Every government assumes power with the conceit that what it chooses to do will resonate for decades to come. In the context of affairs in our region and perhaps beyond, it just may be true.
Every conversation now begins with the emergence of China as a great power being the single most consequential development in world affairs. But there is much more to the future than observing China’s trajectory as passive bystanders. One hopes the Albanese government, having just won an election, will quickly arrive at the same two conclusions as the previous Coalition governments.
The first is that the next five to 10 years are the critical period that will determine how the decades after that may play out. The second is that Australia has immense agency in how things unfold despite our self-identification as a middle power in a world of giants.
China’s closing window
If China is the major variable, we begin with the question of what does Beijing want. Fortunately, its paramount leader Xi Jinping has removed much of the guesswork by telling us what his vision of victory looks like and the strategy to achieve it.
The Chinese Communist Party has two core objectives. First, it wants to guarantee the sustainability of its state-led political economy. This entrenches a permanent and privileged role for the CCP, allowing it to hold on to power and withdraw opportunity at will. If this structure and system takes root beyond China’s borders, it will allow Beijing directly to influence the commercial prospects of firms and prosperity of nations. This is largely what the Belt and Road Initiative and technological upgrading plans such as Made in China 2025 are about; that is, ensuring the way we do business and trade resembles the way the CCP wants it to be done.
Consider the Chinese economic arrangements with Pakistan, Cambodia or Solomon Islands. It is very much about elite capture, opaque terms and eventual subservience to China.
The second objective is to shrink the strategic, military, economic, political, and normative ground in the region on which the US can sustain, build and demonstrate its power and influence. This is because China knows there is no balance without the US.
The more China can weaken the resolve of allies and other countries to support American-led initiatives to counter China, the smaller the ground for Washington to maintain its footholds in distant lands and the closer China gets to regional pre-eminence. These were objectives held by previous CCP leaders, even if Xi is the first to reveal them so explicitly to the world.
His brazenness and willingness to engage in overtly aggressive behaviour is unique and it grows because he believes we are living through “great changes unseen in a century”. It is a phrase evident in many contemporary Chinese policies and speeches. The “great changes” refers to Xi’s apparent confidence that the balance of comprehensive power will be in China’s favour before subsiding from the 2030s onwards. The case for this is based on the following reasoning.
First, Beijing is enjoying a three-decade head start when it comes to modernising a military specifically designed to negate or circumvent US and allied power, at least in northeast Asia. In contrast, US-led coalitions to directly counter Beijing are still in its early days. Japan and Australia are only several years into a belated strategic and military reawakening. Japan, Taiwan, Australia and even the US will need the best part of this decade to develop and acquire the necessary strike and other military capabilities to defeat, deter or complicate matters for China in northeast Asia.
Moreover, countries such as India and Vietnam may have decided China is a problem but is nowhere near possessing the ability to respond to the threat. South Korea is still concerned only with the Korean peninsula, although that could change under Yoon Suk-yeol. Meanwhile, most of the smaller states in south and Southeast Asia are in a strategic holding pattern, watching to see how affairs will play out. The more passive nations become, the better for China as Beijing is seeking to minimise the number of active strategic players in the region.
Finally, China’s economic, age demographic and other structural problems will worsen significantly from 2030 onwards in relative terms vis-a-vis other countries, including the US and many allies. This matters because China has been able to devote a disproportionate share of national wealth towards enhancing state power during the past three decades at the expense of other requirements.
For example, the People’s Liberation Army budget each year has been increasing at a rate about double that of gross domestic product since the early 1990s. The budget for domestic security exceeds that for the PLA and is rising even more rapidly than external defence expenditure. Subsidies for state-owned enterprises and national champions to meet Beijing’s industrial and technological targets are enormous.
At the same time, spending on health and other public goods as a proportion of GDP has been about half that of other middle-income countries across the same period. Of high concern is China’s lack of preparedness for its ageing population, which will be the most rapid in history because of the one-child policy that began in 1980 and ended in 2016.
About three-quarters of urban workers and less than half of the country’s rural workers have access to a pension plan. Even then, and under its own official modelling, Chinese pension funds into which firms are obligated to contribute specific amounts will peak in five years and will be exhausted by 2035. Beijing can adjust. But it will mean allocating more public funds to social goods. It also will mean forcing state-owned firms and national champions to contribute more to the public purse at the expense of resources currently used to advance national industrial plans.
China’s relative strategic, military and economic advantages will narrow and perhaps be reversed as we head towards 2030 and beyond. Xi’s plan is to change the strategic, military and economic environment permanently while China’s relative power is at its peak and other nations are still poorly prepared and on the back foot. A combination of worsening structural problems with the Chinese political economy, which were always going to bite, as well as hubris and overreach by Xi has shrunk China’s window of opportunity. Despite some of the commentary about the inevitability of Chinese success, time is not on its side.
Not a time to be passive
Success for any nation is never a mechanistic or deterministic process. From our perspective, procrastination will only increase the possibility of disaster because the most dangerous period is when the Chinese window of opportunity is closing most quickly – and that is during the next few years.
The strategic, military, economic and technological aspects of competition are all related.
For example, if the US and allies such as Japan and Australia fail to develop the capabilities needed to deter China from engaging in military action in northeast Asia, then other states will lose courage and become even more docile and more accepting of an expansive PLA presence. If China entrenches a Sino-dominated economic and technological ecosystem in the region, then the risk and cost of opposing China will become too onerous for most nations. It also would mean American non-military measures such as sanctions against doing business with Chinese entities or restrictions on US dollar transactions and payments platforms will become less effective.
This brings us to Australian agency to shape events, which too often is dismissed.
Beijing’s antipathy towards the Turnbull and Morrison governments is explained not just by the policies taken to advance Australia’s interest but their willingness to encourage other nations to do the same. It is why Beijing consistently singled out Australia’s decision to ban Huawei from the 5G rollout, shine a light on Chinese foreign interference and pass legislation to minimise it, and leading the way in criticising Chinese disregard for international law in the South China Sea for special criticism. We became an example for others.
Moreover, Australia drove the formation of the AUKUS security pact with Britain and the US; it was instrumental in the reinstitution of the Quadrilateral Security Dialogue with the US, India and Japan; and it played an important role in persuading European nations to take more seriously the comprehensive challenge China poses.
Australia demonstrated that it was possible for a liberal democracy to unite domestic stakeholders sufficiently to resist Chinese coercion – helped greatly by Beijing’s counter-productive wolf warrior diplomats. It is in these contexts that Australia is criticised by Chinese officials and its state media as being an upstart and leader of the anti-China pack.
Senior members of the Albanese government have spent a considerable proportion of their first few weeks abroad meeting allies, partners and those with whom we need to be better friends. This is necessary. But they will soon realise that making decisive strategic decisions invariably will entail unintended risks and costs. AUKUS was negotiated with the utmost secrecy and could not but alienate France.
Many Southeast Asian nations initially were wary of the Quad as they believed it could lessen the relevance of the Association of Southeast Asian Nations. Initially, Australian conversations about Huawei and foreign interference were received awkwardly by some nations reluctant to bite the bullet on these issues. They nevertheless were the right decisions and have been supported by the new Labor government. The point is that good diplomacy – defined as avoiding the ruffling of feathers of partners and friends – is not always in alignment with good strategy.
The previous government made mistakes but generally prioritised urgent strategic action over cordial relations with all nations – the former being actions that directly counter Beijing advancing its two core objectives mentioned earlier. If the Albanese government seeks to act decisively in this critical period, it must be prepared for diplomatic scars along the way.
The Russian invasion of Ukraine and the allied response to it will give China pause for thought when it comes to using force against Taiwan or elsewhere. But it will make Beijing only more determined to advance its broader objectives before other Indo-Pacific nations have time to prepare.
China’s strategic message is that time is on its side and Chinese success is inevitable. Neither of these arguments is inherently true. If Australia and others can do what must be done in the next few years, there is reason to be cautiously optimistic for the decades to come.
Read in The Australian