The China conundrum

Britain shares with most free and open countries a core foreign policy dilemma: how to construct a new, realistic but coherent strategy for the People’s Republic of China (PRC).

Rishi Sunak’s first foreign policy speech as prime minister, on 28th November last year, formally declared what everyone already knew: the David Cameron and George Osborne-driven ‘golden era’ of relations with the PRC was over. The speech also indicated, without clearly articulating, the problem this poses – how to relate to an unavoidable country and economy, while guarding against the danger it presents. Sunak said baldly: ‘We recognise China poses a systemic challenge to our values and interests.’ However, he continued, nor could Britain ‘simply ignore China’s significance in world affairs – to global economic stability or issues like climate change.’

His answer is ‘robust pragmatism’ rather than ‘grand rhetoric.’ This involves, he said, working alongside like-minded countries including the United States (US), Canada, Australia, and Japan to ‘manage this sharpening competition, including with diplomacy and engagement.’ It is not yet clear what such ‘robust pragmatism’ might mean, or how long we will have to wait for its true character to emerge.

In early January, the Sunak government restored some funding to the Great Britain-China Centre (GBCC), which was established almost 50 years ago by the Foreign Commonwealth and Development Office. Alicia Kearns, who chairs the House of Commons Foreign Affairs Committee and also sits on the GBCC board, said in applauding the decision that fathoming how to relate to the PRC is ‘the greatest geopolitical challenge of our time’, and that ‘a lack of China expertise across Whitehall and beyond has become a national security problem in of itself.’

Of course Britain has a different history with the PRC from the US, Canada, Australia and Japan. London opted – for reasons including anticipated trade benefits and concern for Hong Kong – to recognise the PRC formally in January 1950. It took those like-minded countries a further 22 years or so to follow suit.

After Deng Xiaoping, former Paramount Leader of the PRC, inaugurated the PRC’s reform-and-opening-up era in 1979, it took a few years before Western corporations began to develop serious plans for trading and investing. Hong Kong and Taiwanese businesspeople were the first movers. But once boards – and politicians who chase their funding – became PRC-focused, many plunged in head first. An ill-founded belief that the PRC would change politically as a result of its exposure to the global market of both goods and ideas began to take hold.

But the country would remain tied to its ruling communist party, which retained pervasive control despite enjoying an appetite for modernity that was confused overseas with liberal-democratic values. The extent to which the elite of free and open nations had become naively beguiled by opportunism and orientalist misdirection began to emerge starkly after Xi Jinping became General Secretary of the Chinese Communist Party (CCP) in 2012.

Xi has pursued energetically what has been called a Leninist ‘counter-reformation’ to restore the PRC to its Marxist and Maoist core values, as detailed in his four-volume anthology The Governance of China, and encapsulated in his ‘Thought on Socialism with Chinese Characteristics for a New Era’ which has been inserted in both national and party constitutions, and is taught compulsorily from first grade to postgraduate level.

It took surprisingly long for those in free and open nations to wake up to the radical nature of Xi’s ‘rejuvenation’ programme, but it sank in when it started driving a new, gloves-off style of diplomacy.

Three years ago, Wang Yi, then the PRC’s Foreign Minister and today the top international affairs official, urged all at the Ministry of Foreign Affairs’ 70th birthday party to emanate a ‘fighting spirit.’ This formalised a mood that had already seized many Chinese diplomats in the wake of the blockbuster Rambo-style film ‘Wolf Warrior 2’ whose slogan, taken from a Han dynasty saying, was: ‘Whoever offends China will be punished, no matter how far they are.’

Australia soon loomed especially large in those wolf-warrior sights.

It had become more closely engaged with the PRC than almost any other free and open nation. A third of its total trade – goods and services – was, and remains, with the PRC (Britain’s proportion is about 7.5 per cent). Its universities had largely shaped their business plans around maximising Chinese students. Almost a million PRC migrants had become Australian citizens, within a population of just 26 million. Leading politicians from both major parties, Liberal and Labor, had built close business links, especially in retirement, with the PRC. 

Steadily the Australian public, sensing over-reach, led a pushback, coinciding with growing concern in the security services about undue influence. For instance, Sam Dastyari, a former Labor Senator, was forced to quit politics in 2017 after a series of revelations about his connections with CCP-aligned interests in Australia. 

In mid-2018, the then-conservative government introduced legislation, clearly primarily targeting the PRC, to criminalise foreign interference. Australia became the first country, that year, to deny the PRC’s telecommunications giant Huawei from a core role in the construction of its new 5G network. In April 2020, Canberra called for an international inquiry into the origins of Covid-19. In response, Beijing began initiating a series of trade curbs on Australian products – from lobsters, wine and grapes to beef, barley and coal, despite a 2015 free trade agreement. It also halted conversations with Australian ministers. Later that year, the Chinese embassy in Canberra listed 14 grievances against Australia, with Wang Xining, the PRC’s Deputy Ambassador to Australia, saying: ‘If you make China the enemy, China will be the enemy.’ Most exports managed to diversify to other markets, though sometimes at lower prices. 

In the three years from 2018, polling by the Lowy Institute, an Australian foreign affairs think tank, showed that Australian perceptions almost reversed, from 82% describing the PRC as principally an ‘economic opportunity’ in 2018 to 63% – also the figure in 2022 – viewing it chiefly as a ‘security threat.’ 

At the start of 2022 Xiao Qian was appointed as the PRC’s Ambassador to Australia and deployed more professionally diplomatic language. Then after a Labor government led by Anthony Albanese was elected in May, adopting a less broadly critical tone towards the PRC than its conservative predecessor, Beijing restored meetings between ministers, capped by an Albanese-Xi discussion during a regional conference in Bali, Indonesia, in November.

Albanese says that his government ‘will cooperate with China where we can, but we will stand up for Australian values where we must’. Labor continues to back the new security arrangements driven chiefly by concern about the PRC: the Quadrilateral Security Dialogue (between the US, Japan, India and Australia) and AUKUS (between Britain, the US and Australia). Penny Wong, the Australian Foreign Minister, is seeking to link – especially through greater economic commitment – these arrangements with the dominant regional groupings in Southeast Asia (the Association of Southeast Asian Nations) and the Pacific Islands (the Pacific Islands Forum).

If we have entered a new cold war, it is quite unlike the Cold War between the US and the Union of Soviet Socialist Republics (USSR), even if characteristics of it have partly re-emerged following Russia’s renewed aggression against Ukraine. The USSR operated separately from the West. Apart from Russia’s energy supplies to Europe, Moscow’s role has not changed a great deal. But the PRC (while also remaining Russia’s ‘no-limits’ partner) is everywhere, or will be again as it opens up now despite Covid-19 – via its manufactured goods, its students, its tourists, its migrants, its investments, and also its discourse.

The surge in the PRC’s global influence in the first couple of decades of this century was driven by its economic dynamism and by the vibrancy of its discourse that ‘the West is declining, the East rising’, and that to stand with the PRC was to position oneself on ‘the right side of history’.

However, that sense – which included a take that if a business was not in the PRC it had no future – has faded fast. Xi’s ‘common prosperity’ economic strategy that prioritises the state and grapples with the PRC’s crucial property and tech sectors, has run aground. Youth unemployment has reached 20%. Beijing’s Covid-19 management has cost the party-state considerable credibility.

Yet the PRC is not imploding. Its ruling party remains implacable, as does its leader who will remain in power for at least a further decade. Other countries must find a way to live alongside the PRC, preferably beneficially and, as far as can be ensured, safely. But it is becoming harder to do so while retaining full sovereignty, since the party-state tends to believe its own security can only be guaranteed by restraining others’ sovereignty.

Appropriate formulae for solving such issues remain elusive. Beijing has changed; a ‘re-set’ to how relations were around 2015 – in the UK, US and Australia – is no longer an option. ‘Engagement’ arouses problems when the CCP effectively comprises the PRC’s sole institution. And Beijing’s own softer tone can turn stentorian when it faces pushback, recently evidenced in its halting of all short-term visas for Japanese or South Korean visitors after their countries required Covid-19 tests for Chinese travellers.

Xi stressed at the 20th Party Congress the priority ‘to ensure security’ – supplanting prosperity as the CCP’s core source of domestic legitimacy – ‘in the pursuit of development.’

Politics is upstream of all else in Xi’s PRC, requiring a matching response from the political institutions of free and open nations; their governments may have rebuilt domestic leverage thanks to Covid-19 and Russia’s war against Ukraine, but they are still struggling to lead the coherent and sustainable approach to the PRC that businesses, universities and other organisations are seeking.

Australia suffered the Chinese cold-shoulder most famously, but while that relationship takes on a friendlier tone, core issues, involving both interests and values, predictably remain unresolved.

Britain faces a similar challenge.

The PRC’s peak wolf-warrior combativeness may now be curbed since it has been proven ineffectual, or even counter-productive. But its goals are the same, as are its desire to deploy discourse power to achieve them. Liu Jianchao, the new Head of the International Liaison Department of the CCP, says that ‘Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era’ comprises ‘a major ideological public good provided by our party to the world.’

Some British companies and universities are excited by the prospect of a return to business with the PRC as it was before Covid-19 and the deterioration in relations with many free and open countries. But they need to upgrade their relevant capabilities to assess risk.

And at the governmental level, Britain and its partners – especially fellow AUKUS members the US and Australia – ought to intensify their collaboration as they puzzle through the China conundrum.

Rowan Callick is a is a Fellow at Griffith University’s Asia Institute, and has been China Correspondent for both The Australian and The Australian Financial Review.