Global strategy 2021: An allied strategy for China

This strategy was produced in collaboration with experts from ten leading democracies.

Foreword

Following World War II, the United States and its allies and partners established a rules-based international system. While never perfect, it contributed to decades without great-power war, extraordinary economic growth, and a reduction of world poverty. But this system today faces trials ranging from a global pandemic and climate change to economic disruptions and a revival of great-power competition.

As Henry Kissinger has pointed out, world order depends on the balance of power and principles of legitimacy. The rise of Chinese power is straining both aspects of the existing rules-based system. China benefited from the system and does not seek to kick over the table as Hitler did with the 1930s international order, but China wants to use its power to change the rules and tilt the table to enhance its winnings. Beijing is directing its growing economic, diplomatic, and military heft toward revisionist geopolitical aims. While we once hoped that China would become what we considered a “responsible stakeholder” in a rules-based system, President Xi Jinping has led his country in a more confrontational direction.

Some analysts portray a new Cold War, but this historical metaphor misunderstands the nature of the new challenge. The Soviet Union was a direct military and ideological threat, and there was almost no economic or social interdependence in our relationship. With China today, we have half a trillion dollars in trade and millions of social interchanges. Moreover, with its “market-Leninist” system, China has learned to harness the creativity of markets to authoritarian Communist party control. It announced its intent to use this system to dominate ten key technologies by 2025. We and our allies are not threatened by the export of communism – few people are taking to the streets in favor of Xi Jinping thought – but by a hybrid system of interdependence. China has become the leading trading partner of more countries than the US. Partial decoupling on security issues like Huawei (discussed below) is necessary, but total decoupling from our overall economic interdependence would be extremely costly, and even impossible in the case of ecological interdependence such as climate change or future pandemics. For better and worse, we are locked in a “cooperative rivalry” in which we have to do two contradictory things at the same time.

Addressing the China challenge will require a collective effort on the part of the United States and its allies and partners, in which we leverage effectively our hard and soft power resources to defend ourselves and strengthen a rules-based system. Some pessimists look at China’s population size and economic growth rates and believe that the task is impossible. But on the contrary, if we think in terms our alliances, the combined wealth of the Western democracies – US, Europe, Japan – will far exceed that of China well into the century. A clear strategy with well-defined goals that neither under- nor over-estimates China is necessary for the current moment. Over the past two years, the Atlantic Council has convened high-level meetings of strategists and experts to produce just that.

In this paper, Global Strategy 2021: An Allied Strategy for China, Matthew Kroenig and Jeffrey Cimmino, along with expert collaborators from ten of the world’s leading democracies, propose a logical and actionable strategy for addressing the China challenge. The strategy articulates clear long- and short-term goals and several major strategic elements to help achieve those goals.

First, the paper calls for strengthening likeminded allies and partners and the rules-based system for a new era of great-power competition. This will require, for example, prioritizing innovation, repairing infrastructure, and establishing new institutions to bolster democratic cooperation. A successful strategy begins at home.

Second, likeminded allies and partners should defend against Chinese behavior that threatens to undermine core principles of the rules-based system. Executing this element will mean prohibiting China’s engagement in economic sectors vital to national security, countering Chinese influence operations, and deterring and, if necessary, defending against, Chinese military aggression in the Indo-Pacific.

Third, the authors recognize that China also presents an opportunity, and they recommend that likeminded allies and partners engage China from a position of strength to cooperate on shared interests and, ultimately, incorporate China into a revitalized and adapted rules-based system. Thus, efforts should be made to cooperate with China on issues of shared interests, including public health, the global economy, nonproliferation, and the global environment.

They argue that the desired endpoint of the strategy is not everlasting competition or the overthrow of the Chinese Communist Party, but rather to convince Chinese leaders that their interests are better served by cooperating within, rather than challenging, a rules-based international system. They pay attention to both the rivalry and the cooperative possibilities in the relationship.

The paper presents a sound strategic framework and a comprehensive and practical plan for the US and its democratic allies to follow as they address the China challenge. I encourage experts and officials from the United States and allied nations to study this thoughtful report. Following this strategy could help leading democracies cope with the China challenge and advance a revitalized rules-based system for years to come.

Joseph S. Nye, Jr.
University Distinguished Service Professor, Emeritus
Former Dean of the Kennedy School of Government
Harvard University

The Gist: After World War II, the United States and its allies and partners established a rules-based international system. The rules of this system shape financial systems, trade, diplomacy, and the resolution of disputes between nations.

Sustained by the leadership of the United States and other leading democracies, this system has led to an unprecedented expansion of peace, prosperity, and freedom across the globe.

Key Elements:

• The US-led, rules-based international system constructed by the United States and its democratic allies at the end of World War II reflects a set of norms and principles pertaining to global security, economics, and governance.
• The system has contributed to the absence of great-power war for over seven decades.
• Worldwide living standards have nearly tripled as measured by GDP per capita, and the percentage of people living in extreme poverty has dropped from 66 percent to less than 10 percent since 1945.
• The number of democratic countries worldwide has grown from 17 in 1945 to 96 today.

The Gist: In 1949, as the rules-based international system was in its infancy, China underwent a pivotal shift. Mao Zedong led a revolution, after which China emerged as a communist state.

But China struggled to grow into a major player on the global stage until Deng Xiaoping rose to power in the 1970s. Deng instituted a series of market-oriented economic reforms that unleashed a torrent of growth. China rapidly became a force to be reckoned with on the world stage.

Key Elements

• Deng opened China to foreign investment and loosened restrictions on internal markets.
• Technology and capital flooded into the country from abroad; peasants moved to cities for industrial jobs; entrepreneurs founded businesses and produced inexpensive goods for export using cheap labor. 
• As a result of a Deng’s reforms, China’s economy grew at a rapid pace, achieving double-digit growth rates for decades. In 2010, China surpassed Japan as the world’s second-largest economy and it currently possesses over 15 percent of world GDP.
• The Chinese Communist Party (CCP) promised economic growth and improved living standards in return for political obedience. This authoritarian model of capitalism became known within the Party as “socialism with Chinese characteristics.”
• In the realm of foreign policy, Deng advised that China should “hide its capabilities and bide its time.” China would keep a low profile as it rose to become a great power.

The Gist: Many scholars and policymakers in the United States and elsewhere hoped economic liberalization and growth would lead China to shift to a more open political system. It was thought that China would become a “responsible stakeholder” in the rules-based system, adopting its norms.

But that did not happen.

Instead, under President Xi Jinping, China has followed a more confrontational path. 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 prey on the global economic system. Internationally, Xi has abandoned Deng’s dictum that China should bide its time, and has pursued a more assertive foreign policy.

Key Elements

• President Xi has set ambitious goals for China. The CCP aims to dominate in the production of the most important technologies of the twenty-first century by the middle of this decade. 
• 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.

The Gist: China presents a serious challenge to likeminded allies and partners, and the rules-based system. This challenge is evident across the economic, diplomatic/political, and security domains.

Economically, 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. As China has become an economic power, its diplomatic influence has also increased, and it has established strategic partnerships with other autocracies, including Russia and Iran. Moreover, China also presents challenges to global governance, as its repressive political model and reliance on nationalism diminish opportunities for cooperation in a rules-based system. Finally, China is devoting its economic resources to strengthening the Chinese military, and 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.

Key Elements

Economic

• 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 gap between the United States and China in key emerging technologies is narrowing, with important stakes for geopolitics in the coming decades. Whichever country leads the way in twenty-first-century technological innovation will be at a great advantage, as emerging technologies could drive global prosperity and military supremacy in the near future.
• China’s Belt and Road Initiative (BRI) is ostensibly a massive effort to invest 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.

Political

• 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.
• China has boosted its position in existing multilateral organizations, such as the United Nations, and it has used that influence to in some cases undermine the very purpose of these agencies.
• China is engaged in “sharp-power” efforts to interfere in and manipulate the domestic politics of democracies to Beijing’s benefit.
• The CCP has cracked down on freedoms at home. This has manifested in heightened repression of religious and ethnic minorities, especially Uighur Muslims in western China.

Security

• China’s anti-access area denial (A2AD) strategy and capabilities target vital components of US power-projection capabilities.
• 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.
• China is also modernizing and expanding its nuclear arsenal. The US intelligence community projects that the size of China’s arsenal will double in the coming years.

The Gist: Despite serious conflicts of interest, there are several areas in which cooperation with China is necessary to advance likeminded allies and partners’ interests. These areas include economic relations, peacekeeping operations, arms control, public health, and climate change.

Key Elements

• There are many areas of productive economic relations. China’s purchases of US Treasury bonds have financed the US debt and deficit and held down interest rates in the United States and the global economy.
• China has greatly increased its financial and manpower support of peacekeeping operations, and now ranks tenth globally for numbers of global peacekeeping forces.
• The PRC has played a constructive role in nuclear nonproliferation. It supported multilateral sanctions against nuclear programs in Iran and North Korea, and participated in multilateral negotiations with both states. 
• The United States and China have cooperated on global public-health issues over the past two decades, although cooperation has been lacking in the COVID-19 pandemic due, in part, to China’s lack of transparency in the early stages of the crisis.
• As the world’s largest emitter of greenhouse gases, any meaningful action to mitigate the impacts of climate change will require action from Beijing.

The Gist: A good strategy starts with clear goals. At the broadest level, the strategic goal of likeminded allies and partners should be to revitalize, adapt, and defend the rules-based international system.

As for China, in the long term, likeminded allies and partners should seek a stable relationship with China that avoids permanent confrontation and permits cooperation on issues of mutual interest and concern, and that makes China a cooperative member of a revised and adapted rules-based system.

The problem is that this scenario will be difficult to actualize with Xi as president and the current generation of CCP leadership in power.

So in the short term, likeminded allies and partners should prevent China from undermining the rules-based system and defend their interests and international standards, while affording space for and inviting responsible Chinese behavior.

Key Elements

• Likeminded allies and partners need to make China’s leadership understand that challenging them and the rules-based system is detrimental to Beijing’s own interests. Over time, Washington can convince Beijing that its own interests are better served by playing along with the rules-based system, rather than trying to challenge it.
• In the security realm, maintain global peace and stability by fostering a favorable balance of military power for likeminded allies and partners capable of deterring and, if necessary, defeating Chinese aggression.
• In the economic domain, facilitate a global economic recovery and advance global prosperity by maintaining open and market-based economies at home and abroad, while resisting unfair economic practices and the spread of authoritarian, state-led capitalism.
• In the governance arena, maintain freedom by revitalizing democracy in existing democratic states, preventing CCP efforts to undermine democratic practices, and supporting human rights, democracy, and good governance in other states, including in China.

Left: Chinese President Xi Jinping shakes hands with U.S. Vice President Joe Biden (L) inside the Great Hall of the People in Beijing December 4, 2013. REUTERS/Lintao Zhang/Pool (CHINA – Tags: POLITICS)

Right: South China Sea

The Gist: Competition in most domains, such as athletics, is generally more about improving oneself than about bringing down a competitor. Likeminded allies and partners must strengthen themselves, their alliances, and the rules-based system for a new era of great-power competition.

By bolstering themselves, likeminded allies and partners will be in a stronger position, regardless of the choices made by China’s leaders.

Key Elements

• Facilitate a recovery from the current health crisis and pandemic-induced economic downturn;
• Prioritize innovation and emerging technology by boosting research and development spending, investing in STEM (science, technology, engineering, and math) education, and securing supply chains;
• Invest in repairing and renewing infrastructure and ensuring it incorporates advanced technology, including fifth-generation (5G) wireless capability;
• Reassert influence in existing multilateral institutions by, for example, promoting candidates for leadership positions that favor upholding open and transparent global governance;
• Create new institutions to facilitate collaboration among likeminded allies and partners in Europe, the Indo-Pacific, and globally; and
• Develop new military capabilities and operational concepts to achieve a credible combat posture in the Indo-Pacific region.

Left: NATO flags

Right: The wall of an apartment house is being printed by a 3D printer in Wallenhausen, Germany, November 25, 2020. Picture taken November 25, 2020. REUTERS/Andreas Gebert

The Gist: In addition to strengthening themselves to compete with China, likeminded allies and partners must be prepared to defend themselves and the rules-based international system from threatening Chinese behavior. Across the security, economic, and governance domains, they should counter China and impose costs on Beijing when it violates international standards.

Key Elements

• Prohibit Chinese engagement in economic sectors vital to national security;
• Collectively impose offsetting measures, including tariffs, for industries negatively affected by China’s unfair practices;
• Collectively resist Chinese economic coercion by reducing economic dependence on China and offering offsetting economic opportunities to vulnerable allies and partners;
• Counter Chinese influence operations and defend democracy and good governance;
• Coordinate penalties on China when it uses coercive tools, such as arbitrary detention of foreign nationals to coerce their home countries;
• Spotlight CCP corruption and human-rights violations and encourage human-rights reforms in China; and
• Maintain a favorable balance of power over China in the Indo-Pacific to deter and, if necessary, defend against Chinese aggression.

The Gist: As they compete, likeminded allies and partners should look for opportunities to collaborate with China on areas of mutual interests. While they impose costs on China for its threatening behavior, they should also demonstrate the benefits of more fully participating in a rules-based global system, with the ultimate aim of China becoming a cooperative member of an adapted system. 

Key Elements

• Maintain open lines of communication with China, even if competition intensifies; 
• seek to cooperate with China on issues of mutual interest, including public health, the Global economy, nonproliferation, and the environment, without compromising core values; and
• Engage with China to, over the long term, incorporate China into a revitalized and adapted rules-based system.

The Gist: Likeminded allies and partners came together many times in the twentieth century to defeat autocratic revisionist challengers. Working together, they can once again advance their interests and values, and the broader rules-based system, and fend off the twenty-first-century challenge posed by the Chinese Communist Party. 

• The support of the American people is critical to ensuring a strategy is sustainable over the long term. Recent surveys indicate that there is a reservoir of support. Americans understand China is a threat to US interests.
• Much of the US portion of this strategy will not be executed by the White House, but by executive-branch departments. The Defense Department, for example, will be responsible for deterring and, if necessary, defeating Chinese aggression, while the State Department should take the lead in coordinating a common allied approach to China and engaging with Beijing.
• No country should be forced to choose between the United States and China. Countries can, and should, engage with China on areas of mutual interest, but they must also work with the rest of the world to defend against, and impose costs on, Chinese behavior that violates international standards.

Conclusion

China is the foremost geopolitical threat to the rules-based international system since the end of the Cold War, and the return of great-power rivalry will likely shape the global order for decades to come. Likeminded allies and partners need to take deliberate and coordinated action to strengthen themselves and counter the threat China poses, even as they seek longer-term cooperation with Beijing.

The free world has an impressive record of accomplishment in defeating challenges from autocratic great-power rivals and constructing a rules-based system. By pursuing this strategy—and with sufficient political will, resilience, and solidarity—they can once again outlast an autocratic competitor and provide the world with future peace, prosperity, and freedom.

Lead authors

D-10 working group collaborators

This strategy paper was prepared in collaboration with experts participating in a working group associated with the D-10 Strategy Forum. The Atlantic Council serves as the secretariat of the D-10 Strategy Forum, which brings together policy planning officials and strategy experts from ten leading democracies, including Australia, Canada, France, Germany, India, Italy, Japan, South Korea, the United Kingdom, the United States, and the European Union, for a dialogue on global challenges. The paper does not reflect any endorsement of the content by national governments or any officials participating in the D-10 Strategy Forum. The experts listed below contributed their views and expertise, and are supportive of the general thrust and major elements of this strategy, but may not agree with every aspect of the paper.

• Nicolas Casarini, senior fellow, Institute of International Affairs, Italy
• Akiko Fukushima, senior fellow, The Tokyo Foundation for Policy Research, Japan
• Ash Jain, senior fellow, Scowcroft Center for Strategy and Security, Atlantic Council, United States
• Sarah Kirchberger, head, Center for Asia-Pacific Strategy and Security, Institute for Security Policy at Kiel University, Germany
• Rory Medcalf, head, National Security College, Australian National University, Australia
• C. Raja Mohan, contributing editor, The Indian Express, India
• Françoise Nicolas, director, Center for Asian studies, French Institute of International Relations, France
• Roland Paris, professor of international affairs, University of Ottawa, Canada
• Alessio Patalano, senior fellow, Policy Exchange, United Kingdom
• Jung-Yeop Woo, research fellow, Sejong Institute, South Korea