Around the world, 2020 has brought a very different global experience of China. Early in the year, Xi Jinping had his hands full with Covid-19, an ongoing catastrophe in its crucial pig industry, and Hong Kong. Later came almost Biblical flooding. The ongoing fracturing of trade ties with the US has damaged key domestic industries, especially in hi-tech. Anyone thinking that this would weaken Xi domestically has been badly wrong-footed.
On Covid-19, China now dominates exports of PPE and is racing to lead the world in vaccine-diplomacy, especially in Emerging Economies. ‘Democracy’ in Hong Kong has been crushed. Anyone, or any country that raises a hand on China’s early handling of covid, or on Hong Kong or 5G, suffers not only the wrath of China’s diplomatic Corps (‘Wolf Warriers’), but also on trade and investment. No country has suffered more on this than Australia, which has been hung out to dry as Xi sends a message to the world – “comply with our will, or suffer the consequences” https://asia.nikkei.com/Economy/Trade/China-trade-pressure-sends-Australia-wake-up-call-to-diversify
China’s ‘dual circularity’ domestic economic push, and growing middle class could result in China representing 50-60% of global consumption growth over the coming decade. Xi’s ability to coerce countries and companies will only increase.
Perhaps the most important lesson that The West can learn from 2020 and President Xi, is that he is prepared to allow China to suffer significant short term pain in order for him to achieve his strategic goals – these being ‘rejuvenation’ and ‘Great Nation’ status during his (extended) tenure. India is a great example. PLA salami-slicing of territory along the entire Indian border has caused severe damage to Chinese business interests in India, but rather than move his armed forces back, they are digging in. The same is happening with the Senkaku Islands and Taiwan. Xi is moving forward and consolidating at new, more precarious levels of engagement. This is the new China, and Xi is likely to only become more assertive, and risk-tolerant as time evolves.
President-elect Biden knows Xi well. Despite his preference for constructive relations with China, US Congress, and much of US electorate, now sees China as an existential threat, and this view is reciprocated in China now. Many countries, particularly trade-dependent nations in Europe and Asia, are almost begging the US to not force them to choose between China and the US.
There has been a growing realisation in the West that China cannot be contained. Competition is the only route forward. The Chinese economy will soon be larger than the US (it already is on PPP terms), so the only realistic path for Biden is for the US to re-embrace the strategy of the 1950-80’s, of Free World alliances – but this time with an economic and diplomatic emphasis, and a broader mandate that includes India and other nations that wish to resist Xi’s desire to turn them into vassals.
Biden’s task is far harder than Xi’s. Marshalling multiple nations has never been easy, and America’s diminished ‘currency’ following the Trump Presidency will have lasting ‘Trust America?’ effects. The degree to which Biden can actually act externally will be hamstrung by a fractured and largely inward-looking Congress and domestic audience. In contrast, Xi has record-high domestic support for his handling of Covid-19 and a sharply recovering economy. He has been able to smugly sit back and watch America’s standing suffer from its poor handling of Covid-19, and Trump’s assault on Democratic institutions. The Free World urgently needs a stable and trustworthy US, in actions and words; Biden’s early Cabinet picks make clear that he not only understands the challenge, but is also up for it.
Militarily, the Free World has moved more quickly to compete with China than in the economic sphere. NATO is expanding its mandate Eastwards, and The Quad has conducted training and doctrine exercises. These alliances will be crucial as Xi’s territorial claims continue to expand, particularly his clearly laid out desire to retake Taiwan, and his clear intent in the Himalayas, SCS, Cambodia and elsewhere.
Xi is determined that China moves ahead of the US on military technology, and stays ahead. China’s Navy (excluding China’s huge Maritime Militia and Coastguard) already has more modern hulls than the US, and a squeeze on US defence budgets is highly likely in the period ahead. The US is already playing catch-up in key areas like hypersonics. True deterrence (eg Taiwan) will only be effective if Xi believes he cannot win. And as we have already stated – Xi has shown that he will bear ‘any’ cost to achieve strategic goals.
The recent awakening to the China challenge in the UK and EU is encouraging (and overdue!), but competing successfully with Xi’s China can only succeed if long-held resistance to full economic and military collaboration is overcome, particularly within Europe and between Europe and the US. Biden has no small task. Failure is no longer an option, for Xi is a man in a hurry, and with ‘destiny’ as his driver.
John Longhurst, CEO, Tangent Link
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