Magazine | October 15, 2018, Issue

The New China Rules

China’s President Xi Jinping during the 2018 Beijing Summit in Beijing, China, September 4, 2018 (Lintao Zhang/Reuters)
Beijing attempts to force new terms onto the geopolitical order

In July, Palau Pacific Airways shuttered its doors. The small airline had found itself the collateral damage in a battle between its archipelago of 21,000 persons and China. Palau is one of only 18 countries to maintain diplomatic relations with Taiwan. As a result, the Chinese government had banned all tour groups to Palau, imposed fines on those who defied the edict, and thereby crushed revenue for the airline.

At nearly the same time, four American airlines bowed to Chinese pressure and removed all references to Taiwan as an independent nation from their websites. The companies had tried various ways of listing Taipei, Taiwan’s capital, without explicitly stating that it was part of China, but Beijing deemed them insufficient. It warned of consequences to the airlines’ credit ratings and threatened other actions to force complete compliance.

This power play was only the most recent example of Beijing’s increasingly aggressive foreign policy, and the American airlines were just the latest Western corporations to feel China’s wrath. Months earlier, in fact, 40 other global airlines had accepted China’s demands in full. Whether through economic pressure, political and military intimidation, espionage, or propaganda, China is trying to reshape the world to fit its interests, often at the expense of other countries. Western nations are waking up to the fact that China is not adopting their values and upholding the norms that created the post-1945 world. Instead, it increasingly expects the world to bend to its wishes, and it has adopted a set of behaviors to ensure it gets the outcomes it wants. Call them the “new China rules.” They pose the greatest strategic challenge of the next generation.

Richard Nixon’s visit in 1972 began the process of bringing China into the post-war global system. Two decades later, in the flush of post–Cold War triumphalism, America’s leaders assumed that a China that was increasingly treated as a near-peer of the United States and pulled into the global system would eventually, if fitfully, manifest liberal tendencies. U.S. policymakers believed that positive reinforcement in the form of diplomatic respect, earnest attempts at cooperation, and avoidance of topics such as human rights would somehow encourage an evolution of China’s socioeconomic and political system. The benefits of following a liberal course, which some called the “Washington consensus,” were thought to be such that even authoritarian Chinese leaders would grant more power to the middle class, if only to keep it supportive of their rule and further open up their society, since development ultimately would depend on cultural changes that ensured a fertile field for capitalist-style modes of organization. The West’s leaders believed that they could change China. It was the bet of the century.

China has indeed changed over the past four decades, far beyond the dreams of Nixon and his successors. It is a dominant, if not the dominant, global power by a host of measures: industrial production, export of finished goods, provision of foreign aid, size of urban areas, military strength, and diplomatic activity, to name some of the more prominent. For most observers, it is China’s massive economic growth that makes it a great power. Measured by purchasing-power parity, the Chinese economy is the world’s largest, at $23.3 trillion annually, compared with $19.4 trillion for the United States.

In 2015, China overtook Canada to become America’s largest trading partner, with a $648.5 billion two-way trade in goods and services in 2016 and a $385 billion trade surplus with the United States. With its “One Belt, One Road” initiative — a plan to link Eurasia via trade routes running through  China, supported by financial institutions such as the new Asian Infrastructure Investment Bank — and with $1 trillion in promised infrastructure investment around the world, Beijing is bidding to reshape global trade and investment relations.

All this economic wealth has translated into national power. China’s military is widely considered to be the second most powerful in the world, after the U.S. Armed Forces. China’s diplomacy complements its military influence, with Beijing hosting major international gatherings, participating vocally in global institutions, and playing a role in high-profile diplomatic initiatives such as the six-party talks regarding North Korea’s nuclear program.

Chinese citizens are now a common sight around the world. More than 350,000 Chinese enrolled in U.S. institutions during the 2016–17 school year, accounting for over a third of all foreign students. Just as ubiquitous are Chinese tourists, who have become a crucial factor in the global tourism industry, spending $261 billion in 2016.

From a certain point of view, then, the China bet paid off in spades: China, the “middle country,” sits firmly at the center of today’s globalized world.

China, however, has refused to follow Washington’s script. While it has eagerly taken advantage of its access to the global economy and the prestige of sitting at the leading diplomatic tables, it has resolutely pursued its own interests at the expense of other nations. Washington and other liberal capitals also misjudged Beijing’s determination to maintain and even expand its authoritarian practices and mercantilist policies. It is well on its way to becoming an all-pervasive  technological surveillance state.

Far from having liberalized, China at the end of the second decade of the 21st century tightly controls civil society and speech at home while engaging intensively and often overbearingly with the outside world. The China that has emerged after nearly a half century of engagement with the West is more suspicious, less satisfied, less cooperative, and less liberal than its eager American interlocutors hoped it would be. Its values increasingly diverge from those of the West, and the rival systems appear less compatible than many believed just a decade ago.

China’s “new rules” are the means of its aggressive statecraft. They include multifaceted espionage; military pressure in strategic regions; and intimidation and demands for capitulation on geopolitical and ideological issues such as non-recognition of Taiwan or claims on territory in the South China Sea. When the Trump administration labels China a “strategic competitor,” as it did in the most recent National Security Strategy, this is in no small part because of Beijing’s increasing use of confrontational, disruptive tools.

Only in recent years, however, has it become clear that China’s technological and industrial espionage has been a key factor in its economic success. Beijing has taken spying to unheard-of heights. Chinese hackers and traditional spies have pilfered untold billions, or more likely trillions, of dollars’ worth of proprietary information. The U.S.-based Commission on the Theft of American Intellectual Property estimates that the annual cost to the U.S. economy of IP theft is as high as $600 billion, while the U.S. Office of the Director of National Intelligence has calculated the cost of economic espionage by hacking to be $400 billion a year, with both organizations noting that the majority is due to China’s cyberespionage units.

Further, Chinese policies such as “indigenous innovation” have the goal of supplanting the West as an industrial powerhouse by copying or stealing Western intellectual property, or by pressuring Western businesses to transfer technology to their Chinese partners, some of which are government-owned. We may never fully know the degree to which America and other advanced nations have unwittingly subsidized the growth of the Chinese economy.

Nor does Chinese spying stop at goods. Beijing spies in sweeping, indiscriminate ways on a broad range of American interests, and directly on American citizens. In 2015, it was revealed that Chinese hackers had stolen from the U.S. government the confidential personal information, including Social Security numbers, information about foreign travel, and addresses, of more than 22 million Americans, many of whom had security clearances. It also targeted their spouses and family members. At the same time, newspapers reported that Chinese actors were breaking into private corporations such as insurance companies and stealing information on millions of Americans, with the goal of building massive databases to identify potential targets of blackmail.

The U.S. Defense Department acknowledged in 2013 that nearly every American weapons-development program had been infiltrated by Chinese hackers. Such espionage means that U.S. taxpayers are in essence footing the bill for the development of the Chinese military. China’s spying is so pervasive in America that FBI director Christopher Wray has called it the most significant long-term threat the country faces. He has also stated that Beijing has placed spies in scores of American universities and research institutes across the country.

Much of China’s newfound wealth and many of its stolen secrets have been poured into dramatically modernizing its military, which Beijing now uses to intimidate its neighbors. China has threatened military reprisals should Taiwan even hold a referendum on independence, and has undermined Hong Kong’s freedoms by pressuring the judiciary and elected legislature. Beijing regularly sends maritime patrol vessels into the waters of the contested Senkaku Islands (or Diaoyu Islands, as it refers to them) in the East China Sea, challenging Japan’s administrative control of them, and it attempts to intimidate both Japan and Taiwan by sending naval flotillas and bombers into their territorial waters and airspace.

As is well known, China has also built islands on coral reefs in disputed waters in the South China Sea, turning them into full military bases. It undertook the militarization of Fiery Cross Reef, Mischief Reef, and Subi Reef, among others, after promising not to do so. It has thus made itself the dominant power in the strategic waterways of Southeast Asia, through which 70 percent of global trade passes.

China’s grasp is not confined to Asia but reaches across the oceans, to Africa, Latin America, and even the Arctic. President Xi Jinping has pledged $1 trillion to the “One Belt, One Road” initiative. Infrastructure-building is taking place across all of Eurasia, designed to link land- and sea-based trade routes from east to west and north to south, all converging in China. In Europe, Chinese companies have purchased ports in Belgium, Spain, Italy, and Greece. 

All this economic largesse, or promises of such, is used as a tool to expand China’s military reach and gain geopolitical influence. In Djibouti, in the Horn of Africa, Beijing has combined development aid with building its first overseas military base, which opened in July 2017. Chinese military access to key ports in Pakistan, one of its major aid recipients, is growing, and Sri Lanka was forced to turn over control of the strategic port in Hambantota this year after it could not repay its debts to Chinese interests.

China has sent billions of dollars in aid throughout Eurasia, Africa, and the Pacific, some of which finds its way directly into the pockets of corrupt elites, ensuring support for Chinese policies in international forums. A report from the Global Public Policy Institute and the Mercator Institute for China Studies, both based in Europe, details the degree to which Beijing’s growing geopolitical influence and intimidation tactics are changing how Europeans deal with China. “Political elites [in Europe] have started to embrace Chinese rhetoric and interests, including where they contradict national or European interests,” write the report’s authors. After the Chinese made investments in Greece and the Czech Republic, Athens refused to support EU condemnations of China’s human-rights abuses and predatory South China Sea actions, while Prague reversed its earlier public support under former president Vaclav Havel for Chinese dissidents. Australian politics have been rocked in recent years by allegations of massive Chinese donations to politicians and attempts to influence political decisions.

Corporations are also pressured and intimidated, as we saw above. Major companies, from Daimler AG to Marriott International, have been forced to accept Chinese-preferred designations for Taiwan, Hong Kong, and Tibet. After a Marriott employee “liked” a post by a Tibetan independence group on one of the company’s social-media sites, Beijing ordered Marriott to shut down its website in China, and the company fired the offending worker. Its CEO grovelingly announced that Marriott “respects and supports Chinese sovereignty and its territorial integrity.”

Beijing brooks neither criticism nor unflattering images, demanding that only positive portrayals be spread globally. Among its key tools are government-funded “Confucius Institutes,” of which more than 100 have been set up on U.S. university campuses and over 500 around the world. Critics in the U.S. and elsewhere charge that the institutes stifle criticism of China, by linking money paid to the universities to censorship of anti-Chinese perspectives and pushing views approved by China’s Ministry of Foreign Affairs instead. Some U.S. universities, including the University of Chicago, Penn State, and Texas A&M, have closed down Confucius Institutes owing to worries about Chinese-government intervention on campus, which has also drawn scrutiny from the FBI and the U.S. Senate.

China pushes its propaganda in other ways as well. Chinese interests have bought major U.S. entertainment companies, and negative portrayals of China are now almost entirely absent from Hollywood productions. In response to Chinese pressure, for example, the producers of the 2012 remake of the 1980s hit Red Dawn digitally changed the aggressors from Chinese to North Koreans. Businesses all too willingly forfeit their freedom of speech in order to maintain their foothold in China.

Perhaps little of this would matter if China were slowly evolving into a more liberal society with an accountable government, as Richard Nixon and the rest of the world expected. Instead, China is becoming more authoritarian, and the power of the state is increasing inside Chinese society. Much of this can be laid at the feet of Xi Jinping, who took power in 2012 and has become the most powerful Chinese leader since Mao Zedong. Xi has scrapped the ten-year limit on presidential terms, is increasingly moving towards one-man rule, and will remain at the head of the Chinese government for years to come.

Through Xi’s anti-corruption campaign, Beijing has steadily cracked down on civil society, increased propaganda, muzzled alternative media, and tried to control the Internet. Xi is reinforcing Communist thought in China while demonizing the West and its values. In addition, Beijing continues a policy of severe repression in both Tibet and Xinjiang, paralleling its hardening line on Hong Kong. The China of coming decades will be a more tightly controlled and surveilled society in which even elites will be uncertain of their position.

All of this bodes ill for the future. The world will have to deal with a far stronger and more aggressive China that ignores or undermines global norms of conduct, even as it continues to nurture a sense of grievance according to which foreign nations are scheming against it. Instead of building bonds of trust with its neighbors and major partners, it bullies smaller ones and steals from larger ones while asserting that it is the real victim. At home, trade with the West has enriched a Communist dictatorship that is intent on further subjugating its people and serving as a model of illiberal rule.

Western governments and corporations, fearful of losing access to China’s lucrative market, have played by the new China rules for too long. In doing so, they have turned a blind eye to theft, abuse, intimidation, and their own self-censorship. And by not resisting the China rules now, they are making the costs of doing so in the future much higher.

In This Issue



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