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Home , Chinese law, Great Firewall, James Kynge, Michael Spavor, Orville Schell

COMPETING WITH A RISING : POLICIES FOR AMERICAN INTERESTS

March 15 – 18, 2019 | San Diego, California COMPETING WITH A RISING CHINA: POLICIES FOR AMERICAN INTERESTS THE ASPEN INSTITUTE CONGRESSIONAL PROGRAM March 15-18, 2019 San Diego, California

TABLE OF CONTENTS

Rapporteur’s Summary Charlie Vest ...... 3 The National Costs of Harming Qualcomm Orville Schell and David Teece ...... 13 Building a Better Deal with China Daniel Rosen and Scott Kennedy ...... 15 Chinese Views of Information and Implications for the Dean Cheng ...... 21 Whose Side Is Time on? China's Perceptions/Misperceptions of Cross-Strait Relations Yun Sun ...... 33 Xi’s Global Ambition Elizabeth Economy ...... 37 Countering Gray Zone Maritime Coercion in Asia Bonnie S. Glaser ...... 47 It’s Time to Normalize U.S.-China Rivalry: Agree to Disagree, then Cooperate Anyway Robert Daly ...... 57 Conference Participants ...... 63 Conference Agenda ...... 65

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RAPPORTEUR’S SUMMARY

Charlie Vest

School of Global Policy and Strategy, University of California at San Diego

The views expressed here are not the author’s, but rather the rapporteur’s effort to reflect the discussion

Introduction The China Engagement Question On March 15-18, 2019, a bipartisan The opening sessions began with an group of 18 congressional lawmakers met in overview of the trends in Chinese political San Diego, California, to discuss ideas for and economic reform since 1978. One American policy towards China. The theme scholar noted that previous generations of of the meeting, Competing with a Rising Chinese leaders since had, to China, recognized the remarkable transition varying extents, signaled their commitment in U.S.-China relations in recent years to economic reform. Both towards a relationship increasingly marked and Jiang Zemin led tremendous economic by geostrategic competition rather than reforms resulting in the transition from total engagement. While these trends predate state control of the economy towards the Trump administration, they have taken market-led prices and the resurgence of on a special urgency in light of ongoing private enterprise in the 1990s. In the Hu trade negotiations as well as Vice President Jintao administration (2002-2012), market Pence's October 2018 speech outlining the reforms began to stall, and political rationale for a more assertive American messaging shifted away from engagement policy towards China. with the United States towards greater skepticism of Western development models This Aspen Institute conference and of American intentions toward China. brought together lawmakers and scholars to discuss key questions facing policymakers. Participants broadly agreed that Is China's current divergence from economic and political reform has backslid international norms a temporary setback, or under the administration of , and has settled on an economic and that China's foreign policy stance has political system fundamentally at-odds with hardened. Panelists noted that China the norms of advanced industrial nations? If depicts itself as beset by hostile foreign China has chosen divergence, how should forces, and that a growing number of the U.S. respond to best serve American Chinese elites are embracing the view that interests? the United States is China's long-term strategic opponent. Members expressed

their concerns over China's defiance of international in the Sea, its

3 assertive rhetoric regarding , 'E' Engagement and lowercase engagement. continued intellectual theft, its Whereas Engagement meant a strategy of market-distorting high-tech industrial ushering China into the community of policies, and its worsening human rights nations in the hope it would conform to abuses. global norms and values, lowercase engagement is more utilitarian. This These developments sparked debate paradigm gives policymakers flexibility to about China's once-apparent trend towards decide what forms and areas of convergence with the West, and what engagement with China serve American implications this has for U.S. policy. interests. Members opened the discussion by China's Economic Reforms in Reverse questioning why China began veering away from its once-apparent path of Panelists noted that China's progress convergence. Some participants questioned towards economic liberalization that began the premise itself, arguing that the Chinese in 1978 has stalled. Despite Xi's early stated Communist Party never intended to hew to goals of ambitious economic reform, these a Western development path. Others reforms have failed to materialize and pointed to the importance of Xi's rise to Beijing has instead doubled-down on state- power in redirecting China's development led growth. These developments come strategy. amidst a structural slowdown in China's economy: an aging population, slowing Some participants questioned population growth, and rising wages that whether the U.S.'s characterization of China signal the end of China's double-digit as a strategic competitor was a self-fulfilling growth period. prophecy. Others countered that the U.S. had already made extraordinary efforts to What happened to economic engage China, from welcoming Chinese reform? One panelist argued that Beijing's students in U.S. universities to helping failure to push forward the reform agenda is China enter the World Trade Organization. a symptom of China's fragile political system. The expert noted that Xi endorsed One scholar proposed that a comprehensive economic reform plan in understanding China's strategic intent 2013 (known as the "60 Decisions") but toward the United States and its allies was these efforts were met with stinging failures critical to calibrating an appropriate and subsequent retrenchment. Since 2013, response. Others noted that if China this pattern of reform, crisis, and chooses a path running counter to American retrenchment has been seen in interbank interests, it will become increasingly difficult lending, markets, internationalization to cooperate on issues requiring global of China’s currency, and capital controls on action, ranging from counterterrorism to outbound investment. These failures have climate change. This risks a negative diminished Beijing's appetite for economic feedback loop: as these channels for reform, leading policymakers to fall back on cooperation narrow, the overall U.S.-China what they know: the centralized relationship becomes even more administration of the economy. Meanwhile, dangerously fraught. the same problems that halted economic One participant proposed that reform in the first place – indebtedness, policymakers differentiate between capital-

4 inefficiency, and speculation – continue to investment in sectors unrelated to national compound. security, making the disengagement only partial; policymakers must be willing to Unwilling to accept substantially open up again to China if Beijing makes slower growth nor efficiency-enhancing meaningful reforms, making it provisional; market reforms, policymakers have and U.S. policy should be protective of the doubled-down on an unproven economic American economy, not designed to spur growth strategy: high levels of state-led economic crisis in China, thus making it investment in industries they believe are at peaceful. the verge of technological revolution, as exemplified by the "Made in China 2025" Recognizing that China is now facing initiative. Beijing is betting that despite this new economic strains, some Members strategy's enormous wastefulness and its questioned whether U.S. economic policy mixed record of success, this approach will toward China should be crafted with an eye allow China to dominate the core towards precipitating an economic crisis in technologies of the 21st century. China that could spur political and economic reform. Several participants pushed back on One panelist offered three policy this view, noting that explicit efforts to recommendations for Members. First, reset spark an economic crisis could in fact the narrative around China's economic strengthen the regime by playing into CCP growth. China is not blazing the trail of a : that the United States is bent new economic strategy; China is stuck. on containing China's rise. If China began China's embrace of state-led industrial teetering towards economic crisis, one policy is a symptom of its inability to scholar argued, the United States should overcome short-term crises, and it does not keep its distance. offer a serious alternative to the Western model (despite its drawbacks). The U.S. has Members focused a great deal of tools to counter China's distortionary attention on the trade negotiations with policies, including investment screening and China: what is the American interest, and export controls. Policymakers should work what should we expect from China? with partners and allies to help implement Discussants noted that China's primary aim similar controls in their economies as well. is to preserve the quo. In the short term, Beijing is likely to favor a trade deal Second, policymakers must be that includes some managed trade transparent about the costs and benefits of (government-directed purchases of adopting a more assertive economic posture soybeans, natural gas, etc.), but forgoes towards China. Holding firm to American deeper reforms to China's economy. Several long-term interests might require participants worried that a weak deal would implementing safeguards for the medium only delay an inevitable reckoning with term, affecting American firms ranging from China, and could in fact undermine the U.S. agriculture to information technology. bargaining position if a deal boosts Chinese Third, the panelist proposed three imports from the United States at the principles to guide a more assertive expense of our partners and allies. American economic policy towards China. The panelist noted that if Beijing Economic disengagement with China should decides to commit to a meaningful deal, it be partial, provisional, and peaceful. The has concrete measures that it can United States can say yes to Chinese

5 implement now to signal its commitment, BRI, rather than a concerted foreign policy, even if deeper reforms take more time. is instead a catch-all branding strategy for Among others, these include elimination of China's overseas investment. Although foreign joint-venture requirements, ending some participants characterized the BRI as import quotas in film and television, and solely a predatory loan scheme, scholars granting access to American financial argued that it serves a variety of purposes: services companies. as a soft-power initiative, an outlet for industrial overcapacity, a tool for overseas One expert speculated that although political influence, and a means for recycling the United States has leverage in the trade Chinese savings into diversified negotiations because China remains investments. dependent on U.S. markets and technology, Beijing would fight hard for its high-tech Despite the corrosive nature of some ambitions. Beijing is expected to push back BRI projects, some panelists argued that on American efforts to curtail these Chinese overseas investment can be a force ambitions both within and outside of formal for good, given increased transparency and negotiations; if Huawei Chief Financial guidance from more experienced Officer is extradited to the development lenders. Members noted that United States, American executives in China Congress has already taken steps to provide could be at immediate risk of detention – a much-needed American alternative just as happened to two , Michael through the American Reassurance Initiative Kovrig and Michael Spavor, after Meng's Act and BUILD Act. arrest. China's Military Posture in the Pacific Discussion of China's high-tech In a session on China's military ambitions led to broader questions activity in the Pacific, panelists noted that regarding innovation in China. One China has adopted a more assertive military discussant raised the view that creative posture, particularly relating to Taiwan and destruction is the key to genuine the South China Sea. innovation. If social stability is the watchword of the Xi era, how much space Panelists remarked that China has for creative destruction can there be? focused its strategy on building asymmetric Others pointed to the unpredictable nature capabilities in China's maritime periphery. of innovation; once bet heavily on China is striving for the capacity to strategic technologies only to be blindsided dominate the air and sea domain around by the emergence of the . Some Taiwan by amassing the world's largest participants recognized that China is cruise and ballistic missile arsenal. China exposing itself to these same risks today, now has the ability to interdict U.S naval but raised the possibility that China's bets assets along its coast, an issue that drew on technologies such as Artificial concern from Members of Congress. Intelligence and electric vehicles may be In the South China Sea, China has well-placed. What implications would this engaged in gray zone operations – military have for American power? operations short of provoking war – to Members of Congress took interest control and militarize features in the South in the implications of China's Belt and Road China Sea. These operations typically Initiative. Several discussants noted that the involve enforcement, coast

6 guard, and paramilitary fishing vessels. This China in the region. Discussants approach has allowed China to gradually commended the administration's support for change the status quo in the South China freedom-of-navigation operations, but noted Sea. that the administration's vocal skepticism of treaties and partnerships had undermined Although international have confidence among regional partners and ruled against China's "nine-dash " claims allies. The preponderant view in the room in the South China Sea, China continues to was that the alliance structure in the Pacific militarize its claims and harass U.S. ships serves American interests, that the Free and conducting freedom of navigation Open Indo-Pacific Strategy is a welcome operations. China has rejected these development, and that the United States rulings, and aims to resolve territorial needs to build on this progress with much disputes by negotiating with claimants greater economic engagement in the bilaterally – where China's size works most region. in its favor – rather than multilaterally. Additionally, China has pressed members of In addition to discussion of China's ASEAN to accept a code of conduct in the maritime strategy, Members expressed South China Sea that bars companies from concern over China's role in the outside the region from jointly participating denuclearization of the Korean Peninsula. in oil and gas development projects. The panelist noted that China is similarly concerned about North 's nuclear One panelist offered a set of program, but that the U.S. and China have recommendations for policymakers to no shared vision on how to achieve advance American interests in the South denuclearization. China, like , China Sea. The U.S. should keep oceans wants sanctions lifted prior to navigable and reinforce international norms denuclearization. In the long term, China and ; despite China's flouting of the wants U.S. military presence removed from ruling of the Permanent of , and would be happy to see a , only seven countries have re-united Korea with closer ties to China. called for China to comply. The U.S. should work to prevent China's rise as a hegemon Cyber and Information Warfare in Asia, and to do so requires both a clearer One panelist contended that China policy stance from Washington as well as views information as the main currency of cooperation with China's maritime neighbors power in the 21st century, and that the to counter coercion from Beijing. The United States remains vulnerable to Chinese panelist recommended that policymakers information warfare. act to protect the rights of countries to jointly exploit resources within others' The contention was made that China exclusive economic zones. The U.S. can views information control as a critical tool to additionally consider sanctions on Chinese influence public opinion at home and companies participating in the militarization abroad. Domestically, China has tightened of maritime features. Finally, the United control over traditional media, heavily States should continue its leadership in a censors online media, and blocks foreign Free and Open Indo-Pacific Strategy. social media services. The government has instituted a social credit score system that Members assessed the Trump tracks online activity and revokes freedom administration's approach in countering of movement for blacklisted individuals.

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Abroad, Beijing has bolstered its state destination for scientists, engineers, and media operations overseas – such as mathematicians. One expert pointed to the through the media network CGTN – and fact that breakthroughs in AI take place begun exporting censorship and surveillance when people work together across technology to other authoritarian regimes. disciplines, and that a side-effect of a On a strategic level, China seeks to erode tightening academic environment in China the norms of global management of the could be slower innovation. Internet in favor of national Internet Members of Congress debated how sovereignty. best to address China's 5G challenge and its Beijing has prioritized information premier telecommunications giant Huawei. technology in its military modernization One concern was the risk of diplomatic drive. The People's Liberation Army has defeat if the United States takes a hardline sought to institutionalize cyberwarfare stance with allies on Huawei's global capabilities within the Strategic Support infrastructure buildout without offering a Force, which operates at war and in workable alternative. In one view, the U.S. peacetime. While integration of cyber could consider ways to mitigate the risk of capabilities is recognized as a key Chinese using Huawei technology by using Huawei goal, some discussants suggested that we devices in some locations but not others. should not overstate China's success in The opposing view argued that the integrating cyberwarfare capabilities in its structure of the Internet is so complex that military, and that institutional obstacles rerouting sensitive data around Huawei remain. technology would be technically difficult, and that Huawei has already been On U.S cybersecurity, a widely cited suspected of hiding malicious code in their figure appraised the cost of Chinese devices. economic espionage at $300 billion per year. Chinese civilian, military, and Chinese Perspectives on U.S.-China government-affiliated hackers engage in Relations cyberespionage targeted particularly at Throughout the conference, advanced industries. The panelist proposed Members of Congress took interest in that the U.S. should do more to prevent Chinese perceptions of U.S.-China relations. cyber-intrusions, build resilience, and deter What does China want? How did Xi rise to hackers. power? How do average Chinese people Members of Congress expressed feel? concern over China's leaps in artificial One panelist argued that the China's intelligence. Discussants noted that weaker ultimate goal is hegemonic stability – a privacy laws in China may give Chinese AI stable and secure Asia with China at its scientists an advantage from access to center – and that a growing number of more data. Other participants noted that elites in the People’s Republic of China although Chinese scientists may have more believe that the time has come to realize data to work with, their data tends to be this goal. While Deng Xiaoping's maxim of only Chinese, which limits the value of their foreign affairs was "hide your strength and artificial intelligence algorithms in overseas bide your time," Xi Jinping believes that contexts. Others noted that the United China has now entered a "period of historic States has an advantage as a top opportunity" during which China can

8 achieve national rejuvenation under the they underestimate the power of nationalist leadership of the , sentiment in China. Policymakers also need with Xi at the helm. to recognize that Chinese diplomats view diplomacy as transactional: to cooperate on One panelist noted that the wisdom matters important to the United States, of this approach is a point of debate among Chinese diplomats will demand concessions. Chinese elites. Many feel that Xi has By the same token, China has been prematurely challenged U.S. hegemony, and emboldened by U.S. unwillingness to take that the trade war is of Xi's risks; China will continue to pursue overreach. One view is that Xi's decision to aggressive policies until the United States rule China from center-stage has made him demonstrates the willingness to push back vulnerable because policy failures will be and exact costs for assertive Chinese pinned solely on him. Yet despite elite behavior. discontent over some of Xi's policies – particularly the perceived wastefulness of Members expressed concern over the and intensifying Taiwan's growing international isolation political indoctrination – Xi has no obvious under PRC pressure. The panelist noted that challengers to his power. congressional action can be a strong deterrent and that the only reason the PRC One discussant noted that Chinese doesn't coerce Taiwan more aggressively is elites broadly agree that the U.S. is the because of U.S. pressure. Nonetheless, the China's single largest national security PRC continues to isolate Taiwan threat, and that the U.S. is committed to internationally, and the panelist encouraged containing China. The prevailing view in Congress to consider how to impose costs China is that U.S.-China tensions are a on the PRC for this behavior. Other experts historical inevitability stemming from suggested that Congress can pass China's rising power amidst waning U.S. to help Taiwan participate in hegemony in the Pacific. global governance organizations. Chinese elites also tend to believe Members took interest in the views that time is on China's side. As China's that average Chinese hold of Xi Jinping. The power waxes, the United States will panelist remarked that Xi's popularity gradually lose its willingness to bear the among lower- and middle-class Chinese costs of hegemony in the Pacific. This view stems from the perception that Xi's anti- allows the PRC leadership to be patient corruption campaign had succeeded in about realizing its claims to Taiwan. Even if uprooting rampant corruption from the prior public opinion polls in Taiwan show that Hu-Wen administration. The panelist noted peaceful unification is becoming increasingly that entrepreneurs, by contrast, were remote, PRC elites believe that the United concerned about U.S.-China trade tensions States will not always come to Taiwan's and the growing tension between Xi's statist rescue. economy and market-led innovation. One panelist concluded by offering Asked about , recommendations to Members. U.S. the panelist suggested that the Chinese policymakers should consider how to government has been pleased that the U.S. prepare for China's emergence as a has not pushed back more strongly against stronger regional power. Americans should not expect China to democratize, nor should

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China despite its worsening human rights overreacting to concerns about Chinese behaviors. influence operations in the United States. China's Quest for Power under Xi On human rights, several Members voiced concern that Congress was not doing Panelists broadly agreed that Xi enough to push back against the detention Jinping's rise to power has made China of over one million members of the Uyghur more authoritarian at home and more minority in China. Members noted that the assertive abroad. In governance, Xi has chairs of the bipartisan Congressional- overturned prior norms of consensus and Commission on China had signed collective decision-making in favor of one- a letter urging the administration to pursue man rule. Under Xi, the CCP has taken a sanctions against Chinese officials and more active role in social and economic life, companies involved in the detentions from demanding party stakeholders on through the Global Magnitsky Act, but that corporate boards – including foreign no action has been taken thus far. companies and joint-ventures – to the creation of a state in Xinjiang, where On Chinese influence operations, more than one million Uyghurs are several Members of Congress worried that estimated to be detained in so-called re- friction with China was spurring dangerous education facilities. Foreign anti-Chinese and anti-Chinese-American nongovernmental organizations now sentiment in the United States. Some operate in China under much stricter participants worried about visas for Chinese supervision and control. Beyond China's students and researchers in the United borders, the CCP exerts pressure on States, noting that American laboratories overseas students, academics, and would collapse without Chinese talent. By dissidents living abroad. the same token, some participants raised the need to protect visiting Chinese A panelist recommended that students from CCP pressure and Members consider how best to recalibrate surveillance while they study abroad, and the U.S.-China relationship under these new stressed the role that universities could play conditions. Now that the Trump in protecting their students from threats administration has pressed the reset button, and coercion. Experts noted that there is Washington can now turn to strengthening yet no evidence of Chinese direct meddling U.S. economic ties in the region and in U.S. elections. engaging allies and partners. One panelist proposed that the U.S. continue to seek Normalizing Competition with China areas of cooperation with China – both to The final session of the conference serve American goals in areas of shared featured a panel and discussion among interest, but also to bolster reformers within Members of Congress on the key questions the Chinese . To counter facing policymakers. China's Belt and Road public relations blitz, the United States should reframe the The weekend conference began by narrative around U.S. global engagement; asking Members of Congress to consider the U.S. remains the largest donor to Africa, whether the U.S. could afford to continue and ranks just behind the EU and Japan in pursuing a China strategy based more on investment to Southeast Asia. Finally, the the hope of cooperation than competition. panelist argued that the U.S. should avoid The prevailing view among participants was

10 clear: We should expect a high-stakes, China's leaders oppose, and held that these contentious relationship with China for the values are essential to long-term U.S. long-term. and prosperity. Yet others raised concerns that facing down China would be difficult to Based on this view, three justify to constituents whose foremost recommendations were posed in the final concerns are economic ones. session. Members of Congress noted that we First, clearly define the threat from lack a historical paradigm to frame our China. Policymakers should ask: given understanding of these threats. Neither the China's own very real political, economic, Cold War, a competition between two and environmental constraints, what is the superpowers with opposing worldviews and worst it could do? One panelist suggested no economic ties, nor the 1970s and 1980s that three immediate goals should be to competition with Japan – an economic rival prevent Chinese dominance of Asia (while but military ally – apply to competition with accepting our own inability to dominate Asia China today. This makes "right-sizing" an ourselves); prevent the spread of American policy response to China more authoritarianism; and preserve peace by difficult. avoiding an arms race with China. Throughout the conference, Second, be transparent with Members of Congress broadly agreed that ourselves, our allies, and our children about competing with China requires us to get our the costs of countering China. What costs own house in order. Members pointed to are we willing to bear to counter China, and the need to improve infrastructure, how can we justify them to the American education, and government funding for public? research and development. Some Members Third, prepare for a world where argued that this should include instituting both the United States and China are strong visa and immigration rules that preserve the and prosperous. How can we accept the U.S.'s advantage as a hub for global talent. fact that China will play a greater role in Participants noted that China's global affairs while preserving American economic rise had unforeseen interests? consequences for American workers, and One panelist stressed that that their impacts on workers' livelihoods normalizing competition with China not only persist today. One expert noted that tariffs does not preclude engagement, it demands will not bring relief to economically it. Peaceful competition with China will dislocated communities, but that other tools require engagement on a variety of global – including "place-based" policies, reform of challenges, among them AI ethics, arms the Earned Income Tax Credit, and control, peacekeeping, disaster relief, global partnerships between educational health, as well as some commercial and institutions and employers – can better help academic partnerships. communities recover. Members of Congress disagreed on Members of Congress generally the specific threats that China poses to agreed on the need for the United States to American interests. On one hand, some reengage economically and diplomatically in participants noted that U.S. foreign policy the region. Many pointed to growing has long championed universal values that bipartisan support for the U.S. Import-

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Export Bank and progress through the ARIA strategic competition with China will be a and BUILD acts. Some pointed to the need defining issue of the 21st century. The most to bolster our diplomatic corps and train a consequential question facing policymakers new generation of talent with strong now is how the United States should Chinese-language skills. Members broadly respond. expressed their support for the U.S. alliance Though participants' viewpoints system and engagement with regional differed on this question, most recognized partners as a foundation of successful that a reset in U.S.-China relations now competition with China. offers policymakers an opportunity for Conclusion bipartisan action to define a strategy that serves long-term American interests. Participants left the conference with the sense that the possibility of long-term

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THE NATIONAL COSTS OF HARMING QUALCOMM1

Orville Schell and David Teece

Director, Center on U.S.-China Relations, ; Professor, Institute for Business Innovation, Haas School of Business, University of California – Berkeley

As the U.S. and China careen toward and appreciate most, such as fast data an increasingly adversarial relationship, a rates, mobile video, GPS navigation, national security question looms: Can our location tracking and more. A very large country maintain leadership developing, patent portfolio underpins, and protects, using, and deploying key technologies such Qualcomm’s vast investment in those as 5G, artificial intelligence and robotics? technologies. One important drama playing out in U.S. From its early days, Qualcomm District Court in San Jose will help answer followed the industry-standard practice of that question for 5G, the foundation of licensing these technologies to device- many other new technologies, in which the makers. Later, after Qualcomm started Sino-American contest is proxied by developing chips, Qualcomm adopted corporate entities — Huawei for China and industrywide licensing practices that San Diego-based Qualcomm for the United resulted in a reasonable policy that a user States. of its , such as a device- Qualcomm stands accused by the maker, must have a Qualcomm patent Federal Trade Commission, with the active portfolio license to buy Qualcomm chips. It support of Apple and key testimony by is to this practice that the FTC has objected, Huawei, of overcharging for its industry- claiming that Qualcomm’s business model is founding intellectual property backed by the anti-competitive. alleged threat to withhold its industry- Since by law the FTC regulates leading microprocessor chips. If Judge Lucy competitive conditions, not prices, the H. Koh’s ruling, which could happen soon, commission somewhat dubiously argues goes against Qualcomm, a harmful blow that Qualcomm has too much bargaining could be dealt to the California tech leverage against Apple and other device- company that has powered the United makers, such as Huawei. For example, to States’ global competitiveness in wireless reach this conclusion, the FTC arbitrarily technology. segments the market for LTE chips into Qualcomm, one of America’s most premium and nonpremium, confines its innovative companies, delivers the focus to the premium space where technologies underneath many of the Qualcomm has been successful, then smartphone features that consumers value ignores the competitive forces at work in

1 Originally published in the San Francisco Chronicle, February 7, 2019

13 that space, where Qualcomm faces if in March 2018 the Committee on Foreign competition not only from MediaTek, Investment in the United States (CFIUS) Samsung and Intel, but Huawei. (Ironically, had not already explicitly recognized, in Apple dialed down the performance of the blocking an acquisition of Qualcomm by Qualcomm chips it puts into its iPhones so Broadcom, that “a reduction in Qualcomm’s that unlucky consumers who got an iPhone long-term competitiveness ... would with an Intel chip inside wouldn’t notice the significantly impact U.S. national security.” slower speed relative to the equivalent The judgment was that even though Qualcomm-powered iPhones.) Broadcom was Singapore-based, the research contribution made by Qualcomm California’s tech companies, big and was simply too important to the U.S. small, should shudder at the FTC’s “tunnel national security to risk such offshore vision” because highly innovative firms ownership. So now, what Broadcom could could easily be accused of monopoly in not do by acquisition, our own FTC may gerrymandered markets, possibly resulting accomplish through a lawsuit. in overturned business models. Bad theories leveraged against innovative firms do not There is little doubt that if Judge make for sound antitrust policy nor, when Koh enters an injunction dissolving those rivals are geopolitical stand-ins for Qualcomm’s business model, which is what large powers, for sensible national security the FTC has requested, all licensees will policy. cease paying their agreed-upon royalties, and Qualcomm will in short order be in Qualcomm’s evident licensing aim is financial distress. And with the FTC and to get Apple — and all users of its CFIUS at odds and no institutional technology, whether in America, Europe or mechanism to iron out their differences, in China — to pay for the use of that U.S. national interest may also become a technology. Patents are not self-enforcing victim. and Judge Koh (if not the FTC) should recognize that Qualcomm’s business model In sum, it would be self-defeating, if is simply trying to get reluctant and an effort to resolve an ill-considered recalcitrant infringers to pay a price antitrust action ended by seriously sufficient to support the R&D investments compromising America’s global needed to propel the industry forward. competitiveness and national security Without that support, the innovation will not interests, especially as our confrontations be made in the USA. It is precisely here that with China over tech theft, trade inequities, an ill-conceived antitrust suit undermines the South China Sea, Taiwan and myriad national security. other issues show every sign of becoming more belligerent. The regulatory excess on display in FTC vs. Qualcomm would be less troubling

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BUILDING A BETTER DEAL WITH CHINA1

Daniel Rosen and Scott Kennedy

Founding Partner, The Rhodium Group; Director, Project on Chinese Business and Political Economy, CSIS

With Chinese vice premier coming to Washington, D.C. this week to engage in trade negotiations with his U.S. counterparts, this is an important time to take stock of the U.S.- China relationship, assess the goals of the talks, and chart a pathway forward. The Problem the required inducements extended to state-owned enterprises, and pliant The old foundations of the U.S.- domestic firms led to massive distortions at China commercial relationship have cracked, home and abroad that now erode the gains. and a new basis for the two is still Rather than create stability, intervention is unsettled. For decades, bilateral trade and simply leading to new and probably worse investment ties were on balance, mutually concerns about instability, as the tab for beneficial, and did not directly threaten U.S. politicized lending comes due at home and national security. Losses in some U.S. resistance to distortions in competition manufacturing jobs were offset by gains coalesces abroad. In the United States and elsewhere, lower prices for consumer goods beyond there is a growing consensus— lifted household buying power, and the despite impolitic U.S. unilateralism—that economy broadly shifted away from low- Beijing must change course on economic margin activities that were migrating to governance. China toward knowledge-intensive innovation upstream and high-value Beijing’s Choice consumer services downstream. But over At their most recent presidential the last decade, that balance between meeting in Argentina, the United States and benefits and challenges shifted. There are China agreed to a 90-day timeline for multiple reasons for this, but the most reaching an agreement to resolve their important is that China has altered its policy differences. The debate over whether to mix in ways that are inimical to market expect a big deal, a small deal, an extension economies and the liberal international of negotiations, or a collapse of talks and a order they have built. Since 2012, China has new wave of protectionist penalties has reverted to reliance on state-led industrial been unending. We believe there is a need policy to generate growth as successive to reconceptualize the goal of the process. marketization steps became more difficult. The question is not whether China will For a time, statism seemed to become a overnight and deliver higher growth at least in China, but U.S.-China relations will return to “normal,”

1 Originally published by the Center for Strategic and International Studies, January 28, 2019 link: ://www.csis.org/analysis/building-better-deal-china

15 but what kind of system China believes applications for U.S. banks in China to buy serves its interests and what sort of out their partners can be approved; licenses relationship with the United States that for Visa and Mastercard to offer electronic choice permits. Washington has already payment services and for Moody’s, Standard decided, after a debate that started in the & Poor’s, and Fitch to issue domestic ratings previous administration but was largely in China can be issued; quotas on U.S. settled under Team Trump, that the movies can be eliminated entirely; state- commercial relationship with China must be owned enterprises can be held to antitrust bounded both by fairness and the guidelines for mergers and acquisitions expanding needs of U.S. national security. If instead of shielded; industrial and China wants maximum engagement with agricultural subsidies can be capped and the United States, it needs to make made available without discrimination to substantial economic governance changes domestic and foreign firms (and fully so that the division of benefits is far more reported to the World Trade Organization); symmetrical. If China prioritizes political and market access for U.S. companies in engineering of its economy and firms, there high value-added services including is less scope for linkage with the United healthcare, education, logistics, cloud States. Beijing will do what it thinks is right services, and e-commerce can be for China, and Washington must be announced and expedited. If this looks like prepared for either outcome—or something a run-on sentence, it is. It is far from in between. Think of a sliding scale: China comprehensive but describes the right will decide if it wants to converge with degree of ambition for a negotiating advanced economy liberal norms, and the outcome that would break the ice forming United States will calibrate how engaged it over the relationship. can be in response. That is the basic These immediate changes would equation on which an enduring U.S.-China build goodwill and serve as a starting point deal must be built, whether this March, this for structural reforms to be implemented year, or in the years to come. over years to come on a feasible schedule. Immediate Reforms and Long-Term Listing out all the elements of institutional Structural Changes and policy changes that Beijing will pursue if it is earnest about marketization would To the extent China wants a broad take hundreds of pages. Indeed, it has and extensive relationship, it will need to taken hundreds of pages, because this has make structural reforms to its economy. been done before. The World Bank-State Catching up on the reform and opening Council Development Research Center study agenda will take time, after notable delays China 2030, the Communist Party’s 60 in recent years, but Beijing can make Decisions of the Third Plenum in 2013 and meaningful progress immediately. Above companion materials: these and other average tariffs on autos and other lengthy documents have elaborated what manufactured products can be normalized; China needs to do to make the market foreign joint venture requirements can be work, and why. Rather than reiterate every eliminated (yes, now, and across every micro-element of such a package, we sector); China’s negative list for inward recommend looking for decisive action to direct investment can be cut by three- reform in three acid test areas that if done quarters to the advanced economy average;

16 right will flow down to the rest of the bureaucratic gatekeepers but by the system. discipline resulting from a commercially- based financial system and a competitive First, the commitment to make the environment that rewards quality and financial system commercially oriented penalizes poor performance. As the Chinese instead of an extension of state planning Communist Party avowed in the 60 must be made manifestly clear. That will be Decisions manifesto issued early in the Xi a long and challenging task, but it starts era, reiterating an insight the leadership with an acknowledgment that the financial had stressed in 1993, China needs a system is not operating in a wholly “unified, open, competitive and orderly” commercial or sustainable manner today. market system that corrects defects Second, the essence of sustainable plaguing the economy as a result of financial intermediation is increasingly about excessive government interference which returns on investment in intellectual suppresses marketization. Absolutely property. China has many years of hard correct: now it needs to be visibly realized. structural work ahead to create healthy This set of three must-have incentives to protect intellectual property elements is illustrative, not comprehensive. rights (IPR). The formal basis of Myriad other commitments need attention, Washington’s unilateral tariffs and action from non-discriminatory recognition of against China is a set of four arguments industrial standards, certification and about technology and IPR. A serious testing, to the system of explicit and implicit structural outcome in these negotiations subsidies to profit repatriation. must include some agreement that if IPR is not better protected in China in practice, Enforcement and the Sliding Scale then for the damage to private Ultimately, the room for U.S. property will be necessary, and that engagement with China should be abundant evidence of past patterns of calibrated to the degree of convergence pressure on foreign firms require a radical with advanced economy norms and improvement in transparency and pathways structural market reform Beijing intends. for legal recourse today. The duration and extent of interim Third, Beijing needs to align its safeguards and transition mechanisms competition policy goals with the goal of should be geared to how much time China protecting consumers instead of protecting requires to implement that marketization, producers. Even today Chinese officials talk not an arbitrary timetable. It is no sin for about “excessive” competition as though it China to require time to implement reforms; should be reduced until all incumbents are but nor is it benighted for the United States happy with their profitability. If China is or any other market economy to maintain serious about being pro-competitive, then temporary safeguards to remedy distortions national treatment for foreign-invested arising from China in the meanwhile. Such enterprises with regard to registration, safeguard tools as a Transitional Review market access, and other elements of Mechanism (TRM) for the first five years should take precedence over after China’s accession to the World Trade protecting domestic margins. Fears about Organization (WTO) and a non-market “excessive” competition, price wars, and economy pricing methodology for trade overcapacity should be addressed not by

17 remedy cases made compromises possible accomplishments, hence arguing for a in the past and have a role in a deal today. sunset to safeguards, and of Washington’s case that marketization is fading. In the years following China’s WTO entry, the United States focused its trade Escaping the Win-Lose Trap remedies narrowly on individual cases, We have laid out elements that add not—given the seeming clarity of intentions up to a successful U.S.-China trade China’s WTO accession was understood at negotiation. Success cannot mean winning the time to convey—on larger questions of or losing for either side. And the U.S. systemic directions. Alas, today we are told, interest requires a wider set of options than even by some Chinese leaders, that we simply yes, no, or never. A collapse of talks misconstrued China’s future course; that we and escalation of tariffs and only wanted to believe that Beijing had a countermeasures is neither the first-best liberal model of market economics in mind. nor the worst outcome. It would destabilize Regardless whether this is valid or both a China suffering from slowdown and revisionist, the United States must take a sagging business confidence, a U.S. more holistic view of China’s trajectory now economy that won’t enjoy a debt-financed to prevent such misunderstanding. If fiscal stimulus forever, and the rest of the elements in China harbor hostile or world left wondering what the future holds predatory intentions toward liberal nations, for almost half the global economy. A deal the United States will take a series of self- limited to Chinese purchases of U.S. protective steps far more hawkish than products at the expense of other exporters, transitional safeguards, including meanwhile, would just rearrange problems, restrictions on visas, educational and not solve them. Closing the entire U.S.- professional exchanges, technology sharing, China bilateral trade gap in just a few years and cooperation arrangements. These is impossible; closing it without causing would add up to profound disengagement, trade diversion from other nations’ and this outcome would be costly and shipments of natural gas, soybeans, unfortunate even if deemed necessary. airplanes, and other products is not even Measures of progress and half-possible. If the U.S.-China outcome is compliance should not be based on at the expense of other nations—especially subjective impressions or political passions our allies—or leaves China’s structural but instead need to be rooted in objective economic problems unaddressed then it will data on the macroeconomy, the financial dissolve within months. system, specific industries, and in some The good news is that China needs instances companies. To make an objective to embrace a structural reform agenda as approach to the relationship possible much as the United States and other improvements in the quality and advanced economies need to insist on it. transparency of economic statistics are China’s entrenched interests will fight tooth essential. Economic data generally improved and nail, but just as with WTO accession, in past decades (as lengthy analyses have China as a whole will benefit immensely described), but presently that progress from restored internal structural adjustment seems to be eroding. Reliable and and external stability in its relationship with transparent data is the wellspring both of the United States and its other trading Beijing’s ability to trumpet its partners. Beijing will have a better

18 opportunity to make its economic transition risk that consensus toward that end-point sustainable and avoid the middle-income could slip along the way. A deal based on a trap, and mitigate the difficulty of financial sliding-scale principle will require U.S. distress. For all sides, it is more important flexibility: if China is ready to reform, to get the right kind of deal than a Washington must temper plans for superficial one based on false permanent disengagement in favor of achievements. transitional safeguards instead. If China is not prepared to do so, then the United The prospects are not black and States should accept that choice, however white. Even if China is committed to disappointing, and adjust accordingly with marketization, it will take years to realize much less malice in mind and more focused that intention, and we are all awake to the self-interest.

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CHINESE VIEWS OF INFORMATION AND IMPLICATIONS FOR THE UNITED STATES

Dean Cheng

Senior Research Fellow, The Heritage Foundation

When it comes to Chinese activities in the information domain, much of the public’s attention has been focused on its information extraction activities. Hacking of U.S. government databases, such as the Office of Personnel Management (OPM) as well as various corporations have tended to dominate the American public’s discourse on Chinese information activities. But understanding the reasons and strategy underlying China’s actions is essential, for this context shapes the Chinese approach to information, and information technologies, which includes artificial intelligence, quantum computing, and space operations.

How China Sees Information and to gather accurate information in a timely Future Power manner, transmit and analyze it, and then rapidly exploit it, is the key to success. The most important element, as These abilities are the centerpiece of any reflected in Chinese writings regarding the effort to achieve “information dominance”— nature of future power, as well as on the ability to gather, transmit, analyze, and informationized warfare, information exploit information more rapidly and warfare, and information operations, is that accurately in support of one’s own ends, the Chinese leadership sees while denying an adversary the ability to do information as inextricably linked to the same. both the broader national interest, but also to regime (or at least Chinese At the same time, however, the free Communist Party, CCP) survival. It is flow of information constitutes a dire important to note here that this is not potential threat to CCP rule. While the simply about the role of information in Chinese Communist Party may no longer wartime. The Chinese leadership is not emphasize ideological arguments of “from solely focused how information might be each according to their ability, to each applied in a military conflict; rather, they according to their needs,” it remains firmly see it as being a determinative factor in the committed to its role as the “vanguard ongoing competition among states writ party,” and therefore, the sole legitimate large. political authority in the People’s Republic of China, PRC. It also likely sees the collapse This, as Chinese writings emphasize, of the as a consequence of the is because of the ascendant role of failure to retain the “vanguard party” role, information in the 21st Century’s economic and as important, the liberalization of and political realities. In their view, we are informational controls. The policies of living in the Information Age, and the ability glasnost and perestroika, of opening and

21 reform, led to the downfall of the other qualitative changes wrought by the rise of major Communist Party. Just as the Information Age, are different in scale information is the currency of economic and and scope. Controlling information now military power, it is also the basis for means limiting not just newspapers and political power. television programs, but the functioning of the Internet, on a global scale. This maodun (矛盾), or conundrum, sets the stage for the second key Some of this may be achieved conclusion. As an authoritarian party, and through technical means. The “Great with the fate of the Communist Party of the of China,” for example, is a major Soviet Union as an object lesson, the CCP undertaking to examine, in detail, the data cannot afford to allow the free flow of streams that are trying to enter the PRC. information. This would allow too many Chinese state-run telecoms reportedly challenges to its rule. The Chinese hijack and redirect portions of the Internet leadership therefore will seek to that are not normally intended for Chinese control the flow of information. destinations. To some extent, efforts at exerting But China’s efforts are not limited to this control are merely sustaining the technical side. The effort to influence, if longstanding policies. The CCP has long not control, the functioning of the Internet demonstrated a willingness to employ extends to how the PRC looks upon the extravagant lengths, such as the massive international system, including the organizational infrastructure to support governance of the international common censorship, to limit that flow. However, spaces. If the Chinese are going to because of the nature of the Information control and influence information flow Age, including extensive interconnections to China, then it will have to shape and and linkages across various information mold the international structures networks, the CCP cannot only control the which manage that information flow. flow of information within China. Instead, This is not to suggest that China is about to it must also control the flow of information overthrow the current system. Chinese to China. writings regularly note that the PRC is still in the period of “strategic opportunity,” which This effort to control the external China needs to exploit, if it is to improve flow of information constitutes a itself, and elevate itself to the ranks of fundamental, qualitative change in how middle-developed powers.1 Thus, China nations approach information as a resource. must continue to pursue policies of peaceful Of course, states have long sought to shape development and interaction. and influence how they are portrayed. Nor is limiting access to outside information a As China has grown steadily more new phenomena. However, the Chinese powerful, though, it has increasingly efforts, in light of their views of the questioned the underlying international

1 YUAN Peng, “China’s Strategic Opportunity Period Has Not Ended,” People’s Daily Online (July 31, 2012). http://en.people.cn/90883/7893886.html; XU Jian, “New Changes in the Next Decade of China’s Period of Strategic Opportunity,” Guangming Ribao (October 30, 2013). http://cpc.people.com.cn/n/2013/1030/c83083-23372744.html; and ZHANG Yunling, “Deeply Considering the International Environment Confronting Our Nation’s Period of Strategic Opportunity,” Seeking Truth (December 18, 2015), http://theory.people.com.cn/n1/2015/1218/c83846- 27946374.html

22 structures that more and more often waging the kind of gray conflict typical of constrain its behavior. These structures, as hybrid warfare. Chinese writings note, were often Therefore, at the strategic level, the formulated without input from the PRC. A PRC will be constantly striving to shape both reviving China, as well as a CCP intent on domestic and foreign views of itself through staying in power, increasingly chafes at the information that it transmits and these externally imposed limitations. projects. Meanwhile, it will be trying to Nonetheless, challenging the current determine and dictate how others view structure assumes greater urgency as the China, as well as identifying their strengths PRC, and especially the CCP, also sees and weaknesses. These efforts are no itself as increasingly in competition different than how every state behaves, in with the other major powers, terms of collecting intelligence about especially the United States. It is the potential allies and adversaries. United States that champions Internet Where the PRC has diverged from freedom and, more broadly, the free flow of other states’ practices, however, is their information. Moreover, as many Chinese growing focus on dominating the officials have argued, it is American policies information-space in both peacetime and that encourage China’s neighbors to wartime. In particular, Chinese efforts to challenge Chinese hegemony over its littoral establish information dominance, while waters, or help sustain the Dalai Lama and somewhat constrained in peacetime by the other sources of internal instability. international system, are likely to be more This does not mean that the PRC comprehensive as well as much more believes that war or armed conflict is pronounced in event of war. inevitable. Indeed, there is no reason to This is reflected in Chinese military think that, in the short-term (the next developments of the past several years, decade or so), that the PRC would actively which are themselves the culmination of engage in an armed attack on its neighbors. nearly a quarter century of thought Unlike the Cold War, there is no “Fulda regarding the shape and requirements Gap” scenario to concentrate upon. of future warfare. The Chinese concept of At the same time, the Chinese “informationized local wars” reflects this leadership is well aware of the utility of ongoing evolution, with its focus on the role pursuing its ends through a variety of of information in all aspects of future means, including “hybrid warfare.” China warfare. This concept grows out of the has demonstrated an ability to employ lessons initially derived from observing the fishing boats and civilian allied coalition in the first Gulf War of 1990- vessels to pursue its territorial agenda. If 1991, leavened with observations from the Chinese warships are not shooting at Balkan wars of the 1990s and the American foreign craft, Chinese fishing boats have invasions of Afghanistan and Iraq. Thus, the had fewer compunctions about physically People’s Liberation Army (PLA) initially interfering with foreign vessels’ operations. conceived of future wars as “local wars The world’s information networks, where under modern, high-technology conditions,” attributing actions are much harder, would but then concluded that not all high- seem to be the ideal environment for technology was equally important.

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With the conclusion that information PLA clearly views the ability to establish technology is the foremost element of high “space dominance (zhitian quan; 制天权)” technology, reflecting the larger strategic as a key element of future “informationized shift from the Industrial Age to the local wars.” But space is important not as a Information Age, the PLA has subsequently place or domain, but because of its role in developed new doctrine, to link its concept gathering, transmitting, and allowing the of future wars to the kinds of forces it will exploitation of information. Consequently, field and the kinds of operations they will efforts to establish space dominance are not conduct. In the process, the PLA appears to necessarily focused on anti-satellite missiles again be refining its views. or co-orbital satellite killers. A special From an initial focus on network operations force that can destroy a mission warfare, electronic warfare, and control facility, or an insider threat that can , it is not apparently insert malware into a space tracking emphasizing command and control warfare, system, are as much means of achieving and intelligence warfare. The implication space dominance. would seem to be that not all networks, How Chinese Conclusions Will Shape electronic systems, or leaders are equally Chinese Actions important; instead, those in key decision- making roles, and the people and systems Given these Chinese conclusions, that inform their decisions, should be higher there are certain implications that arise, priority targets. It is important to note here which are reflected in Chinese behavior. that this does not mean that the PLA will Chinese actions must be holistic, neglect other networks, systems, or and will be comprehensive. The PRC still personnel (e.g., logistics, combat units) in sees itself as a developing country. Despite its pursuit of winning future informationized being the second-largest GDP in the world, wars. Rather, it reflects priorities for this must be spread over a population of 1.3 allocating resources and developing billion. As important, China is not necessarily capabilities. wealthy; while it has enormous untapped This may be seen in the efforts of human and physical potential, until that is the last several years in fielding various converted into actual capacity and capability, types of new equipment and improved joint much of China will remain poor. In this light, training. Alongside new fighters, warships, the Chinese are likely to pursue more of a and self-propelled artillery are an array of whole-of-government approach, if only to new unmanned aerial vehicles, electronic leverage its available resources. Thus, warfare platforms, and sensors. The whereas the United States has both a military massive reorganization of late 2015 and and a civilian space program (the latter early 2016 marks a major waypoint in this divided into three substantial segments), steady effort to prepare the PLA “to fight China is unlikely to pursue such a strategy and win future local wars under that demands extensive redundancy and informationized conditions.” overlap. Especially important is outer space. This will likely be reinforced by the One of the key domains of Hu Jintao’s “New high priority accorded informationization in Historic Missions” for the PLA (alongside the general. While various senior level efforts maritime and electromagnetic domains), the have been halting at times, Xi Jinping has

24 clearly made informationizing China a major believed it was facing threats from both the policy focus. Insofar as the Chinese see Soviet Union and the United States. their future inextricably embedded in the Chinese views about the extent of Information Age, these efforts will enjoy threats are further reinforced by the reality highest level support, with efforts to reduce that the information space is both virtual stove-piping and enhance cross- and global; it is therefore not currently bureaucracy cooperation. This, in turn, will restricted by any national borders. For the mean not only greater cooperation within Chinese leadership, controlling information the military, but also between the military flow and content therefore entails operating and the other national security not just within the Chinese portion of , as well as with the larger information space, but globally. It requires range of Chinese ministries, and both public accessing foreign information sources and and private enterprises. influencing foreign decision-makers, while Chinese actions are determined preventing outside powers from being able by Chinese priorities, and are unlikely to do the same in China. to be heavily influenced by external As a result, the PRC is pressure or blandishments. If the undertaking an increasing array of Chinese leadership sees information as actions beyond its own borders, integral to national survival, and views striving to dominate what had economic espionage as part of the process previously been part of shared spaces. of obtaining necessary information, then it This applies not only to information space, will not be easily dissuaded. Similarly, such as the Internet, but also physical insofar as the Chinese leadership links domains such as the seas and outer space. information flow with regime survival, Indeed, one can see parallels among Beijing will also restrict and channel Chinese efforts to dominate the South China information flow in ways that meet internal Sea, its growing array of counter-space security requirements. To this end, the capabilities, and its efforts to control and targets of Chinese actions will have to dominate information space. In each case, impose very high costs on Beijing, so that the PRC is intent upon extending Chinese the gains are not worthwhile to the PRC, if sovereignty, including its rules and its they seek to alter the Chinese approach. administrative prerogatives, over what had The difficulty of influencing Beijing is previously been open domains. exacerbated by the Chinese leadership’s In this regard, Chinese actions are sense that it is already in a strategic justified by a very different perspective on competition with various other states. The the functioning of national and international CCP perceives challenges to its security law. Indeed, Chinese views of legal warfare stemming not only from the United States, occur in the context of a historical and but also from Russia, India, and Japan, as cultural view of the role of law that is very well as certain non-state actors such as different from that in the West. At base, the Uighur and Tibetan separatists. Indeed, it is Chinese subscribe to the concept of rule by essential to recognize that the Chinese law, rather than the . That is, the leadership sees itself as already engaging in law serves as an instrument by which multilateral deterrence—a position it has authority is exercised, but does not adopted since at least the 1960s, when it constrain the exercise of authority.

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In the broadest sense, pre-1911 This has meant that the Chinese Chinese society saw the law from an government employ laws, treaties, and instrumental perspective, i.e., a means by other legal instruments to achieve their which authority could control the ends, even when they fly in the face of population, but not a control extended over traditional legal understanding or original authority. Laws were secondary to the intentions. Thus, the Chinese do not see network of obligations enunciated under the their efforts to extend Chinese authority Confucian ethic. The Legalist “school” of over shared spaces as inconsistent with ancient China placed more emphasis on the , but as part of political creation of legal codes (versus the ethical warfare; opposition to their efforts is codes preferred by the Confucians), but similarly seen as an effort to contain China ultimately also saw the law as a means of and to threaten CCP rule. enforcing societal and state control of the Consequently, Chinese efforts to population. No strong tradition ever dominate information space strive not only developed in China that saw the law as to control the flow of information, but to applying to the ruler as much as to the delegitimize the idea of the information ruled. realm as a shared space, accessible to a During the early years of the PRC, variety of groups. Chinese authorities have Chinese legal development was influenced striven to limit the role of non-state players by the Marxist perspective that the “law in setting the rules for the Internet. At the should serve as an ideological instrument of same time, it has also sought to limit the politics.”2 Consequently, the CCP during the access of dissidents, Taiwan political formative years of the PRC saw the law in authorities, Tibetan activists, and others the same terms as imperial China. The law who have tried to oppose China’s position to served as essentially an instrument of not only Chinese audiences, but global governance but not a constraint upon the ones. Given the Chinese leadership’s view of Party, much less the Great Helmsman, Mao the existential threat posed by information Zedong. In any case, the Party exercised (whether inside or outside China), such rule by , rather than through the efforts are perceived as defensive efforts provision of legal mechanisms. Mao himself, aimed at preserving the regime. during the , effectively China is likely to pursue a form abolished both the and the legal of informational isolationism. The structure.3 Since Mao’s passing, while there Chinese solution to the challenge of have been efforts at developing a body of information vulnerability is to restrict the laws, most have been in the area of flow of information. This is not intended to commercial and law. Moreover, the replicate the extreme North Korean form of law remains an instrument that applies isolation, but to align information flows primarily to the masses as opposed to the ideally “with Chinese characteristics.” Party, i.e., the law exists to serve authority, Indeed, Beijing strives to make itself not to constrain it. informationally autarkic, wholly self-

2 Eric W. Orts, “The Rule of Law in China,” Vanderbilt Journal of Transnational Law (January 2001). 3 Murray Scot Tanner, The Politics of Lawmaking in China (Oxford, UK: Clarendon Press, 1999), p. 43, and Dwight Perkins, “Law, Family Ties, and the East Asian Way of Business,” in Culture Matters, ed. by Lawrence E. Harrison and Samuel P. Huntington (NY: Basic Books, 2000), p. 235.

26 dependent in terms of information access, Implications for American Policy information generation, and information Makers transmission. Thus, the PRC has created Given the Chinese conclusions Chinese versions of information companies, regarding the impact of information on is pursuing a homegrown semiconductor Chinese strategy and policy, American industry to substitute for imported computer decision makers need to recognize the components, and otherwise tries to limit extent to which the United States is already informational access to and from China. in competition with the PRC. This, in turn, This is an ironic rejection of the very has implications for a variety of American macroeconomic policies of the past four policies. Similarly, all those involved in the decades that have allowed China to succeed national security enterprise, not simply and advance. But, just as the CCP accepts decision-makers, need to recognize the performance costs in the speed of the range of efforts that the PRC is undertaking, Chinese Internet (imposed by the nature of and begin to move to counter them. the of China), they accept the The United States and China Are economic and innovative opportunity costs Competing that are imposed by the broader restrictions imposed on information flow. This is a The foremost consideration must be dangerous bargain, however, as CCP the recognition that the Chinese leadership leaders appear to be trading longer term sees itself in competition with the United economic growth for short-term stability States, and indeed with the rest of the and curbing immediate challenges to their world writ large, and arguably in a state of authority. If the Chinese leaders are correct conflict. It is important to note that that future development of “comprehensive competition does not imply war. The PRC national power (CNP)” is directly tied to the clearly does not operate as though it is in a ability to exploit information, then their state of armed conflict with the United actions are likely, in the long run, to actually States, nor with its neighbors. But it does limit future CNP growth. see its relations with many of these states, including the United States and Japan, as It is important to note, however, fundamentally adversarial in nature. that this isolationism does not mean closing Restrictions on access to advanced China off from the rest of the world’s technology, imposed in the wake of the information. Reports that China actively Massacre in 1989, subsequent redirects and hijacks entire segments of the additional restrictions on transfers of space Internet to Chinese servers (presumably for and other technology, limitations on later examination and analysis) highlight Chinese ability to acquire various Western that Chinese leaders want to control what corporations, all are seen as denoting an comes into China, not simply exclude it.4 As unfriendly stance towards China. important, they are willing to undertake actions that affect, and could alienate, There is a recognition among many other states and actors in pursuit of various key decision-makers that China is this end. one of the foremost security competitors of the United States. The 1999 Cox

4 Chris Demchak, Yuval Shavitt, "China’s Maxim – Leave No Access Point Unexploited: The Hidden Story of ChinaTelecom’s BGP Hijacking," Military Cyber Affairs (Vol. 3 : Iss. 1, 2018).

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Commission report, the annual Worldwide asymmetric (implying a different approach Threat Assessment provided by the Office to a problem from a common starting of the Director of National Intelligence, and point), as orthogonal (implying a completely the annual DOD report to Congress on different set of starting points for the two China, all make clear that China is parties). For example, publications from the increasingly challenging American security Joint Chiefs of Staff, such as doctrinal constructs in the western Pacific and statements regarding information globally. This involves not only Chinese operations or space operations, only apply development of an array of new capabilities to American military forces, operating under in its armed forces, but in the realm of the restrictions imposed by American laws information warfare capabilities. (e.g., the separation of military, Title 10, functions from intelligence, Title 50, Ironically, many of the concepts functions). Chinese writings, by contrast, underlying these new capabilities appear to clearly encompass all national information parallel American ones. Chinese descriptions resources, whether military, civilian, or non- of the need to establish information governmental. dominance correspond to American writings regarding the need to understand and At a more fundamental level, exploit the information environment, American policy-makers recognize that especially as embodied in Joint Pub 3-13 there are large swathes of information that Information Operations.5 In terms of are not likely to be accessible to the military doctrinal writings, the two sides’ government, due to considerations of uniformed services clearly share some privacy. Few legislators or presidents would common ground. seriously consider creating a “social credit score” that the PRC is actively striving to The United States and China Are implement. Competing Orthogonally Part of this difference is rooted in The difference between the Chinese the fundamentally different historic and American approaches to information circumstances that frame the contexts for warfare, despite certain similarities in Chinese and American decision-makers. As doctrinal writings, typifies the larger, more noted earlier, East and West have radically fundamental chasm separating the two different perspectives on the role and nations. In many ways, American leaders do nature of law, whether it constrains not recognize how the two states are authority or not. Similarly, the United competing. States, for example, ultimately believes in What is essential is understanding the free flow of information. The the extent to which Chinese and American and the rights enshrined concepts approach the entire realm of therein essentially guarantee a minimum of information, including informationized governmental interference in the warfare, from very different starting points. transmission of information, such as The two sides are not so much through , freedom of

5 It is useful to examine the evolution of this joint publication, from the 1998 version (then entitled Joint Doctrine for Information Operations), through the 2006, 2012, and 2014 revisions. Joint Chiefs of Staff, Information Operations, Joint Publication 3-13 (Washington, DC: Office of the Joint Chiefs of Staff, 2014). http://www.dtic.mil/doctrine/new_pubs/jp3_13.pdf

28 expression, and freedom of assembly. As information on a global scale, for important, there has long been a role for a philosophical, political, commercial, and robust civil society in the West’s more military reasons will constitute a challenge liberal conception of the interplay between to the Chinese, and specifically the CCP’s, state and society. The very recognition that vision of its interests. So long as the CCP the two are discrete elements, distinct from sees regime survival as tantamount to each other, reflects this core concept. national survival (“l’etat, c’est nous”), then such efforts will also be seen as By contrast, the CCP has clearly jeopardizing the Party’s grip on power, even demonstrated that it is not prepared to if that is not the motivation underlying countenance free and open expression of American efforts. information. And the pervasive presence of Party committees ensures that civil society The Competition Is All-Encompassing develops in China only under Party guidance For the same reason, the Chinese and supervision. This view is not simply the leadership sees competition with the United product of the CCP’s positions, but is more States, and the larger liberal Western order, deeply rooted in various aspects of Chinese as all-encompassing. In the first place, the culture and history, including the very Chinese concern about raising their different views regarding the role of the “comprehensive national power” requires law. It should not be surprising, then, that that the PRC improve itself, not simply in there is no “right to privacy” in the PRC. military or economic terms, but across the For this reason, the Chinese should board. This will include elevating the level not be seen as pursuing an asymmetric of sophistication of the economy, expanding approach, because “asymmetric” implies a its scientific and technological prowess, different approach from a comparable obtaining greater political unity, and starting point for roughly similar ends. securing more diplomatic respect. All of Beijing’s starting point is one that is these aspects entail some degree of fundamentally dissimilar, shaped by wholly information operations, whether it is different circumstances. It should not be engaging in espionage, gathering surprising that this radically alternative intelligence, exerting influence, or preparing contextual framework leads to constraints for military operations. Because of the and objectives that are wildly divergent emphasis on improving China’s position from our own—in short, orthogonal. during this period of “strategic opportunity,” there is little likelihood of any abatement in In this regard, it is not that the U.S. various Chinese information activities, and China are necessarily pursuing including economic and technological antagonistic goals. Indeed, the two sides espionage or efforts at extending global may at times find themselves in agreement influence. on ends, means, or both. At other times, they will find themselves pursuing mutually Moreover, from Beijing’s unrelated objectives. But more and more perspective, determining who controls the often, the two states will find themselves at flow or information across the globe and odds, as the two states’ interests intersect, who has access to that information is not albeit for different reasons. only a fundamental national security issue, but one touching on regime survival. The Most fundamentally, the American United States subscribes to the view that interest in maintaining a free flow of

29 there are multiple legitimate stakeholders in for civil society organizations (NGOs, press determining who should have access. This is entities, religious organizations), the harder reflected in the American support for the it will be to suppress the introduction of Internet Corporation for Assigned Names unfriendly information. and Numbers (ICANN), and its inclusive This same persistence will mark stance on who gets to participate in the Chinese military activities. There will, on the rules-setting regime. The free flow of one hand, be a growing effort on the part of information does not affect the fundamental the Chinese military to obtain information stability of the United States or its about potential adversaries, including not institutions. only the United States, but Taiwan, Japan, For the Chinese leadership, allowing Vietnam, India, but also Russia. This will such a wide variety of groups to have include not only technical information about unfettered access to the dissemination of weapons systems, but information about information necessarily poses a organization and processes—how decisions fundamental threat. Information can not are made, who staffs those decisions, and only affect China’s future security, but more what procedures are followed. All of this importantly, it will affect the CCP’s ability to provides insights both about whom to retain power. In the first place, if this target, and when and with what types of divergence is left unchecked, then there will capabilities. It might be determined that it be a proliferation of potential sources of would be more advantageous to defer information. This would make it virtually attacking a target until it has become a impossible for the PRC to limit its flow. As single point of failure (e.g., attacking important, the greater the variety of players satellites after first damaging undersea providing information, the more likely that it cables which carry far more bandwidth). Or will include sources such as religious there may be circumstances where it is groups, separatists, and dissidents. That, in determined that it would be more useful to turn, would begin to make such groups, and employ trusted agents to alter information, their messaging, appear legitimate to rather than employ hard-kill methods to Chinese audiences, and therefore pose a destroy physical infrastructure. Much of this greater challenge to the CCP. will depend upon peacetime gathering of information. Therefore, the PRC wants to restrict access, ideally, to state-level players. At the same time, there will likely be Hence, its support for transferring a growing effort to deny adversaries the administration of the Internet to entities ability to collect comparable information such as the United Nations International about their Chinese counterparts. American Telecommunications Union (ITU). If and other states’ intelligence gathering successful, this would minimize the range of operations are likely to be major targets for players while affording Beijing maximum physical, technical, and political leverage over each of them. China is more interference. The Chinese island-building likely to successfully pressure states into activities in the South China Sea, for denying groups Internet addresses and the example, are likely to lead to the creation of like, by employing its economic strength. an air defense identification zone which, in (This would be a case of asymmetric turn, will serve to exclude American pressures.) By contrast, the greater the role reconnaissance aircraft from patrolling

30 easily off China’s shores. Similarly, the will also be even more restrictive on the ability to engage in a variety of jamming Chinese domestic information scene, for the and dazzling behavior against space same reason—to limit the potential for more systems will compel adversaries to consider widespread dissent and disruption. carefully when (and whether) they will Unfortunately, this is also likely to employ their satellites to observe the PRC. mean an intensification of Chinese efforts to If gaps emerge in coverage, that, in turn, exclude foreign, and especially American, will afford Chinese military forces forces from the western Pacific littoral. opportunities to engage in more effective Insofar as Chinese leaders believe that it is denial and deception operations. the American military that heartens local Given the Chinese leadership’s states in rejecting Chinese sovereignty efforts at integrating civilian and military claims (or even that the U.S. foments such capabilities and assets, these enhanced efforts outright), limiting American freedom efforts at information reconnaissance and of action in the region will reduce that denial are likely to involve greater appeal. Moreover, denying American forces participation of various Chinese entities that the ability to establish information are not necessarily formally part of the dominance is an essential means of military, but which have been assigned deterring, or coercing, Washington into supporting tasks and roles. This will likely acceding more to China’s vision of the make attribution even more difficult than it regional order. has been in the past. At the same time, the The reorganization of the PLA will massive reorganization of the PLA is likely also likely lead to an intensification of to similarly complicate attribution efforts, as Chinese military information gathering past patterns (and therefore certain efforts, as various organizations determine indicators) are disrupted as well. their respective purviews. With an entire The Competition Will be Intensifying— service (the People’s Liberaion Army and Militarizing Strategic Support Force, PLASSF) oriented towards establishing information dominance None of this means that Chinese through actions in the electromagnetic efforts at establishing strategic information domain, network space, and outer space, dominance in peacetime will be abating. this new organization will probably be as Indeed, if the Chinese economy slows intensively engaged as its previous down, and if this leads to greater internal constituent elements. Similarly, the newly unrest, then the Chinese are likely to created permanent joint commands in intensify their efforts to control the global charge of the various new war zones will information space. This will be in order to undoubtedly also be trying to obtain minimize the ability of outsiders to information about their respective areas of influence, exacerbate, or exploit the responsibility. domestic discord. At the same time, they

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32

WHOSE SIDE IS TIME ON? CHINA'S PERCEPTIONS/MISPERCEPTIONS OF CROSS-STRAIT RELATIONS1

Yun Sun

Director, China Program, The Stimson Center

On Jan. 2, 2019, Chinese President force.” That patience is widely attributed to Xi Jinping delivered a major policy speech to positive expectations on cross-strait commemorate the 40th anniversary of the relations following the inauguration of the Message to Compatriots in Taiwan. The Ma Ying-jeou government earlier that year, speech is widely interpreted as Xi’s policy a luxury Xi does not enjoy today. Xi also platform for cross-strait relations for years, sticks to the term “peaceful development,” or even decades, to come. While Beijing’s emphasizing “peaceful,” suggesting statements on Taiwan policy have been continuation rather than a change of relatively consistent, the speech and position. Chinese interpretations of it suggest key However, there should be no perceptions and misperceptions that will mistake that Xi is keeping the threat on the have major implications for cross-strait table. His declaration that “the Chinese will relations. not fight the Chinese” makes it clear that if Use of Force, or Else? Taiwan pursues independence and the Taiwanese are no longer Chinese, war will First, despite speculation that Xi is not be off limits. According to Xi, only more ready to use force for the purpose of Beijing has the authority to identify so- unification, in fact, he is not. The speech called “Taiwan independence separatists” did not change the mainland’s line on “not and their separatist activities. Beijing wants abandoning the use of force.” The to be both the referee and a player at the language used is almost identical to former same time. That is self-serving and harmful President Jiang Zemin's 1995 Eight-point for future solution of the issue. Proposal for the Development of the Cross- Straits Relations and the Promotion of Beijing Navigating Taiwan Politics Peaceful Reunification. It is also consistent The most significant policy with former President Hu Jintao’s call to adjustment in Xi’s speech lies in its call to “prepare to fight, seek to talk, don't be look beyond the Democratic Progressive afraid to delay.” Hu was more patient in his Party (DPP) for discussion on the future of 2008 speech to commemorate the 30th unification and cross-strait relations. Xi calls anniversary of the Message to Compatriots for “political parties and all sectors on both in Taiwan, which did not mention “use of sides of the Strait [to] recommend

1 Originally published in the Pacific Forum, February 21, 2019

33 representatives to conduct extensive and in- to win over Taiwan’s public opinion as well depth democratic consultation on cross- as on military preparedness to prevent any strait relations and the future of risky moves by Tsai. and establish institutional arrangement for That Xi’s speech has boosted peaceful development of cross-strait President Tsai’s popularity is dismissed by relations.” The mainland is apparently the mainland. This could be because encouraged by the result of Taiwan local officials and experts feel a need to defend elections last November, which confirmed to Xi’s authority and deny any unexpected Beijing that the DPP’s popularity has waned. consequences from his speech. A more The mainland seeks out new political forces likely explanation is that Beijing is making in Taiwan that do not necessarily share the the calculated risk to control damage and DPP’s agenda. Although the November project a new strategic direction. It has election did not focus on cross-strait insisted on concessions and reassurances relations, those new political forces will from Taiwan, which is smaller and weaker become Beijing’s engagement target. For than the mainland in every sense. The irony example, the reelection of Taipei mayor Ko is that China also insists that the U.S. Wen-je, an independent, has raised great should be the first to make concessions and interest in the mainland about his political reassurances to North Korea in ambitions in the 2020 presidential election denuclearization talks because “North Korea and the acceptability/compatibility of his is much weaker and thus the U.S. has cross-strait policy. material advantages, and hence the moral The problems with this formula are obligation to reassure .” many. Apparently, the DPP is excluded from Xi’s speech messaged a demand for the so-called democratic consultation, yet it clarity on a broad range of issues. Some continues to represent a significant portion argue this is disruptive and destabilizing of the Taiwan population. By dropping the because ambivalence or ambiguity has DPP from this discussion, Beijing is also sustained the status quo. However, from excluding those Taiwanese that the DPP the mainland’s perspective, ambiguity only represents from participating in a decision works for China when the Taiwan on their future. No politician in Taiwan can government is cooperative and willing to embrace such a framework without being embrace the One China principle. In delegitimized. contrast, when the DPP government is seen According to Chinese government as detrimental to the mainland’s agenda, interlocutors, Beijing has given up hope on ambiguity provides cover for “harmful possible and meaningful engagement with maneuvers” by the Tsai administration and the Tsai administration. It no longer undermines Beijing’s interests. This believes it can convince President Tsai to perception prioritizes China’s need to push embrace the 1992 Consensus and the One Taiwan but disregards the strain on cross- China principle. And any move to engage strait relations, and more importantly, on her government on an official level at this U.S. policy, which emphasizes retention of point will be perceived as a retreat by the status quo. Beijing’s push to tilt the Beijing from the 1992 Consensus. Beijing balance publicly and boldly does not will likely enhance efforts on both “peaceful promote stability. development” to extend economic benefits

34

Why the Notorious One Country, Two “everything can be discussed.” (In recent Systems? conversations, it was reiterated that the mainland will embrace “any negotiations in There is a major disagreement any format about any unification formula between China and the rest of the world as with Taiwan under the One China to whether Xi equated the 1992 Consensus principle.”) That is just glaring hypocrisy. with the One Country, Two Systems (1C2S) Beijing considers , Macao, and a formula. Taiwanese and foreign observers reunified Taiwan as constitutionally believe that he did. Mainland experts insist subordinate entities. No one, Chinese or that Xi’s exact words—“peaceful unification Taiwanese, expects the mainland to treat and One Country Two Systems are the best Taiwan as a true equal in such negotiations. approach to national unification”—do not If they did, 1C2S would not be unilaterally exclude other arrangements. The dual imposed by the mainland. Chinese analysts message is that peaceful unification and have been vocal about the widening power IC2S are seen by the mainland as the best, gap between the mainland and Taiwan in but not the only, option, which leaves room the past decade, particularly since Xi for other non-peaceful means and other assumed power. In the Chinese policy political arrangements. playbook, negotiations are decided by the Although the Chinese blame the power equilibrium between the mainland “social stigma” associated with the 1C2S on and Taiwan. Chinese conclude that Taiwan’s Taiwanese politicians, they are deluding best chance to negotiate a deal with the themselves if they believe this. Almost all mainland only exists when it can leverage Chinese interlocutors privately acknowledge support from the U.S. against the mainland. the disastrous results of 1C2S in Hong Kong Whose Side is Time On? and Macao. However, Xi’s resort to 1C2S and the invocation of Deng Xiaoping’s For the mainland, the solution to the authority to formulate his own Taiwan Taiwan issue does not lie across the Taiwan policy is politically safe. Given the domestic Strait, but across the Pacific Ocean. Chinese economic slowdown and the deterioration of insist Taiwan harbors three illusions about China’s external relations, Xi cannot afford its future: that democracy can solve to make a new and untested proposal on Taiwan’s problems; that the mainland will Taiwan without full confidence in its result. collapse; and that the U.S. will always come to Taiwan’s defense. For the Chinese, the The Chinese often forget that when first two have been exposed as false and Deng first proposed 1C2S in the early the last remains to be seen. This is the 1980s, Taiwan was not a democracy and single most important Chinese the vision was for the coexistence of two perception/misperception about the Taiwan authoritarian systems based on a political issue: that it is not about Taiwan or its deal. The attempt to place a democratic people. The Chinese believe that as the society under the governance of an balance of power shifts between China and authoritarian system has only led to the the US, there will be a day when the U.S. is erosion of the former and forced a clash as exhausted by its commitment in a region far has occurred in Hong Kong. from its homeland and decides to withdraw Mainland interlocutors sometimes after a grand bargain with China. That express a willingness to explore doesn’t mean that China will immediately arrangements other than 1C2S, or say that

35 use force to take over Taiwan; but it does While the world sees Taiwan public opinion mean that the Chinese believe that the moving away from unification, the mainland political will of Taiwan to negotiate with the has a paradoxical and confounding mainland will not emerge unless the U.S. confidence that time is on its side. As they leaves and Taiwan has no other option. see it, the critical card is not in Taipei’s hand, but in Washington’s. While the U.S. These perceptions lead China to searches for a grand strategy in the region, reach the exact opposite conclusion on the it is essential to remember that China is essential question of whose side is time on? waiting and Taiwan’s fate is on the line.

36

XI’S GLOBAL AMBITION

Elizabeth Economy

C.V. Starr Senior Fellow and Director, Asia Studies, Council on Foreign Relations and Visiting Distinguished Fellow, Hoover Institution,

Chinese President Xi Jinping may societal discontent. Moreover, too much well be tempted to take a victory lap. Within ambition has cooled the initial ardor of his first five years in office, he has upended many in the international community for Xi’s thirty years of a Deng Xiaoping-led model of vision of a new global order “with Chinese reform and opening up to create his own characteristics.” Xi, himself, has given few model of Chinese politics. In his drive to signals publicly that anything has gone realize the “great rejuvenation of the awry; the first speeches of his second five- Chinese nation,” he has moved away from year-term suggest he is mostly doubling Deng’s consensus-based decision-making to down on the current model. Yet without a consolidate institutional power in his own course correction, Xi and his model may hands, deepened the penetration of the soon begin to stumble. Chinese Communist Party (CCP) into The Xi Model Chinese political, social, and economic life, constrained the influence of foreign ideas Xi’s accomplishments to date are and economic competition, and left behind undeniable. His efforts to consolidate Deng’s low-profile foreign policy to pursue a institutional power received a significant far more ambitious and expansive Chinese boost in March 2018, when he successfully presence on the global stage. maneuvered to eliminate the two-term limit on the presidency, ensuring that he could And yet, the mood in Beijing is far continue to hold three of the most powerful from victorious. As Xi begins his second positions—CCP General Secretary, Chairman five-year term as CCP General Secretary of the Central Military Commission, and and soon as president as well, there is President of the country—at least through mounting concern that the model’s very 2027, if not beyond.2 His anti-corruption successes are becoming liabilities. Xi’s campaign also continued to gain steam: In power grab has alienated party elders and 2018, 621,000 officials were punished for many in China’s intellectual and business corruption, a marked increase over the elite.1 Too much party control is 527,000 detained in 2017.3 And dozens of contributing to a stagnant economy and

 The following paper draws from a forthcoming article in Foreign Affairs 1 Li Yuan, “China’s Entrepreneurs Are Wary Of its Future,” New York Times, February 23, 2019, https://www.nytimes.com/2019/02/23/business/china-entrepreneurs-confidence.html. 2 James Doubek, “China Removes Presidential Term Limits Enabling Xi Jinping to Rule Indefinitely,” NPR, March 11, 2018, https://www.npr.org/sections/thetwo-way/2018/03/11/592694991/china-removes-presidential-term-limits-enabling-xi-jinping-to- rule-indefinitely. 3 “China Focus: China's Anti-Graft Campaign Keeps Crushing the Corrupt,” Xinhua, January 10, 2019, http://www.xinhuanet.com/english/2019-01/10/c_137734283.htm.

37 universities have raced to establish new on the Management of Foreign Non- institutes and departments devoted to the Governmental Organizations, the number of study of . 4 foreign NGOs operating in China has fallen from more than 7,000 to under 400.7 Made Under Xi’s leadership, the Party now in China 2025—China’s effort to protect its has eyes everywhere—literally. As many as domestic firms in ten areas of critical 200 million surveillance cameras contribute cutting-edge technology—will also make it to control the population—both to reduce more difficult for multinationals to compete. and to prevent social unrest.5 The In Sichuan province, for example, the local surveillance technology will also play an government has passed a regulation that essential role in the 2020 national rollout of prevents hospitals from being reimbursed the country’s social credit system, which will for operations and procedures unless they evaluate people’s political and economic use Chinese-manufactured medical devices trustworthiness, and reward and punish (for fifteen types of devices).8 them accordingly. On the economic front, the Party has extended its reach into 70 Ambitious and Expansive Abroad percent of all private enterprises and joint Xi’s efforts to transform politics and ventures through the establishment of party economics at home have been matched by committees and tasked them with ensuring equally dramatic moves to establish China that Beijing’s political and economic as a global power. His call for the “great interests are advanced.6 In one case, for rejuvenation of the Chinese nation” is not example a newly- empowered party only about rebuilding the domestic political, committee demanded that a German economic, and military wherewithal of the multinational (in a joint venture) invest in country but also about reclaiming China’s an economically impoverished region to centrality on the global stage. Thus, even as help local development. The multinational Xi’s policies at home constrain opportunities successfully pushed back, but the European for the international community to engage head expects that more such demands will within China, he seeks to project Chinese be forthcoming. values, priorities, and policies globally to Beijing’s efforts to constrain expand China’s economic, political, and influence from the outside have also been security influence and power. Xi’s China is successful. Foreign television content has an illiberal state seeking leadership in a been slashed; the free flow of information liberal world order. via the Internet is increasingly constrained The reunification of China, including as Beijing widens the scope for what is Taiwan, Hong Kong, and the South China considered threatening to national security; Sea, is a central element of Xi’s and in the wake of the January 1, 2017 Law rejuvenation narrative, and he has

4 Te-Ping Chen, “Reading, Writing and Xi Jinping Thought: China’s Students Learn Leader’s Philosophy,” Wall Street Journal, March 23, 2018, https://www.wsj.com/articles/reading-writing-and-xi-jinping-thought-chinas-students-learn-leaders-philosophy- 1521797406. 5 Paul Mozur, “Inside China’s Dystopian Dreams: A.I., Shame and Lots of Cameras,” New York Times, July 8, 2018, https://www.nytimes.com/2018/07/08/business/china-surveillance-technology.html. 6 Catherine Tai, “China’s Private Sector is Under Siege,” The Diplomat, December 22, 2018, https://thediplomat.com/2018/12/chinas-private-sector-is-under-siege/. 7 “How Many Foreign NGOs Have Registered Offices in China and Where Are They?,” ChinaFile China NGO Project, May 3, 2018, http://www.chinafile.com/ngo/faq/how-many-foreign-ngos-have-registered-offices-china-and-where-are-they. 8 Tom Hancock, “Multinationals Lose Ground in China’s Medical Devices,” , May 27, 2018, https://www.ft.com/content/ea032bba-5f33-11e8-9334-2218e7146b04.

38 established 2049 as a soft target date for In addition, Beijing has adopted a the completion of that process.9 Over the range of coercive economic and political past six years, Xi has moved from staking policies to advance its sovereignty claims claims around sovereignty in the South over Taiwan, including: successfully China Sea, Hong Kong, and Taiwan, to persuading multinationals to avoid realizing them. He has successfully recognizing Taiwan as a separate entity, militarized seven artificial features in the convincing five countries to switch their South China Sea and, in January 2019, a diplomatic recognition from Taiwan to the Chinese naval official suggested that China mainland, cancelling cross-straits dialogue might “further fortify” the islets if it feels since the 2016 election of Taiwan president threatened.10 Beijing and ASEAN are Tsai Ing-wen, reducing tourism to the working toward a South China Sea code of island, and, reportedly, meddling in conduct, but Chinese demands, such as Taiwan’s local elections in December to help excluding participation by non-ASEAN or ensure the victory of their preferred Chinese multinationals in oil exploration and candidates. At the same time, Beijing has barring participation by foreign powers in also offered incentives to Taiwanese military drills unless agreed to by all students and businesses to encourage them signatories to the code, are slowing to move to the mainland.14 progress.11 The Chinese leadership has also Xi has also increased the mainland’s sought to extend its political, economic, and political and economic control over Hong security influence beyond its immediate Kong by banning a pro-independence neighborhood. This is understandable. , buying up the island’s Ensuring supply lines for natural resources bookstores and purging them of any books and other goods requires not only a well- critical of the mainland, and calling on the organized trade and development agenda Hong Kong media to resist pressure from but also an ability to protect those supply “external forces” to criticize or challenge routes. The Chinese also no longer want to Beijing.”12 A vast economic development be passive recipients of information from plan that was announced in February the outside world; they want to shape that 2019—the Greater Bay Area—will integrate information for consumption at home and Hong Kong even more closely to the abroad. Xi’s most noticeable gambit, in this mainland.13 regard, is his Belt and Road Initiative (BRI), a modern incarnation of the ancient Silk Road and maritime spice routes. Launched

9 Xi Jinping, “Secure a Decisive Victory in Building a Moderately Prosperous Society in All Respects and Strive for the Great Success of Socialism with Chinese Characteristics for a New Era,” October 18, 2017, http://www.xinhuanet.com/english/download/Xi_Jinping%27s_report_at_19th_CPC_National_Congress.pdf/. 10Christopher Bodeen, “Why a Chinese Officer Said South China Sea Island Fortification is Driven By ‘Threats,’” Navy Times, January 9, 2019, https://www.navytimes.com/news/your-navy/2019/01/09/why-a-chinese-officer-said-south-china-sea-island-fortification-is- driven-by-threats/. 11 Ankit Srivastava, “ASEAN to Devise Code of Conduct on South China Sea,” The New Delhi Times, February 4, 2019, https://www.newdelhitimes.com/asean-to-devise-code-of-conduct-on-south-china-sea/. 12 David Tweed, “China Urges Hong Kong Media to Work Against ‘External Forces’,” Bloomberg, October 19, 2018, https://www.bloomberg.com/news/articles/2018-10-19/china-urges-hong-kong-media-to-work-against-external-forces. 13 Tony Cheung and He Huifeng, “China’s State Council Reveals Details of Greater Bay Area Plan to Turn Hong Kong and 10 Neighbouring Cities into Economic Hub,” South China Moring Post, February 19, 2019, https://www.scmp.com/news/hong- kong/politics/article/2186569/chinas-state-council-reveals-details-greater-bay-area-plan. 14 Russell Hsiao, “China’s Intensifying Pressure Campaign against Taiwan,” Jamestown China Brief, June 19, 2018, https://jamestown.org/program/chinas-intensifying-pressure-campaign-against-taiwan/.

39 in 2013, the undertaking is a grand-scale military officers, is the third largest source connectivity plan that now encompasses as of global arms sales after the United States many as 1,500 projects—more than 80 and Russia; and conducted 20 bilateral or percent of which are contracted to Chinese multilateral military exercises in 2017.17 firms—and extends beyond Asia, Europe, Strikingly, Xi Jinping has also and Africa to include Latin America. In suggested that the “China model” might addition to constructing hard offer a different path forward for countries infrastructure—ports, railroads, highways, disenchanted with the western model of and pipelines—China is pursuing a digital market democracy. In 2018, Beijing BRI, including fiber optic cables, satellite conducted two and three-week courses on systems, and e-commerce. Although it has censorship and surveillance for officials from yet to realize success, Beijing also hopes dozens of countries, and sent officials to that the BRI will encourage greater countries such as Uganda and Tanzania to adoption of the Chinese currency in global train their counterparts on how to control trade.15 the media and manage civil society.18 There is also a security component Overall China has exported its surveillance to the BRI. Beijing maintains control or has system to eighteen countries and assisted controlling stakes in at least 76 ports and thirty-six countries in developing the terminals in 34 countries. And despite capacity to repress free speech.19 In a less Beijing’s claims that the ports are for overt form, China also extends political and commercial purposes only, in Greece, cultural influence globally through its Pakistan, and Sri Lanka, Chinese port Confucius Institutes, Chinese Students and control has been followed by high-profile Scholars Associations, and think tanks. visits from Chinese naval vessels.16 The While nominally cultural and educational People’s Liberation Army has established a organizations, all these institutions must be logistics base in Djibouti, and according to responsive to Beijing’s political priorities. one military official, expects as many as one Finally, Xi Jinping has sought to hundred overseas bases in the future. establish new institutions to support China’s Indeed, across a number of metrics, China position as a regional and global leader and is rapidly enhancing its position as a leading make international norms and institutions security power: China has developed more directly reflect Chinese values and extensive training programs for foreign interests.20 He has called explicitly for China

15 “Belt and Road Tracker,” MERICS, July 6, 2018, https://www.merics.org/en/bri-tracker/methodology. 16 David Shullman, “Protect the Party: China’s Growing Influence in the Developing World,” Brookings Institution, January 22, 2019, https://www.brookings.edu/articles/protect-the-party-chinas-growing-influence-in-the-developing-world/. 17 Steve Mollman, “China’s Growing Power Is Bringing Military Drills Center Stage in Asia,” Defense One, August 23, 2018, https://www.defenseone.com/threats/2018/08/chinas-growing-power-bringing-military-drills-center-stage-asia/150765/. 18 Adrian Shahbaz, “Freedom on the Net 2018: The Rise of Digital Authoritarianism,” Freedom House, https://freedomhouse.org/report/freedom-net/freedom-net-2018/rise-digital-authoritarianism. 19 Sheridan Prasso, “China’s Digital Silk Road Is Looking More Like an Iron Curtain,” Bloomberg, January 10, 2019, https://www.bloomberg.com/news/features/2019-01-10/china-s-digital-silk-road-is-looking-more-like-an-iron-curtain. 20 On the financial front, China has helped create the as well as the Asian Infrastructure Investment Bank. In trade, it has pushed the Regional Comprehensive Economic Partnership, a trilateral free trade agreement with Japan and South Korea, and the Free Trade Area of the Asia Pacific. In addition to the already existing Shanghai cooperation Organization, a Chinese-led security institution that includes Russia, India, Iran, and the four Central Asian states, Xi has proposed a new Asia Pacific security structure that would exclude the United States. Speaking at a conference in 2014, Xi famously stated: “It is for the people of Asia to run the affairs of Asia, solve the problems of Asia, and uphold the security of Asia.” Xi also places importance on institutions that place China in a leadership role within regions outside Asia, such as China’s engagement with regions as a whole,

40 to “lead in the reform of global 2018.22 And the 2018 birthrate, which governance.”21 In some instances, such correlates closely with economic growth and reform may be additive to the current consumer optimism, hit the lowest level international order, such as the since 1961.23 establishment of the Asian Infrastructure Societal discontent also continues to Investment Bank, which operates according flare and new forms of protest are to existing international norms. In other emerging. Traditional protests around the arenas, such as human rights or Internet environment or inadequate wages or governance, China proposes ideas and pensions have been supplemented by broad arrangements that are antithetical to those social movements that cross age, gender, of the United States. And China’s promotion and class, such as those advocating feminist of a “community of common destiny” is at and LGBTQ rights. Several multi-province heart a call for the end of the U.S.-led strikes by workers, including those in food system of alliances. delivery, van delivery, and crane operations With Great Power, Comes Great also speak to broad economic discontent. 24 Problems And a nationwide trucker strike in summer 2018 hinted at the potentially enormous Yet it may be that the Xi model— disruptive force of the emerging gig fully realized—is simply too much of a good economy on the Chinese workforce.25 Most thing. Too much party control—and perhaps troubling to Xi, however, was likely the consolidation of power into Xi’s hands—has news that Chinese university Marxist groups contributed to economic stagnation. The were converging on Shenzhen’s Jasic constant stream of often competing Technology plant to stand beside workers directives from Beijing has produced and retired party cadres workers to support paralysis at the local level. When Beijing’s the workers’ efforts to organize independent demand for deleveraging, for example, was labor unions. The protest was quickly shut replaced with a demand for banks to boost down, but the moral legitimacy of its lending and localities to boost spending, demands remains to be addressed.26 local leaders resisted. They borrowed but would not spend, afraid to deepen a credit The international community is also burden, for which they ultimately would be raising concerns over the excesses of the Xi held responsible. The Chinese economy is model. The deepening penetration of the slowing: one Chinese professor reported party into Chinese enterprises, for example, that an internal government study has caused all Chinese companies to be concluded that it grew only 1.67 percent in viewed as extended arms of the CCP. There such as Forum on China-Africa Cooperation, 16+1 framework in Europe, and partnership with the Community of Latin America and Caribbean states (CELAC). 21 “Xi Says China Must Lead Way In Reform of Global Governance,” , June 23, 2018, “https://www.reuters.com/article/us- china-diplomacy/xi-says-china-must-lead-way-in-reform-of-global-governance-idUSKBN1JJ0GT.” 22 “Politics Watch: Xi’s Reform Anniversary Speech Signals Political Crisis in China,” SinoInsider, December 17, 2018, https://sinoinsider.com/2018/12/politics-watch-xis-reform-anniversary-speech-signals-political-crisis-in-china/. 23 Echo Huang, “China in 2018 Saw Its Fewest Births in More than Half a Century,” Quartz, January 21, 2019, https://qz.com/1529170/china-in-2018-saw-its-fewest-births-in-more-than-half-a-century/. 24 Brian Hioe, “Trucker’s Srike the Latest Multi-Province Strike in China?,” New Bloom, June 19, 2018, https://newbloommag.net/2018/06/19/truckers-strike-china/. 25 Viola Rothschild, “China’s Gig Economy Is Driving Close to the Edge,” Foreign Policy, September 7, 2018, https://foreignpolicy.com/2018/09/07/chinas-gig-economy-is-driving-close-to-the-edge/. 26 Jenny Chan, “Shenzhen Jasic Technology: the birth of a worker-student coalition in China?,” Hong Kong Free Press, September 1, 2018, https://www.hongkongfp.com/2018/09/01/shenzhen-jasic-technology-birth-worker-student-coalition-china/.

41 is no longer any confidence that a Chinese population in Xinjiang29 and abduction of company—private or not—could resist a foreign citizens in China, such as the CCP directive. The current international Swedish citizen Gui Minhai or Canadians debate around the adoption of technology and Michael Spavor30, by Chinese national champion Huawei in undermine its efforts to shape a positive countries’ critical infrastructure in part narrative of its international engagement reflects such an assessment.27 In addition, and leadership. In addition, Beijing’s Chinese policies, including the enormous mobilization of its overseas students subsidies provided Chinese state-owned globally to protest visits by the Dalai Lama, enterprises, widespread intellectual property inform on Chinese studying abroad who do theft, coerced technology transfer, and not follow the CCP line, vociferously China’s Made in China 2025 program have represent the government’s position on encouraged a number of countries to push sensitive issues such as Hong Kong and back against an uneven playing field. Taiwan31, and, in rare cases, steal technology from the university labs in which Xi’s BRI ambitions are also they work32, has led to a backlash in a encountering new roadblocks. Mounting number of countries, including Australia, levels of debt, as well as environmental, Canada, and the United States. labor, and governance concerns, have caused Malaysia, Myanmar, Pakistan, Xi 2.0 Bangladesh, and Sierra Leone, among In his description of leadership, Xi others countries, to reconsider previously Jinping is fond of using the analogy of a arranged deals. Roughly one-third of the relay race: a baton is passed from one projects in terms of overall value have been runner to the next and each runner builds stayed or cancelled. Even experts within upon what has come before but also China question the wisdom of the country’s delivers his own contribution. With the foreign investment operating principles; baton in Xi’s hand, the Chinese government many of the large SOEs driving the BRI now possesses far more reach and influence projects are dramatically increasing their at home and abroad. And Xi is playing a debt to asset ratios—well beyond those long game. Yet the externalities of Xi’s incurred by other countries’ firms.28 model, such as local government paralysis, And Xi’s efforts to project Chinese declining birthrates, weak soft power, and soft power have fallen flat. Xi’s coercive growing international economic backlash, approach to Taiwan has only contributed to among others, are also beginning to alienate further the island’s citizens; and impinge on Xi’s ability to cross the finish Beijing’s treatment of its Uighur Muslim line. Xi may well be coming to the point

27 Joe Panettier, “Huawei Banned in Which Countries?,” Channel E2E, February 19, 2019, https://www.channele2e.com/business/enterprise/huawei-banned-in-which-countries/. 28 James Kynge, “China’s Belt and Road Projects Drive Overseas Debt Fears,” Financial Times, August 7, 2018, https://www.ft.com/content/e7a08b54-9554-11e8-b747-fb1e803ee64e. 29 “‘Eradicating Ideological Viruses:’ China’s Campaign of Repression Against Xinjiang’s Muslims,” , Septemner 19, 2019, https://www.hrw.org/report/2018/09/09/eradicating-ideological-viruses/chinas-campaign-repression-against-xinjiangs#. 30 Dan Bilefsky, “The Canadians Detained in China: An Ex-Diplomat and a Daring ‘Fixer,’” New York Times, December 14, 2018, https://www.nytimes.com/2018/12/14/world/canada/china-detained-spavor-kovrig.html. 31 “University Protests Raise CCP Influence Concerns,” , February 15, 2019, https://chinadigitaltimes.net/2019/02/protests-at-canadian-universities-raise-concerns-about-chinese-government-involvement/. 32 “Student accused of stealing research from Duke professor under Chinese government order,” WRAL.com, July 24, 2018, https://www.wral.com/student-accused-of-stealing-research-from-duke-professor-under-chinese-government-order/17722099/.

42 where he must consider a course correction partnerships with both allies and partners, or perhaps pass the baton to the next help give shape to an otherwise amorphous runner. concept. At the same time, Congress has moved aggressively to try to address issues U.S. Policy: Rethink, Reset, and Refine around Chinese human rights abuses, Xi’s ambitions (as well as the Taiwan, Chinese acquisition of core emerging challenges that he faces in technologies, and Chinese influence achieving them) provide a significantly operations. altered landscape for U.S. policy, and the The Missing Pieces Trump administration has already hit the rethink and reset buttons on the bilateral To date, the strength of relationship. Talk of engagement is rare. Washington’s response has been to Discussion of a “G-2,” in which the United acknowledge and confront quickly and States and China would respond together to directly many of the challenges that China global challenges and shape the norms and presents to U.S. interests, particularly on institutions of global governance, has the trade front. Somewhat surprisingly, disappeared. Instead, China-focused among significant sectors of the Chinese conversations in Washington revolve around elite, the tougher Trump administration the challenge—even the threat—that China policy is appreciated. Many Chinese now poses to the United States. As FBI director argue that President Trump provides an Christopher Wray famously testified before important bulwark against Xi Jinping’s worst Congress in early 2018; “One of the things excesses. In light of this and the current we’re trying to do is view the China threat challenges Xi now confronts, continued as not just a whole-of-government threat, pressure by the United States is critical. Yet but a whole-of-society threat.” important pieces are still missing. Five priorities for the administration should be The result has been a frenzy of to: activity. The President has focused overwhelmingly on the U.S.-China bilateral • Strengthen the economic pillar trade relationship and on advancing the of U.S. global engagement. The denuclearization of North Korea and played United States often operates at a a much smaller role—at least publicly—in deficit relative to China because addressing the larger context of the U.S.- much of the region—and the world— China relationship and the U.S. role in Asia. believes that the United States is To a significant extent, the broader foreign essential for security but China is policy bureaucracy and Congress have filled indispensable for economic the vacuum. They tout the concept of a prosperity. Reframing this narrative “Free and Open Indo-Pacific,” (FOIP) that is to underscore the importance of U.S. rooted in traditional principles of American economic contributions and foreign policy: freedom of navigation, good leadership is essential. First, governance, and free (and now fair) trade Washington should underscore how and investment. The passage of the Asia important U.S. companies actually Reassurance Initiative Act to help realize are: For example, in 2018, U.S. FOIP’s objectives and the establishment of corporations invested more in Africa the International Development Finance than China (as they do most years). Corporation, as well as enhanced security Second, the United States needs a

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broader global strategy to compete • Engage allies and partners at more effectively with China, the highest level around top- particularly in critical areas such as priority issues. International advancing digitalization. It is not concern over the Xi model is enough simply to criticize Chinese widespread. In the spring 2018 Pew technologies or companies, the polls, a 25-country median of 63 United States needs to provide and percent said they preferred a world support a credible alternative. And in which the U.S. was the leading Washington should also consider power, while 19 percent favored using impending trade negotiations China (although President Trump, with Japan as a backdoor into himself, fared worse in the polls joining the Comprehensive and than Xi Jinping).33 As countries take Progressive Agreement for Trans- sides over the adoption of Huawei’s Pacific Partnership. 5G technology, however, the United States appears poised to suffer a • Develop a long-term (thirty- diplomatic defeat along the same year) strategic game plan. China lines as it experienced previously is moving aggressively to solidify its with the Asian Infrastructure control in areas it considers its Investment Bank (AIIB). If sovereign territory. It is also Washington is going to precipitate a developing regional arrangements showdown with Beijing, it needs to and institutions in the Asia-Pacific do more quiet diplomatic work up- that do not include the to ensure that it does not lose. States. The Trump administration Given that many such issues are also has outlined the basic principles of a debated in local parliaments or other Free and Open Indo-Pacific, but its representative bodies, Congress content has not been fully should also consider playing a more elaborated. Washington needs to active role in engaging its look out over the next thirty years to counterparts. determine its own place and role in the Asia Pacific, work with its allies • Reach out to communities and partners to develop an within the United States on integrated plan, and ensure that all issues of Chinese influence and actors are husbanding the resources investment. Chinese influence and developing the capabilities to operations, theft of intellectual achieve their aims. In addition, property, and aggressive investment President Trump should offer his in U.S. technological capabilities— full-throated support for FOIP, as from university labs to start-ups to well as for the U.S. alliance system large corporations—have all that will be essential to the U.S. triggered alarm bells in Washington maintaining a significant presence in over the past few years. Yet much of the region. the rest of the country has not caught up to such concerns. U.S. universities, labs, Chinese diaspora

33 “Trump’s International Ratings Remain Low, Especially Among Key Allies,” Pew Research Center, October 1, 2018, http://www.pewglobal.org/2018/10/01/trumps-international-ratings-remain-low-especially-among-key-allies/.

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communities, and multinationals containment of its harmful have all operated for decades under behaviors. Some potential areas of a framework of engagement with cooperation include: establishing China, and with an understanding best practices for infrastructure that, in many respects, the deeper development, ramping up the the engagement, the better. collective efforts on drug trafficking, Washington’s heavy-handed and developing norms around approach to addressing these artificial intelligence. sensitive issues risks a backlash. The policy of the United States More and better education and toward China is a reflection of a changing engagement between Washington China, as well as the Trump Administration’s on the one hand and university assessment and understanding of the presidents, CEOs, and heads of labs opportunities and challenges Xi’s China on the other are needed to prevent presents to U.S. interests. Given both the growing political divisiveness among current fractured nature of foreign the many disparate communities policymaking in the United States, as well involved in the U.S.-China as the dramatic changes ushered in by Xi relationship. Jinping, it is not surprising that an • Seek out areas of cooperation overarching strategy to advance American with China. Vice President Pence’s interests in the face of a changed China October 2018 speech on China, continues to elude the administration. which many commentators have In the meantime, however, it hailed as the Trump Administration’s should, at the very least, take steps to defining China moment, was little reassure its allies, partners, and even China, more than a recitation of Chinese that its policy is coherent, cohesive, and vices and an inflated assessment of ultimately constructive. America’s role in shaping Chinese history. Instead of providing fodder for hardline elements within China to bolster their containment narrative, the United States should be establishing new areas of cooperation, while at the same time

pursuing competition with China and

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46

COUNTERING GRAY ZONE MARITIME COERCION IN ASIA

Bonnie S. Glaser

Director, China Power Project, Center for Strategic and International Studies

In the past decade, tensions in Asia Chinese Maritime Coercion and U.S. have risen as Beijing has become more Interests assertive in maritime disputes with its Beijing has employed gray zone neighbors and the United States.1 Regional tactics to advance its maritime claims and leaders have expressed concern that to challenge other actors operating in the Chinese “gray zone” coercion—attempts to seas and airspace near its coastline. achieve one’s security objectives without Chinese activities appear explicitly designed resorting to direct and sizable use of force— to avoid triggering U.S. security threatens to destabilize the region by commitments by exploiting ambiguity, undermining the rules-based order and asymmetry, and incrementalism. These increasing the risk of conflict. Yet, despite efforts are slowly shifting the status quo by the threat posed to regional security and leveraging China’s asymmetric strengths prosperity, the United States and its allies against U.S., ally, and partner weaknesses. and partners in East Asia have struggled to develop effective counters to maritime Arenas of Chinese gray zone actions coercion. The inability of U.S. policymakers in Asia include the Sea, the to deter coercive actions or to articulate a South China Sea and the Taiwan Strait, coherent gray zone strategy has raised where China has territorial disputes. questions about Washington’s ability to Chinese maritime coercion tools include the protect U.S. interests, to integrate China employment of paramilitary forces, along into the international order, and to maintain with law enforcement and naval ships, to existing alliance commitments. As a result, gradually alter the status quo. All three are experts in the United States and in East Asia being used against Japan in the East China are searching for new approaches to Sea, for example, where China seeks to counter coercion in the East and South advance its claim over the disputed China Seas. Senkaku/Diaoyu Islands. Economic levers are increasingly being used by Beijing to

coerce its neighbors, such as the quarantine of imported Philippines tropical fruit to punish Manila for challenging Chinese

1 This short paper draws from the excellent work by my current and former CSIS colleagues Michael Green, Kathleen Hicks, Zack Cooper, John Schaus and Jake Douglas, Countering Coercion in Maritime Asia: The Theory and Practice of Gray Zone Deterrence., Rowman and Littlefield for the Center for Strategic and International Studies, Lanham, Boulder, New York and London, 2017, https://csis-prod.s3.amazonaws.com/s3fs- public/publication/170505_GreenM_CounteringCoercionAsia_Web.pdf?OnoJXfWb4A5gw_n6G.8azgEd8zRIM4wq.

47 fishermen at disputed Scarborough Shoal in Public confidence that “the U.S. takes into 2012. account the interests of countries like ours a great deal or fair amount” declined between Countering Chinese coercion in 2013 and 2018 in the Philippines (85 to 74 maritime Asia is vital to U.S. security and percent), Indonesia (52 to 39 percent), prosperity. U.S. interests in the region South Korea (35 to 24 percent), and Japan include: 1) protecting American citizens and (38 to 28 percent). In Australia, public U.S. allies; 2) expanding trade and confidence increased slightly (28 to 30 economic opportunities; 3) supporting the percent).2 rule of law and universal democratic norms that underpin the post-World War II liberal A mid-2017 Gallop public opinion international order; and 4) preventing the poll revealed a sharp drop in approval of rise of a hostile hegemon on the Eurasian U.S. leadership among adults in Australia continent. (31 percent), the Philippines (12 percent), South Korea (14 percent), New Zealand (36 To protect and advance those percent), Japan (16 percent), and Thailand interests, the U.S. pursues several (13 percent). Belief that the U.S. would not objectives, including 1) safeguarding defend their country increased from 2016 to freedom of the seas; 2) maintaining access 2017 in New Zealand (11 percent), South to and ability to maneuver within Asia’s Korea (6 percent), the Philippines (4 maritime spaces; 3) deterring conflict and percent), Australia (2 percent) and Japan (1 coercion; and 4) promoting adherence to percent). Confidence among adults in international law and standards. Singapore, not a U.S. ally, that the U.S. U.S. Allies and Public Opinion Polls would defend their country fell 24 percent 3 If the United States fails to develop an in that period. Data collection for that poll effective strategy for responding to took place in mid-2017, and therefore does coercion, the likelihood that it will be able to not reflect many developments that preserve American interests in the Asia- occurred subsequently. It is likely that Pacific will decline. If U.S. allies and approval of U.S. leadership in allied partners doubt U.S. commitment or resolve, countries has continued to decline, and they are more likely to adopt a neutral beliefs that the U.S. would not defend their position between the U.S. and China, or country may have increased. even accommodate Chinese interests. In a November/December 2018 poll China’s pressure on U.S. allies and partners of elites in ASEAN member states, 59 could undermine the hub-and-spokes percent of respondents believed that U.S. system of bilateral regional relationships by global power and influence has deteriorated demonstrating insufficient U.S. capacity and or deteriorated substantially compared to willpower, or the weakness of alliance one year ago. The same poll found that solidarity. under 27 percent of respondents had full or Public opinion polls conducted by some confidence in the United States as a the Pew Research Center in the spring of 2018 showed that confidence in key countries that the U.S. considers the interests of their country has declined.

2 Pew Research Center Global Attitudes Survey, http://www.pewglobal.org/2018/10/01/trumps-international-ratings- remain-low-especially-among-key-allies/. 3 Stafford Nichols and Zacc Ritter, “U.S. Defense Promise Still Credible in Asia-Pacific,” https://news.gallup.com/poll/237209/defense-promise-credible-asia-pacific.aspx, July 17,2018.

48 strategic partner and provider of regional and advance U.S. interests in the Indo- security4. Pacific region? Free and Open Indo-Pacific Strategy 2) Is the balance among diplomatic, economic, and military policies within the Building on the Obama FOIP strategy correct? administration’s rebalance to Asia, President Trump launched the Free and Open Indo- 3) Are U.S. Indo-Pacific military forces Pacific (FOIP) strategy in his remarks to the properly deployed to secure U.S. interests? Asia-Pacific Economic cooperation CEO 4) Is U.S. diplomacy for the Indo-Pacific Summit in Da Nang, Vietnam in November adequately funded to implement the FOIP 2017. The strategy elevates the importance strategy? of the maritime domain, especially the trade and energy linkages between the Pacific 5) Is future defense procurement and Indian Ocean regions. FOIP is also a adequately funded to protect U.S. interests? normative concept imbued with the values, 6) Do American values play an appropriate principles, and norms that the United States role in the FOIP strategy?6 and its allies see as underpinning the regional order. Although the FOIP strategy Congress has passed important focuses on setting out a positive vision for pieces of legislation related to the FOIP the region, it is undeniably aimed at strategy, which have established institutions competing more effectively with China in and provided resources for implementation the Indo-Pacific zone. of Trump administration Indo-Pacific policies. These legislative initiatives and According to a recent U.S. State their passage into law have boosted Department fact sheet, the U.S. approach to confidence globally in the U.S. commitment the Indo-Pacific focuses on economics, to the Indo-Pacific region. Key pieces of governance and security. The Trump legislation include: 1) the John S. McCain administration is “taking a whole-of- National Defense Authorization Act for government approach to advance fair and FY2019; 2) the Better Utilization of reciprocal trade, promote economic and Investments Leading to Development commercial engagement that adheres to (BUILD) Act of 2018, which created the high standards and respects local United States International Development sovereignty and autonomy, and mobilize Finance Corporation; and 3) the Asia private sector investment into the Indo- Reassurance Initiative Act (ARIA) of 2018, 5 Pacific.” which authorized $1.5 billion annually for Congress has a substantial role in five years to advance specific U.S. overseeing the FOIP strategy and setting objectives in the Indo-Pacific. Several of resource levels for its policies. Questions for these objectives pertain to the maritime Congress to consider include: realm, including to improve the defense 1) Is the FOIP strategy adequate to protect capacity and resiliency of partner nations to resist coercion and deter and defend against security threats; to conduct regular

4 ISEAS Yusof Ishak Institute, “State of Southeast Asia 2019 Survey Report,” https://www.iseas.edu.sg/images/pdf/TheStateofSEASurveyReport_2019.pdf. 5 “Advancing a Free and Open Indo-Pacific Region,” Fact Sheet, Office of the Spokesperson, November 18, 2018, https://www.state.gov/r/pa/prs/ps/2018/11/287433.htm. 6 “The Trump Administration’s ‘Free and Open Indo-Pacific’: Issues for Congress, Congressional Research Service, October 3, 2018, https://www.everycrsreport.com/files/20181003_R45396_3b75f4bf108ab8d5ab4419b8e98d4edfc80c31ed.pdf.

49 bilateral and multilateral engagements, • Lesson 1: Tailor deterrence strategies. particularly with the United States most Leaders should only draw red lines that they highly-capable allies and partners; and to are willing to uphold. Tailoring gray zone increase maritime domain awareness deterrence therefore requires differentiation programs in South Asia and Southeast among four categories of coercion and only Asia.7 attempting deterrence when it can be done credibly. These four categories of coercion Countering Maritime Coercion: Policy include: contesting physical control, Recommendations contesting rules and norms, exploiting Thus far, the Trump administration’s physical control, and exploiting rules and strategy to counter Chinese maritime norms. coercion has focused primarily on two • Lesson 2: Clarify deterrence goals: building the capacity of partner commitments. Although ambiguity can be nations to resist coercion and conducting useful, gray zone coercion can exploit regular freedom of navigation operations ambiguity to undermine commitments. that challenge Chinese excessive maritime Increasingly, leaders will have to be clear claims. While both of these policies are about the actions they oppose and crucial, they are nevertheless insufficient to demonstrate how they may respond in prevent Beijing from using gray zone order to credibly deter those actions. pressure to enhance its influence over contested maritime spaces. A more effective • Lesson 3: Accept calculated risk. Too strategy is needed to prevent Beijing from often, Washington has sought to eliminate eroding the rules-based order and rather than manage gray zone risks. Yet, threatening the sovereignty and security of risk avoidance encourages coercion by U.S. regional allies and partners. reassuring China that the likelihood of escalation in gray zones is minimal. Rather than acting defensively and reactively, the United States should develop • Lesson 4: Tighten alliances and a strategy that aims to shape the maritime partnerships. If Washington clarifies its environment. An essential part of a U.S. commitments and accepts more risk, then strategy must be willingness to impose the United States should seek to deepen costs on Beijing for its destabilizing alliance cooperation. By ensuring that the behavior. In some cases, the U.S. will need United States is a constant participant in to accept risk to deter a particular coercive allied decisionmaking, Washington can action. Effectively countering Chinese dissipate both ally fears of abandonment coercion will require strengthening U.S. and U.S. fears of entrapment. alliances and partnerships, and restoring • Lesson 5: Exercise restraint while regional confidence in U.S. commitment and demonstrating resolve. If the United States resolve to regional security. takes a more robust approach to deterring A CSIS study titled “Countering gray zone coercion, then it should also Coercion in Maritime Asia: The Theory and engage Beijing to demonstrate that Practice of Gray Zone Deterrence” examined Washington still welcomes the rise of a several incidents of gray zone coercion in peaceful and prosperous China.8 maritime Asia and analyzed deterrence theory. It drew the following five lessons:

7 S.2736 - The Asia Reassurance Initiative Act of 2018, https://www.congress.gov/bill/115th-congress/senate- bill/2736/text. 8 Countering Coercion in Maritime Asia: The Theory and Practice of Gray Zone Deterrence, pp. 266-278.

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DISPUTE OVER EXCLUSIVE ECONOMIC ZONES (EEZ) IN THE EAST CHINA SEA

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RIVAL CLAIMS IN THE SOUTH CHINA SEA

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ISLAND BUILDING AND LAND RECLAMATION

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FIRST AND SECOND ISLAND CHAINS

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IT’S TIME TO NORMALIZE U.S.-CHINA RIVALRY: AGREE TO DISAGREE, THEN COOPERATE ANYWAY

Robert Daly

Director, Kissinger Institute on China and the U.S., The Wilson Center

It is now widely acknowledged that 19, 2018, Secretary of Defense Mattis said the United States and China have entered a that the U.S. must prevail over China “if the new era of contentious relations. They are values that grew out of the Enlightenment engaged in a competition to shape security are to survive.” In his 2018 State of the architectures, trading regimes, technology Union address, President Trump called development and regulation, norms and China a “horrible danger” to American practices, and values systems worldwide. interests, economic well-being, and values. The outcome of this rivalry, if one may Neither power has responded to speak of outcomes, will probably not be declining relations effectively. Under Xi known for decades. Jinping, China has overreached in its quest Overreach and Overreaction for comprehensive national power—its term for the kind of pre-eminence the United Although the roots of rivalry States has enjoyed since the end of the predated the advent of Donald Trump and Cold War. Facing multinational blowback to Xi Jinping, the realization that the its economic policies and global lending relationship had changed—that our practices and influence operations, Beijing is respective fears now outweigh our hopes, recalibrating its relationship with the U.S., to adapt a phrase from David Lampton1— its Belt and Road Initiative, and the framing came suddenly to policymakers in of its Made in China 2025 program. Washington and Beijing. When China built artificial islands in the South China Sea, For its part, the United States has militarized them, and flouted the findings of overreacted. While American concerns the Permanent Court of in 2016, about China’s intentions and behavior are its regional ambitions and disdain for merited, Washington’s failure to address international law and opinion were laid them within a strategic framework creates bare. The American response was offered in the impression—even among nations that late 2017, when the new National Security share American anxiety over Chinese Strategy stated that China was America’s power—that the U.S. is simply flailing. primary long-term security challenge and Name-calling and uncoordinated, short-lived (together with Russia) was a greater threat attacks on a variety of Chinese policies have to the U.S. than terrorism. In rolling out the been the order of the day. new National Defense Strategy on January

1 https://www.uscnpm.org/blog/2015/05/11/a-tipping-point-in-u-s-china-relations-is-upon-us-part-i/

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Vice President Mike Pence’s October Americans will tolerate harm to their 4, 2018 speech at the Hudson Institute was incomes, industries, and communities as the the starkest example to date of the trade war drags on. China has a long limitations of this approach. In a blanket tradition of personal suffering (eating declaration of hostility, Pence called China a bitterness) for the good of the nation and bad actor at home, where it is repressing China’s party media can control national religion and building a surveillance state, discourse and hide the costs of competition abroad, where it practices debt-trap while American citizens complain freely. The diplomacy, and within the United States Chinese believe they can outlast the U.S. if itself, where the Chinese Communist Party real privation is called for. China believes, in (CCP) is attempting to influence American other words, that it has an advantage of communities and institutions. This litany will, as rising powers often do over status was largely accurate, but the speech was a quo nations. declaration of an attitude, not an outline of How much competition can the strategy. The elements of a sustainable United States afford? China has the strategy that were absent from the Pence world’s largest consumer class, is the major speech have not been raised by the trading partner of most countries in the administration in the intervening months. Indo-Pacific, and is improving its ability to The major omissions, phrased below as fight an asymmetrical Asian war with the questions for policymakers, were these: United States. Although its economy is still Do the American people support smaller than that of the U.S., China’s the bipartisan Beltway consensus on authoritarian government can place a the China challenge? Without such higher percentage of national wealth at the support, the United States cannot meet service of strategic objectives than can China’s "whole-of-society threat” with “a Washington. The United States, meanwhile, whole-of-society response," as FBI Director is lowering taxes, expanding deficits, faces Christopher Wray recommends.2 In a a possible recession in the short term and a February 2017 Gallup poll, 50% of certain long-term structural budget deficit, Americans expressed positive views of and cannot even afford to modernize its China3—the highest rate of approval since own infrastructure. Where will the resources the 1989 Tiananmen Massacre. The onset for great power competition be found? of the U.S.-China trade war seems to have Even if the U.S. can afford tempered enthusiasm, however: in a July competition with China, as a moral 2018 Gallup poll, 62% of Americans said matter, how much harm are Americans China’s trade practices were unfair4 and, in willing to inflict? At the personal and an August 2018 Pew poll, only 38% of cultural levels, Chinese and Americans have Americans had a positive view of China.5 always been at least as fascinated as Even if Americans think the frustrated by their mutual engagement. relationship is fundamentally Many Americans have been to China and competitive, what costs are they know Chinese and Chinese-Americans willing to bear? It is far from clear that personally as friends, neighbors, colleagues,

2 https://www.businessinsider.com/china-threat-to-america-fbi-director-warns-2018-2 3 https://news.gallup.com/poll/204227/china-image-positive-three-decades.aspx 4 https://news.gallup.com/poll/236843/americans-say-china-trade-unfair-trade-canada-fair.aspx 5 http://www.pewglobal.org/2018/08/28/as-trade-tensions-rise-fewer-americans-see-china-favorably/

58 classmates, teammates, and co- are not recognized, moreover, American parishioners. They are aware of the critiques of the CCP will be unconvincing essential contributions that Chinese even to Chinese citizens who might Americans have made to every aspect of otherwise give the U.S. a fair hearing. American life. This familiarity and What is the specific China interdependence will make it hard to threat? What’s the worst China could convince Americans that they should inflict do? Despite Xi Jinping’s confidence and suffering on one-fifth of humankind in order China’s assertive foreign policy and growing to protect an American pre-eminence that financial and military might, China is many of them no longer believe in. constrained. Its debt, demographics, Are official American corruption, pollution, growing economic assessments of the PRC founded in a inequality, water shortage, and sclerotic full understanding of China’s politics make China a fragile superpower, as development? As noted above, the view Susan Shirk6 pointed out in 2007. China is of China on which Vice President Pence also constrained by geography. It is ringed based his 2018 speech was largely in by narrow straits and American allies in accurate, but it was wholly negative. It is the Western Pacific and has land borders true that China is becoming a techno- with fourteen nations, four of which are surveillance state, that the CCP is locking nuclear and nearly all of which are wary of Uighurs in re-education camps, persecuting Chinese power. According to a 2018 Pew faith communities, free thinkers, and human survey, 73% of people in the Asia-Pacific rights , and further restricting the region prefer American to Chinese always limited freedoms of journalists, leadership.7 As China’s economy slows, NGOs, universities, think tanks, artists, and these factors will weigh more heavily on the any group that organizes outside of CCP decisions of China’s leaders. Beijing may auspices, including Marxist university have to dial back its ambitions, no matter students advocating for labor rights. But the what course the U.S. adopts. The strategic story of repression in China is not question, then, is not, What does China straightforward. Few people skulk in the want? (we know: it wants a Sino-centric streets. Energy, ambition, and eastern hemisphere), but What will China entrepreneurialism percolate up through the settle for? This, of course, is also the sidewalks. Most Chinese report a high question for the United States. degree of satisfaction with the country’s Last, and most importantly, What is direction and with their own prospects and the best the United States can hope those of their children. Chinese who do not for in its competition with China? challenge Party authority enjoy a high What is America’s vision for a stable degree of personal freedom. An American relationship between a powerful, strategy that does not comprise these prosperous U.S. and a powerful, realities—that doesn’t comprehend China in prosperous, China? Because no such its totality and complexity—will be strategic vision has been proposed, there is unrealistic by definition and will have scant no floor to prevent this increasingly chance of success. If Chinese achievements

6 Susan Shirk, Chair of the 21st Century China Center at the University of California at San Diego , wrote the book China: Fragile Superpower (2008) 7 http://www.pewglobal.org/2018/10/01/most-prefer-that-u-s-not-china-be-the-worlds-leading-power/

59 contentious relationship from descending months, scholars have turned their into conflict. attention from describing the decline of U.S.-China relations to prescribing In his Hudson Institute speech, Vice frameworks for the peaceful management President Pence moved directly from a list of rivalry. Notable recent publications of China’s many sins to a declaration that, include Course Correction: Toward an “We’re modernizing our nuclear arsenal, Effective and Sustainable China Policy, by we’re fielding and developing new cutting- an Asia Society and University of California edge fighters and bombers, we’re building a 9 new generation of aircraft carriers and San Diego task force, Andrew Erickson’s warships, and we’re investing as never Competitive Coexistence: An American before in our Armed Forces.”8 None of the Concept for Managing U.S.-China 10 questions raised above seems to have been Relations, and After the Responsible considered as the United States leapt from Stakeholder, What? Debating America’s an enhanced threat perception to a new China Strategy, by Hal Brands and Zack arms race. Cooper.11 The authors of these balanced assessments are in broad agreement with But the China challenge is unfolding each other. Their work could form the basis more gradually and uncertainly than many of an American diplomatic effort to define headlines suggest. The U.S. still has time to and limit a Sino-U.S. competition that develop a comprehensive, effective, China otherwise threatens the prosperity of both strategy. nations. Normalizing Rivalry To normalize contentious relations, The task is to move beyond the each nation must define its interests as freak-out of 2017-2018 and normalize Sino- clearly and narrowly as possible. This U.S. rivalry. During the Cold War, the U.S. traditional feature of foreign policy has been and the Soviet Union normalized adversity strikingly absent from both nations’ based on a (roughly) common diplomacy over the past several years. understanding of each other’s goals and Under Xi Jinping, China has had more to say means. Because they understood the about its rights and ambitions than dangers and limits of their competition, they interests, while the United States under were able to exercise restraint and found Donald Trump has focused on outrage and ways to cooperate when necessary. Neither fear. side hid behind win-win bromides, nor were The U.S. has three major interests they inclined, as the relationship matured, vis-à-vis China: to make broad threats and accusations without strategic direction, as the United • To prevent Chinese dominance of States has been doing since 2017. the Indo-Pacific, and the Western Pacific in particular, as Chinese American China experts have dominance would cripple America’s already taken the first steps toward alliance system, undermine international normalizing competition. In the past few law, and precipitate a regional nuclear

8 https://www.hudson.org/events/1610-vice-president-mike-pence-s-remarks-on-the-administration-s-policy-towards-china102018 9 https://asiasociety.org/center-us-china-relations/course-correction-toward-effective-and-sustainable-china-policy 10 https://nationalinterest.org/feature/competitive-coexistence-american-concept-managing-us-china-relations-42852 11 https://tnsr.org/2019/02/after-the-responsible-stakeholder-what-debating-americas-china-strategy-2/

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arms race. Yet even as the U.S. opposes Chinese economic and social development, China’s dominance, it must accept engagement in the new era must be more increased Chinese influence in the self-interested and reciprocal. The focus will region, as greater Chinese influence is be on negotiations, confidence building inevitable and in order to lower China’s measures, joint and multilateral , threat perceptions. Striking the balance and cooperation on combatting climate between preventing Chinese dominance change, fisheries management, promoting and accommodating its increased global health, poverty alleviation, influence will try, but should not overtax, peacekeeping, setting international safety the military and diplomatic capabilities of standards for food, pharmaceuticals, and the U.S. and its allies. consumer products, and reaching technical and ethical understandings to regulate new • To prevent the spread of Chinese technologies and medical procedures. illiberalism beyond China’s borders. Because competition and cooperation are The goal of PRC foreign policy is to not mutually exclusive, and in many cases shape a world that is highly integrated are hopelessly intermingled, there will be and wholly accepting of CCP prerogatives rivalry between the U.S. and China even and practices. Many of those practices when they are collaborating. It can’t be are noxious to free societies. The United helped, but it can be done if it is a strategic States should continue to call China out priority. and to oppose illiberalism with all of the vigor that its investments, traditional and Objections public diplomacy, civil society American interests are often stated organizations, and soft power resources in positive, universal terms which can muster. At the same time, the United emphasize what the United States should States must recognize that China is build and promote worldwide rather than, increasingly able to provide genuine as I have done, what it should prevent and international public goods and should avoid with reference to a single country. It recognize and welcome Chinese is true that the U.S should counter Chinese contributions to global welfare. Like attempts to dominate the Indo-Pacific preventing Chinese dominance of the because America has a constructive interest Indo Pacific, this goal is within America’s in upholding a balance of power conducive ken. to global peace and prosperity. Prevent the • To avoid a new arms race with spread of Chinese illiberalism sounds China that comprises nuclear, cyber, defensive and petty compared to maintain a and space-based weapons, which will liberal world order. I support positive and require new dialogue mechanisms and non-exclusive formulations in principle. But treaties between the United States, in the context of the high stakes U.S.-China China, and third countries. competition, high-minded descriptions of national intent can take on a self-righteous, Pursuit of American interests does disingenuous tone that prevents frank not preclude engagement with China; it discussion. This is the problem with Xi demands it. In contrast to the engagement Jinping’s constant, meaningless advocacy of of the first forty years of U.S.-China a Community of Common Destiny. Given relations, which often (and necessarily) how far and fast U.S.-China relations have emphasized mutual understanding and

61 fallen, it will be more productive for the U.S. international course as Xi Jinping and his and China to tell each other, dispassionately more hawkish American opponents would but precisely, which of each other’s have the world believe. China is still behaviors they object to, and then to work crossing the river by feeling for stones— together in certainty that both countries Deng Xiaoping’s way of saying the PRC is know where they stand. making things up as it goes along. The story of modern China remains a story of There are leaders and public figures change. Since 1979, the United States has in the United States (and in China) who been a foremost catalyst of China’s ongoing believe that the bilateral relationship is evolution. Disengaging from China will irredeemable and that the time for reduce that impact and make the U.S. less cooperation has passed. In this view, secure. engagement was a forty year sucker’s game won by China, which is now a monolith There are no easy answers in U.S.- moving inexorably “to supplant us as the China relations. Normalizing rivalry by world’s superpower.”12 China is a grave defining American interests is not a challenge to the United States in many panacea. It is, however, the urgent next respects, but it is not as confident, as step if the two powers are to avoid conflict. competent, or as certain of its domestic and

12 https://www.washingtonpost.com/world/national-security/top-fbi-official-warns-of-strategic-threat-from-china-through-economic- and-other-forms-of-espionage/2018/12/12/38067ee2-fe36-11e8-83c0-b06139e540e5_story.html?utm_term=.8ea7834fdd65

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COMPETING WITH A RISING CHINA: POLICIES FOR AMERICAN INTERESTS THE ASPEN INSTITUTE CONGRESSIONAL PROGRAM March 15-18, 2019 San Diego, California

CONFERENCE PARTICIPANTS

MEMBERS OF CONGRESS:

Representative Brendan Boyle Representative Jimmy Panetta and Jennifer Boyle Representative Scott Peters Representative Salud Carbajal and Lynn Gorguze

Representative Judy Chu Representative Kathleen Rice

Representative Lou Correa Representative Tom Rice and Esther Reynoso and Wrenzie Rice

Representative Mark DeSaulnier Representative Dutch Ruppersberger and Kay Ruppersberger Representative Ted Deutch and Cole Deutch Representative Dina Titus and Tom Wright Senator Cory Gardner Senator Chris Van Hollen Representative Billy Long and Katherine Wilkens and Barbara Long Representative Peter Welch Representative Alan Lowenthal and Deborah Malumed Senator Roger Wicker and Gayle Wicker

SCHOLARS AND SPEAKERS:

Dean Cheng Senior Research Fellow, Asia Studies Center, the Heritage Foundation Peter Cowhey Dean, School of Global Policy and Strategy, University of California at San Diego Robert Daly Director, The Kissinger Institute, The Wilson Center Elizabeth Economy Director for Asia Studies, Council on Foreign Relations

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Gordon Hanson Director, Center on Global Transformation, University of California at San Diego Bonnie Glaser Director, China Power Project, Center for Strategic & International Studies Daniel Rosen Founding Partner, The Rhodium Group Orville Schell Director, Center on U.S.-China Relations, Asia Society Yun Sun Director, China Program, The Stimson Center

UNIVERSITY OF CALIFORNIA-SAN DIEGO FACULTY

Tai Ming Cheng Director, Institute on Global Conflict and Cooperation Lei Guang Director, 21st Century China Center Barry Naughton Sokwanlok Chair of Chinese International Affairs Molly Roberts Assistant Professor of Political Science Weiyi Shi Assistant Professor of Political Science

FOUNDATION REPRESENTATIVES:

Elizabeth Knup China Country Director, The Daniel Stid Director, The Madison Initiative, The Hewlett Foundation Nancy Yuan Vice President, The Asia Foundation

RAPPORTEUR:

Charlie Vest Master’s Candidate, School of Global Policy and Strategy, UCSD

ASPEN INSTITUTE:

Dan Glickman Executive Director, Congressional Program Lauren Kennedy Manager of Congressional Engagement Bill Nell Deputy Director, Congressional Program Carrie Rowell Conference Director, Congressional Program

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COMPETING WITH A RISING CHINA: POLICIES FOR AMERICAN INTERESTS THE ASPEN INSTITUTE CONGRESSIONAL PROGRAM March 15-18, 2019 San Diego, California

CONFERENCE AGENDA

FRIDAY, MARCH 15

Pre-Dinner Speaker U.S.-CHINA GLOBAL COMPETITORS: PROSPECTS FOR THE FUTURE China’s rise to a major economic and strategic player on the global stage over the last three decades has been a phenomenal story that now positions it as a major competitor to the U.S. The prospects for the future direction of this dynamic relationship is the foundation for the weekend’s discussions.

Peter Cowhey, Dean, School of Global Policy and Strategy, University of California at San Diego

Working Dinner Seating is arranged to expose participants to a diverse range of views and provide the opportunity for a meaningful exchange of ideas. Scholars and lawmakers are rotated daily. Discussion will focus on the opportunities, challenges, and potential solutions regarding the economic dimensions of U.S.-China relations.

SATURDAY, MARCH 16

INTRODUCTION AND FRAMEWORK OF THE CONFERENCE This conference is organized into roundtable conversations and pre-dinner remarks. This segment will highlight how the conference will be conducted, how those with questions will be recognized, and how responses will be timed to allow for as many questions and answers as possible. This format is important to enable full participation.

Dan Glickman, Executive Director, Aspen Institute Congressional Program Roundtable Discussion AN OVERVIEW OF GLOBAL RIVALRY As peer or near-peer competitors, China and the U.S. are striving to shape security architectures, trading regimes, norms and practices, and values systems worldwide. Few of the issues they face are merely bilateral. The measure of the relationship will be taken not only in

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Beijing and Washington, but in Africa, the Arctic, the Antarctic, Southeast Asia, outer space, and cyberspace. • Do the U.S. and China understand the terms and costs of their unprecedented global rivalry? • What assets and liabilities does each nation bring to the competition? • How are the superpowers’ global ambitions related to their domestic politics? • Which global perceptions and attitudes shape Sino-U.S. competition?

Orville Schell, Director, Center on U.S.-China Relations, The Asia Society Roundtable Discussion FROM ENGAGEMENT TO ADVERSITY: BILATERAL TRADE AND INVESTMENT, AND CHINA’S BELT AND ROAD INITIATIVE After 40 years of engagement in which economics served, in China’s President Xi Jinping’s phrase, as the “ballast” of the relationship, American dissatisfaction with China’s trade and investment policies became the fuse that ignited a comprehensive competition. China is unwilling to restructure its economy to meet American demands, however, and it is learning to leverage its wealth to build influence worldwide and within the U.S. • Which of China’s trade and investment policies pose the greatest threat to the U.S., and what are the chances of altering them? • Is the Belt and Road Initiative, China’s global expansion plan, simply a program for “predatory lending,” or is China providing global public goods and rewriting rules that may be accepted? • Should the U.S. view China’s economy as developing and reforming, or as a static, mercantilist menace? • To what degree does each country’s development depend on economic engagement with the other?

Daniel Rosen, Founding Partner, The Rhodium Group Roundtable Discussion EMERGING THEATERS OF COMPETITION: CYBERSPACE AND ESPIONAGE, WEAPONIZATION OF SPACE, AND THE RACE TO DOMINATE ARTIFICIAL INTELLIGENCE Beijing and Washington agree that innovation is now the key to economic, military, and soft power. A key feature of their competition is the race to master and marketize emergent technologies, and Artificial Intelligence in particular, which has the capacity to accelerate and integrate other innovations. If one side gains a clear advantage in AI, the other may never catch up. • Is China still an imitative nation, or has it developed the ability to innovate at the American scale? • Is the American regulatory environment a spur to AI innovation, or a drag on the growth of this emerging industry? • Which nation will likely prevail in the AI competition, and what are the global implications of dominance?

Dean Cheng, Senior Research Fellow, Asia Studies Center, the Heritage Foundation

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Individual Discussions Members of Congress and scholars meet individually to discuss U.S. policy toward China. Scholars available to meet for in-depth discussion of ideas raised in previous sessions that day include Orville Schell, Daniel Rosen, and Dean Cheng. Pre-Dinner Remarks THE QUEST FOR FAIR TRADE BETWEEN THE U.S. AND CHINA The terms of trade between the U.S. and China is a central factor impacting the relationship between these two superpowers. Professor Hanson will discuss costs and gains from expanded trade with China, which he first articulated in his piece, The China Shock.

Gordon Hanson, Director, Center on Global Transformation, University of California at San Diego Working Dinner Seating is arranged to expose participants to a diverse range of views and provide the opportunity for a meaningful exchange of ideas. Scholars and lawmakers are rotated daily. Discussion will focus on the opportunities, challenges, and potential solutions regarding the economic dimensions of U.S.-China relations.

SUNDAY, MARCH 17, 2019 Breakfast Remarks A CHINESE PERSPECTIVE ON U.S.-CHINA RELATIONS China sees its exponential development over the last few decades as a restoration of its destiny as a major power. China’s relationship with the U.S. has been a significant factor in its dramatic growth. What is China’s perspective on the U.S.-China relationship?

Yun Sun, Director, China Program, The Stimson Center Roundtable Discussion UNDERSTANDING CHINA’S QUEST FOR POWER ON CHINA’S TERMS Under Xi Jinping, the Chinese Communist Party has aggressively used clout to fulfill an ambition to rise its stature on the global stage irrespective of its competition with the U.S. Xi’s rejuvenation of a strong Chinese global presence has implications for issues of sovereignty, political, security and economic concerns as well as changing global rules in the realms of human rights and governance of internet space. China’s attempt to shape global narratives and to influence investment serve its historic aspirations. • What are the primary methods by which Beijing influences American institutions? • What specific harms have resulted from Chinese influence operations? How widespread are they? • What is the relationship between China’s influence campaigns and its public diplomacy, espionage, and interference operations? • How do China’s actions differentiate from legitimate “soft power” activities?

Elizabeth Economy, Director for Asia, Council on Foreign Relations

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Roundtable Discussion STANDOFF OR STATUS QUO IN THE WESTERN PACIFIC? It appears that China has succeeded in establishing a “new normal” in the Western Pacific; its constant patrols near the Senkaku Islands are barely mentioned by Western media and, in the South China Sea, it has militarized artificial islands and flouted the findings of the Permanent Court of Arbitration with impunity. American Freedom of Navigation operations have not altered Chinese behavior or ambitions. • Does the “Indo-Pacific” strategy offer realistic hope of countering China’s growing power in the region? • What are the implications of China’s growing power in the Western Pacific for U.S. alliances with Japan and South Korea, Thailand, and the Philippines? • How do Southeast Asian nations view the relative power of the U.S. and China in the region? • How is China’s more assertive stance toward Taiwan related to its policies in the Western Pacific?

Bonnie Glaser, Director, China Power Project, Center for Strategic & International Studies Roundtable Discussion TOWARD AN EFFECTIVE STRATEGY: POLICY IMPLICATIONS FOR THE U.S. The U.S. has informed China of its grievances and offered a stark declaration of its attitude toward the People’s Republic of China: We are rivals. Washington has not yet articulated policies to deal with the China threat, however, much less has it integrated its policies in light of American capabilities, constraints, and national will. In sum, the U.S. does not have a strategy for managing its greatest security challenge. • What are America’s primary interests vis-à-vis China? • What costs are the U.S. government and the American people willing to bear over the long run in competition with China? • What does the U.S. envision as the stable end point of the China rivalry? • What specific policies can best address American interests?

Robert Daly, Director, The Kissinger Institute, The Wilson Center Individual Discussions Members of Congress and scholars meet individually to discuss U.S. policy toward China. Scholars available to meet for in depth discussion of ideas raised in previous sessions that day include Elizabeth Economy, Bonnie Glaser, and Robert Daly. Working Dinner Seating is arranged to expose participants to a diverse range of views and provide opportunity for a meaningful exchange of ideas. Scholars and lawmakers are rotated daily. Discussion will focus on the opportunities, challenges, and potential solutions regarding the economic dimensions of U.S.-China relations.

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