The US shift on China: Australia’s options narrow
18 Oct 2018|

At the beginning of October, US Vice President Mike Pence delivered arguably the most significant policy statement produced by the Trump administration. His speech to the Hudson Institute, a Washington think tank, on ‘the administration’s policy toward China’ sets out the most dramatic shift in relations with Beijing since Nixon and Kissinger’s ‘opening’ of relations in the early 1970s. Australians should read Pence’s remarks because they will surely lead to changing American expectations of alliances in Asia. Here are six conclusions about the speech and the trajectory of US–China relations.

1. This is a genuine policy change

Pence’s speech amasses a strong case for ‘a new approach to China’ and builds on a slew of American policy documents such as the national security strategy of December 2017, the unclassified summary of the 2018 national defense strategy, and White House and Pentagon statements on Chinese theft of American intellectual property. The speech points to intelligence assessments ‘about China’s actions’ that conclude ‘Beijing is employing a whole-of-government approach, using political, economic, and military tools, as well as propaganda, to advance its influence and benefit its interests in the United States’. That’s a view reinforced by senior intelligence officials publicly saying in recent weeks that China rather than Russia is the biggest threat to American strategic interests.

The speech is the product of something we have recently overlooked in Washington: away from the soap opera of the Oval Office, coherent policy work still goes on. What we have here is a widely shared administration, national security and intelligence community view that China has launched on an all-out competition to supplant America as the dominant strategic and technological power in the Asia–Pacific. The White House’s National Security Council has been working on a new China policy for months, is deeply critical of the Obama administration’s drift and indecision about pushing back against Beijing’s military annexation of the South China Sea, and is determined to stop the wholesale predation of American intellectual property.

2. Pence’s moment

It’s significant that Mike Pence has emerged as the champion of this new China policy agenda. Vice presidents don’t usually get to steer such consequential issues. Why so this time? Well, unlike Trump, Pence can deliver a tightly scripted 40-minute speech that goes much deeper than Trump’s inchoate distaste for ‘unfair’ trading relationships. Pence’s speech is unfailingly polite about Trump, noting that the president has ‘forged a strong personal relationship’ with Chinese President Xi Jinping, working on ‘most importantly the denuclearization of the Korean Peninsula’. Is it too cynical to imagine that Pence well understands that Trump’s infatuation with the ‘little rocket man’ is a busted flush? Stand aside Nikki Haley, Mike Pence is interested in the presidential nomination too.

3. ‘Wholesale theft of American technology’

A substantial part of Pence’s speech details the range of methods used by China to steal American IP. In June, the White House Office of Trade and Manufacturing Policy said that ‘estimates of the cost of trade secret theft alone range between $180 billion and $540 billion annually’—that is between 1% and 3% of US gross domestic product. A week after the speech, the US Justice Department advised that an intelligence officer, Yanjun Xu of China’s Ministry of State Security, had been extradited from Belgium to face charges of ‘attempting to commit economic espionage and steal trade secrets from multiple US aviation and aerospace companies’.

The criminal complaint lodged with the US District Court in southern Ohio makes fascinating reading, showing that between ‘at least March 2017’ and Xu’s arrest on 1 May 2018, US intelligence officers had tracked Xu’s cultivation of an employee in GE Aviation using the cover of working with academics at the Nanjing University of Aeronautics and Astronautics to steal data relating to the ‘manufacture of jet engine fan blades and fan containment structures’.

The Xu case is one spectacularly public example of what FBI Director Christopher Wray told the US Senate Intelligence Committee in February was being tracked ‘in almost every field office that the FBI has around the country’—industrial-scale Chinese IP theft. Pence rather biblically claimed that ‘the Chinese Communist Party is turning plowshares into swords on a massive scale’. This, rather than the balance of trade, is what has Washington most riled.

4. Curious reference to allies

Pence quotes China scholar Michael Pillsbury, saying: ‘China has opposed the actions and goals of the US government. Indeed, China is building its own relationships with America’s allies and enemies that contradict any peaceful or productive intentions of Beijing.’ The speech points to the ‘debt diplomacy’ of the Belt and Road Initiative. The takeaway for Australia is that Washington is watching how its allies deal with Beijing. Australia is regularly cited in DC these days as being ahead of the game in pushing back against Chinese influence. The US will expect us to continue the push. This surely will be raised when Pence meets Prime Minister Scott Morrison in the margins of the East Asia Summit and APEC in November.

5. ‘Beijing’s malign influence and interference’ in the US

About half of Pence’s speech focuses on Beijing’s shaping and influencing agenda within the United States: ‘The Chinese Communist Party is rewarding or coercing American businesses, movie studios, universities, think tanks, scholars, journalists, and local, state, and federal officials.’ What is most striking about his comments is that they precisely graft onto China’s own efforts in Australia. From encouraging American business leaders to ‘condemn our trade actions, leveraging their desire to maintain their operations in China’, through to media supplements, radio and TV broadcasts, and the role of the Chinese Students and Scholars Association, Pence makes clear that there is an established CCP playbook —called a ‘propaganda and censorship notice’—guiding their activities. It’s in play in Australia too.

6. ‘China wants a different American president’

In a speech with many surprises, perhaps the most startling claim is that ‘China has initiated an unprecedented effort to influence American public opinion, the 2018 elections, and the environment leading into the 2020 presidential elections’. Pence claims ‘what the Russians are doing pales in comparison to what China is doing across this country’ with the aim of removing Trump as president. It would be a great pity if a widely shared American concern about the PRC’s behaviour were to be turned into a highly partisan American political stoush.

Pence ends with the rather forlorn hope that ‘China’s rulers can still change course and return to the spirit of reform and opening that characterize the beginning of this relationship decades ago’. Nothing in his speech suggests that that hope is realistic.

What happens next? Trump remains mercurial and wildly unfocused, but Pence shows that there is a strategic plan behind the broader administration’s China policy. This has Beijing worried. China’s ambassador to the US, Cui Tiankai, told Fox News Sunday: ‘Honestly, I’ve been talking to ambassadors of other countries in Washington DC and this is also part of their problem … They don’t know who is the final decision-maker. Of course, presumably the president will take the final decision. But who is playing what role?’

Now here’s a curious thing: On 4 October—the same day Pence made his speech—Scott Morrison made an address to what was described as a Chinese–Australian community event. The speech appears on the website of the Australian embassy in Beijing, but not the prime minister’s official website.* Morrison says of China: ‘We welcome its remarkable success and we are committed—absolutely committed—to a long-term constructive partnership with China based on shared values, especially mutual respect.’

Shared values, indeed. Australia’s wiggle room to ‘balance’ American and Chinese interests is narrowing. The key message for Australia is that we need to get our own China thinking in order, reduce our dependence on Beijing’s money and set some realistic strategic policy goals for our national security. These are challenging times.


* As of the afternoon of Friday 19 October, we note that Scott Morrison’s speech to the Hurstville Community Lunch has been posted on the PM’s website.