How to think about US-China relations in 2018

Relations between the United States and China will remain the major axis of the East Asian strategic equation in 2018. The adjustments underway between the US and China will preoccupy the region for decades to come. It is imperative that we think about US-China relations clearly and clinically.

Two developments in 2017 – Donald Trump's inauguration as the 45th President and Xi Jinping's consolidation of power at the 19th Party Congress – threaten to cloud our capacity for dispassionate analysis. They reinforced the tendency to think about US-China relations in deterministic, binary terms. This is inaccurate and dangerous.

A more symmetrical US-China strategic relationship is emerging. But neither China nor the US is going to trace a straight-line trajectory up or down.

China's rise is not America's decline, except relatively. Both will remain substantial powers in absolute terms. Neither is without weaknesses.

Simply put: The US under Mr Trump is not as bad as the American establishment and media – still in denial over his victory – portrays; China under Mr Xi is not the juggernaut the Communist Party's propaganda apparatus would have us believe.

This is clouded by the emotional shock of Mr Trump's election and the confidence with which Mr Xi proclaimed China's ambition for a "new era".

The American establishment and media present almost everything Mr Trump does as wrong because they want him to fail in order to vindicate themselves.

China presents ambition as already existing reality because persuading others that it is so goes some way towards making it so.

Singapore's establishment is generally comfortable with the American establishment, often sharing similar educational and career experiences.

It also cannot be denied that the cultural affinity towards China that some in our establishment feel makes us vulnerable to the seductions of Chinese narratives.

US-China competition is as much psychological as material. Biculturalism is an advantage. But it also exposes us to the worst of both worlds.

The identity of a country only 53 years old is still tentative. There is an inchoate sense of deference among some Singaporeans towards more ancient civilisations, or supposedly more advanced political cultures.

The American media is undermining confidence in America as much as China's propaganda apparatus.

Typical is the contention that Mr Trump's refusal to lead has undermined international order and given China an advantage. This is superficially persuasive, but grossly exaggerated.

The US National Security Strategy (NSS 2017) published in December 2017 makes clear that the Trump administration has not eschewed leadership, but has a different, narrower, concept of leadership that puts "America First" and stresses a more robust approach to competitors.

Whether the strategy will work is yet to be determined. But nothing that Mr Trump has done has been as disruptive of international order as George W Bush's 2003 invasion of Iraq.

The ensuing decade of war in the Middle East wearied Americans, discredited the establishment, and led to Mr Trump's election, and that of Barack Obama before him.

In East Asia, Mr Trump's cancellation of the Trans-Pacific Partnership was a blow to American credibility. But as bad was Mr Obama's failure to enforce the "red line" he drew in Syria.

Mr Trump's decision to bomb Syria while at dinner with Mr Xi has done much to restore the credibility of American power. Without credible power, there can be no leadership.

Mr Trump has reaffirmed US alliances with Japan, South Korea and Australia. There is no sign that his administration will retreat from the East and South China Seas, where he has given the 7th Fleet greater latitude to conduct Freedom of Navigation Operations to challenge China.

Mr Trump attended the Asia-Pacific Economic Cooperation summit, the Asean-US Summit, and the East Asian Summit.

Whether he will continue to do so is as much up to Asean's ability to demonstrate the utility of Asean-led multilateral diplomacy as it is up to an administration whose emphasis after Mr Obama is again on bilateralism.

The most important discontinuity is in trade, where NSS 2017 makes abundantly clear that the focus will be on fair, not free, trade.

This poses risks to all, but more risk to China, which NSS 2017 labelled (along with Russia) a "revisionist power".

Decisions on intellectual property, steel and aluminium are imminent. NSS 2017 signalled a more restrictive approach to investment and on STEM students from designated countries, which clearly includes China.

Mr Trump is moving from the failed decades-old policy of denuclearisation to one of deterrence against a nuclear North Korea by deploying more force than the region has seen for a long time.

The risk of war by design is low, although not non-existent. But the shift implies reduced dependence on China to manage North Korea, which could well enhance the trade risks.

Beijing has not responded effectively to this change of tack. It is angry with Pyongyang, aware of the economic and strategic risks, but ultimately impotent to influence either North Korean or American policy.

OPPORTUNITIES AMIDST UNCERTAINTIES

Western commentary on Mr Xi's 19th Party Congress speech focused on China's global ambitions and the abandonment of Deng Xiaoping's policy of biding time. But the overwhelming focus of the speech was in fact domestic.

Two points stand out: Mr Xi's definition of the "principal contradiction" facing Chinese society as that between China's "unbalanced and inadequate development and the people's ever-growing needs for a better life", which are "increasingly broad", and the urgent imperative of revitalising the Communist Party to meet those needs if the goal of building a "modern socialist country" is to be met.

This sets an extremely complex agenda: Moving industry up the value chain, cutting overcapacity, promoting entrepreneurship and innovation, improving the environment, revitalising the rural sector, promoting balanced regional growth, dealing with an ageing population, healthcare and social security, promoting social mobility, improving education, housing and food safety, dealing with corruption, defusing social tensions and expanding "orderly political participation".

Each is a major challenge in itself, requiring enormous resources and attention, and this list is only partial.

Moreover, Mr Xi's speech alluded only obliquely to a key issue left over from the 18th Party Congress in 2012: What is the appropriate balance between market efficiency and Communist Party control? The 19th Party Congress offered no clarity, and, in fact, there are no clear answers.

Mr Xi reaffirmed the commitment to economic efficiency, but his stronger insistence on the party's role may have sharpened the dilemma.

There is nothing unusual about a big country having big ambitions. Still, China's global ambitions, in particular Mr Xi's hallmark Belt & Road Initiative (BRI), is as much about dealing with this fundamental domestic challenge as it is a new global strategy.

The BRI is essentially the externalisation of a growth model heavily dependent on the stimulus of SOE-led infrastructure investment.

The 18th Party Congress had recognised that this was unsustainable within China itself. But a new growth model required structural adjustments that Beijing was not sure how to make without risking internal instability that could jeopardise party rule.

The BRI buys time for Beijing to deal with this serious internal question. It remains to be seen how it will be dealt with in Mr Xi's second term.

Despite its "win-win" justification, the BRI is thus a "China First" strategy. This accounts for the uneasiness it has generated in many countries and the pushback it has encountered, recently even within Pakistan, which is almost entirely dependent on Chinese largesse now that Mr Trump has threatened to cut back American assistance.

None of this implies that there are no gains for other countries, or that China will fail.

Like the US, China is a creative and resilient society with a proven record of adaptability. But the complications suggest that the BRI's implementation will at best be patchy, subject to conflicting demands on resources, and that the BRI is not a practical alternative to the current US-led international order.

The BRI – and China's growth -- are built on the foundation of the current order. Can they succeed if Mr Trump's America First strategy fails and the US and China stumble into a trade war, or if the world turns protectionist? China was the greatest beneficiary of post-Cold War globalisation; it may be the greatest loser if globalisation falters.

In January and November last year, Mr Xi delivered eloquent defences of globalisation at Davos and the Danang APEC Summit.

He made much the same points in his 2018 New Year message, indicating his willingness to lead if America under Mr Trump was not. But this was more a rhetorical extension of the "Great Rejuvenation" narrative by which the party justifies its rule than a settled proposition.

The leader of an open international order must itself be open. It is precisely how much China will open up in its next stage of reform that Beijing has yet to decide.

Both Mr Trump and Mr Xi have signalled that they want to co-operate even as they compete.

But we will face a prolonged period of more than usual uncertainty. There will be risks, but also opportunities.

Singaporeans should keep calm, watch developments alertly, understand the mind games that we are being subjected to, avoid rushing to judgement, and not forget the obvious: We are neither American nor Chinese, and have our own interests.

ABOUT THE AUTHOR:

Bilahari Kausikan is Ambassador-at-Large at the Ministry of Foreign Affairs, where he was previously Permanent Secretary.