Chatham House briefing
Published 29 July 2019
Updated 17 December 2020
ISBN: 978 1 78413 351 1
The growth of China’s wealth and military power represents an epochal change in international politics. This briefing argues that China’s rise has worrying implications for the liberal international order and explores how this will affect the transatlantic relationship.
Despite this uncertainty, recent Chinese behaviour shows that economic interdependence has not deterred Beijing from asserting national interests in ways that will pose a serious challenge to transatlantic cooperation, and to the liberal international order. China is not revolutionary, and has an interest in preserving many aspects of the international system more broadly. But its values and priorities diverge from those of the US, Canada and Europe in numerous ways, and have already begun to conflict with transatlantic goals in trade, cyberspace, international development, security and human rights.
A key area of divergence is in the economic realm. Of course, over the years, significant CPC reforms have narrowed the gap between Western market economies and China’s centralized, statist economy. China’s 2001 accession to the WTO required substantial reforms in order to comply with WTO rules. Scholar Edward Steinfeld has argued that China has become rich by ‘playing our game’, and that to do so it has had to make profound domestic adjustments.15 In many ways, however, Chinese economic policies remain at odds with the goals of the liberal trade regime. Relative to the US, Canada and Europe, China maintains numerous tariffs as well as non-tariff barriers that block foreign access to its domestic market. As the Financial Times notes: ‘As China’s economy has matured, protectionism has remained one of its key organising principles.’16
Furthermore, as China’s economy has moved up the value chain, domestic firms (supported by the CPC) have engaged in rampant intellectual property (IP) theft, stealing technology from innovative firms in the West. Outright theft through corporate espionage (particularly cyber espionage) is one common method; another is the forced transfer of technology. The Chinese government has targeted seven strategic industries that it supports in a variety of ways (under what it has called the ‘Made in China 2025’ plan). In addition to subsidies (including low-interest loans from state-owned banks), the Chinese government requires foreign firms to transfer technology in order to remain in the Chinese market. Threatened with expulsion, or encountering costly disruptions to services or market access, many Western firms have reluctantly agreed to China’s demands to form joint ventures (in which the foreign partner often holds a minority stake), transferring their IP to Chinese competitors in the process.17
In this way, argue Dennis Blair and Keith Alexander, ‘Chinese companies, with the encouragement of official Chinese policy and often the active participation of government personnel, have been pillaging the intellectual property of American companies.’ Blair and Alexander estimate that such IP theft costs the US economy about $600 billion per year.18 British, Canadian, Dutch, French, German and other Western firms have experienced similar theft or forced transfer. Of course, similar practices are far from unknown elsewhere (the UK, after all, castigated the US for IP theft during the latter’s rise; Japanese growth was fuelled in part by its theft of US and other countries’ IP).19 But Chinese policies of protectionism and IP theft not only harm the transatlantic partnership’s economies, they also undermine Western diplomatic efforts to expand the global trade regime so that it encompasses IP protection.
The Chinese government requires foreign firms to transfer technology in order to remain in the Chinese market
Beijing’s approach to cyberspace differs from that of liberal countries in North America and Europe. Advancing the principle of ‘cyber sovereignty’, the CPC views the internet not as an open area, but as a space under its jurisdiction, as The Atlantic noted in 2018:
China has pushed through dozens of regulations and technical standards that, in conjunction, bolster the government’s control of and visibility into the entire internet ecosystem, from the infrastructure that undergirds the internet, to the flow of data, to the dissemination of information online, to the make-up of the software and hardware that form the basis of everything from e-commerce to industrial control systems.20
Beyond its policies at home, the CPC exports this model through international cooperation and development initiatives. These channels include: bilateral partnerships with developing countries; the Asian Infrastructure Investment Bank (AIIB); and the Belt and Road Initiative (BRI). Scholars warn that such institutions and initiatives will bind countries to China as the region’s dominant power.21 China’s vision of cyber sovereignty ‘crashes headlong into the foundational principles of the internet in market-based democracies: online freedom, privacy, free international markets, and broad international cooperation’.22
Towards the goal of peaceful and prosperous interdependence, the founders of the Bretton Woods system sought to promote free-market economic development in the Global South. To be sure, their policies often did not live up to this liberal vision. The US and others maintained many tariffs and subsidies, and often used economic statecraft to advance national strategic goals – including through the policies of the development banks they created. While the key players in the transatlantic community often used their majority shareholdings in such banks to advance national interests, those players also used those banks and other institutions to promote a liberal vision of international development. Development banks extended loans and offered crisis management to developing countries. Executives at the World Bank and other development banks evaluated projects, imposing conditions on lending to ensure that borrower countries met certain standards: for example, that workers had the right to assemble and negotiate for higher pay, better treatment or safer conditions; or that development projects not harm vulnerable minority peoples (such as forcing involuntary resettlement) or cause environmental devastation.23
The founders of the Bretton Woods system sought to promote free-market economic development in the Global South
China has much to offer as a leader of international development. Its historic economic growth gives it significant expertise and resources that could benefit developing countries. Furthermore, Chinese leadership in development institutions and initiatives (as noted, for example, with the AIIB and the BRI) could complement transatlantic development goals.
Yet the ‘China model’ of development – in which a more powerful China can be expected to advance through international institutions – threatens to undermine transatlantic goals for liberal economic development. China has declared that its development efforts are aimed at creating a ‘community of common destiny’. Nadège Rolland notes that this is ‘at a minimum, an indirect criticism of the universal values and core principles that hold up the existing world order’. She notes that China’s declaration that it will let each community member choose its own developmental path translates to a disregard for democracy, human rights and the rule of law.24 For example, China will lend to countries with illiberal labour policies. China’s own labour laws forbid unionization. Trade unions are one form of popular assembly associated with building networks of trust – something that authoritarian regimes cannot permit because of such networks’ anti-government potential. Chinese labour laws against trade unions stem from the CPC’s desire to control labour and prevent political assembly, which could be used to galvanize opposition to the government. Whereas members of the transatlantic community (through the World Bank and other development banks) require loan recipients to guarantee workers the freedom to unionize, China as a lender does not impose this condition.
Furthermore, the prominent role of state-owned enterprises (SOEs) in the Chinese economy creates concerns about Chinese-led development. China’s SOEs are part of the country’s broader, statist, mercantilist vision; in addition to using them as vehicles for employment and the provision of social welfare benefits, the government relies on SOEs to drive investment in strategic sectors.25 Analysts fear that a powerful China at the IMF, or in its own AIIB, would favour Chinese SOEs in development projects.
Observers also question whether Chinese-led development banks will adhere to strict policies and high standards, or whether, as one commentator notes, they may ‘cut corners on environmental, social and anti-corruption standards’, extending loans ‘with few or no noneconomic conditionalities, such as environmental protection’.26 Optimists point to evidence of early cooperation between the AIIB and the World Bank. However, it strains credulity to believe that the illiberal, mercantilist Chinese government would not use a bank that it founded and controls to advance its own interests. After all, great powers have long used international development – as well as economic statecraft more broadly – as an important tool to expand their influence.27
Since the collapse of the Soviet Union, the security order in the transatlantic system has been based on a unipolar distribution of power (embodied in the dominance of US military power) and on the long-standing NATO alliance. In East Asia and the Pacific, the US maintains alliances with several countries (notably Australia, Japan, the Philippines and South Korea). Transatlantic relations as well as the liberal international order more broadly have thus been underpinned by the US alliances and by the dominance of American power. These alliances – all with liberal countries – have sought to deter aggressors from seizing territory. The alliances have also sought to reassure US allies that they need not engage in significant military build-ups. This has prevented the development of regional spirals of mistrust among historic adversaries. US military power also gives it the ‘command of the commons’, which facilitates the safe movement of commerce and enables US military movements.28
The rise of China threatens to undermine the US-led security order in Asia. Chinese military modernization, particularly in the maritime sphere, has begun to shift the regional balance of power. To push the US military away from its coasts and airspace, China has adopted an anti-access, area denial (A2/AD) doctrine. This relies on networked space-based and land-based sensing systems to detect surface ships; on unmanned aerial vehicles for reconnaissance; and on long-range missiles to threaten US surface fleets and air bases throughout the region.29 As the US military finds it increasingly dangerous to introduce and move military forces in East Asia, this will undermine the credibility of its alliances – weakening deterrence and creating doubt among US allies as to whether those alliances continue to serve their interests.
China also challenges the territorial status quo as perceived by the US, Canada and countries in Europe. The Chinese government maintains, for example, that the Senkaku/Diaoyu Islands in the East China Sea (claimed and currently controlled by Japan) are Chinese territory. In 1949, China’s government proclaimed the establishment of a ‘nine-dashed line’ around the South China Sea. Within this area, the Chinese government claims the Paracel Islands (disputed with Vietnam) and the entirety of the Spratly Islands (various of which are disputed with five Southeast Asian countries, as well as with Taiwan). Since its foundation, the People’s Republic of China has also proclaimed that there is ‘One China’ that includes the territory of Taiwan, and asserts that this territory is ruled by the CPC in Beijing.
China also challenges the territorial status quo as perceived by the US, Canada and countries in Europe
Whereas for decades China was too weak to assert these claims, the country’s economic rise and military modernization have changed the picture. In 2013, in the East China Sea, the Chinese government declared an ‘air defence identification zone’ over the islands, and has increasingly put military pressure on the Japanese by sending aircraft and vessels into the disputed area. In the South China Sea, China has been engaged in island construction, reclamation and development. It had promised multiple times that it had no intention of militarizing these features – first making this commitment in the 2002 ASEAN Code of Conduct. Later, Chinese President Xi Jinping, standing in the White House Rose Garden alongside US President Barack Obama, declared that ‘China does not intend to pursue militarization’ in the area.30 China has violated both these pledges by installing radar domes, military-grade runways, and anti-ship and anti-aircraft missiles. This militarization has significantly transformed the balance of power in the area; as Admiral Philip Davidson (head of US Indo-Pacific Command) states, ‘China is now capable of controlling the South China Sea in all scenarios short of war with the United States’.31
China’s government has signalled that it has no intention of relying on international institutions to mediate in its numerous territorial disputes with neighbours. Instead, Beijing relies on its maritime superiority vis-à-vis weaker claimants to establish control over disputed areas. It summons swarms of fishing vessels (in effect, a maritime militia), its coastguard (now the largest in East Asia) and also naval ships to push neighbours’ vessels out of the disputed areas.32 In 2003, China forced the Philippines out of the disputed Scarborough Shoal, and has been attempting to push it out of the disputed Second Thomas Shoal/Ayungin as well. In response to the verdict of a 2016 international tribunal that sided with the Philippines, China rejected the notion that the tribunal had any jurisdiction. As Harriet Moynihan has argued:
The Chinese government has tended to perceive international dispute settlement mechanisms involving independent adjudication by judges and arbitrators as Western-dominated, which has led to an instinctive distrust of them. Submitting to such processes involves a sacrifice of control, and thus sovereignty, which China is reluctant to cede.33
China’s interpretation of maritime law also diverges both from those of its neighbours and from the interpretations applied by members of the transatlantic partnership. According to the UN Convention on the Law of the Sea (UNCLOS), constructed or ‘reclaimed’ islands confer no rights of sovereignty or economic exploitation. Furthermore, UNCLOS stipulates that both civilian and military vessels enjoy the right of innocent passage: both through a country’s 12 nautical miles (nm) of territorial waters, and through its 300-nm exclusive economic zone (EEZ). As Raul Pedrozo argues:
Long-standing state practice supports the position that surveillance and reconnaissance operations conducted in international airspace beyond the twelve-nautical-mile territorial sea are lawful activities. Since the end of World War II, surveillance and reconnaissance operations in international airspace have become a matter of routine.34
China, however, rejects prevailing interpretations of international maritime law. In the South China Sea, it is asserting sovereignty and EEZ rights around features that it has constructed through reclamation activities. China’s interpretation of UNCLOS also differs starkly from that of other countries with respect to rights of ‘innocent passage’: Beijing argues that military vessels must first gain permission for such a passage, both within the 12-nm radius and also the 300-nm EEZ. China’s interpretations of maritime law would impede freedom of movement and raise the risk of a military crisis in Asia. In sum, China’s challenge to the regional balance of power, as well as its policies challenging the territorial and legal status quo in East Asia, runs counter to prevailing maritime law and to the interests of the transatlantic partners.
The founding principles of the leading states in the transatlantic partnership, and the institutions they created, include a commitment to individual human rights, free speech, democracy and the rule of law. The horrific abuses of the Second World War led these countries to establish (and over time to expand) a regime to protect human rights around the world. The UN Charter of 1945 and the Universal Declaration of Human Rights of 1948 underpinned this regime. Over time, multilateral institutions and non-governmental organizations (NGOs) identified new threats and adopted new causes, such as protecting the rights of women and LGBTIQ+ communities. Controversially, the human rights regime has recently expanded to challenge the principle of sovereignty: activists declared that leading countries have a ‘responsibility to protect’ the human rights of peoples whose governments are abusing or neglecting them.35 Transatlantic institutions and diplomacy have thus been imbued with a progressive agenda on human rights.
Of course, as critics of the concept of the ‘liberal international order’ have argued, the US and other Western countries have not upheld their own values on many occasions, and sometimes they have ignored or abused human rights in the process of advancing national goals.36 That said, while rose-tinted views of the international order are indeed overly simplistic, a key goal of the post-war order (however imperfectly implemented in practice) has indeed been to expand the community of states committed to free markets, democracy and human rights – and under the aegis of this order, the liberal community has indeed expanded.37
Political activists or suspected enemies of the CPC are detained without legal grounds and subjected to harassment, arrest, lack of access to the judicial system, inadequate healthcare and torture
The rise of an illiberal superpower contravenes the progressive agenda. At home, China’s authoritarian government controls the marketplace of ideas, censors information and debate, forbids assembly, and detains and imprisons people whom it sees as hostile to the regime. As organizations such as Human Rights Watch and Amnesty International detail, political activists or suspected enemies of the CPC are detained without legal grounds and subjected to harassment, arrest, lack of access to the judicial system, inadequate healthcare and torture. The CPC engages in extensive surveillance – relying on the use of facial recognition and big data for increasingly pervasive control.38 It imposes political education on its citizens, sometimes to the extent of detaining them in re-education camps (as in the case of hundreds of thousands of people from the Uighur minority in Xinjiang).39 The CPC also has tightened restrictions on NGOs – which it sees as engaging in activities that undermine it. Western governments are increasingly forced to protect their nationals – including journalists, scholars and NGO activists – from Chinese government detention and interference.40
Chinese diplomacy also undermines the liberal agenda that underpins the transatlantic relationship. One of China’s ‘Five Principles of Peaceful Coexistence’ is that of non-interference in other countries’ internal affairs. This principle has frequently led China to veto international intervention or other liberal goals supported by transatlantic partners. China’s principle of non-intervention has led it to extend ‘no strings attached’ loans to countries that abuse human rights and engage in rampant corruption, thus undermining efforts by North American and European governments to promote good governance and human rights.41 In addition, Chinese diplomats have grown more assertive within international institutions in their efforts to ‘undermine the legitimacy of international mechanisms to monitor human rights, avoid “name and shame” tactics and sanctions, and weaken protections for human rights defenders and independent media’.42 In sum, in several realms – trade, international development, cyberspace, territorial status quo, alliances and human rights – Chinese government policies and priorities clash with those of the transatlantic system, and threaten to undermine its liberal goals.
