Bilahari Kausikan: China buys Australian minerals because it needs them, not because it likes you
26 Aug 2020|

China imports raw materials from Australia because the quality is good and the price is right, says Singaporean international affairs specialist Bilahari Kausikan.

The former head of the island nation’s foreign ministry told ASPI’s online ‘Strategic Vision 2020’ conference that Australians concerned about balancing their security relationship with the United States and their economic relationship with China shouldn’t wring their hands in despair.

Australians could afford to disregard a lot of Beijing’s ‘bluster’, Kausikan said.

‘They are not buying Australian minerals because they like your face or because they are trying to do you a favour. They’re buying it because they need it, your quality is good, your price is right’, he said.

Interviewed by journalist Stan Grant, Kausikan said Prime Minister Scott Morrison was ‘spot on’ when he warned that the world was poorer, more disordered and more dangerous. ‘We are all going to be in recession of various degrees, for quite some time.

‘I don’t believe that the world is going to deglobalise, as some of the more alarmist predictions have it, but we are certainly going to see major disruptions. We’ve already seen it, and some of these disruptions may become permanent.’

Kausikan said that while heightened strategic competition between China and the US was complicated, there would be ‘a ceiling and a floor’ to it. ‘It’s probably going to be a more uncertain, a more volatile and a more dangerous world for quite some time to come.’

Covid-19 had accelerated global changes that were already underway, Kausikan said. ‘We will get over this eventually. Everything eventually ends, but it will not be the same place when it ends. I don’t think, for example, we will ever be able to travel as freely as we used to. I don’t think the supply chains are going to be exactly the same as they used to be. For one thing, it has shown the vulnerability of a single point of failure in the supply chains. Overdependence on a single point, in this case China.’ He said he did not think trade with China would stop. ‘That’s easier said than done, but there were already diversions beginning before the pandemic, and that will certainly continue.’

Kausikan said China underplayed the seriousness of the emerging pandemic for crucial days in January and it was very unfortunate that those days coincided with the Chinese New Year when many people were travelling inside China and outside of China. ‘They did fumble the ball initially, but having done that they acted ruthlessly to try to contain it and succeeded in a relatively short time. So, I think there was a dent to the Chinese Communist Party’s reputation, but they did recover it because of the ability to contain the virus.’

Now China’s leaders faced a new challenge, he said. ‘Much more than any other country in this part of the world, the legitimacy of the CCP depends on economic performance. All our governments depend on economic performance, but they much more because I don’t know anybody who believes in communist ideology, class struggle and that sort of thing anymore.’

China would face a period of slow growth. It had put stimulus measures in place but it appeared that unemployment was still a concern and that the small and medium-sized industries which were the largest part of its GDP were not doing well. That was complicated by the trade war with the US. Xi Jinping had stressed the need to rely much more on the domestic economy than on exports, but that had been the case for many years. China seemed to have stalled at around 40% of GDP, while most major economies were between 50% and 60%.

The more fundamental issue for China was that the CCP, as it acknowledged itself during its 18th national congress, needed a new model which placed more emphasis on economic efficiency and market efficiency. But that implied a diminution of control.

Kausikan said that had created a real dilemma for Xi Jinping because he’d gone the other way and the party claimed absolute control over everything. That was not entirely irrational because, in a huge country like China that was making a rapid transition, matters could get out of control.

‘But it does create a dilemma between the political logic and the economic logic, which they have not resolved yet. And, of course, the pandemic enhances it.’

By contrast, democracies reacted more slowly in a crisis. In the US under Donald Trump, dealing with the pandemic took much longer than necessary because there were periods of denial and complete confusion. ‘However, there are strengths too, and I think the strength of America is simply that what happens in Washington DC is not necessarily the most important thing that happens in America, never has been. What happens in the 50 states, what happens in the universities, research laboratories, Wall Street, has always been much more important. And change comes from bottom up in the US, much more than top down. This is almost a diametric opposite of China.’ The US took longer to organise itself, but it was much more resilient.

Kausikan said that while Southeast Asia was at a strategic crossroads, it was misleading to suggest that the region faced a new cold war. ‘It’s always been in the middle of a great-power rivalry and we have survived this in the past. We can survive this too, provided we keep our heads and keep calm.’

The emerging situation was much more complicated than the Cold War when the spheres of the Soviet Union and the West were only connected tangentially. The Soviet Union was never a major global economic player, except in its own sphere in Eastern Europe and a few other places. ‘Now China and the US are both vital parts of the global economy. They are interdependent in ways that are unprecedented between great powers.’

The two superpowers were connected by very intricate and widely distributed supply chains. And while some in the Trump administration might want to decouple from China and some in China wanted to create an alternative system, whether to further their own ambitions or as a response to the Trump administration’s actions, he did not think either would succeed entirely.

The USSR largely contained itself by pursuing autarchy within its system, but China was not like that, Kausikan said. China and the US were so intertwined that he did not think they could decouple from each other. ‘That doesn’t mean both sides are not going to try, and that’s where the complication is. It will not be as simple or as straightforward as during the Cold War proper.’

The world would be more complex. ‘You will have to accommodate some Chinese aspirations when they are legitimate, and they have legitimate aspirations. You will have to modify some of the rules because the rules were not made by China, but it’s not a stark dichotomy, again, between the West and the rest. It’s not that China is winning and the West is losing. The choices are never binary and we shouldn’t make them binary.’

He said the natural instinct of Southeast Asia, having lived for centuries in the midst of great-power conflict, was to hedge and balance simultaneously. ‘In Western political science theory, you balance, or you bandwagon, or you hedge. These are alternatives. In Southeast Asia we do all quite simultaneously and are quite happy about it.’