COMPETING WITH A RISING CHINA: 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 United States 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 1 2 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 Mao Zedong had, to China, recognized the remarkable transition varying extents, signaled their commitment in U.S.-China relations in recent years to economic reform. Both Deng Xiaoping 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 Xi Jinping, and has Beijing 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 law in the South China Sea, its 3 assertive rhetoric regarding Taiwan, 'E' Engagement and lowercase engagement. continued intellectual property 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, equity 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 propaganda: 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