with the capitalist west.’
keep reading
February 7, 2021
' "Longer Telegram" Sets Off Fierce Global Debate'
'The fierce global debate set off this week by a thought-provoking paper - “TheLonger Telegram: Toward a New American China Strategy” – has underscored the urgency and difficulty of framing a durable and actionable U.S. approach to China as the country grows more authoritarian, more self-confident and more globally assertive.'
keep reading
February 7, 2021
The 'Longer Telegram' & Its Discontents
Why everyone wants to be George Kennan‘In 1947 X penned his history-changing “Sources of Soviet Conduct” in Foreign Affairs,’ wrote Edward Luce in the Financial Times in 2018.‘The piece, which crystallised America’s cold war containment strategy, was the making of George F Kennan’s life-long reputation as a master of geopolitics.’‘ As the architect of a doctrine that won the cold war.’
keep reading
March 11, 2021
China, Ai, & the Coming U.S. Industrial Policy
‘The government will have to orchestrate policies to promote innovation; protect industries and sectors critical to national security; recruit and train talent; incentivize domestic research, development, and production across a range of technologies deemed essential for national security and economic prosperity; and marshal coalitions of allies and partners to support democratic norms.'
keep reading
March 11, 2021
'Why Biden Should Ditch Trump’s China Tariffs'
‘President Joe Biden has to decide whether to rescind his predecessor’s China tariffs.’
keep reading
March 11, 2021
Then There are Semiconductors
‘While American companies pioneered semiconductors and still dominate chip design, many have outsourced the actual fabrication of chips, mostly to Asia.’
keep reading
March 11, 2021
'Hard lesson for HK opposition: Extreme political confrontation is not in the designs of China'
'The radical forces in Hong Kong thought they were strong!’
keep reading
March 11, 2021
'China Turns to Elon Musk as Technology Dreams Sour'
‘China is having its techlash moment. The country’s internet giants, once celebrated as engines of economic vitality, are now scorned for exploiting user data, abusing workers and squelching innovation. Jack Ma, co-founder of the e-commerce titan Alibaba, is a fallen idol, with his companies under government scrutiny for the ways they have secured their grip over the world’s second-largest economy.’
keep reading
March 11, 2021
For Industrial Policy: National Security Advisor, Jake Sullivan
‘While American companies pioneered semiconductors and still dominate chip design, many have outsourced the actual fabrication of chips, mostly to Asia.’
keep reading
March 10, 2021
'Beijing replicates its South China Sea tactics in the Himalayas'
‘Emboldened by its cost-free expansion in the South China Sea, Chinese President Xi Jinping’s regime has stepped up efforts to replicate that model in the Himalayas.'
keep reading
March 10, 2021
'China Crackdown on Hong Kong'
‘The scale of the protests really shook Beijing. All the previous protest movements had lasted a few months, at most. This time, there was huge support, and it wasn’t dying down on its own.’
keep reading
March 9, 2021
'Neither China nor the US fits neatly into any one box’ Yuen Yuen Ang
‘Binary narratives lie behind the common misconception that China’s economic success has vindicated autocracy. (The simplistic logic is that if China is not a democracy, it must be an autocracy, and when it prospers, that prosperity must be because of its autocracy). For liberal democracies, this raises the fear that the “China model” poses an ideological challenge to democracy.’
keep reading
March 7, 2021
Part 2 | 'How Biden Can Learn From History in Real Time' Copy
‘ “International relations scholars,” the political scientist Daniel Drezner has written, “are certain about two facts:'
keep reading
March 7, 2021
How the WTO Changed China
'WTO membership, the new consensus goes, has allowed China access to the American and other global economies without forcing it to truly change its behavior, with disastrous consequences for workers and wages around the world.’
keep reading
March 7, 2021
With growth on track, China starts to unwind stimulus
‘China was the first country to open its lending and spending taps in the face of the coronavirus downturn. Now, it is the first to start to close them, giving others a partial preview at the National People’s Congressof what the end of stimulus will look like. The most notable aspect is its gradualism.’
keep reading
March 6, 2021
'Taper test - With growth on track, China starts to unwind stimulus'
‘China was the first country to open its lending and spending taps in the face of the coronavirus downturn. Now, it is the first to start to close them, giving others a partial preview at the National People’s Congressof what the end of stimulus will look like. The most notable aspect is its gradualism.’
keep reading
March 5, 2021
Nursing China’s Debt Hangover
‘China official target of 6% annual economic growth, announced Friday, is so modest it’s clear something else is going on. A plausible theory is that this is part of a strategy to rein in debt.’
keep reading
March 4, 2021
China & the U.S.: Getting Each Other Wrong
China and the U.S. seem to be in the process of reassessing their views of each other’s strengths and weaknesses. Xi Jinping appears to be seeking some balance in his assessment of the U.S. And analysts in the U.S. have reversed a trend of opinion that ‘China is inexorably rising and on the verge of overtaking a faltering United States.' They argue instead ‘the United States has good reason to be confident about its ability to compete with China.’
keep reading
March 4, 2021
'NATO's Shifting Focus to China'
‘Consider, for example, a war escalating over the defense of Taiwan. “We should not forget that the main member state in NATO, the United States, is not only a transatlantic nation, but also a Pacific nation. And the question is, if at a certain stage, the U.S. were to be threatened by China, would that invoke Article 5 in the treaty?"'
keep reading
March 3, 2021
Missing: Has anyone seen Europe’s China plan?
‘Caught between Washington and Beijing, European capitals find themselves in lack of a strategic China policy.’
keep reading
February 28, 2021
Why Beijing was right to rein in Jack Ma's rogue Ant Group IPO
‘In July 2020, just before their IPO application, Ant Financial not only abandoned the word "financial" and renamed themselves Ant Group, they attempted to list not on the Shanghai or Shenzhen exchanges, where financial institutions list, but rather on the Shanghai STAR Market, which was created as an exchange for high-tech innovators.’
keep reading
February 27, 2021
The rivalry between America and China will hinge on South-East Asia
‘In the rivalry between China and America, there will be a main zone of contention: South-East Asia. Of the two competitors, China looks the more likely prize-winner.'
keep reading
February 26, 2021
'Inside Xinjiang’s Prison State'
‘After years of first denying the facilities’ existence, then claiming that they had closed, Chinese officials now say the camps are “vocational education and training centers,” necessary to rooting out “extreme thoughts” and no different from correctional facilities in the United States or deradicalization centers in France.’
keep reading
February 24, 2021
Japan Is the New Leader of Asia’s Liberal Order
‘In an era of Chinese bellicosity, North Korean provocations, and a raging pandemic, Japan’s inconspicuous ascent to regional leadership has gone mostly unnoticed.’
keep reading
February 23, 2021
‘Patriots’ Only: Beijing Plans Overhaul of Hong Kong’s Elections
‘China plans to impose restrictions on Hong Kong’s electoral system to root out candidates the Communist Party deems disloyal, a move that could block democracy advocates in the city from running for any elected office.’
keep reading
February 23, 2021
HSBC offers lesson in corporate realpolitik
‘HSBC’s Asia pivot is a lesson in corporate realpolitik. It is just as much a recognition of the new political reality facing every western company that is dependent on doing business with China. Businesses will have to choose between western markets and access to China, and between liberal and authoritarian value systems.’
keep reading
February 23, 2021
Germany Is a Flashpoint in the U.S.-China Cold War
'As goes Germany, so goes Europe — and that’s a real challenge for the U.S. Berlin leads a European bloc that could cast a geopolitical swing vote in the U.S.-China rivalry.’
keep reading
February 22, 2021
Remaking “Made in China”: Beijing’s Industrial Internet Ambitions
‘The Chinese government is placing large bureaucratic and financial bets on upgrading and digitizing its already dominant manufacturing base. Such efforts have coalesced around one key term: the “industrial internet” (工业互联网). The successful application of it across Chinese industry would prolong and elevate the “Made in China” era.’
keep reading
February 22, 2021
How American Free Trade Can Outdo China
‘When it comes to trade, a critical dimension of the U.S. and China competition, America is ceding the field. At the same time, China has expanded its trade footprint. When it comes to trade and investment agreements, China isn’t isolated. The U.S. increasingly is. Now we have to make up for lost ground. America can out-compete China, but first it needs to get back in the game.’
keep reading
February 21, 2021
China’s ‘two sessions’: why this year’s event is so important for Xi Jinping’s vision for the future
‘The ‘Two Sessions,’ the annual meeting of the National People’s Congress, the country’s legislature, and the top political advisory body, the Chinese People’s Political Consultative Conference, begins on March 5 and runs for about two weeks.’
keep reading
February 20, 2021
‘The Future of China’s Past: Rising China’s Next Act'
‘By the Party’s own acknowledgment, Deng’s initial arrangement has run its course. It is therefore time to develop a new understanding that will do for the Party in the next 30 years what Deng’s program did in the previous era.'
keep reading
February 20, 2021
‘UNDERSTANDING DECOUPLING: Macro Trends and Industry Impacts’
‘Comprehensive decoupling is no longer viewed as impossible: if the current trajectory of U.S. decoupling policies continues, a complete rupture would in fact be the most likely outcome. This prospect remains entirely plausible under the Biden administration.’
keep reading
February 20, 2021
‘Europe can’t stay neutral in US-China standoff’
‘China aims to create a world that is not safe for Europe — strategically, economically or ideologically. Xi is actively striving to undermine the stature of democracies in the global order. The more power China amasses, the less tolerant it will become with any government that won’t toe its line. China also represents a long-term economic threat to Europe — not merely because it is an advancing competitor in a global market economy, but because Beijing’s policies are designed to use and abuse that open world economy to eventually dominate it.
keep reading
February 20, 2021
‘Beat China: Targeted Decoupling and the Economic Long War'
‘The economy is the primary theater of our conflict with China. It is now clear that the U.S. and Chinese economies are too entangled, particularly in critical sectors such as medicine, defense, and technology.'
keep reading
February 19, 2021
‘No, China is not the EU’s top trading partner'
‘This week the media seized on a report by Eurostat, the European Union’s statistical agency, to declare that China surpassed the United States in 2020 to become the EU’s main trade partner. This is simply not true.’
keep reading
February 18, 2021
‘China faces fateful choices, especially involving Taiwan’
'Should Mr Xi order the People’s Liberation Army to take Taiwan, his decision will be shaped by one judgment above all: whether America can stop him. If China ever believes it can complete the task at a bearable cost, it will act.’ ‘
keep reading
February 18, 2021
'An Unsentimental China Policy'
'Jake Sullivan, wrote in Foreign Affairs in 2019, “The era of engagement with China has come to an unceremonious close.”Yet it is worth remembering what engaging China was all about.’ For most of the past half century, efforts to improve ties with the country were not about transforming it. Judged by its own standards, U.S. engagement with China succeeded. It was only after the Cold War that a desire to change China became a prominent objective of U.S. policy.’
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.