The emerging face of Chinese foreign policy

The contours of a new approach in Chinese foreign policy is emerging rapidly. It has by now antagonised most of its neighbours and major powers. Even tiny Bhutan has not been spared - by introducing the new formal claim over Sakteng Wildlife Sanctuary, China is claiming over 10% of Bhutanese territory! This is a good list of all its neighbourhood disputes - 17 land and water territorial disputes.

Over a period of less than six months, the Chinese government has managed to squander all the goodwill and influence it had accumulated over decades from its contribution to global economic growth, both among governments and publics at large. What makes this feat at wanton diplomatic self-destruction even more remarkable is that it has come despite everything that Donald Trump has done to alienate the US from its own allies and undercut America's own commitment to a stable global order.

Today, apart from those betrothed due to economic compulsions, which is a deeply undesirable state of relationship, there is no major country (apart from Russia) which the Chinese could count on as a partner, leave aside friend or ally. In the history of the world, there is perhaps no parallel for such  rapid diplomatic self-destruction.

See this and this on the Xi Jinping turn that has broken with the long-held Deng Xiaoping's approach of "hide your strength, bide your time, and never take the lead". This and this are earlier posts on the  associated reset in relations between China and the western countries. The pace of unravelling is most likely only getting expedited.

For sure, some of it is also the birth pangs of a new power which feels it has arrived at the global scene. But even by this yardstick, Chinese foreign policy has been excessively abrasive and needlessly so.

Britain is the best example of a country which has swung from tight embrace of China to a abrupt decoupling now. The FT has a nice story on the reversal in UK-China relations. Like US and others, the government of David Cameron too believed that engagement could change China,

The British approach has rested in part on the hope that Beijing would open itself progressively to western goods and influences. However, over the past decade, the government has been faced with growing evidence that China was actually moving in the opposite direction. On the political front, the limited space that once existed for legal activists and non-governmental groups has eroded, especially since Mr Xi took power in 2013, while the media has become even more tightly-controlled. The direction of industrial policy has also reduced the space for foreign companies in the Chinese economy. There was dismay in western capitals when in 2015 Beijing launched its “Made in China 2025” strategy, which aims to secure Chinese dominance in 10 high-tech sectors.

The culmination of the reversal has been the decision to bar Huawei from participating in UK's 5G roll-out and the directive that all operators should phase out Huawei from their networks by 2027.  This comes six months after the UK had decided to allot upto 35% of the 5G rollout to Huawei. The decision comes on the back of UK intelligence chiefs warning that they could not assure that the new kit used by Huawei would be secure.

Further, this decision has been taken despite it likely to cost UK operators an additional £2 billion and delay the roll-out by 2-3 years. Also UK's dependence on Chinese imports has not been a deterrent in the country's diplomatic about-turn.

A recent study by the Henry Jackson Society, a think-tank, found that the UK was “strategically dependent” on China for 229 out of 831 categories of traded goods. This is defined as a situation where the country both imports more than 50 per cent of its supplies from China and Beijing controls more than 30 per cent of the global market for that good. 

China has not only done little to help its cause, but has done everything possible to the contrary. It has become a feature in recent times that Chinese diplomacy loses all its diplomacy when faced with any disagreement with a partner. This is a good latest balance sheet of the country's 'wolf-warrior' diplomacy,

China routinely chastises states that say or do things that upset it. The first step is to cancel meetings between politicians, as happened when Mr Cameron’s government was put in the freezer for a year after he met the Dalai Lama, Tibet’s spiritual leader. Economic threats come next. China is Britain’s third-largest trading partner after America and the European Union, with 5% of total trade, and its government is skilled at targeting symbolic and politically sensitive exporters. Norwegian salmon exports were hit after the Nobel peace prize was awarded to a Chinese dissident. Australia’s beef and barley exports were choked after it called for an international probe into the coronavirus outbreak.

This is another example of China's very crude effort to arm-twist UK, 

China also tries to use its influence in education to protect itself from criticism. Testimony to a UK parliamentary select committee in January 2019 describes how the Chinese embassy threatened to cut off the flow of Chinese students — and cash — to Oxford university unless the vice-chancellor, Louise Richardson, stopped Chris Patten, the chancellor and a former Hong Kong governor, from visiting the ex-British colony. She refused.

Its 'wolf-warrior' diplomats, perhaps in their attempts to signal appropriately to the single leader, have been outdoing each other in abrasiveness and lack of diplomacy. It is hard not to feel that they have lowered China's credibility and influence among atleast a generation of interlocutors from other countries. 

Through his July 6 press conference, Liu Xiaoming, the Chinese ambassador in London, may have made the UK's decision to bar Huawei almost inevitable. This statement, in particular, left no room for any nuance.

“We want to be your friend, we want to be your partner, but if you want to make China a hostile country, you have to bear the consequences.”

Whatever he was thinking, after this brazen threat, it may be impossible for him to ever regain the trust of any of his British interlocutors. But Liu has a low bar to cross considering that he is following in the footsteps of  colleagues like this.

As Kurt Campbell and Mira Rapp-Hooper have written, Xi appears convinced of the country's continued rise and feels that China is done biding its time. They point to the aggressive foreign policy stance of China since the pandemic broke out. This goes beyond the tone, tenor and behaviours of its diplomats. Xi calculates that "China will gain more by flexing its military and economic muscles even if it loses some of its soft power along the way". Accordingly, 

Over the past few months, it has upped the ante in nearly all of its many territorial disputes and even provoked new ones, in another departure from past practice. The political scientist Taylor Fravel has shown that China has long prioritized among its territorial disputes, pressing ahead with some and putting others on the back burner to avoid courting too much tension at once. That restraint seems to have fallen by the wayside. Since March, China has stepped up its patrols near the Diaoyu Islands (known in Japan as the Senkaku Islands) in the East China Sea and doubled down on its maritime claims in the South China Sea, sending vessels to linger off the coasts of Indonesia, Malaysia, and Vietnam. It has conducted aerial reconnaissance near Taiwan, effectively ended Hong Kong’s semiautonomous status, ginned up a new border dispute with Bhutan, and by all appearances, provoked a deadly border clash with India in what was the People’s Liberation Army’s first use of force abroad in 30 years. Any one of these moves by Beijing might have been unsurprising on its own. Put together, however, they amount to a highly unusual full-court press.

Once content to permit diversity and different sets of norms to persist inside China’s semiautonomous territories, the CCP has also reversed course when it comes to its national periphery. In the western province of Xinjiang, a government crackdown on the Muslim Uighur minority, initiated before the pandemic hit, has since turned into a campaign of ethnic cleansing. Meanwhile, a controversial new national security law has all but stripped Hong Kong of its unique legal status. The law contains provisions that could potentially transcend national boundaries and extend Chinese jurisprudence globally, marking a shift from China’s traditionally defensive conception of sovereignty to a more offensive approach to extend Beijing’s authority. China has long resisted international efforts that it saw as endangering national sovereignty, rejecting, for example, the responsibility to protect (R2P) doctrine, which aims to prevent genocide and humanitarian crises. Now, Chinese sovereignty appears to come in only one form—the one imposed by the CCP.

Even beyond its immediate neighborhood, China now seems willing to court controversy, even open hostility. Its approach to Australia is a case in point. After Canberra called for an independent investigation into the origins of the pandemic, Beijing issued a harsh rebuke and imposed trade sanctions on Australia. It also appears to have carried out a series of cyberattacks against Australian government servers and businesses. Australian public opinion is rapidly turning against China as a result, with growing support for a more hard-line foreign policy... The stubbornness on display in China’s treatment of Australia—the determination to barrel through instead of recalibrating—is emblematic of a wider shift.

Campbell and Rapp-Hooper makes this important point about the changed foreign policy stance,

When Beijing encountered unforeseen foreign policy challenges in the past, it followed a clear process of deliberation that was comprehensible to outside observers. That has not been the case of late. Xi is rumored to be making many of the most important decisions himself, without even a trusted cohort of advisers. This may help explain why China’s foreign policy has become less risk averse: with fewer voices pitching in, an undaunted Xi may have no one to dissuade him from pressing ahead. Past Chinese leaders, notably Deng Xiaoping and Jiang Zemin, believed in the institutionalized processes of collective leadership. Xi has disabled or neutralized many of these channels. The world may now be getting a sense of what China’s decision-making looks like when a singularly strong leader acts more or less on his own.

This extra-territoriality of the Hong Kong security legislation is stunning,

There is another important concern with the so-called National Security law, which directly impacts European fundamental interests: it infringes on the rights of foreigners in general and those of European citizens in particular. Its article 38 states “This Law shall apply to offences under this Law committed against the Hong Kong Special Administrative Region from outside the Region by a person who is not a permanent resident of the Region.” Yes, a European citizen who in her home country argues in favour of self-determination for Hong Kong (or Taiwan, or Tibet for that matter) falls afoul of the law and could be imprisoned. The same holds for a European parliamentarian who calls for sanctions against China. And by writing this column, so have I.

This imperial foreign policy will have its moment under the sun. But, as with other dimensions of the Xi Jinping turn, this may only be expediting the unravelling of the hitherto smooth Chinese growth story. The history of such one-man driven foreign policy pursuits have not been pleasant. Unfortunately, its costs are also borne by foreigners. 

The oft-raised point (also drummed by Chinese diplomats) about dependence on Chinese imports and capital being a concern for other countries cuts the other way with China too. Perhaps even more so. While the importers, especially the developed countries which form the vast majority of Chinese export share, will substitute away to other sources and products, the loss of export markets, with all associated credibility loss from export-restrictions, is likely to hurt China much more. The numbers of workers who are likely to lose their jobs are very significant, and likely in concentrated pockets. Unlike western democracies which are better placed to cope with such structural shifts, an autocratic China will find it a very difficult challenge, and that too especially when the economy is slowing.   

Further, for a country striving to escape the jinxed middle-income trap, technology transfers from developed economies are very important. What makes this critical is the sequential or ladder nature of many technology applications, where newer ones are built on pre-existing technologies. The effects of being choked off many of these pre-existing technologies, as has been illustrated with the example of Huawei, can have a cascading effect across the technology chain. It is inconceivable for one country to locally develop capabilities and expertise across the spectrum of advanced technologies. The squeeze felt by Huawei is only an illustration.

It has to be kept in mind that but for all its famed manufacturing prowess, Chinese companies lag far behind Japanese and even South Korean in penetrating western markets on branded and high technology products. Apart from mobile phones, there is hardly any Chinese global consumer brand. Not one clothing or footwear brand! In technology, apart from Huawei and in heavy engineering and infrastructure, Chinese companies' global presence is nothing to speak of. How many IT products, much less cutting-edge, have emerged out of China? Even the behemoths like Alibaba, Tencent, Baidu, Didi Chuxing etc have struggle outside China. At best they are in Africa and South East Asia.  And as the case of TikTok shows, it is only likely to get more difficult to make inroads outside. In the financial markets too, Chinese financial institutions and financial products have limited global presence. 

We should be careful not to confuse being the manufacturing back-office (or factory) of the world with being at the technology frontier.

While the spectacular success of Chinese exporters has captured all the attention, a less discussed but perhaps more important feature of Chinese economic growth has been the local dominance of its own home-grown companies across sectors. In other words, the Chinese industrial policy has been as much about Make in China for China as it has been for Make in China for the World. In fact, the former laid the foundations for the success of the latter. India's singular lack of focus on Make in India for India (in areas like clothing, footwear, basic electronics, consumer durables etc) stands out in this regard. 

Even in areas where it has a comparative advantage, like with the voluminous data which supposedly gives it a head start in areas like AI, facial recognition and so on, we are now realising the limitations of the technology itself. The limitations of vast volumes of data from the very distinct monoculture of Chinese population and market are likely to become evident soon. 

Foreign policy is only one of the areas where Xi Jinping has taken the country backward. See this (HT: Ananth) detailed letter from civil rights activist Xu Zhiyong where he documents the ways in which China has gone backward on economic reforms and civil rights and demands that Xi step down.

Update 1 (26.07.2020)

Alan Crawford in Bloomberg has a good summary of how Chinese actions have riled up other countries. The souring of relations with Europeans, in particular, has been remarkable.

This report captures the new challenges faced by Chinese technology companies with big global ambitions, who now face the prospect of having to remain confined to China.