Review: Turning Beijing’s playbook against it

Chinese President Xi Jinping stands above a giant portrait of late Chinese chairman Mao Zedong as he arrives for the event marking the 100th founding anniversary of the Communist Party of China, on Tiananmen Square in Beijing, China July 1, 2021. REUTERS/Carlos Garcia Rawlins - RC2BBO92BEIT

HONG KONG, July 30 (Reuters Breakingviews) - In a 1973 meeting with an American delegation, Chinese Premier Zhou Enlai caught his interlocutors off guard by asking: “Do you think China will ever become an aggressive or expansionist power?” When his U.S. counterpart politely replied in the negative, Zhou disagreed. “It is possible. But if China were to embark on such a path, you must oppose it. And you must tell those Chinese that Zhou Enlai told you to do so!”

Rush Doshi, China director on President Joe Biden’s National Security Council, quotes this advice in “The Long Game: China’s Grand Strategy to Displace American Order”. He then proposes that the White House take it. A former Fulbright scholar with fellowships at the Brookings Institution and Yale University’s Paul Tsai China Center, Doshi argues that China is not only attempting to sabotage global governance norms led by the United States but is trying to place itself at the top of a new system modelled in its autocratic image. It’s a very hawkish assessment of Chinese intentions. But 60 pages of painstaking footnotes, many of them quoting internal statements by Communist Party leaders and intellectuals, make it rather compelling.

During the Cold War China was a quasi-ally of America. But after the Soviet Union collapsed the Chinese Communist Party grew suspicious. The United States easily toppled Iraq’s Saddam Hussein on the flimsiest of pretexts. That terrified Chinese officials who were convinced the Americans aspired to repeat in Beijing what they had accomplished in Moscow.

The CCP’s strategy to prevent that outcome consisted of two phases which Doshi calls “blunting” and “building”. First, the People’s Republic joined and then hobbled international institutions like the World Trade Organization. This protected the country from tariffs that could have crippled its export sector and made it harder for America to project its influence. Next Beijing built alternatives it could control, such as the Asian Infrastructure Investment Bank. On the military front it first invested in sea mines and long-range missiles to fend off the U.S. Pacific Fleet, then built aircraft carriers to project sea power further afield.

At the same time, China drew heavily on American finance and expertise to reverse-engineer industrial champions. Today, Chinese companies compete head-to-head with Western multinationals in railway technology, networking equipment and clean energy. The near-implosion of the U.S. financial system in 2008 and the election of President Donald Trump eight years later appear to have convinced Beijing it has an opportunity to push America aside entirely.

Doshi sees little room for accommodation. Aside from cooperation on curbing global warming, he advocates using China’s tactics against itself. The United States and allies like Japan should join China-led institutions, including the Belt and Road infrastructure initiative, and then seek to dilute Beijing’s influence. They should also reinvigorate forums that China has sabotaged, like the Association of Southeast Asian Nations.

The Pentagon should mimic the People’s Liberation Army by spreading drones and missiles and small bases around the southern Pacific. Influential media platforms like TikTok must sever links with their Chinese subsidiaries and shareholders or face a ban. The Treasury should develop a digital dollar to defend the greenback’s global position.

Doshi gives the business side of the equation less attention than diplomatic and military facets. Yet Beijing derives much reassurance from American corporations which have poured almost $300 billion into the country over the last three decades, according to Rhodium data. Hollywood studios grovel for market access, painting China in glowing tones. Even as admirals fret about armed Chinese drone swarms, American venture capitalists shower money on mainland artificial intelligence startups.

To get the private sector back on side, Doshi proposes forcing chief executives to focus on “longer term planning”. He suggests changing capital gains taxes to encourage investors to hold shares for longer periods. While such tweaks may have merit, they’re unlikely to change the way executives approach the People’s Republic. China was the third-largest market for American goods in 2019, and a critical part of the U.S. supply chain. Giants like Goldman Sachs (GS.N), Starbucks (SBUX.O) or Apple (AAPL.O) are not in China for a quick buck.

Back at home, Doshi recommends a Beijing-style industrial strategy to revive U.S. manufacturing. Yet reversing the hollowing-out of American industry appears at odds with the free trade principles and dollar dominance that Doshi proposes to preserve.

It’s also far from clear that the political system can implement Doshi’s ideas. Sympathetic executives and allies must factor in the possibility that voters will eject Doshi’s ultimate boss from office in 2024. Given America’s deep political divisions, it’s hard to see legislators agreeing on any coherent strategy, much less sticking with it for decades as Beijing has.

China’s bid for dominance might yet fail due to its inherent contradictions: the CCP’s enthusiasm for trade surpluses, the country’s looming demographic and debt crises, and the ethnocentric, xenophobic nature of President Xi Jinping’s Chinese Dream. Democracies can hope, but hope is not a strategy.

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- “The Long Game: China’s Grand Strategy to Displace American Order” by Rush Doshi was published by Oxford University Press on July 1.

Editing by Peter Thal Larsen and Oliver Taslic

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Asia Economics Editor Pete Sweeney joined Reuters Breakingviews in Hong Kong in September 2016. Previously he served as Reuters' chief correspondent for China Economy and Markets, running teams in Shanghai and Beijing; before that he was editor of China Economic Review, a monthly magazine focused on providing news and analysis on the mainland economy. Sweeney came to China as a Fulbright scholar in 2008, and in that role conducted research on the Chinese aviation industry and outbound M&A. In prior incarnations he helped resettle refugees in Atlanta, covered the European Union out of Brussels, and took a poorly timed swing at craft-beer entrepreneurship in Quito even as the Ecuadorean currency collapsed (not his fault). He speaks Mandarin Chinese, at the expense of his Spanish.