China is facing not just a trade war with the US but an assault on all fronts. Can it survive, and even thrive?

Andrew K.P. Leung says the US is confronting China in multiple arenas, ranging from technology to Taiwan to the South China Sea.
China can emerge stronger if it makes changes that benefit both itself and the US while retaining its development model

Andrew Leung

Published: 3:00am, 24 Jan 2019

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While the world anxiously watches the US-China trade talks unfold, there has been all-out resistance against the perceived “China threat”, albeit with uncertain results.

Following a series of national security and defence reviews, there is bipartisan consensus in the US on the need for an anti-China confrontation. China’s rise is regarded as being at America’s expense.

After joining the West-led liberal trading system, not only has China not become more like the West, but it is perceived to be not playing fair, while turning more authoritarian and assertive. Additionally, it now threatens to eat America’s lunch at the technological top table.

To what extent can China withstand this assault on all fronts?

First, amid the trade war, a Politburo meeting in late October underscored the need for “stabilisation” in six areas – employment, finance, investment, foreign capital, foreign trade and expectations.

By adding 3,200km (1,988 miles) to its high-speed rail network in 2019, China will have over 30,000km (18,641 miles) of express railway lines by 2020, accelerating the linking of urban regions. Other stimulus measures include a medium-term lending facility to help private businesses.

While growth is expected to slow from 6.6 per cent in 2018 to 6.3 per cent in 2019, the weakest in 29 years, the rate is still respectable.

Steps such as buying more American agricultural products and energy, reducing China’s tariffs, opening up markets in finance, insurance and foreign ownership, protecting intellectual property and reducing subsidies of state-owned enterprises coincide with what China needs to boost long-term productivity.

Thus, while Beijing will not abandon its development model and technological advances, a meaningful deal with the US remains probable.

Second, on the technology front, apart from blocking acquisition of “sensitive” technologies, the US targeted ZTE and Huawei, China’s vanguards in 5G development, a 21st century game-changer.

Huawei has leapfrogged rivals in technology, quality-price competitiveness and market penetration, serving 170 countries worldwide. It accounts for a substantial proportion of 5G patents and an increasing number of leadership positions on standard-setting bodies for the industry.

While the company remains confident that it is still a market leader despite restrictions in the US and other markets, it faces an uphill battle amid mounting accusations of intellectual property theft and commercial espionage.

For the US, Huawei is the heart of darkness

China’s huge strides in technology include launching the world’s first quantum satellite in 2016 and landing the world’s first probe on the far side of the moon this month. From 2013 to 2018, China published more scientific papers than any other country in 23 out of the 30 busiest fields and 11 per cent of the most influential papers from 2014 to 2016.

Third, centrality in the global supply chain is China’s trump card. American tariffs are forcing the relocation of some outsourced operations in China, but most are reluctant to move as quality, efficiency, price, infrastructure and economy of scale may not all be transferable.

Fourth, there are restrictions on Chinese talent. Taking aim at China’s Thousands Talents Plan, the US sought to curtail Chinese researchers and university students’ access to science and technology.

However, China has the world’s largest cohort of research and development personnel, numbering over 3 million, one-third of the world’s total. This springs from an annual output of 7 million university graduates, including 300,000 with doctorates, many in technology, engineering and mathematics.

Fifth, in the South China Sea, the US navy has been conducting more frequent freedom of navigation operations, challenging China’s territorial claims and deploying more warships to the Asia-Pacific under the newly named Indo-Pacific Command.

China’s main priority is to safeguard its national interests in the region, including shipping routes for trade and commodity imports, and its “one China” policy over Taiwan.

Despite international disquiet, China has built fortified islands out of sandbanks. China has also modernised its military enabling the country “to impose its will in the region”, according to a US Defence Intelligence Agency Report this month.

Sixth, US-China rivalry is heating up in space. After announcing the set-up of a Space Force, US President Trump signalled the development of a space-based missile defence system.

Meanwhile, China’s own space weapons notwithstanding, its space agency is planning to launch another mission to the moon by December and a mission to Mars next year.

China’s Defence Minister Wei Fenghe (left) and then-US defence secretary James Mattis review a guard of honour in Beijing in June 2018. While China is modernising its military, the US has stepped up its naval activity in the South China Sea. Photo: AP

Seventh, the US is turning arms sales to Taiwan and mutual high-level visits into the new normal. However, while there is no mileage for unification, the most recent local elections have handed the bulk of Taiwan to the party that is less confrontational towards Beijing.

While economic and local issues may have been the key reasons for this, it still signals a more reassuring cross-strait relationship.

Lift-off for China-US rivalry over space’s new frontiers

Eighth, on the ideological battleground, US Vice-President Mike Pence has denounced China’s “unfair trade practices” and “debt trap” diplomacy under its Belt and Road Initiative.

This follows the West’s demands that China shut down “re-education camps” for its Uygur ethnic minority and American threats that it will stop treating Hong Kong as a separate customs area from China over perceived erosion of the “one country, two systems” model.

A Uygur man looks on as a truck carrying paramilitary police passes by during an anti-terrorism oath-taking rally in Urumqi in Xinjiang Uygur autonomous region, China, in May 2014. Photo: Reuters

While these concerns are justifiable, there is also the danger of neo-McCarthyism. Even China’s openly proclaimed “two centenary goals” – the building of a moderately prosperous society by 2021 and the creation of a “rich, powerful, democratic, civilised and harmonious socialist modern country” by 2049 – are interpreted by some, such as US defence policy adviser Michael Pillsbury, as China’s “secret strategy to replace America as the global superpower”.

These voices ignore China’s primarily regional priorities and its unwillingness and incapacity to challenge the US.

Nevertheless, the all-out pushback highlights what William Overholt terms China’s “crisis of success”. To realise its centenary goals, China must change structurally and address legitimate concerns warranted by its rapid rise, without having to copy the West’s development model.

Perhaps in the future, China may look back to this sharp turn in relations with the US as the watershed in its path towards building a global “community of common destiny”.

China would do well to become more open as a global economic powerhouse, more fair as the world’s largest trader and manufacturer, more likeable as a superpower attentive to other nations’ fears, interests and aspirations, and more confident of its own people’s opinions and beliefs.

Andrew K.P. Leung is an independent China strategist. [email protected]

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