Strategic momentum shifts at APEC
19 Nov 2018|

The APEC meeting in Port Moresby will have been a shock to Chinese President Xi Jinping, because it showed that his assertive approach to using China’s growing power is now facing fairly broad trouble.

This has a lot to do with the clarity from the US administration delivered by Vice President Mike Pence, but it will be apparent to Xi that the problems with the way he has been pushing China’s agenda in the region are deeper than that.

What happened in Port Moresby was a reversal of strategic momentum between China and the US, with the US and its partners taking back the initiative. Although there’s a lot more to see and do before this results in sustained momentum, it has been a marked shift.

Until 2018, Xi’s ‘China Dream’ vision and economic outreach had been running along nicely. Pressure on governments that had not signed up to his signature Belt and Road Initiative was growing, driven by that millenial phenomenon known as FOMO (the fear of missing out). Mainly on Chinese cash.

China’s military was attaining dominance in the South China Sea without much resistance—in part because of its rapid territorial seizure and construction activities on reefs there, and its increasingly aggressive patrolling and challenging. Regional nations, other maritime powers and the US did not seem to be contesting creeping Chinese control.

The mass forcible detention of China’s Uyghur population was proceeding, gathering pace and scale, but this was an internal problem that wasn’t very visible to the rest of the world.

Xi felt confident enough that the world couldn’t get in his way to launch ‘Made in China 2025’ and his civil–military fusion agenda. The first explicitly seeks to make China the indigenous source of breakthrough internet and communications technologies, because these next-generation platforms will give China strategic and economic power. The second seeks to turn China’s corporations and non-military university sector to advance the state’s military capability, so that the People’s Liberation Army achieves breakthrough warfighting capabilities that advance China’s security interests in the world.

As recently as January 2017, Xi was hailed by the leaders at Davos as the protector and advocate of globalisation, with critical comparisons drawn between Xi and Donald Trump.

Xi’s language in Port Moresby last weekend was much the same as he used in Davos in 2017—there was lots in the spirit of ‘win–win development’, lots about how ‘China will pursue with resolve continued reform’ and lots about ‘China’s strong commitment to support free and open trade and to voluntarily open its market to the world’. But the ears that heard it and the environment in which his words landed has changed.

And what he didn’t say was loud. He didn’t show a sign that China would change the core policies guiding ‘Made in China 2025’ or the civil–military fusion agenda. On the key issues that are at the heart of the US–China trade dispute, he referred to ‘better protecting intellectual property rights and making our investment and business environment more attractive’.

This is all about stopping Chinese intellectual property from being shared and opening up non-strategic sectors. There will be no reduction in cyber theft of intellectual property and no opening of the strategic sectors around high technology or advanced manufacturing which are key to the US administration.

Xi was silent on any steps to reverse Chinese militarisation of the South China Sea, silent on the brutalisation of his Uyghur population, and upbeat about his Belt and Road Initiative moving to ‘full implementation’. He made no mention of increasing transparency on project goals, finances or debt burdens. Again, he is not stepping back—he pushed the Digital Silk Road aspects of the BRI hard.

Xi is probably shocked by the breadth of initiatives that the US, Japan, Australia and New Zealand rolled out at the summit with Pacific partners (including Papua New Guinea and Vanuatu), and by the applause that some of Pence’s remarks—most obviously pointed at China—received. Like ‘a free and open Indo-Pacific also deserves a free and open internet’. Or, more pointedly, ‘Do not accept foreign debt that could compromise your sovereignty. Protect your interests. Preserve your independence. And, just like America, always put your country first.’

Xi isn’t used to dissent he can’t control or international forays where the momentum isn’t with him. But he’s likely to adapt.

The most Xi was able to say about the newly defined US policy of strategic competition with China was that ‘Protectionism and unilateralism are resurfacing. The multilateral trading system is under assault.’ He said he wanted World Trade Organization reform, but that it shouldn’t involve ‘the organisation being overhauled’.

Xi’s core problem is that his words aren’t being believed. The gaps between his lofty language about an ‘open, inclusive, balanced, global economy’ with ‘opportunities more equal and societies more inclusive’ and Chinese state actions are just too great to bridge even with the rose-tinted goggles of greed for Chinese money.

This year, there’s been transparency about the seamy downside to Xi’s China Dream: US$22 billion in cancelled corrupt BRI deals with Malaysia, publicity over unpayable Chinese loans from Tonga to the Maldives, and exposure of the brutal repression of millions of Uyghurs and of Chinese military aggression in the South China Sea. Most clearly, from an APEC perspective, is that despite words of opening and reform, Xi continues with state-driven policies to secure economic control and dominance under ‘Made in China 2025’.

In contrast, Pence was representing a US administration that a few months ago was looking like being a global wrecking ball for international trade and a unilateralist military and strategic power. Risks to the global economy from Trump’s ‘America First’ mindset remain, as do tremors in various alliance and security partnerships.

However, we now see a genuine US commitment to strategic and economic partnerships across the Indo-Pacific—whether through the BUILD Act that is putting billions of US dollars at the call of US businesses to operate in Asia, or through the kinds of new initiatives Pence announced with partners at APEC, like the joint PNG–Australia–US initiative to develop the Manus Island naval base and the US–Japan–Australia trilateral Indo-Pacific infrastructure initiative. And the US now seems to have a clear agenda to engage in strategic competition with China that has both economic and security aspects.

The contrast is pretty stark. The US leadership is able to talk about and demonstrate strategic and economic partnerships, while Xi has only economics to sell. And Pence was standing with multiple other leaders announcing joint initiatives with Pacific partners, while Xi was talking at people.

The most positive thing for Xi might be how Scott Morrison handled questioning about Australia’s relationship with China. The prime minister is obviously very keen to keep on the ‘reset’ bus in the relationship, so he stuck to the strong policy line that Australia wants ‘to see an Indo-Pacific which is open and which is free and which respects all independent sovereign states and nations’.

On Australia’s approach to China and to the US, he said, ‘Our role here is to ensure that we maximise Australia’s interests and that is done by working incredibly constructively with our long-term partner in the United States—a great friend and ally—and working very closely with the Chinese government with whom we also have an excellent Comprehensive Strategic Partnership which is advancing Australia’s economic interests.’

Note here that our relationship with China is all about economic opportunity. Our relationship with the US is much broader.

Morrison refused to be drawn on reports of argumentative Chinese officials berating their PNG hosts, or on whether any of the announcements—including the Manus base—had any relevance to limiting the potential for growth of the Chinese military presence in the South Pacific.

This is an understandable effort at positive public diplomacy. Morrison also acknowledged that public statements were one thing, but there was ‘a lot more pragmatism going on here’ and ‘a lot of movement under the water’.

So, the overall outcome from APEC might not be a joint communiqué, but the summit communicated one big thing very clearly—the US administration has called it right: we can see that Xi’s China and Trump’s America are indeed now engaged in long-term strategic and economic competition.

Australian policy at this moment is to buy into the positive agenda coming out of Washington, while downplaying its gravity and seeking to preserve the newly returned positive harmonics with Beijing. We still have a China policy that dare not speak its name.

Luckily for Morrison, Xi seems to realise that it’s the wrong time to turn the freezer back on, no matter how much he wants to. But, as the song says, ‘We’ve only just begun’.