07 May 2019

Rustat Report on China's Role in the World

On 27 March 2019, this Rustat Conference offered a timely opportunity for experts to discuss the changing role that China plays in the world. We welcomed a number of Chinese nationals and international participants currently working in China, helping to ensure that we were able to move beyond the familiar and limited perspective of outsiders looking in.

Experts from a wide range of backgrounds, including academia, policy, and industry, gathered to bring their insights. The discussion was especially opportune in light of political events such as the recent ‘two sessions’ meeting in Beijing, but also because of international developments like the debate around Huawei products, Italy’s decision to endorse the Belt and Road Initiative (BRI), and the European Union’s major and ongoing review of relations with China. To some, these developments signal a step-change in China’s role, as it comes of age as a 21^st century superpower operating within the rules of international trade and cooperation. To others, it seems alarming – part of an attempt to assert not merely regional but also global dominance.

While the experts held a range of different views, it was accepted by almost all of our attendees that ever-deeper understanding of Chinese priorities, its political strategy, and its culture were required to engage sensibly with interpreting China’s actions. Perhaps because of the outdated tendency for Westerners to ascribe a kind of breathless mystique to the great country – often regarded as the longest-standing civilisation in human history, or to simply ignore the history – most participants agreed that there had often been a self-defeating lack of attempts to grapple with Chinese efforts to become more involved in globalised trade, technology, and diplomacy.

China and the wider world have never been so intertwined. This rings true in the UK as much as anywhere else; Britain relies on Chinese students to subsidise its own university undergraduates to the tune of billions of pounds a year, while British exports to China have increased by 64% since 2010 during the so-called ‘golden era’ of economic ties announced by former prime minister David Cameron. But with this intertwining comes the spectre of protectionism and disagreement, most obviously apparent in the tariff disputes between the Trump Administration and Beijing.

This day-long event was arranged into four linked discussions. Those sessions have been consolidated in this short report to reflect the key themes of the day:

China’s self-image
The Belt and Road Initiative
China and geopolitics
The globalising Chinese economy.

We are grateful to our participants for their generosity in offering their time and expertise. As always with such deep and complex issues, the conference raised more questions than it answered, but we feel confident that everyone left the room more enlightened and equipped to consider China’s role in the world. That was certainly our experience. We thank all those who attended, as well as our Rustat Members for their ongoing support of the Conferences: Nick Chism, Dr James Dodd, Andreas Naumann, AstraZeneca, Harvey Nash and Laing O’Rourke.

We have also worked with YouGov to perform some polling for this event. You can view the data and analysis on YouGov.

China's Self-Image

Our discussion began with that most difficult of questions: what shapes the evolution of a nation’s self-identity, and how might that affect its behaviour? This is challenging enough to answer in a small island nation like the United Kingdom – which is nonetheless experiencing an historic upheaval as competing ideologies and viewpoints clash. But is it the case that a nation of almost 1.4 billion people must necessarily be so divided? Or does the history of Chinese integration and centralised power create the structure for a coherent, shared objective?

Illuminating presentations from our experts highlighted possible frameworks for thinking through the topic. The point that China may have many simultaneous goals but only one objective – a common destiny or a ‘Chinese dream’ – came through strongly. This concept of global peace and development, it was argued, stems from a view of history and politics that embraces a far broader, more strategic sweep. The Chinese, it was suggested, do not think in terms of electoral cycles of four or five years; they are more likely to think in terms of forty, fifty, or even a hundred-year span. The point was raised that even during the time of the warring states (475-221 BCE) there was nonetheless a basic agreement over the importance of stability through unity. Philosophers developed a remarkably strong consensus about a unified territory under a single power centre, which remained constant even throughout those seismic power struggles.

Yet set against this apparently bold and resilient unifying mindset we may wish to place a search for external validation. Some participants characterised this tendency almost in terms of theatre, with even domestic politics in China ultimately a search for status. In this framing, the eyes of the wider world become key in determining the country’s self-image even if the empirical data indicates growing domestic prosperity. Put crudely, China wants to be taken seriously by the rest of the world.

These simultaneous and somewhat conflicting views create a potential dualism that sits alongside the fault lines exposed in other major global powers at the time of writing. The tumult that has overtaken the USA and the UK – a fervour created by the clash of internationalism and a sense of ‘Englishness’ or ‘Americanness’ – could well be replicated in China as the influence of other countries on daily life increases.

Other experts were enlightening on the way the country seeks to prevent this outcome, through a three-pronged strategy to ensure stability. That strategy, encompassing full employment, tangible increases in prosperity for citizens, and complete control of the media and internet narrative, helps to explain why the population remains largely content despite a lack of the freedoms and rights we might take for granted.

Finally, our experts were clear that understanding China was not high enough up the agenda of European or North American countries. While Chinese students pour into the major English-language higher education markets – the USA, UK and Australia – few make the opposite journey. This lack of intellectual curiosity makes the creation of a genuine exchange of views far more difficult. This is striking at a time when China continues to push for global recognition. Our experts all agreed that whether or not we ever make the effort to understand our counterparts in Beijing, they will be seeking to understand us.

The subject of trust and trustworthiness came up repeatedly, and the need to enhance mutual trust between China and the rest of the world. Shared understanding of each other’s culture, values, and objectives will be crucial to develop that trust. In particular it was suggested that there should be more focus in the education system in the UK on China, particularly on history and culture rather than just language.

The Belt and Road Initiative

The Belt and Road Initiative (BRI) is a massive infrastructure ambition, and a clear demonstration of China’s improved interest in and capability for managing and financing international infrastructure. There could not be a better or more prominent symbol of Chinese development and growth, and the problems that may stem from it, than the BRI. Depending on who you ask, the massive infrastructure project – currently expected to involve investments and projects in 152 separate countries and international organisations – is either a 21^st century Marshall Plan, addressing sorely needed areas of underinvestment, or the harbinger of a neocolonial masterplan predicated upon debt-trap diplomacy.

For our experts, there were certainly disagreements along these lines. The BRI summit, in which Xi Jinping was joined by other leaders of major states including Vladimir Putin and Tayyep Erdogan, was considered by some to be a version of the old political tribute system, exchanging political credibility for cash, but undermining trust in the process. At its peak, it was suggested, the BRI could ultimately assist with military force projection, an outcome that is even being forewarned about within China.

On the other hand, there was a strong case that China was merely acting as any other nation with a competitive advantage and global interest might. Some of our attendees suggested that the BRI represents China’s attempt to operate in the general interest, and that it involves the creation of real public goods. With a $20-30 trillion infrastructure gap in Asia over the next decade or so, the natural marriage between smaller nations’ requirements and China’s capabilities is hard to ignore.

The more prosaic aspects of BRI were also put forward. In particular, the domestic implications of failing to act now were noted, with energy security considered a vital area; by building better transport links over land, China can alleviate its so-called ‘Malacca dilemma’. The Strait of Malacca remains one of the most essential sea lines of communication globally, carrying more than 30 per cent of the world’s seaborne trade through a narrow channel. The effort to link other ports such as Gwadar in southern Pakistan to China’s north-western region of Xinjiang will allow the transport of supplies from the Persian Gulf. But these are difficult projects even before the vexed question of legal regimes and friction from border crossings, compared to the long-standing management systems governing Malacca.

Seen in this light, the BRI takes on an altogether different character, some of our experts suggested: an enormous set of hedges designed to act as one collective bulwark against blockage of vital sea routes. Rather than being an expansionary attempt to wrest control of various countries or even regions, it is a pragmatic and even predictable way to minimise strategic risk. The emphasis is on domestic politics and domestic audiences – making the country safer and citizens feel protected.

Whatever one’s view on the BRI, it was generally agreed that it presents substantial opportunities for international companies. The UK especially is well-placed to generate large revenues from its very experienced infrastructure industry. The question will be how such companies can be incentivised to participate, and whether they will feel the risks are worthwhile.

China and Geopolitics

Considering the question of China’s attitude to geopolitics, some experts argued that the country’s foreign policy, which has become increasingly collaborative, is again largely for domestic consumption. This took us back to some of the discussion in the first session: can China’s increased peacekeeping role at the United Nations, for example, really secure it the ‘honest broker’ status it has craved? At a time when other nations have turned inwards to deal with their own divisions, perhaps it is unsurprising that an ambitious government would invest heavily in reputation as well as security. Thus, China’s contribution to the UN peacekeeping forces grows larger every year, and is now larger than the other permanent members’ troop numbers put together.

One perspective on this is that it represents yet another thread of the collective effort to make China indispensable, and central, to the world’s progress. An alternative view was that the UN deployments are part of a wider strategy. This encompasses the acquisition of ports and the transformation of land forces from heavyweight to lightweight and manoeuvrable, Meanwhile, the placement of senior party members at the top of most businesses ensures state control of industry.

This does not mean though that we are doomed to a future in which China is regularly projecting force beyond its borders. According to Joseph Nye, the well-known political scientist and former chair of the USA’s National Intelligence Council, China still remains likely to want to influence the rules of the game by retaining its seat at the table, rather than aiming to throw the pieces off the board. Nye’s notion of ‘smart power’, combining elements of hard and soft power into a successful strategy, appears to encapsulate China’s attempts to bring together economic and geopolitical themes. There are glimmers of hope that China will use its growing power to become a rule-maker through international institutions rather than a rule-breaker. Even smaller cooperative efforts such as the Arctic Council have seen China put significant resources into the Polar Code in recent times.

Experts agreed that China is at least on a par with other leading economies in innovation and technology, and that this has taken other countries by surprise. This is a further reason to avoid the simplistic binary of economy versus security. If China can show there is a way to combine the two not only in its own interests but in ways that add weight and value to existing supranational entities, it could yet result in a China that is central to the world’s progress. But this cannot be achieved solely by Chinese effort, and the current aggression typified by the Trump administration towards Huawei and other technology leaders filled neither our panellists nor our wider audience with short-term optimism.

A Globalising Economy

There were three issues introduced as we kicked off the final session. The first was the encouragement from our experts to consider what role we think China is likely to play across various timeframes – to 2025, 2050 or even 2100. The second was to ask the question, ‘to what extent is the past a guide to China’s future?’ And the third was whether and how, and how soon, there might be a movement towards regulating the global economy in everyone’s interests rather than a few interests – whether at the nation-state level or on the individual level.

The backdrop to this is the astonishing period of growth the Chinese economy has experienced. In 1980, the IMF’s purchasing power parity (PPP) figures placed China at 2.3% of global GDP. By 2018, that had increased to 19% of global GDP, higher than the EU at 16%. By way of further comparison, the UK now represents roughly 2% of global GDP.

One of the most incisive points cutting through the conversation during this final session was the suggestion that the battle raging over globalisation in certain countries is something of a phoney war. Perhaps the USA or the UK might turn in on themselves, but that will not change the overall trajectory, which is towards (for instance) teenagers in Africa getting their first smartphones. In that environment, welcoming globalisation – as China appears to have done – is a smart move, and if other nations fall back, the impact of China in foreign markets will no doubt increase, as indeed it has already begun to do.

Nonetheless, there is a long way to go. For a country with 20% of the world’s population and almost 20% of its collective GDP, China still lags behind on other key indicators of globalisation and readiness: while China invested about $1.5 trillion of foreign direct investment (FDI) in 2017, that is just 19% of the US figure and, in fact, lower than the UK’s own FDI efforts. With other considerations such as an ageing population and a lack of trust from the international community, much rests on the BRI.

For other nations, the question is how and when to engage. One of our experts put it colourfully: China is like a teenage boy learning to contribute to the world, and needs the help of other nations to ensure it performs successfully. An increased role for Chinese diplomacy, perhaps powered by the cohort that used to study in London and Oxbridge, might be one of the most valuable ways to begin to build the kind of lasting trust that will power China into the 21^st century as one of the great powers of history.

Of course, if they choose not to engage but instead to freeze China out, there will be two traps awaiting. The first, and better known, is the Thucydides Trap, referenced by one of our attendees: the idea that the gradual displacement of one power by another creates a fear that makes conflict inevitable. The second – again, put forward by Joseph Nye – is the so-called Kindleberger Trap. This suggests that the rise of a new leading power may create instability or even war if the top dog does not use its power to create ‘global public goods’. Of course, the delicacy of international diplomacy is that both traps can, and perhaps do, coexist. However, based on our discussion, it would appear that through the BRI and other initiatives, China has no intention of being perceived as a lone wolf, uninterested in global governance and improvement. Will other nations show similar strategic thought to avoid the rash judgements that have characterised similar times in human history?