Country Report: China (February 2018)

Danielle F. S. Cohen (assisted by Dong Jiaxin)

In early 2018, Chinese analysts assessed the Trump administration’s tariff policies and considered various countries’ policies toward North Korea. They considered the Trump administration’s Indo-Pacific strategy, China’s South China Sea policy, and the necessity of ensuring maritime security in Southeast Asia for achieving the Belt and Road Initiative.

A Simmering China–US Trade War?

In a series of talks and articles, Chinese experts evaluated the implications of Trump’s flurry of tariff announcements in March 2018. In a speech at Peking University on March 29, 2018, Lin Yifu attributed Trump’s actions to his twin desires to solidify the support of the voting public and constrain China’s rise. Lin recognizes that stagnant US wages over the past several decades have made many Americans feel like they are losing out, as wealth becomes concentrated in Silicon Valley and Wall Street and US workers lose jobs to automation. According to Lin, Trump’s willingness to blame China for changes in the US employment environment accords with the perceptions of many average Americans and strengthens their support for his presidency. Meanwhile, Lin argues that Trump’s tariff policies aim to constrain China’s rise by focusing on the more advanced industrial products promoted by the “Made in China 2025” campaign, rather than on consumer goods. (An alternative explanation for this focus is that Trump is attempting to avoid irritating his domestic supporters by increasing the cost of the cheap Chinese imports on which they rely.)

Although Trump blames China for the massive trade imbalance, Lin argues that it arises from a decades-long gap between US consumption and savings that emerged after financial liberalization. Furthermore, Lin reminds his audience that China is only the latest source of labor-intensive imports, following earlier US reliance on Japan and the four Asian Tigers. Though the United States is eager to fault others for its trade imbalance, Lin argues that it has only itself to blame.

Lin advocates that China adopt a three-part approach to respond to the current trade frictions. First, it must continue to prioritize the measures necessary to achieve China’s development objectives. Second, it should respond to Trump’s tariff policy by imposing its own tariffs on US imports. Finally, China should seek to shape both domestic and international opinion. Within China, the government must avoid provoking extreme nationalism. Internationally, China should emphasize its commitment to free trade and globalization, while using the WTO adjudication mechanism to oppose the US Section 301 investigation.

In The Paper, March 31, 2018, Xin Hua argues that Trump’s tariff policy is part of a larger strategic chess game. While many attribute Trump’s policies to impetuousness, Xin argues that the United States has developed a defensive economic policy that is well integrated with its other objectives regarding China. This policy covers four key areas: With regard to trade and industry, the United States is using sections 201, 232, and 301 of the 1974 Trade Act to impose tough sanctions on Chinese manufacturers. Like Lin, Xin recognizes the importance of these measures for solidifying the support of Trump’s base. In the field of investment, the United States is more actively using the Committee on Foreign Investment in the United States (CFIUS) to block foreign takeovers of US companies, as it did in early March with Singapore-based Broadcom’s attempted takeover of San Diego-based Qualcomm. In terms of national security, Trump conceptualizes a growing economy and balanced trade as essential for ensuring US security and considers economic competition between China and the United States to be a security threat on par with military competition. Finally, Trump’s defensive economic policy seeks to prevent China from surpassing US science and technology capabilities. Despite the recent uptick in economic nationalism, Xin argues that US foreign policy has long combined the twin impulses of protectionism and unilateralism, on the one hand, and liberalization and multilateralism on the other.

Xin contends that Trump’s effort to wield a trade war as a weapon will worsen three simmering conflicts. First, it will aggravate the existing tensions between emerging economies and traditional industrialized states, which will have negative implications for US relations with the Asia-Pacific and Latin America. Second, Xin argues that Trump’s policy is likely to exacerbate the strains between traditional and emerging industries and between the material and virtual economies. Trump’s policies attempt to respond to the hollowing out of US industry by bringing capital and traditional industry back to the United States from China. These measures have already harmed Chinese manufacturing and, by increasing US consumer prices, hamper the US high-tech research and development, financial, and services industries. Finally, Trump’s policies will worsen the conflict between the winners and losers from globalization. While those on Wall Street, in Silicon Valley, and working in science and technology have benefited from globalization and seek freer trade, the losers include the less educated or technically skilled who have been unable to upgrade their capabilities to match the demands of new technology. These workers consequently advocate economic nationalism and mercantilism in an attempt to protect their livelihoods. Xin concludes that if China and the United States have long been like a bickering couple that will never divorce, the fighting has recently grown noisier and the neighbors now have no way to escape the deafening sounds.

In contrast to these pessimistic views, Lin Hongyu offers a far more optimistic take on recent developments in China–US relations in an April 8, 2018 article on the website of Huaqiao University. Lin argues that there is no “trade war” after all, and insists that efforts to portray the current tensions as such are hysterical overreactions. Instead, Lin argues that Trump’s policy is merely an attempt to fulfill his campaign promise to be tough on China. According to Lin, Trump has fulfilled almost 80 percent of his campaign promises; while his earlier management of Sino–US relations was measured and rational, thanks in part to Xi Jinping’s skillful diplomacy, Trump has concluded that he must ultimately fulfill the promise he made to the American people regarding China. Despite this relatively lenient view of Trump’s policy, Lin, like others, recognizes that Trump’s overall foreign policy is motivated by his “America First” mentality and his opposition to globalization as a force that has destroyed US jobs and damaged its national interests. Ultimately, however, Lin concludes that the US–China relationship is “too big to fail.” The world will win if China and the United States can cooperate, but it will lose if they fight. To avoid the chaos that would arise from competition, China should avoid provocative language and urge the United States to follow a more cooperative path.

Policy Options Regarding North Korea

A series of articles in Dongbeiya Xuekan, No. 1, 2018 evaluates the policies of key countries toward North Korea. Dong Xiangrong assesses South Korean president Moon Jae-in’s new approach and its limitations. Dong notes that South Korea’s policy toward the North has tended to swing between the promotion of cooperation and reconciliation by progressive administrations and a tougher policy, which emphasizes coordination with the United States and Japan, that has characterized previous conservative administrations. After nine years of more conservative policies, the election of Moon, a progressive human rights lawyer whose family originates from the North, has ushered in a return to a more conciliatory approach.

Dong argues that Moon’s policy is based on three key premises. First, Moon is strongly opposed to the declaration of war on the peninsula by any party, unless South Korea has agreed to such a step. He vastly prefers the peaceful resolution of the nuclear crisis. Second, he believes that South Korea should become more self-sufficient. South Korea should pursue “responsible self-defense,” take the initiative in denuclearizing the peninsula and reconciling with the North, and lead international cooperation and coordination efforts. Furthermore, Moon believes that South Korea should maintain wartime operational control of its military, a responsibility that currently rests with the US military. Third, Moon seeks greater economic cooperation between North and South Korea in order to head off North Korea’s strategy of advancing its nuclear weapons capabilities in order to achieve its economic goals.

According to Dong, however, Moon’s policy faces a number of domestic and international constraints. The most obvious is North Korea’s recent series of nuclear and missile tests, which make it more difficult for South Korea to pursue the conciliatory policy that Moon favors. Furthermore, South Korean public opinion toward the North has been hardening in recent years, even though it is far more stable than the wildly vacillating policies of previous conservative and progressive South Korean administrations. In a 2017 Gallup poll that asked whether South Korea should halt aid to North Korea if North Korea refuses to abandon its nuclear efforts, 57 percent of respondents said yes (compared to 46 percent in 2013), while only 39 percent said no (compared to 47 percent in 2013). Consequently, even though Moon’s policies are in many ways a return to those of his progressive predecessors, he faces a harsher domestic political environment. Finally, changing US policy toward North Korea complicates Moon’s policy initiatives. Dong asserts that North Korea’s demonstration of its ICBM has brought it right up against the US redline and notes Trump’s vows to use “maximum pressure” and take nothing off the table. Dong questions how South Korea can possibly ensure that military conflict will occur only with its approval, given the possibility of an attack by either North Korea or the United States. These domestic and international factors complicate Moon’s South Korea policy.

In the same issue, Gao Hong evaluates Japan’s North Korea policy, arguing that it has become exhausted. Though previous Japanese administrations have, to varying degrees, considered North Korea a threat, Gao argues that Abe has taken advantage of the worsening North Korea situation to justify stronger Japanese military capabilities and normalization. Nevertheless, Japan also faces constraints on its policy. Given Japan’s history of aggression against the Korean Peninsula and long-standing antagonism between Japan and North Korea, the two countries lack diplomatic relations. The lack of diplomatic ties eliminates a possible means by which Japan could influence North Korea. Meanwhile, if Japan follows the United States and imposes harsh sanctions on the North, conflict becomes more likely. As a US ally situated near the Korean Peninsula, Japan might be a convenient target for the North Koreans if they want to retaliate against the United States, Gao cautions. Furthermore, even if Japan asserts that it is going to use armed force to subdue the North Korea threat, acting on such a declaration would generate opposition from its public, China, South Korea, and even the United States, which all expect Japan to abide by its existing norms.

In addition, the US–Japan alliance still plays an important role in regulating Japanese behavior. Even though the alliance constrains Japan’s military development far less than it did in the past, it still limits Japan’s militarization and protects Japan’s security. The alliance is a key factor (in addition to massive domestic opposition) that has thus far prevented Japan from seeking an independent nuclear capability. However, Japan is uncertain about whether the United States can adequately protect it from a conflict with North Korea. Japan worries that it will be drawn into a conflict with North Korea that it does not start. Yet, it also worries that it will be abandoned by the United States, particularly in light of Trump’s “America First” strategy. It is possible, for example, that the United States could reach an agreement with North Korea that still leaves Japan vulnerable. Faced with a difficult situation, the Abe administration has pursued closer relations with the United States in the hope that if Trump decides to take military action against North Korea, he will inform Japan first. Even so, Gao concludes that Japan is not just a “victim” of the North Korean nuclear crisis, but also a “beneficiary,” as it attempts to strengthen the US–Japan alliance, balance China, and achieve its dream of military power and normalization.

In a third article, Jin Canrong assesses US policy toward North Korea under the Trump administration. Jin situates this policy in the context of Trump’s broader approach to the Asia-Pacific and to foreign policy more generally, which he argues is full of contradictions. Thus far, Jin contends, Trump has focused on domestic affairs, particularly economic growth, in an attempt to fulfill his “America First” pledge. With much of his domestic agenda unachieved and many key appointments still unfulfilled, Jin argues that Trump is less focused on foreign policy, which remains ill-defined. According to Jin, there is a tension in Trump’s foreign policy approach between his desire for the United States to maintain its role as a world leader and his unwillingness for the United States to bear the costs and responsibilities of leadership. Furthermore, Jin argues, while Obama clearly prioritized Asia in his foreign policy, Trump is unsure how to prioritize Asia compared to the Middle East and Europe. With regard to the Asia-Pacific, Trump is also uncertain about how to rank his priorities. He wavers between a desire to cooperate with China and a belief that he must be on guard. By embracing the concept of the Indo-Pacific, for example, Trump tries to constrain China. Trump is also unsure how to prioritize the North Korean nuclear crisis compared to trade. North Korea’s development of capabilities that can directly threaten the US homeland have made the nuclear crisis a key priority, though what Jin considers to be an undisciplined team of Trump advisers makes for a somewhat erratic US policy. The emergence of a possible China–US trade war in March 2018, after this piece was published, suggests that Trump has at least temporarily switched to emphasizing trade over the nuclear crisis.

Jin contends that Trump’s North Korea policy will consist of three key measures. First, Trump is determined to place “maximum pressure” on the North Koreans, which includes greater military and diplomatic pressure. Trump also wants China to impose sanctions to further increase the pressure on the North Korean regime. However, Jin is not optimistic that maximum pressure will have much of an effect, pointing out that North Korea has lived under tight sanctions regimes for many years and that the UN is unlikely to adopt the type of comprehensive sanctions the United States seeks.

Second, Jin argues that Trump will pursue secret negotiations with the North Koreans, as he alleges have already happened in New York, Geneva, and Oslo. Although Jin believes that some American officials think the United States can accept North Korean nuclear possession and will negotiate from this premise, he argues that such a concession would threaten the global leadership position of the United States. Consequently, he places the likelihood of North Korea and the United States reaching an agreement through negotiations at less than 30 percent.

Third, Jin believes that Trump is seriously preparing for a military strike. These measures include preparations for a US-led decapitation strike, an attack on guided missile sites and other offensive capabilities north of the 38th parallel, and strikes against North Korea’s industrial base. North Korea’s determination to continue what it sees as the final leg of its development of nuclear and missile capabilities means it will not give in to international pressure and adds a sense of urgency to the crisis. Trump’s tendency to use tough measures has made the probability of an outbreak of armed conflict higher than it has ever been—Jin estimates it at 70 percent. Armed conflict could occur if the United States launches an attack, North Korea launches missiles, or some kind of provocative measure, such as a North Korean nuclear test in the Pacific, spooks the Americans. Though Jin is supportive of China’s current North Korea policy, which includes following UN resolutions, pursuing active diplomatic engagement, and promoting the relaunch of the Six Party Talks, he concludes that China must prepare for the situation to worsen.

The Trump Administration’s Indo-Pacific Strategy

In Heping yu Fazhan, No. 1, 2018, Chen Jimin argues that the Trump administration’s pursuit of an Indo-Pacific strategy faces many constraints. Although what exactly the Trump administration means when it refers to an Indo-Pacific strategy remains unclear, Chen asserts that it will likely consist of four components. First, the United States will continue to value the development of its alliance and partner relations and will attempt to integrate these various relationships. Chen worries that this will eventually result in a number of small multilateral structures centered around the United States, continuing a process that began during the Obama administration. Since coming to office, Trump seems to have accelerated the development of a US–Japan–India–Australia quadrilateral alliance, but is less enthusiastic about ASEAN than his predecessors. Second, Chen anticipates that the United States will continue to deepen economic relations, even though these will differ in principle and form from their previous nature. Trump prioritizes fair and mutually beneficial trade relations. He differs significantly from Obama in his preference for bilateral agreements over multilateral agreements. Third, Chen believes that Trump will continue to strengthen US military deployments in the Indo-Pacific to achieve “peace through strength.” To this end, the United States will continue to maintain a forward-deployed military posture with the power to deter and, if necessary, defeat any adversary. Finally, Chen believes the United States will continue its active diplomatic engagement and further deepen its bilateral relations with countries in the region (Trump’s de-prioritization of the State Department and the large number of unfilled appointed positions, including the ambassadorships to South Korea and ASEAN, seem to undermine this last point).

Nevertheless, Chen contends that the Trump administration’s Indo-Pacific strategy remains conceptual, and the implementation of this strategy faces many constraints. Fundamentally, the Indo-Pacific strategy is inconsistent with the dual principles of “Make America Great Again” and “America First” that lie at the heart of Trump’s foreign policy. Trump’s eagerness to quit agreements that he does not see as serving US interests, such as TPP, may undermine the pursuit of a broader strategy. In addition, the Trump administration may find it difficult to implement this strategy, in part because it lacks the personnel to oversee such an effort. Furthermore, although the United States has long relied on its allies and partners to implement its international strategy, mixed feelings among other countries in the region may limit their willingness to support the United States. Though many welcome US intervention in Asian affairs because it will balance China’s rise, they also need to maintain positive relations with China for economic and strategic reasons. These allies and partners may also hesitate to trust that the United States is dedicated to the Indo-Pacific strategy given its “America First” policy, and will instead hedge their bets.

Finally, Chen highlights the challenges of integrating the Indo-Pacific strategy with the US policy toward China. One motivation for the Indo-Pacific policy is to take advantage of the faster anticipated growth of the economies of the Asia-Pacific and India, compared to the slower expected growth of the US economy, in order to achieve Trump’s domestic economic promises. However, another key motivation is to respond to the medium- and long-term challenges posed by China’s rise. Trump’s perceptions of China are more negative than those of his predecessors. However, Chen insists that these anxieties are based on misperceptions of China’s intentions. Chen concludes that China’s continuing economic development and its diplomatic response will give it considerable influence over the evolution of the US Indo-Pacific strategy.

China’s South China Sea Policy

In Guoji Luntan, No. 1, 2018, Qi Huaigao argues that China’s position in the South China Sea has strengthened since 2012. Qi contends that China’s reef and island building in the Spratly Islands has solidified its sovereignty claims. Meanwhile, China’s establishment of Sansha City on Woody Island in July 2012 and the government apparatus it has built up there have strengthened China’s political presence in the disputed islands. China’s development of a South China Sea Fleet has given it a stronger military position and plays a key role in China’s naval strategy. Furthermore, China’s increasing practical control of Scarborough Shoal since the 2012 standoff with the Philippines strengthens its ability to control Macclesfield Bank.

Despite China’s recent successes, however, Qi identifies several challenges. A perpetual concern is interference by outside states, such as the United States and Japan. Although Trump has been far less focused on the South China Sea and China’s maritime position than Obama was, the US freedom of navigation operation in May 2017 demonstrated that it will continue to challenge Chinese claims in the South China Sea. Meanwhile, Abe supports US policy and Japan has helped claimant countries like Vietnam and the Philippines to strengthen their maritime defense capabilities. Maritime environmental problems, such as a desire to protect the coral reefs, might also serve as an excuse for outside great powers to intervene in the region. Qi is also concerned about the impact of the Hague adjudication, which challenged China’s sovereignty claims. Although China did not recognize the legitimacy of the adjudication, other countries do and might even be inspired to bring their own cases. In addition, China must balance its competing desires to strengthen its control over the South China Sea and to pursue stable relations with ASEAN.

Qi concludes by offering a series of policy recommendations to further strengthen China’s position in the South China Sea. First, it should cooperate with other countries surrounding the South China Sea on projects that are relatively uncontroversial, such as environmental protection and fisheries. It should also pursue joint development of oil and gas resources because shared economic interests will stabilize the region. China must continue to work with ASEAN on the development of a Code of Conduct for the South China Sea, and should prioritize the demarcation of certain contested maritime borders. Finally, China must appropriately manage its strategic competition with the United States to prevent a conflict from breaking out.

Security in Southeast Asia and the Belt and Road Initiative

In Dongnanya Yanjiu, No. 1, 2018, Cheng Xiaoyong stresses the importance of maintaining security in Southeast Asia in order to advance the Belt and Road Initiative (BRI). In order for BRI to succeed, China will need to cooperate with countries along the route to ensure a secure environment. One reason the ancient Silk Route failed, Cheng contends, is because of the disorder in many important countries along the route. Today, many of the countries along the route are immersed in the broader strategic game being played between the great powers, and some also face challenges from territorial disputes, ethnic conflict, and terrorism. China must cooperate with countries along the route because it cannot guarantee the security of the route by itself.

Although China enjoys close economic and political relations with Southeast Asia, its security relations lag behind. Nevertheless, ensuring maritime security in Southeast Asia is essential for the future of China’s trade with the region. Both China and Southeast Asia share an interest in securing the pathways for their economic exchanges. China and Southeast Asia also face common non-traditional security threats, such as piracy, terrorism, environmental accidents, and natural disasters.

Given these shared interests, China and Southeast Asia have made steady progress in cooperating since China first established relations with ASEAN in the 1990s. In recent years, China and ASEAN have strengthened maritime security through measures such as search and rescue drills and the establishment of cooperative mechanisms. In 2012 and 2016, China’s State Oceanic Administration issued plans concerning cooperation with regional partners on maritime research, environmental protection, disaster prevention, and other relatively uncontroversial measures. In addition to strengthening cooperation with ASEAN, China has also developed cooperative mechanisms and specific programs with Thailand, Indonesia, Malaysia, Cambodia, Myanmar, Brunei, Vietnam, and Singapore.

Ultimately, Cheng argues, BRI has attracted global interest, but has also raised concerns. China can use BRI as a tool to motivate cooperation on non-traditional security measures, with a goal toward eventually strengthening cooperation on traditional security matters. China should also move beyond Southeast Asia to seek cooperation with outside great powers in order to highlight shared interests and minimize the potential for conflict. Ultimately, maintaining security will enable China to achieve its economic development objectives.

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