Blog No. 210 China: The Many Dimensions of Its Growing Power

Keeping up with the daily melodramas of Donald Trump’s Washington leaves relatively little time and energy to grapple with larger, long-range challenges. Among those challenges, none is more important than China’s growing power and influence. Although President Trump has fulminated endlessly about our trade imbalance with China, that is far from the most significant aspect of our relationship with China: the trade imbalance may or may not be mitigated by a deal that we may or may not make with China but, either way, it is not fundamental to our economy or national security. Apart from trade, various areas of conflict with China have been noted in the media, but there have been few attempts to consider them together.

The most prominent exercise of China’s power has been in the Pacific region — in China’s view, its neighborhood. But China’s reach extends far beyond that area: around the globe, in space, and in technology initiatives that surpass, or threaten to surpass, the United States. It may be somewhat exhausting to consider, even briefly, each aspect of Chinese power, but doing so is a first step to any assessment of China’s overall position relative to the United States.

China in the Pacific Region: Artificial Islands and More

In recent years, China’s presence in the Pacific Region has expanded dramatically, both economically and militarily. Economically, China has made major gains in both trade and investment. As summarized in Jennifer Lind’s 2018 article in Foreign Affairs, “Life in China’s Asia”:

Over the past few decades, China has become the number one trading partner and principal export destination for most countries in East Asia. Beijing has struck a number of regional economic deals, including free-trade agreements with Australia, Singapore, South Korea, the Association of Southeast Asian Nations, and others. Through such arrangements, which exclude the United States, Beijing seeks to create a Chinese-dominated East Asian community. Beijing is also building an institutional infrastructure to increase its influence at the expense of U.S.-led institutions, such as the International Monetary Fund (IMF) and the World Bank, and Japanese-led ones, such as the Asian Development Bank. In 2014, China, along with Brazil, Russia, and India, set up the $100 billion New Development Bank, which is headquartered in Shanghai. In 2015, China founded the $100 billion Asian Infrastructure Investment Bank, which 80 countries have now joined. Furthermore, Xi’s much-heralded Belt and Road initiative will promote Chinese trade and financial cooperation throughout the region and provide massive Chinese investment in regional infrastructure and natural resources. The China Development Bank has already committed $250 billion in loans to the project. 

An important counterweight to China could have been provided by the Trans-Pacific Partnership, a free trade agreement painstakingly negotiated by the Obama administration with a dozen Asian countries and excluding China. Unfortunately, however, the TPP became a casualty of the 2016 election, opposed by Hillary Clinton (despite her previous support for it) and then rejected by Donald Trump after his election.

Militarily, China’s most controversial and conspicuous moves have involved the construction of six artificial islands in the South China Sea. The islands are in the area of the Spratly Islands; China’s claim to ownership of the Spratlys was successfully challenged by the Philippines in the International Court of Arbitration in the Hague, but China has simply refused to accept the ruling.

The artificial islands house air force bases, missile shelters, and radar and communications facilities. Although the U.S. Navy conducts Freedom of Navigation Operations in the area, it is constrained by the expanding bubble of Chinese air defenses, by China’s growing ability to find and strike U.S. naval vessels, and by an increased missile threat to U.S. air bases and ports. Construction of the islands is part of the Chinese People’s Liberation Army’s doctrine of “anti-access/area denial” or “A2/AD.” That doctrine includes air defense, missiles and submarines, all of which pose potential threats to U.S forces well beyond the China Sea.

A recent commentary in the Wall Street Journal, “The U.S Is Ceding the Pacific to China,” urged the necessity of strengthening our military position in the Pacific, lest our Pacific coast find itself eventually looking “out upon a China lake.” A friend of mine, a retired Navy Captain, concurred:

To have a viable fighting force, there must be assured supply lines. We have surrendered Pacific outposts such as Subic Bay, Philippines, a huge supply depot used extensively in the Vietnam period. I feel our resources in Japan have suffered a similar fate.  

The Navy’s greatest worth is its ability to project power,  What does this mean? It is to have a force that can hit, in a meaningful way, enemies on their own turf…. China’s move to make military outposts on small islands in the Pacific is but a small example….

Maintaining sea power requires a complex web of supporting players, R&D, logistics, adequate resources (ships, planes, submarines,  and on-and-on). The bottom line is the US must maintain the ability to project power.

A discussion of China and the United States in the Pacific would not be complete without mention of Taiwan. As discussed in a recent Foreign Relations article by Richard Haass, “The Looming Taiwan Crisis,” that island once again shows signs of being a point of potential conflict involving the United States. Since 1979, the United States has recognized the People’s Republic of China as the sole legal government of that country. In subsequent communiques, we acknowledged “the Chinese position that there is but one China and Taiwan is part of China.” We agreed to downgrade ties with Taiwan and have since maintained only unofficial relations with the island. At the same time, United States law has indicated that we would come to the defense of Taiwan if necessary (though not actually requiring us to).

That ambiguous arrangement has kept the peace and allowed Taiwan to achieve remarkable economic success. Now, however, Haas points out that there are signs of restlessness within China, the Trump administration and Congress, all of which could present a threat to that stability. Haass concludes:

In other words, the risks for all concerned are high. It would be best to avoid symbolic steps that would be unacceptable to the others. The status quo is admittedly imperfect, but it is far less imperfect than what would follow unilateral actions and attempts to resolve a situation that doesn’t lend itself to a neat solution.

Global China: The Belt and Road Initiative

Jennifer Lind’s discussion of China’s investments in Asia refers to China’s Belt and Road Initiative (BRI), a program that reaches far beyond Asia. The mission of the BRI is to provide investment in infrastructure, education, construction materials, railway and highway, automobile, real estate, power grid, and iron and steel. The ultimate objective is to strengthen China both economically and geopolitically.

When the BRI was first announced in 2013, it bore the name “Silk Road Economic Belt and the 21st-century Maritime Silk Road.” The name was derived from the ancient Silk Road, a trade route connecting China and Europe. The modern “Belt” refers to the overland routes for road and rail transportation, comprising the “Silk Road Economic Belt,” while “Road” refers to sea routes or the “21st Century Maritime Silk Road.” As indicated by the illustration above, the initial concept was for investments in Asia, Africa and Europe, but in 2018 it was expanded to Latin America. A March 5, 2019 Council on Foreign Relations report, “China’s Massive Belt and Road Initiative,” describes the magnitude of the BRI:

China’s overall ambition for the BRI is staggering. To date, more than sixty countries—accounting for two-thirds of the world’s population—have signed on to projects or indicated an interest in doing so. Analysts estimate the largest so far to be the $68 billion China-Pakistan Economic Corridor, a collection of projects connecting China to Pakistan’s Gwadar Port on the Arabian Sea. In total, China has already spent an estimated $200 billion on such efforts. Morgan Stanley has predicted China’s overall expenses over the life of the BRI could reach $1.2–1.3 trillion by 2027, though estimates on total investments vary.

The Morgan Stanley report enumerated 24 European countries that have agreed to participate in the BRI, and last week, Italy became the first member of the G-7 group to indicate that it too would participate in the BRI. The announcement produced a predictably sour response from Washington, consistent with previous comments on the BRI:

“We view BRI as a ‘made by China, for China’ initiative,” Garrett Marquis, White House National Security Council spokesman, told the Financial Times. “We are skeptical that the Italian government’s endorsement will bring any sustained economic benefits to the Italian people, and it may end up harming Italy’s global reputation in the long run.”

The CFR and Morgan Stanley analyses covered the BRI only in Asia, Africa and Europe and did not extend to Latin America. The BRI arrived in Latin America and the Caribbean (LAC) only in 2018 when Chinese Foreign Minister Wang Yi announced the expansion at a meeting of the China-CELAC (Community of Latin America and the Caribbean). Wang’s presentation was reportedly received with enthusiasm, but the scale of China’s plans for LAC is not known. Nevertheless, Foreign Policy reported in November, 2018 that “Over the past several years, China has managed to turn itself into Latin America’s largest creditor, mostly by funding large-scale infrastructure projects. In doing so, Beijing has managed to grow quite close to some of the region’s capitals.” The impact over time of China’s investment in LAC on United States interests in the region remains to be seen, but it seems likely to be significant.

China and Technology: In Space and Cyberspace

China in Space

As China has expanded its reach around the globe, it has also demonstrated that its grasp is not limited to this terrestrial sphere. China’s advances in space exploration have been remarkable and, in China’s perception, they are directly linked to its economy. An informative commentary in the Washington Post, explains in some detail China’s progress to date. The commentary, titled “The new space race pits the U.S against China and the US is losing badly,” contrasts China’s efforts with those of the United States and the Soviet Union during the Cold War, which could be seen primarily as bids for global prestige:

By contrast, China is focused on establishing a permanent presence in space. China views space, especially the area of space including Earth’s moon, as directly connected to the rejuvenation of the Chinese nation. Last week, China established an important foothold toward resource exploitation by landing on the far side; the United States needs two to three years before its first robotic missions touch down on the moon. The relative lead on space resources could determine who is the dominant power in the years to come.

Still more important, China’s ambitions do not by any means end with the moon. Rather, China envisions “building a lunar industrial infrastructure for cost-effective access to deep space.” In other words, the moon will become a launch point and refueling station comparable to refueling posts in the steamship age. The piece concludes:

At stake isn’t simply prestige here on Earth: It’s whether the future of space exploration, resource development and colonization will be democratic or dominated by the Communist Party of China and the People’s Liberation Army of China. The American people should think hard about whether they want to cede the next century — and the next frontier — to a different government with a very different set of values.

China and 5G Networks

The global networks that operate computers and cellphones around the world are about to be upgraded to a faster, more efficient Fifth Generation (“5G”). This is a development of significant economic importance, but as reported in the New York Times on January 26, it also involves a vital issue of national security. The article, “In 5G Race With China, U.S. Pushes Allies to Fight Huawei,” explains that the issue is whether Huawei Technologies Co, China’s leading telecommunications producer, should be allowed to furnish 5G equipment throughout the world. The intelligence community’s concern is that such equipment could be designed and manufactured with the capacity to covertly provide data to Chinese Intelligence services.

That concern was serious enough for the U.S. government to mount an international lobbying effort seeking to bar Huawei from participating in the 5G networks. The effort, however, has had only mixed success. Huawei has firmly denied cooperating with Chinese Intelligence services and has insists that it will not allow its equipment to be corrupted to serve the purposes of the Chinese government. The next six months should largely determine the outcome of this contest. In the meantime, CNN reported on Monday that representatives of the intelligence community have testified to Congress that Huawei equipment in rural towers could compromise U.S missile sites located in proximity to the towers.

China and Artificial Intelligence

In December, the Boston Consulting Group published a report documenting China’s lead in developing and deploying Artificial Intelligence (AI). As that report explained at the outset, AI and its uses are not as exotic as some may believe:

When people think of artificial intelligence (AI), many picture some far-off future portrayed by popular science fiction: intelligent, humanoid robots by our sides to do all the things we prefer not to do ourselves. But in reality, the AI revolution is already here today. AI-enabled products are becoming commonplace in many household applications, and in the business and manufacturing world, the power of AI is already showing itself in industries around the globe.

China’s global leadership, the report explains, is based on the fact that 85% of Chinese companies are actively using AI at some level while the United States is in second place with 52%.

On February 11, President Trump issued an Executive Order on AI, “Accelerating America’s Leadership in Artificial Intelligence.” The Order makes no reference to China’s achievements in AI, let alone its position of global leadership as documented in the Boston Consulting Group study. Rather, the Order insists – in Trumpian fashion – that America is the world leader and that the steps outlined are intended merely to “accelerate” that leadership. The New York Times summarized the Order:

The executive order aimed to better educate workers in the field, improve access to the cloud computing services and data needed to build A.I. systems, and promote cooperation with foreign powers. But the order did not set aside funds for A.I. research and development, and the administration provided few details on how it planned put its new policies into effect.

China and Blockchain

While the U.S government’s initiative on AI may have been belated and rather tepid, Josh Rogin points out in the Washington Post that there appears to be no government strategy at all to match China’s efforts in developing blockchain. (“China is racing ahead of the United States on blockchain”)  What is blockchain, some readers may ask, and why does it matter? In simplest terms, blockchain is a highly advanced system of interconnected computers used to store and transmit information — primarily though not exclusively, commercial and financial. More broadly, Rogin sees it as a system that “ can be used to distribute power, which in turn can promote rule of law, fight corruption and crime, and protect digital identity and privacy.” On the other hand, he warns:

If the Chinese government is able to control the way blockchain is developed and governed worldwide, that would be a grave and long-term threat to U.S. and international economic and national security.

China and Cyberwarfare

In September of 2015, President Obama and President Xi reached an agreement to restrain hacking for commercial purposes, such as theft of intellectual property. (There was no agreement as to cyber intrusions for military or political purposes.) In March of 2018, a report from the Treasury Department accused China of breaching the agreement on numerous occasions, but that accusation did not appear to lead to any consequences.

Chinese hackers were believed (though not proven) to have been responsible for high-profile hacks of the U.S Office of Personnel Management in 2015 and Marriott files on 338 million individuals in 2018. Nevertheless, according to a January 7 analysis in Security Week:

China Inc is conducting a low and slow cyberwar, attempting to stay under the radar of recognition in the same way that individual hackers use low and slow techniques to remain hidden.

If this analysis of the long-term goal of China Inc is correct, then the threat from Chinese cyber operations is more dangerous and insidious than commonly thought. The policy is not one of direct confrontation but more designed to slowly maneuver the global economy until dominance shifts from the U.S. to China.

China in 2019 and beyond

In 2012, Mitt Romney was mocked for saying that Russia was our number one “geopolitical foe” after President Obama chided him for not appreciating that the Cold War was over. In light of subsequent events, including Russia’s seizure of Crimea and interference in the 2016 election, Romney’s judgment is widely believed to have been vindicated. Still, if Romney were asked the same question today, he might consider the possibility of nominating China. Russia, of course, is still a threat: it retains a fearsome nuclear inventory, it continues to look for opportunities for mischief in Europe, it has established a significant presence in the Middle East, and it may well seek to interfere in the 2020 election. Nevertheless, its fragile economy is a small fraction of China’s — and the Cold War was won not by a military victory but as a result of the collapse of the Soviet economy.

An article in Monday’s Financial Times by Gideon Rachman, the paper’s chief foreign affairs columnist, surveys some the current areas of competition and potential conflict between China and the United States. Rachman concludes:

The two-bloc world of the cold war was replaced by an era of globalisation. Now globalisation itself may be threatened by the re-emergence of a two-bloc world.

It may arguably be inappropriate or premature to regard China, in Romney’s term, our “geopolitical foe.” Nevertheless, there is reason to believe that we may not be far from the day when we find ourselves in just such a relationship. If we do, China will be a formidable foe indeed.