Page 166 - 2021 White Paper
P. 166
1 White Paper on the Business Environment in China
to mitigate the damage, President Donald Trump eventually. Things are now at a turning point. A
himself strained virtually every element of the Biden Administration will likely be less caustic
region’s operating system. He pressed allies such and create fewer disruptions within the global
as Japan and South Korea to renegotiate cost- economic order. But the massive shift in public
sharing agreements for US bases and troops opinion towards China, as well as a growing
and threatened to withdraw forces entirely if he bipartisan consensus in Washington to consider
was unsatisfied with the new terms. Both moves China a strategic competitor on a divergent
undermined alliances the Indo-Pacific needs trajectory, means things are unlikely to result in
to remain balanced. Trump was also generally ‘globalization renewed’. Unfor tunately, China’s
absent from regional multilateral processes and response to this ‘crisis of interdependence’
economic negotiations, ceding ground for China seems to be a redoubling of its drive to build
to rewrite rules central to the order ’s content self-reliance, and European companies in China
and legitimacy. This combination of Chinese report that this drive is different and more radical
assertiveness and US ambivalence has left the than in the past. As the December 2020 Central
region in flux. The contemporary Indo-Pacific Economic Work Conference summaries noted,
feels like prewar Europe—drifting out of balance, China’s top two priorities for 2021 are: 1) to build
its order fraying, and with no obvious coalition to scientific and technological strength, with a call
address the problem. If the Biden administration for a “new type of whole-of-nation system”; and
wants to preserve the regional operating system 2) developing greater autonomy and control
that has generated peace and unprecedented in industrial supply-chains. Any further market
prosperity, it needs to begin by addressing each opening and deeper ‘coupling’ with China will
of these trends in turn (Campbell and Doshi). therefore be conditional upon whether doing so
supports these two goals (Amela et al.).
Through market access and other barriers,
China has long managed its interdependence “ T h e b a l a n c e o f p o we r,” K i s s i n g e r w r i t e s i n
with the world economy in a highly strategic A World Restored, “is the classic expression
and limited manner: selective coupling where of the lesson of history that no order is safe
it needed foreign technology or competition— without physical safeguards against aggression”
such as in high-speed rail and the financial sector (Kissinger). Kissinger observed this dynamic in
respectively—and remaining uncoupled in sectors nineteenth-century Europe, but it applies equally
reserved for China’s, often state-owned, national well today. Applied to the Indo-Pacific, such a
champions. For more than 15 years, China’s warning is prescient: China’s growing material
leaders have also advanced extensive industrial power has indeed destabilized the region’s
policies in an attempt to develop self-reliance in delicate balance and emboldened Beijing’s
critical technologies and seek dominance in high- territorial adventurism. Left unchecked, Chinese
value-added industries. The now infamous China behavior could end the region’s long peace.
Manufacturing 2025 (CM2025) initiative, which
aims to substitute global competitors in ten Legitimacy in the Indo-Pacific is not only a
strategic technologies, was just the most visible matter of international politics and security. Trade,
expression of a deeply engrained and extensive technology, and transnational cooperation are also
support system that protects China’s rising stars. vital. In the political and security realm, bolstering
It is this blend of China’s conditional coupling, the present order ’s legitimacy will, at minimum,
a vast state-aid apparatus and protectionism require serious US reengagement: an end to
extended to national champions, and Beijing’s shaking down allies, skipping regional summits,
new-found self-confidence in its non-convergence avoiding economic engagement, and shunning
with Organization for Economic Co-operation and transnational cooperation. This new posture will
Development (OECD) norms and principles that give the US a greater regional role and empower
is driving the current ‘crisis of interdependence’ Indo-Pacific states in the face of China’s growing
with China. The Trump Administration may clout. In the economic realm, strengthening
have provided the spark, but the powder the present order means ensuring the system
keg China had created was bound to ignite continues to deliver material benefits for its
166
to mitigate the damage, President Donald Trump eventually. Things are now at a turning point. A
himself strained virtually every element of the Biden Administration will likely be less caustic
region’s operating system. He pressed allies such and create fewer disruptions within the global
as Japan and South Korea to renegotiate cost- economic order. But the massive shift in public
sharing agreements for US bases and troops opinion towards China, as well as a growing
and threatened to withdraw forces entirely if he bipartisan consensus in Washington to consider
was unsatisfied with the new terms. Both moves China a strategic competitor on a divergent
undermined alliances the Indo-Pacific needs trajectory, means things are unlikely to result in
to remain balanced. Trump was also generally ‘globalization renewed’. Unfor tunately, China’s
absent from regional multilateral processes and response to this ‘crisis of interdependence’
economic negotiations, ceding ground for China seems to be a redoubling of its drive to build
to rewrite rules central to the order ’s content self-reliance, and European companies in China
and legitimacy. This combination of Chinese report that this drive is different and more radical
assertiveness and US ambivalence has left the than in the past. As the December 2020 Central
region in flux. The contemporary Indo-Pacific Economic Work Conference summaries noted,
feels like prewar Europe—drifting out of balance, China’s top two priorities for 2021 are: 1) to build
its order fraying, and with no obvious coalition to scientific and technological strength, with a call
address the problem. If the Biden administration for a “new type of whole-of-nation system”; and
wants to preserve the regional operating system 2) developing greater autonomy and control
that has generated peace and unprecedented in industrial supply-chains. Any further market
prosperity, it needs to begin by addressing each opening and deeper ‘coupling’ with China will
of these trends in turn (Campbell and Doshi). therefore be conditional upon whether doing so
supports these two goals (Amela et al.).
Through market access and other barriers,
China has long managed its interdependence “ T h e b a l a n c e o f p o we r,” K i s s i n g e r w r i t e s i n
with the world economy in a highly strategic A World Restored, “is the classic expression
and limited manner: selective coupling where of the lesson of history that no order is safe
it needed foreign technology or competition— without physical safeguards against aggression”
such as in high-speed rail and the financial sector (Kissinger). Kissinger observed this dynamic in
respectively—and remaining uncoupled in sectors nineteenth-century Europe, but it applies equally
reserved for China’s, often state-owned, national well today. Applied to the Indo-Pacific, such a
champions. For more than 15 years, China’s warning is prescient: China’s growing material
leaders have also advanced extensive industrial power has indeed destabilized the region’s
policies in an attempt to develop self-reliance in delicate balance and emboldened Beijing’s
critical technologies and seek dominance in high- territorial adventurism. Left unchecked, Chinese
value-added industries. The now infamous China behavior could end the region’s long peace.
Manufacturing 2025 (CM2025) initiative, which
aims to substitute global competitors in ten Legitimacy in the Indo-Pacific is not only a
strategic technologies, was just the most visible matter of international politics and security. Trade,
expression of a deeply engrained and extensive technology, and transnational cooperation are also
support system that protects China’s rising stars. vital. In the political and security realm, bolstering
It is this blend of China’s conditional coupling, the present order ’s legitimacy will, at minimum,
a vast state-aid apparatus and protectionism require serious US reengagement: an end to
extended to national champions, and Beijing’s shaking down allies, skipping regional summits,
new-found self-confidence in its non-convergence avoiding economic engagement, and shunning
with Organization for Economic Co-operation and transnational cooperation. This new posture will
Development (OECD) norms and principles that give the US a greater regional role and empower
is driving the current ‘crisis of interdependence’ Indo-Pacific states in the face of China’s growing
with China. The Trump Administration may clout. In the economic realm, strengthening
have provided the spark, but the powder the present order means ensuring the system
keg China had created was bound to ignite continues to deliver material benefits for its
166
