West must be firm and resist China’s bluster

Sure, as The Sydney Morning Herald’s international editor Peter Hartcher wrote on August 9, Nancy Pelosi, US Speaker of the House, really went to Taiwan for domestic US political reasons – just as Chinese President Xi Jinping reacted for domestic political reasons.

Pelosi wants to win another term in November’s mid-terms. She and her party, the Democrats, are down in the polls and not much in the US works as well politically as standing up to China. Xi is facing his own party Congress around the same time, and not much works as well politically in China as standing up to the US.

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Yet Pelosi’s visit made much of the world see that China intends, eventually, to take Taiwan, possibly by force, but for economic reasons that may be a long time off. China’s ambassador to Australia, Xiao Qian, was explicit about China’s intentions at the National Press Club on August 10. For those who have not yet understood Chinese attitudes to foreigners and their criticisms of China, this fits squarely with the centuries-old idea that foreigners are barbarians.

Under the 1858 Treaty of Tianjin that settled the Opium Wars, the British government banned China from referring to foreigners as “barbarians” in official documents. China has little respect for international law, and even less so, democracy. China understands force, money and power.

Taiwan presents a particular problem even though the Chinese Communist Party has never ruled there. The formula for Western appeasement has been the One China Policy: the US, Australia and China’s trading partners accept there is only one China – mainland CCP China. Taiwan is neither independent nor part of mainland China.

For foreign policy “realists” this formula allows us to maintain an important trading relationship with the CCP while still conducting relations separately with Taiwan, a vigorous democracy of 23 million people, almost as many as Australia. Yet the Pelosi visit, China’s military exercises launched in its wake to show Xi’s disapproval, and the words of China’s ambassador in Canberra make it clear China does not really see One China – as it now exists – as a long-term formulation.

For the West, in the wake of Russia’s invasion of Ukraine and Russian leader Vladimir Putin’s February pact with Xi, it is important that leaders make it clear China will face serious consequences if it tries to take Taiwan by force, as it has taken Hong Kong. For parts of the local foreign policy establishment, especially those linked to former national security adviser Hugh White, former Labor PM Paul Keating and former NSW Labor premier and former federal foreign minister Bob Carr, this is heresy, and our national interest is best served by playing to China’s rules.

Yet rejecting that is not to signal support for the emerging idea, spurred by former US secretary of state Mike Pompeo, that the US Republican Party should move to explicit recognition of Taiwanese independence. That would risk direct Chinese military intervention across the Taiwan Strait that US defence strategists do not believe America could win without resorting to all-out war.

This column has long believed the world does not need to behave as if China is already the pre-eminent global power, and that the CCP knows it cannot afford to risk further alienating Western trading partners or, worse, risk all-out war at a time of domestic economic weakness.

Chinese modernisation is not linear.

Having achieved heroic growth for 30 years, China now faces severe economic headwinds and looks likely to follow the path of Japan, where the Nikkei sharemarket index was 38,700 in 1990 but only 29,000 today.

At its highs, the Tokyo property market was worth more than all the land in the US, and American academics worried that what were seen as unfair Japanese trade practices might eventually end in war with the US – if Japan became the world’s No.1 economy.

Japan now sits firmly with the US and Australia as part of a Pacific trilateral alliance. US GDP is $US23 trillion compared with $US4.9 trillion in Japan.

It is not inevitable that China’s economy will outstrip America’s any time soon. Nor is war inevitable, or in China’s interest. Remember, US President Joe Biden in May said the US would defend Taiwan should China invade.

Michael Schuman, an author of two books on China’s economic expansion, published an influential piece in The Atlantic in January last year, long before the latest Taiwan events. Schuman argued that “China’s economic miracle was not that miraculous”, but a triumph of basic economics as “the state gave way to the market, private enterprise and trade flourished, growth quickened and incomes soared”.

He wrote the “lesson appears to be lost on Xi Jinping”, who is “reasserting the power of the Communist Party within the economy and redirecting Chinese business inward”.

Economists argue Xi’s return to centralised economic control will end in a misallocation of resources better left to markets. Into this atmosphere feeds a meltdown in China’s largest property construction companies, especially Evergrande.

Moody’s ratings agency in June said it had issued 91 downgrades for Chinese property developers in nine months. The developers’ bonds were downgraded to B3-negative or lower – essentially speculative grade. Moody’s said the share of China’s bonds that were rated speculative was now higher than in the 2009 financial crisis.

Notoriously unreliable, Chinese official GDP growth is expected to slow to 5 per cent this year.

With large parts of the country locked down as part of Xi’s Covid zero policy, and global supply chains adversely affected, there is a growing realisation across Western businesses that “just in time” delivery of components made in China will have to give way to increased domestic manufacturing in the West.

Oxford University researcher George Magnus, author of Red Flags: Why Xi’s China is in Jeopardy, nailed it in the Guardian last December: “Overtaking the United States is going to require a lot more than a narrative. It requires policies to which Xi is opposed. The consequences for China and the rest of the world have not been properly thought out.”

For Australia, these consequences include over-reliance on China for our exports and imports, and a mistaken belief in imminent Chinese economic and military hegemony.

Back to the first par. For all the ongoing media fuming about President Trump, China was much less assertive during the Trump presidency. For all this column’s disdain of Pelosi for her Trump impeachments, she was right to visit Taiwan.

For all Malcolm Turnbull’s political ineptitude he was right to ban Huawei from the local 5G rollout, and right to introduce foreign interference legislation. He and then foreign minister Julie Bishop were right to support Australian “freedom of navigation” patrols of shipping lanes in the South China Sea.

Scott Morrison was right to stand up to China on a proper investigation of the origins of Covid, to resist Chinese trade sanctions against Australian exporters, and to sign up to AUKUS with the US and Britain.

And for all the conservative criticism of Labor over China before the May 21 election, Penny Wong, Anthony Albanese and Richard Marles have been strong in standing up to China over Taiwan, and the potential for Chinese military expansion in the Solomon Islands.

Sydney

Chris Mitchell began his career in late 1973 in Brisbane on the afternoon daily, The Telegraph. He worked on the Townsville Daily Bulletin, the Daily Telegraph Sydney and the Australian Financial Review before … Read more

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commentaryWest must be firm and resist China’s bluster

22:14 PMChris MitchellIt is not inevitable that China’s economy will outstrip America’s any time soon. Nor is war inevitable, or in China’s interest.

Donald Trump, Nancy Pelosi, Malcolm Turnbull, Scott Morrison and Penny Wong have all highlighted the dangers of appeasing communist China.

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