Wed, Dec 16, 2020

The China challenge

Atlantic Council Strategy Paper Series by Jeffrey Cimmino, Matthew Kroenig

A Huawei logo and a 5G sign are pictured at Mobile World Congress (MWC) in Shanghai, China June 28, 2019. REUTERS/Aly Song/File Photo

China presents a serious challenge to likeminded allies and partners, and to the rules-based system. Over the past several decades, China has experienced a remarkable economic expansion. Deng Xiaoping implemented economic reforms in the late 1970s that allowed China to adopt elements of a capitalist economy while maintaining strict CCP control of politics. He opened China to foreign investment and loosened restrictions on internal markets. At the same time, the CCP maintained strict control over strategic sectors of the economy through state-owned enterprises (SOEs). The CCP promised economic growth and improved living standards, in return for political obedience. This authoritarian model of state-led capitalism became known within the party as “socialism with Chinese characteristics.”

Scholars predicted that China’s rapid economic growth would eventually result in a move toward greater political liberalization and a more cooperative Chinese foreign policy. Western leaders hoped that these processes would help transform China into a “responsible stakeholder” in the rules-based system.

Instead, under the leadership of President Xi Jinping, China has launched itself on a more confrontational course. After a tense leadership transition in 2012, Xi has consolidated power at home, eliminating term limits, and set himself up to be China’s most powerful dictator since Mao Zedong. He has stalled or backtracked on promised economic reforms, and China continues to exploit the global economic system to its advantage. Internationally, President Xi has abandoned Deng’s dictum that China should bide its time, and has pursued a more assertive foreign policy.

President Xi has set ambitious goals for China. Through its program formerly known as “Made in China 2025,” the CCP aims to dominate the most important technologies of the twenty-first century by the middle of this decade. The follow-up program is “China Standards 2035,” which lays out a blueprint for China’s government and leading tech companies to set global standards for emerging technologies. Xi’s goal is for China to have a world-class military by 2035. By 2049, the one hundredth anniversary of the CCP’s assumption of power in Beijing, he aims for China to be a global superpower, and to make the world safe for the CCP’s brand of repressive autocracy.

Economic challenges

The China challenge begins with Beijing’s growing economic clout. A wealthy China is not a problem in its own right, but Beijing is employing its economic power to engage in unfair trade practices, dominate the commanding heights of emerging technologies, make infrastructure investments that fail to live up to international standards, and engage in economic coercion.

Growing Economic Power. After China put economic reforms in place in the 1970s, its economy grew at rapid rates for many decades, although its growth rates are now leveling off. China possesses the world’s second-largest economy, and economists project that it could overtake the United States for the top spot within the coming decade. These projections, however, are heavily dependent on one’s assumptions, and some economists now doubt whether the Chinese economy will ever surpass that of the United States.

China is also the largest trading partner of many nations around the world, including key US allies such as Japan and Australia, in addition to being the United States’ third-largest trading partner. It is the largest holder of foreign currency reserves, and it holds more than $1 trillion in US Treasury securities, second only to Japan. Beijing is using that increasing economic clout to bolster its diplomatic initiatives and to modernize its military. China’s growing economic power poses a challenge, in part, due to Beijing’s consistent violation of international economic standards.

Unfair Trading Practices. In its race to become an economic and geopolitical power, China has systematically flouted the rules of the global trading system. China steals technology from Western firms through industrial espionage and forced technology transfer. Its theft of intellectual property may amount to the largest transfer of wealth in human history. The CCP has provided Chinese firms an unfair advantage in global markets through government subsidies and, in the past, manipulating China’s currency. It has forced foreign firms to find a Chinese partner to access China’s market and used these joint ventures as avenues for forced or unwitting technology transfers. Christopher Wray, director of the Federal Bureau of Investigation, called China the “greatest long-term threat to our nation’s information and intellectual property and to our economic vitality.”

In recent years, countries have started to respond to China’s predatory economic behavior. Japan, the European Union (EU), and the United States have all criticized China’s unfair trade practices. In 2018, the United States initiated a trade war aimed at pressuring Beijing to adopt the international standards followed by market economies. Any attempt at a unified free-world approach to confronting Beijing’s trade practices, however, has been limited by several factors, including by Washington’s parallel trade disputes with traditional allies.

The Technology Race. The West has led the world in technological development for centuries, and this innovation edge has contributed to its economic and military prowess. The CCP recognizes the benefits of being the global center for innovation, and understands that if it is able to dominate twenty-first-century technology, it would gain important geoeconomic and geopolitical advantages. Another key aspect of this competition is which states or groupings of states will set the standards for twenty-first-century technology. Will the leading democracies be able to set standards for the use of new technology consistent with liberal norms and values, or will China set standards more congruent with its preferred autocratic model?

The program formerly known as “Made in China 2025” is a CCP-led effort to help China become the world’s leader in the next round of technological breakthroughs. China has prioritized emerging technologies such as artificial intelligence (AI), quantum computing, three-dimensional (3D) printing, robotics, and 5G wireless technology.

Already, China is thought to be ahead of the democratic world in some of these key technologies. China has utilized its large population and lack of privacy protections, for example, in an effort to collect large quantities of data to train its AI algorithms. China is now ahead in some applications of AI, including facial recognition.

Another important application of AI is for autonomous vehicles, and the United States and China are neck and neck in this race. The US lead in the semiconductor industry gives it one advantage, as chips are critical to these vehicles, but China has advantages as well. Its large population means that it can drastically scale up new technologies. Its laxer safety standards mean that it can more easily introduce driverless cars on roads and highways despite accidents.

Quantum computing manipulates subatomic particles as a means of transmitting information. It has the potential to dramatically accelerate the ability to process data. It also promises the possibility of unsurpassed encryption, which could provide states with secure communications and military information dominance. The United States is ahead of China in the development of quantum computers, but China may be leading in quantum satellite communications.

Perhaps most visibly, China is a major player in the development of 5G wireless networks. 5G is more than one hundred times faster than 4G, and will serve as the digital infrastructure for the Internet of Things (IoT) and “smart cities” of the future. The Chinese telecommunications company Huawei is a leader in the global market for 5G technology, although many democratic countries recognize that relying on China to supply the digital infrastructure of the twenty-first century entails serious national security risks. Some countries—including Australia, the United States, the United Kingdom, Sweden, Japan, Denmark, Norway, Estonia, Lithuania, France, Poland, Belgium, Netherlands, and others—have decided to ban or restrict Huawei’s involvement in building their 5G networks.

China’s possible technological advantages also extend to military weaponry. Hypersonic missiles travel five times the speed of sound and are maneuverable. While all the major powers are making progress on this technology, China has conducted more tests than the United States, and has already rushed this technology to the field.

While most concerned about China, the West has its own internal divisions. The United States and Europe, for example, have very different standards for data privacy, which will complicate their ability to coordinate around common technology standards, apart from the China challenge.

As the rest of the world seeks to decouple technology supply chains from China for security reasons, there could also be a significant effect on global innovation. To this point, supply chains have been geared toward efficiency, allowing for a momentous burst of innovation in recent decades. Global innovation could slow, therefore, as nations deprioritize efficiency in favor of greater supply-chain security.

The gap between the West and China in key emerging technologies is narrowing, with important stakes for geopolitics in coming decades. Whichever country leads the way in twenty-first-century technological innovation will be at a great advantage, as artificial intelligence, 5G, quantum computing, green tech, semiconductors, and other technologies could drive global prosperity and military supremacy in the near future.

Overseas Infrastructure Investments. China’s Belt and Road Initiative (BRI) presents another area of concern. The BRI represents one of Xi’s boldest initiatives for boosting China’s global position. It is ostensibly a massive project of investing in infrastructure projects—such as ports, roads and bridges—in other countries as a way of resurrecting the old Silk Road trading routes. In practice, it is a grand strategy for China to increase its geopolitical influence in every world region. One tracker places Chinese investments in, and contracts for, BRI projects at more than $750 billion. More than sixty countries have signed on to, or expressed interest in, BRI projects.

While infrastructure investments are badly needed in many recipient countries, the investments do not meet global standards for transparency, and the deals sometimes disadvantage recipient countries. BRI projects involve unclear bidding processes and financial arrangements kept hidden from the public. This prompts legitimate questions about corruption and accountability among citizens of recipient countries. One Chinese company has been accused of bribery in the Philippines, Malaysia, and elsewhere, while in Sri Lanka, the prime minister’s family was allegedly bribed by Chinese companies. Projects usually employ Chinese, rather than local, workers, further upsetting residents of recipient nations. In some cases, China has secured its investments with commodities, raising accusations of neo-colonialism.

China’s BRI program has also sometimes resulted in debt traps for recipient countries, even if that was not the original intent. For example, when Sri Lanka fell behind on payments for a Chinese-built port, the CCP took control of the port and surrounding territory. Chinese military vessels have visited this port, raising fears that China could use the port to expand its military’s reach in the key connective zone of the Indian Ocean.

China’s financial influence in Africa is especially pronounced. Through December 2019, Chinese investment in BRI infrastructure projects in Africa totaled more than $140 billion. Approximately 20 percent of all African government debt—including, but not limited to, BRI projects—is owed to China. Amid the COVID-19 pandemic, many African countries have expressed concern about their ability to pay off interest on debts while addressing the crisis. While China has shown a willingness to offer some relief, the CCP faces a dilemma: restructure or forgive debt and stress China’s own debt-burdened economy, or demand payments and hurt China’s global image.

China recognizes the importance of trade and investment as diplomatic tools. Between 2005 and 2019, China’s outgoing foreign direct investment (FDI) totaled around $1.23 trillion. For the Chinese, trade and investment are not viewed only as economic opportunities, but also a way to increase political and diplomatic influence abroad. It is unsurprising, then, that Chinese investment tends to focus on areas of strategic interest. Its trading partners view relations with China as an integral and unavoidable piece of their international position.

Utilizing BRI and other investment programs, China has managed to strengthen relationships with nations with historically close ties to the United States, such as Italy and Greece. China’s also exerts influence over NATO allies and other Eastern European nations in the 17+1 program. The 17+1 group, also known as the China Central and Eastern European Countries (China-CEEC), includes twelve EU member states, six Balkan nations, and fifteen NATO members—roughly half the Alliance. Since 2012, China has contributed more than $15 billion to infrastructure and other projects in member nations.

BRI is helping the CCP to increase its influence overseas, but the CCP’s heavy-handed practices are also beginning to provoke a backlash. Coercive foreign aid, debt traps, and a lack of transparency are feeding anti-Chinese sentiment abroad, including recently in places such as Kazakhstan and Kyrgyzstan, where China has invested heavily in infrastructure projects. Many locals view China’s behavior as predatory and corrupt. Some BRI recipients have canceled or reduced the scope of projects over cost concerns. In 2018, for example, Myanmar scaled back a port-building project from an estimated $7 billion to just more than $1 billion, and Sierra Leone outright canceled a project to build a new airport. Similarly, in 2019, Malaysia’s government permitted a BRI project to continue after renegotiating a significantly reduced price tag.

Economic Coercion. China employs its economic power as a tool of political coercion. The economic coercion is often employed as retaliation for behaviors the CCP finds objectionable. The starkest case is Beijing’s pressure on Australia following that country’s call for an independent inquiry into the origin of COVID-19. In November 2020, the Chinese embassy in Canberra released an extraordinary list of fourteen demands on Australia, some of which struck against core democratic values and interests, such as support for a rules-based regional order, domestic freedom of expression, and the right to make and enforce laws against foreign interference. China backed the demands with economic sanctions across diverse industries, including coal, beef, barley, and wine. The Australian experience could become a test case for a middle-sized democracy’s ability to withstand, and for the willingness of other nations to show solidarity in the face of, Chinese bullying.

There are many other examples of Chinese economic coercion. After South Korea announced and deployed the US Terminal High-Altitude Area Defense (THAAD) missile system over the course of 2016–2017, China cut tourism to South Korea and closed almost ninety Korean-owned Lotte Mart stores in China. This was not an isolated instance. China also cut tourism to Taiwan in the run-up to Taiwan’s 2019 presidential election, in a bid to influence the result. When the Norwegian Nobel Committee awarded Chinese dissident Liu Xiaobo the Nobel Peace Prize in 2010, China responded by temporarily freezing diplomatic relations and banning Norwegian salmon exports to China. In 2016, China raised fees on Mongolian mining products after the Dalai Lama (whom the CCP views as a separatist) held public events in Mongolia. The Mongolian government apologized in an effort to restore commercial ties.

Former US National Security Adviser HR McMaster refers to this as China’s “co-opt, coerce, and conceal” strategy. Beijing co-opts foreign governments and firms through commercial relations and then employs that economic interdependence as a tool of coercion, even as it engages in subterfuge to deny that it is doing any such thing.

Flag of the People’s Republic of China, Beijing, China (Daderot/Wikimedia Commons)

Political and diplomatic challenges

As China has become an economic power, its diplomatic influence has also increased. While China has only one formal treaty ally (North Korea), it has established strategic partnerships with other autocracies, including Russia and Iran. China’s economic power has made it a vital trade and investment partner for countries across the world, further extending its diplomatic sway. As the United States has retreated from multilateral institutions in recent years, China has bolstered its influence in those bodies and established its own institutions.

China also presents challenges to global governance. The CCP’s repressive political model and reliance on nationalism diminish opportunities for cooperation in a rules-based system. Through concerted sharp-power efforts, China has sought to disrupt democracies with disinformation and shape narratives about the CCP. Moreover, it exports technology that autocrats use to control their populations, thereby helping China create a world safe for autocracy.

Alliances and Partnerships. China lacks a robust network of allies and friends, and China’s leaders have said for decades that they eschew formal alliances as an unnecessary burden. Yet, to become a true global power, China will need friends and allies. China’s lone formal treaty ally, North Korea, has often proven more of a liability than an asset.

China has, however, fostered strategic partnerships with other autocracies. China and Russia are increasingly aligned. They view US power and democratic values as a threat, and they are working together to disrupt US global leadership. Closer ties between Russia and China are evident in several domains. Russia and China are engaging in joint production of weapons systems, and have conducted joint military exercises in both Asia and Europe. The Chinese company Huawei is developing Russia’s 5G data system. China is Russia’s largest trading partner, while Russia is China’s primary oil supplier. Some recommend that the United States seek to peel Moscow away from Beijing, but this may not be possible or desirable.  Likeminded allies and partners, therefore, may need to manage the Russia challenge as part of a broader strategy for China.

China has also worked toward a strategic alignment with Iran. A prospective deal includes provisions for Chinese infrastructure investments in Iran, as well as possible cooperation on intelligence, weapons development, and military exercises. A comprehensive bilateral agreement with Iran would give China a larger footprint in the Middle East, potentially altering the geopolitics of the strategically important region.

China also maintains a longtime strategic partnership with Pakistan and growing strategic ties, backed by infrastructure investments and economic linkages, with other nations in Southeast Asia.

Multilateral Institutions. China has boosted its position in existing multilateral organizations such as the United Nations, and it has often used that influence to undermine the very purpose of these agencies. While the United States has pulled back from some multilateral bodies, China has focused on winning elections to key leadership positions in multilateral organizations. It is also expanding its influence by increasing its voluntary financial contributions. The most notable recent example is China’s increasing influence in the WHO. In the early stages of the COVID-19 pandemic, the WHO publicly praised China even as its staff privately complained that China was refusing to share information about the disease. China has also proactively integrated into major standard-setting bodies such as the International Organization of Standardization (ISO) and a broad range of international industry-level forums in which technical standards are developed. China is also reactivating ailing organizations like the Conference on Interaction and Confidence-Building Measures in Asia (CICA).

In addition to gaining influence within existing institutions, China is creating new multilateral bodies. The Shanghai Cooperation Organization is an intergovernmental body composed of China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. The body focuses on security and economic issues, and it has been used as a forum for China to challenge global norms, such as Internet openness. The Chinese-led Asia Infrastructure Investment Bank (AIIB) provides much-needed infrastructure investments throughout Asia, but may not operate according to Western standards of quality and transparency.

These developments raise concerns about China weakening the existing rules-based system, both from within, and by building new bodies to route around it.

Sharp-Power Practices. China is engaged in “sharp-power” (or “authoritarian influencing”) efforts to interfere in and manipulate the domestic politics of democracies to Beijing’s benefit. China seeks to mute criticism of, and amplify positive narratives about, China, shape understandings of sensitive issues important to the CCP (such as Taiwan), and covertly influence democracies’ legislation and policies toward China.

China supports hundreds of Confucius Institutes throughout the world, including at colleges and universities. The CCP offers free language and cultural instruction, in exchange for the opportunity to indoctrinate students. Learning materials proffered by Confucius Institutes overlook CCP-manufactured disasters such as the Great Leap Forward and Cultural Revolution. Topics such as Taiwan are off limits at institute events. These organizations also attempt to influence and pressure China scholars on campuses in the United States and Europe. The US Department of Defense is no longer providing Chinese-language scholarships to universities that house Confucius Institutes, and other countries are also starting to shut down these organizations as evidence mounts that they misrepresent Chinese history to bolster the image of the CCP.

China funds propaganda supplements in prominent publications, such as the Washington Post, and pays lobbyists to promote the CCP’s desired narrative. Chinese state media are boosting their global presence, in part by buying foreign media outlets. A 2019 report by the journalist-advocacy group Reporters without Borders argued China has “actively sought to establish a ‘new world media order’ under its control, an order in which journalists are nothing more than state propaganda auxiliaries.”

The United States has designated certain Chinese news outlets as foreign missions, meaning they are “substantially owned or effectively controlled” by a foreign government and must follow “certain administrative requirements that also apply to foreign embassies and consulates.” These measures do not, however, place restrictions on content. Earlier this year, amid disputes over coverage of the COVID-19 pandemic, the United States and China engaged in a back-and-forth battle of restrictions on journalists. The Donald Trump administration limited the number of Chinese citizens who can work in the United States at five Chinese state-run news organizations. Other countries, including Australia and New Zealand, are increasing scrutiny of media purchases and foreign-government investments.

Chinese efforts to exert sharp power also extend to political and thought leaders. In 2019, a professor at Prague’s Charles University was fired after it was revealed that he had accepted payments from the Chinese government. The professor, Milos Balaban, had been the head of Charles University’s Center for Security Policy (SBP). China has also engaged in efforts to exert undue influence on Australian politicians. In December 2017, a prominent senator in the opposition Labor Party, Sam Dastyari, was compelled to quit politics after media revelations of his connection with a Chinese entrepreneur, Huang Xiangmo, who was later barred from the country as a suspected agent of foreign influence. Dastyari had notoriously recounted Chinese talking points at odds with Australian policy on South China Sea issues during a 2016 election campaign. The Australian government subsequently enacted laws to ban foreign political interference. In 2020, Australian authorities began enforcing these laws, laying criminal charges against one man in Melbourne and separately raiding the residence of a state lawmaker in Sydney. In both instances, the concerns related to alleged CCP interference in Australia’s domestic politics.

China is also using its economic power to stifle free speech in democracies. China threatens to retaliate against Western businesses that denigrate China. Through this coercion, the CCP has persuaded Hollywood to change movie scripts involving China, the National Basketball Association to apologize for an executive who spoke out on Hong Kong, and US airlines to remove Taiwan from global maps.

China also conducted an arbitrary arrest of two Canadian citizens, in an apparent attempt to pressure Ottawa into releasing Huawei executive Meng Wanghou.

“Wolf Warrior Diplomacy.” Contrary to traditional diplomatic niceties, Chinese diplomats are increasingly engaging in “wolf warrior diplomacy,” combatively denouncing any criticism of China and aggressively lashing out at critics. Wolf warriors are named after a popular Chinese movie franchise and, while the practice existed before, it has been highlighted by the COVID-19 pandemic. China has sought to change the narrative surrounding its significant early missteps, including suppression of information and silencing those who sounded the alarm about COVID-19. It has also “accused Western countries of failing to protect their people, unleashing vitriol usually preserved for domestic audiences on the world, provoking anger” and rebukes abroad.

Examples of the wolf warriors’ hostile diplomacy abound. Chinese officials have spread conspiracy theories about the virus being brought to China by the US Army. A Chinese diplomat in Paris complained about the French media’s treatment of China, saying it is to “howl with the wolves, to make a big fuss about lies and rumors about China.” Chinese diplomats have also accused French authorities of letting the elderly die in nursing homes. After Australia called for an inquiry into the virus’s origins, China’s state media labeled Australia “gum stuck to the bottom of China’s shoe,” and an ambassador suggested Australia was putting the nations’ trade relationship at risk. Chinese officials also got into a battle with the German newspaper Bild after it called on China to pay billions in compensation to Germany.

Chinese Nationalism. The CCP has its ideological roots in Marxism-Leninism and maintains supreme control over the functions of the state and law. Its values, and its often-repressive approach to maintaining power, do not square well with the values of the rules-based international system.

Whereas democratic states benefit from sources of legitimacy such as the consent of the governed and attractive values, the CCP relies heavily on nationalism to perpetuate its hold on power. Nationalism rallies political support for the CCP and directs internal energies against external opponents. Furthermore, as CCP ideology has grown increasingly intertwined with capitalism, and has sacrificed its Marxist ideals, nationalism has served as a means of binding the Chinese people together.

Chinese nationalism has deep historic roots. The Chinese have long thought of their land as a Middle Kingdom, the center of the universe, with outsiders seen as barbarians.After Qin Shi Huangdi made himself emperor of a unified China in the third century BCE, China was ruled by a succession of imperial dynasties in which the emperor was understood as the gods’ representative on Earth. In East Asia, China was the center of the international system and Asia’s leading power for centuries, surrounded by smaller, tributary states.

In the nineteenth and twentieth centuries, however, China’s situation worsened, and the years between 1839 and 1949 are considered China’s “Century of Humiliation.” After being overmatched by Great Britain in the Opium Wars of the mid-nineteenth century, China was forced to accede to several “unequal treaties” with external powers. China gave up territory for ports and conceded spheres of influence within its borders.In the late nineteenth and early twentieth centuries, China suffered additional defeats as it was surpassed by a rising Asian power in Japan.

Chinese nationalism is founded on the narrative that China endured years of shame at the hands of the West and Japan, and it should now return to its great-power status. The CCP deliberately fosters this narrative, and has staked its rise on undoing a Western and Japan-dominated global order, enforcing its view of China’s territorial integrity and international stature. Key foreign policy issues have assumed symbolic significance, including “the principle that Japan must atone for its historical sins, the ‘one China’ principle that Taiwan must accept, invented historical rights to the contested South China Sea, and the principle of opposition to supposed American hegemonism.”

Furthermore, the CCP’s cultivated sense of China as a revived Middle Kingdom reduces its ability to accept the motivations of outsiders on their terms, or to accommodate ethnic differences. This has given rise to the idea of Hanization, a chauvinistic belief that privileges Han identity both within China and internationally.

China’s leaders foresee a return to China’s rightful role as the Middle Kingdom, the most powerful state in the center of the international system, with countries on its periphery as tributary states within China’s sphere of influence.

Making the World Safe for Autocracy. Following the Cold War, the Western model of open market democracy was virtually unchallenged on the world stage. Now, there is a formidable competitor in the form of China’s model of authoritarian state capitalism. This Chinese model is proving attractive to many current and would-be autocrats. Indeed, for the past few decades, China has shown it is possible to attain dramatic economic growth within a repressive political framework. As open market democracies in Europe and the United States struggled amid the 2008 financial crisis, China’s economy proved resilient, further increasing its model’s appeal.

Scholars debate whether China is consciously exporting its model. At a minimum, however, it is clear that China wants to create a world safe for autocracy. After all, if democracy spreads to Beijing, the CCP and its officials would be in mortal danger. The CCP has increased restrictions on freedoms at home. This has manifested in heightened repression of religious and ethnic minorities, especially Uighur Muslims in western China, more than one million of whom are in internment camps. The CCP has also cracked down on Hong Kong, passing a sweeping surveillance law designed to prohibit criticism or protest of the party’s authoritarian practices. The CCP is also using advanced technology to develop stronger tools for controlling the Internet in China, bolstering its “Great Firewall.”

Abroad, there is at least some evidence that China is trying to export its model. Through the BRI’s “Digital Silk Road” initiative, China has pushed for national governments to have greater control over the Internet. China is also training governments from Cambodia to Serbia on how to control the flow of information and target individuals who challenge the official narrative. Chinese corporations have provided authoritarian governments in Venezuela and elsewhere with facial-recognition technology and other surveillance tools. These domestic and foreign efforts by the CCP have contributed to democratic decline globally.

Authoritarian state capitalism is attractive in part because it has delivered continuous impressive growth rates in China, but this may be changing. China’s economy was slowing prior to COVID-19. Xi has backtracked on promised reforms, choosing political control over economic liberalism and likely higher growth rates. The trade war with the United States also hurt China’s economic performance. The COVID-19 pandemic marked the first time in decades that China’s economy experienced a significant downturn.

A lagging economy could eventually strain the CCP’s social contract with the Chinese people, as diminished outcomes may prompt some to question their submission to the CCP. While regime collapse does not seem imminent, increased domestic political discontent is possible. Nevertheless, despite these challenges, authoritarian state capitalism will remain a formidable alternative to the Western model of open market democracy for the foreseeable future.

Military vehicles carrying hypersonic missiles DF-17 drive past Tiananmen Square during the military parade marking the 70th founding anniversary of People’s Republic of China, on its National Day in Beijing, China October 1, 2019. REUTERS/Thomas Peter

Military challenges

China is devoting its economic resources to strengthening the Chinese military. It has shifted the balance of power in East Asia, raising questions about whether the United States can defend long-standing partners in the region.

Shifting Balance of Power in the Indo-Pacific. China’s rapid military modernization threatens the United States’ decades-long preeminence in the Western Pacific. China’s anti-access/area denial (A2/AD) strategy and capabilities target vital components of US power-projection capabilities. Using sensors, submarines, and thousands of surface-to-surface ballistic and cruise missiles, the Peoples Liberation Army (PLA) aims to destroy US and allied ships, forces, and bases in Asia in the early stages of a conflict. This strategy aims to prevent, deter, and deny US forces from operating near China, potentially giving China the ability to act with impunity against neighboring states, including Taiwan.

China’s naval modernization is also essential to its efforts to assert regional hegemony in the Indo-Pacific maritime theater. The People’s Liberation Navy (PLN) now boasts a force larger than that fielded by any East Asian country, and it also recently surpassed the United States Navy in the number of deployed battle-force vessels.

China’s military strategy also relies heavily on operations in cyber and space. China could use cyber and anti-space capabilities in the early stages of a conflict with the United States to disrupt US command and control, rendering US forces unable to visualize the battlefield or communicate with one another. The Department of Defense has stated that the PLA is working to develop “capabilities with the potential to degrade core US operational and technological advantages.”

China is also modernizing and expanding its nuclear arsenal. The US intelligence community projects that the size of China’s arsenal will double in coming years. New road-mobile intercontinental ballistic missiles (ICBMs) and submarines have improved the survivability of its nuclear forces. China is also adding multiple independently targetable reentry vehicles to its missiles, making it more difficult for them to be countered by missile defenses.

A growing Chinese nuclear force threatens all the major goals of US nuclear strategy. It would render the United States less able to limit damage in a conflict with China. As the United States becomes more vulnerable to threat of Chinese nuclear attack, it may be more difficult for the United States to stand firm in a crisis or war, or to credibly extend nuclear deterrence to, and assure, allies.

Beijing has also established itself as a leader in emerging military technologies, such as quantum communications, artificial intelligence, and hypersonic missiles.

The military scenario of greatest concern is a fait accompli against Taiwan. If China were to move quickly to attack the island, the United States and its allies would struggle to expel Chinese forces. Moreover, given the ambiguous US security relationship with Taiwan, the CCP may miscalculate and gamble that it could attack the island without foreign interference.

These developments raise the prospect that the United States might not win a direct great-power conflict with China. The National Defense Strategy Commission ominously warns that a major war with China is possible, and that the United States might very well lose.

Territorial and Maritime Disputes. China is involved in a number of long-standing territorial and maritime disputes, and it has grown more assertive in making its claims in recent years. These disputes, from Taiwan to the India-China border to the South and East China Seas, are all flashpoints for possible conflict.

China considers Taiwan a renegade province, and reserves the right to use force to reclaim it. The twentieth century witnessed several crises in the Taiwan Straits, in which tensions between China and Taiwan came close to boiling over into full-scale war. Amid the pandemic, China has bolstered its military presence around Taiwan, raising questions about whether it sees the crisis as an opportunity for an act of military aggression.

In the resource- and commerce-rich South China Sea, China asserts a “nine-dash line” of control that competes with the maritime claims of other nations in the region and amounts to an area covering 90 percent of the sea. Over the past seven years, China has developed and militarized artificial islands in the Spratly Island chain and placed anti-ship cruise missiles and long-range surface-to-air missiles on these islands. An international tribunal ruled against China’s territorial claims in 2016, after the Philippines pursued legal action, but the CCP has ignored the ruling. The United States and its allies regularly conduct freedom-of-navigation operations (FONOPs) in the South China Sea to counter China’s claims and protect free seas.

Along the China-India border, tensions have risen in recent months. The two countries fought a border war in the 1960s, and there is concern that miscalculation by either side could lead to another conflict. In the fall of 2020, India and China exchanged fire, and there were dozens of casualties on both sides from apparent hand-to-hand combat. It is now reported that Chinese forces sit on India’s side of the Line of Actual Control. Any conflict among these large nuclear powers could degenerate into a major conflagration. These tensions are likely to push India closer to the United States and its partners seeking to counter China in the region.

Meanwhile, in the East China Sea, China is engaged in a dispute with Japan and Taiwan over control of the Senkaku Islands. The United States recognizes Japanese administration of the islands, but it has not taken a position on the sovereignty question. In recent years, China has stepped up patrols near the islands, including with maritime militia forces, in an effort to assert its claims. In 2012, the two sides nearly went to war over the islands, and the United States clarified that its defense treaty with Japan would apply in such a circumstance.

Growing Global Military Footprint. The PRC has also begun to expand its global military footprint. This includes building overseas military installations. China’s first overseas base, opened in 2017 in Djibouti, has been described as a logistics hub, but has the infrastructure necessary to conduct wider military operations. In addition, China has established a military listening station in Argentina. Furthermore, China’s infrastructure investments may provide it with a “string of pearls” of ports for possible naval operations from South Asia, through the Indian Ocean, to the Gulf of Aden.

China is also engaging in military exercises with other autocratic powers outside of the Indo-Pacific region. China has participated in major military exercises with Russia in Europe, including a naval exercise in the Baltic Sea and another in the Mediterranean. In 2019, Chinese, Russian, and Iranian naval forces participated in a joint exercise in the Gulf of Oman. In the summer of 2019, Russia and China conducted a joint strategic bomber patrol that drew live-fire warning shots from the Republic of Korea (ROK) Air Force (and caused friction between South Korea and Japan). In September 2020, China announced that it would participate in military exercises in the Russian Caucus mountains region alongside Russia, Iran, Pakistan, Myanmar, and others.

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