The Perfect Enemy | Andrew Small on the Origins of ‘China’s War With the West’
December 10, 2022

Andrew Small on the Origins of ‘China’s War With the West’

Andrew Small on the Origins of ‘China’s War With the West’  The Diplomat

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From the United Nations General Assembly to climate change conferences, and from the G-20 to the G-7, one theme emerges at nearly every international gathering these days: tensions between China and the United States. But Washington is not alone; most European powers, including France, Germany, and the U.K., have soured on Beijing as well in recent years.

Why? That’s the question Andrew Small, a senior transatlantic fellow with the Asia program at the German Marshall Fund of the United States, explores in his new book “No Limits: The Inside Story of China’s War with the West.” Based on his experiences and interviews over the past decade, Small traces the downward trajectory of China’s relationships with the United States and EU countries. The narrative progressed at different rates and with different major motivations, but the arc toward disillusionment and distrust is similar.

In an email Q&A with The Diplomat, Small explains the differences and similarities in how Europe and the U.S. see China, the role of the Trump administration in this broader trend, and China’s role in the developing world.

Chinese officials often suggest that Europe’s volte-face on China is due to U.S. pressure, and in turn demand that European leaders adopt an “independent” foreign policy – despite EU efforts to position itself as a “geopolitical protagonist.” In your view, how much of a factor has the U.S. shift in China policy been in Europe’s changing attitude?

The reasons for the shift in views on China in Europe were pretty similar to those in the United States. Whether it was U.S. defense planners or German business groups, they all saw, from different vantage points, that the Chinese economic and political model was headed in a direction that posed more of a systemic challenge and that the existing framework for dealing with that was inadequate.

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Many of my interviews for the book tried to tease out what the triggers had been for that reassessment. The most common answers in Europe were generally some variant on how the shift from soft-authoritarianism to a more totalitarian version under Xi Jinping was fusing with China’s growing power.

The more clinical analysis tended to be focused on how far the asymmetric openness of our system was fueling this: The PRC benefited from ready access to our markets, advanced commercial technologies, and research facilities, the capacity to invest freely, and to take controlling stakes in our critical infrastructure, while keeping access to its own system far more carefully controlled. Europeans may have seen the economic risks of that dynamic more than the military ones, but they were essentially reacting to the same phenomenon.

Many of the developments on the PRC side were cumulative, though – a slow boil rather than a single shock – and in the absence of that, it was always possible to keep deferring the most difficult policy decisions that this assessment implied. The Trump administration helped deliver that shock; European officials have been quite clear that the sheer scale of the rethink that the Trump administration undertook on China had a catalytic effect. It forced a number of European governments to take a fresh look at whether their own policies made sense any more or had just been on autopilot. If anything, the shocks that followed – the COVID-19 pandemic and China’s handling of Russia’s invasion of Ukraine – had an even more significant impact on political views of China in Europe. There’s no question that the United States was part of the “wake up” process though, especially through its campaign on 5G telecom networks.

There will be some European states that accommodate U.S. preferences on China because the United States is their most important security backer; there are others that will try to differentiate their approach to China from the U.S. for its own sake, even in areas where they agree. But the more important driving factors in Europe by far now are internal.

You note in the introduction that leaders like Zhao Ziyang and Wen Jiabao “reinforced the sense of… political counterparts in the West that there was a version of this China and the party-state that the world could live with.” That perception is long gone today, banished along with China’s “reformist” leaders. Do you think under different leadership – under a General Secretary Li Keqiang, say – that China could have avoided the current tensions with Europe and the U.S.? Or would a rising China under the CCP simply pose too much of a threat regardless of the man in charge?

I think there’s no question that a different Chinese leader could have handled these dynamics in a way that at least did not lead to such a damaging and rapid slide in relations with the West. Even Xi Jinping himself, if he’d made a couple of different choices at important junctures – such as the decision to pull back from the broader trade deal with the United States that Liu He had negotiated – could have maintained ties on a better footing while still pursuing many of the same goals. Everyone who worked closely on China policy in the Trump administration can point to crucial moments where the overall balance of U.S. policy might have ended up looking quite different.

This isn’t to say that we wouldn’t have been dealing with an increasingly competitive and contentious relationship. At a minimum, though, it seems entirely plausible to me that the debate in the Chinese system, characterized in the book as “assertive now or assertive later,” could have broken in the latter direction. Another leader could have made the assessment that there was still a period in which relations with the United States and Europe needed exceptionally careful management, given the extent to which Chinese companies, and ultimately the Chinese military, still benefit from – in some areas even rely on – access to the Western system. We may well have got to the same place in the end, but Beijing could have bought itself more time, and that time would have been critical in certain sectors of technology indigenization.

The “Bond villain blunder,” as David Rennie characterizes it – laying out a very dark picture of the PRC’s agenda somewhat prematurely while the West still has the opportunity to “escape” – does feel like one of Xi’s own making.

Souring views on China in Germany date all the way back in 2018, when a BDI paper labeled China a “strategic competitor.” But many saw German Chancellor Olaf Scholz’s recent visit to China as a sign that Berlin’s basic policy remains the same: prioritizing closer business ties. Can Germany really change its China policy?

It is worth noting just how profoundly the debate on China in Germany has changed in recent years. The German public has long been one of the most PRC-skeptic in Europe, but now you have a pretty solid consensus across much of German industry, and the major political parties – including the Social Democrats – that sees systemic rivalry as the principal dynamic in the relationship, and thinks that Germany should not repeat the mistakes it made with Russia when it comes to dependencies on the PRC. The Chancellery, and some of the business groups that still want to double down on their commercial relationship – which is now a notably smaller subset of German industry – are in a defensive and unpopular position. And even if you read the op-ed that Scholz wrote before his trip to China, there is language there that would have been unimaginably critical a couple of years ago.

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The German economy is in a difficult spot right now, and there is a temptation to put off various China-related measures – even those as basic as pulling back political and financial support for new investments in the PRC – out of a “don’t rock the boat” mindset. There is also a fierce rearguard resistance now from certain companies that are uncomfortable with the place they see German China policy is headed. But I think you have to watch the direction of flow on this question rather than the single snapshot of the Scholz visit.

Scholz himself isn’t as rigid as Merkel was, either – she was wedded to a vision of the relationship that was rooted in another era; he has been more willing to recognize the new realities, but seems wary of taking the necessary steps to adapt Germany’s economic model.

In the United States, there’s been a shift away from pursuing strategies to simply “out-compete” China on high-tech. The U.S. government is now moving to actively restrict China’s ability to advance in cutting-edge technologies. Can Washington get allies on board with tough measures to cut off China’s access to certain tech, given the revenue losses that would entail?

There are differing accounts of the negotiations on this question over the last year, in part reflecting the fact that there are still debates within the companies and governments themselves. Some are happy for the U.S. to be the bad guy on the issue and quietly get in line. Some are resentful simply about the fact that the U.S. is able to dictate the terms. Others genuinely think the balance of what PRC is allowed to access should land in a different place, though in most cases it’s not as if the U.S. government is being presented with sophisticated alternative assessments of the impact on the development of PLA capabilities if that were to happen.

I don’t think there is an objection to the principle that these restrictions should be tightened, the question is just about where to draw the line. It’s the same question that was debated on the U.S. side too, about the impact on the pace of innovation for some of these companies if they’re cut off from the revenue the Chinese market provides, and indigenization on the Chinese side accelerates. These rules on semiconductors were based on a relatively narrow definition – albeit with very pronounced effects for China – which still enables most firms to maintain the bulk of that revenue base. They haven’t elicited particularly strong resistance so far.

But this is not just about advanced node semiconductors, where we can essentially name all the companies in play, some of which are swimming in cash. This is going to be a framework that gets applied in various other areas too. And there isn’t yet a transatlantic consensus on exactly what it should look like. For anyone who’s looked at the early history of COCOM, the debates sound very familiar – but the commercial stakes are far, far higher.

Both sides have a closing window now to get this right. The United States has to be careful not to lean towards too unilateral a set of moves and elicit so much resistance that the Europeans ultimately come up with an “autonomous” framework that amounts to a form of transatlantic decoupling, instead of Europe, the U.S., and partners in Asia designing a set of shared rules for the system that everyone can live with. The Europeans, however, have to be careful that they don’t squander the opportunity to figure this out with a highly consultative U.S. administration that has consistently tried to take account of partners’ positions: at some point this could just be approached coercively by the U.S., given the importance of the national security issues at stake. And to the U.S. side, at times it isn’t clear that the security risks are being taken seriously enough – that this is really just about European companies wanting this to be as close to cost-free as possible.

The China-Pakistan Economic Corridor (CPEC) has largely underwhelmed on the ground, and new projects are few and far between (aside from the much-hyped deals signed during Prime Minister Shehbaz Sharif’s recent trip to Beijing). Are CPEC’s struggles due to China’s particular approach to foreign investment, or to Pakistan’s security woes? In other words, is CPEC’s faltering more due to a China problem or a Pakistan problem?

There were problems on both sides – the CPEC that was originally envisaged, a multi-stage process of transformative economic investments, was never fully attempted. The economic and political conditions in Pakistan from late 2017 resulted in a major slowdown in the projects, and it’s unlikely ever to resume its early fast trajectory. Some of those economic conditions were quite predictable – I sat through a number of meetings with Chinese South Asia hands who were being gently encouraged by both Pakistani and U.S. experts to take on past lessons about Pakistan’s economic cycles or the issues with its energy sector. They were politely ignored.

Some of the political conditions were a byproduct of the way that the PRC operates – it didn’t attempt to build a real national consensus behind CPEC, it operated under conditions of secrecy, it wanted a strong central authority to drive everything through rather than dealing with the Pakistani political system as it actually was. Imran Khan’s suspicions about CPEC – and the suspicions in the army too – were partly a product of that secrecy, and the corruption that had become so evident in other BRI countries. The book captures that moment in particular: the annus horribilis for the BRI of 2018 when a series of newly-elected governments exposed some quite shocking practices, and demanded major revisions of the terms of their investments. In fact, Pakistan looked quite different from Malaysia or the Maldives, but Imran Khan took office assuming that the same thing must have been going on with the PML-N too.

Throughout, there have been implementation issues on the Pakistani side, and the security situation, which was not at all bad for Chinese workers when CPEC was launched, is much worse now. The miserably slow progress on Gwadar reflects both sets of problems. The economy is evidently in dire straits now too. But this was broadly a test case for whether China could come in and apply what it saw as its “model” in a very friendly country: Did it have the flexibility to adapt it to the economic and political conditions there and bed in a package of projects that was resilient over time? The answer is not a total failure, but is certainly underwhelming.

Overall, the book – from its review of China’s relations with the U.S. and Europe, to its treatment of China’s BRI – gets to the question of whether China’s “model” for development is really replicable – especially with China acting as the main aid partner/investor, not the developed world. After all, China benefited greatly from the West’s openness, as you explain in the book; can other countries reap similar benefits from opening their economies to a tightly controlled Chinese economy?

One of the problems China faced is that wasn’t even the best agent for its own model. As your question suggests, China benefited from integration with a set of dynamic market economies, and from influxes of Western and Japanese finance and expertise. In that sense it isn’t encouraging other countries to follow China’s own developmental path; it’s trying to get them to open their economies to a party-controlled and increasingly securitized economic system, which is a very different thing. The track record when it has tried to push that at scale, through the BRI, has not been very impressive.

The book questions whether there was an alternative path that tried to draw lessons from the successes and failures of both the Western-led and Chinese approaches – the Jin Liqun analysis is, to me, an interesting reference point there – but that was not something Xi Jinping ever seemed to take seriously. He placed such a focus on control, on bilateralism, and on demonstrating the superiority of the Chinese system that there was no space afforded for a more dialectical process. As the reception given to the AIIB indicates, for all the PRC’s complaints about how unfairly the BRI was treated, there was a litany of Western governments – and India, too – that were willing to sign up to a Chinese-led initiative if it was consultative, somewhat multilateral, and willing to adhere to some universal principles.

Which goes back to the earlier question – was there an alternative version of a party-led China that the world’s leading democracies could have rubbed along with very differently? I think it’s actually very easy to spell out an international economic policy, a foreign policy, and a domestic economic model that were wholly consistent with the party’s goals and not so far from what people were actually expecting in Xi’s early years after taking power. It would have been far harder to build a consensus behind taking on the systemic challenges and threats posed by the PRC if that had been the case.