- Current political and economic issues succinctly explained.
[Editor’s note: This was an address to the conference on “PRC’s Power Shift and Governance” sponsored by the Mainland Affairs Council (MAC) and organized by the Chinese Council of Advanced Policy Studies (CAPS).]
Today I am going to share my thoughts on the outlook for U.S.-China and cross-Strait relations. I will do so in the context of both internal developments in China, including the start of a third Xi Jinping term as leader of the CCP, as well as larger trends in the region and the world. I am sorry I am not in the hall with you, but events required my being here in New York. That said, I will soon be boarding a plane for Taiwan, and I much look forward to visiting and getting a first-hand view of what people are currently thinking there.
What we saw during the 20th Party Congress, while unsurprising, demonstrates that Xi Jinping exercises a degree of power that many underestimated and may have only one precedent in the PRC’s history. For the foreseeable future, this is Xi’s China.
With this reality comes certain consequences. Some could prove to be positive, in that they allow for clear decision-making, consistent policy, and disciplined implementation. Clear authority theoretically allows those in power to prioritize long-term objectives over short-term considerations. Here, Xi’s anticorruption campaign clearly ruffled a lot of feathers and won him powerful enemies, and while it was also a political campaign there is no doubt that he tamed corruption and made meaningful progress on a difficult issue, one that bedeviled his predecessor.
But the pitfalls of such centralization are likely to be greater, something we have seen in other authoritarian systems where power is highly personalized and centralized. First, the bureaucracy is often paralyzed, waiting for one man's decision. It is difficult to do anything unless the leader or leaders agree and empower subordinates to implement an agenda. Decisions can be made arbitrarily, without adequate consideration of alternatives and costs, while advisors are often afraid to speak out and offer other perspectives. And to the extent that this person makes the wrong decision, it often proves difficult to modify. The chance of miscalculation is high. This is not to suggest democracies are immune to mistakes, which they clearly are not. But democracies do provide for greater constraints on what leaders can do, they allow for more varied inputs to decisions, and most importantly, they have a greater ability to correct mistakes after they are made and so recognized.
This is relevant because Xi has made mistakes. His highly assertive foreign policy has alienated neighboring countries, from Australia to India, South Korea, and Japan, as well as in Europe. Public polling on attitudes toward China reflect this. He signed on to a “no limits” relationship with Russia on the eve of Vladimir Putin initiating a brutal, unwarranted, and costly war against Ukraine, one that violates what had historically been precepts long at the core of Chinese foreign policy, including a commitment to non-aggression, to respect territorial integrity and sovereignty of others, and to avoid interfering in the internal affairs of others. His policies toward Taiwan have put Beijing’s desired goal of unification further out of reach. At home, his adherence to zero COVID, paired with a larger role for the state in the economy and a crackdown on private industry, has hurt China's economic performance.
To focus on foreign policy, the Deng Xiaoping era of hide and bide is over. Xi's China is asserting itself on the global stage. He believes China's time has arrived and he is willing to tolerate more risk in pursuing China's interests.
We can see a pattern of this, from militarizing the South China Sea to a border clash with India, economic sanctions on Australia, South Korea, the Philippines, and others, and increasing pressure on Taiwan.
We also see troubling signs in what China will not do. China refused to cooperate with the WHO or preserve evidence as to the origins of the Covid-19 virus despite legitimate questions as to its origin. There is no evidence that China is using leverage it possesses to influence the aggressive behavior of North Korea. And while China is not to the best of my knowledge supplying Russia with arms, it continues to purchase energy from Russia, in the process funding its war effort.
We've had a decade of this and there is no reason to believe Xi will recalibrate. Instead, without having to look ahead to another party congress for some time and surrounded by loyalists, we are more likely to see a continuation of trends or even a doubling down.
For decades now the CCP and a succession of leaders have derived much of their domestic legitimacy from delivering extraordinary levels of economic performance. Such growth is no longer possible. Misguided Covid policies, stalled economic reform, drought, unemployment, financial bubbles, and demographic trends all add to internal pressures. The risk is that China will look to what it does beyond its borders to compensate for failures within them, to play the nationalist card.
This could prove to be a major risk during Xi’s third and potentially additional terms. Xi clearly sees himself as a leader on par with Mao, the country’s founder. But it is unclear what accomplishment he will point to as evidence that he belongs in that company. If economic growth sputters out, Xi may look elsewhere to secure his legacy—potentially to Taiwan.
Xi may also see little cost in doing so as prospects for improved relations with the United States have all but disappeared. Deep suspicion of China is now shared across party lines in my country. Language in the National Security Strategy, recently published by the Biden administration, described China as the only competitor with both the intent to reshape the international order and increasingly the economic, diplomatic, military and technological power to advance that objective. This language could just as easily have been produced by the Trump administration…and is likely to be representative of American thinking regardless of what happens in the upcoming midterm elections or the 2024 presidential vote. The era of American support for China’s rise, of seeking to integrate it into the existing international order in the hopes it would lead to a more open, market-oriented and peaceful China, has largely been replaced by one in which the US reluctantly accepts the limits to desired internal reform, seeks to slow China’s rise, and works to constrain its external behavior.
All of which brings me to Taiwan. For more than four decades Taiwan has benefitted from a peaceful, stable environment that supported its economic development and political evolution. The democratic, prosperous, thriving Taiwan of today is the result. This environment can no longer be assumed.
The principal reason stems from the mainland. We can expect more pressure on Taiwan—economically, diplomatically, and militarily—to try to influence political developments on the island and move the status quo in China's favor. Taiwan represents a threat to the PRC not because of what it does but because of what it is. It represents an alternative political, economic, and social path for China and the Chinese people.
Two parallels come to mind here. One is Hong Kong. One country, two systems proved unacceptable to a mainland government that feared the example of a successful second system that promised a degree of freedom and a dilution of party control. The result is increasingly one country one system. A second parallel is Russia and Ukraine. Ukraine posed a threat to Russia as it represented an alternative democratic future, one embedded in the EU, for Slavic people. This was something Vladimir Putin decided he could not risk lest it prove irresistible to Russians living in Russia.
Hence the growing impatience with the status quo, Xi’s explicit linkage of unification with his broader goal of national rejuvenation, the more frequent military incursions, the economic sanctions, and the seeming acceptance on the mainland that peaceful unification is drifting away and that coerced unification might be required, sooner rather than later.
What should the United States and its partners do about this?
First, augment deterrence. The goal is to deter a war or failing that to defend Taiwan rather than liberate it. For the United States, this means increasing our defense budget—the good news is we spent much more as a percentage of GDP during the Cold War and it did not crowd out other spending. Just as important, it means shifting capabilities to the Indo-Pacific, hardening our bases, dispersing our forces by seeking new access arrangements, and pushing our military services to prioritize China. A clearer commitment to come to Taiwan’s defense, what I have termed strategic clarity, would help as well. So too would staying the course on behalf of Ukraine and against Russia; it is critical that the attempted acquisition of territory by force by Russia not succeed lest China learn a dangerous lesson…and, more broadly, that disrespect of borders not become a feature of international relations lest what order there is in the world be forfeited.
Taiwan for its part needs to urgently transform its defense. Its consistent increases in defense spending are welcome, but more is needed. Taiwan needs to use that money wisely, investing in asymmetric capabilities like missiles and small attack boats that are survivable. It needs to develop a territorial defense force. A lesson from Ukraine should be that all of Taiwan's people will need to be involved, not just those in uniform. Taiwan also needs to focus on its resiliency by stockpiling energy and food and figuring out how to continue to function as a society without the internet or telecommunications.
Japan will play a critical role in any defense of Taiwan, and the United States needs to gain a better understanding from Japan on the scope of assistance it would provide. Public statements from Japanese leaders that any attack on U.S. forces in Japan would be considered to be an attack on Japan itself would be welcomed.
Second, deterrence and if need be defense requires reducing our collective economic reliance on China, both as a market and as a provider of inputs. Here I'm not just talking about rare earth minerals or other strategic items. I am talking about anything where the volume of trade makes it strategic. We need to conduct a comprehensive analysis of our vulnerability during a crisis and take steps to address it. I don't think decoupling is feasible or desirable but what I would describe as economic distancing may well be. This applies to Europe, to Japan, South Korea, to the United States, and any other partner or ally. And to Taiwan. It makes no strategic sense that Taiwan's largest trading partner is the mainland. That needs to be adjusted. Economic leverage must work in our favor, not China’s.
Third, we need to act responsibly and with discipline. The goal should be to avoid war. This will require avoiding needless provocation. Taiwan’s formal independence is not in the cards. The stakes are too big for symbols or needless provocations. To the contrary, there is a role for reassurance of China, including continued fidelity to the one-China policy.
It is best to understand Taiwan and the US-China-Taiwan triangle as a situation to be managed rather than a problem to be solved. Unilateral action by any party in an effort to change the fundamentals must be avoided. All three parties as well as the region and the world have benefitted from an imperfect but stable situation. The goal of diplomacy should be to extend this, as the alternative is sure to be costly in every way for everyone be they involved directly or not.
Thank you for asking me to speak today. I look forward to your reactions and questions.