Address to the Foreign Correspondents’ Association
Friday, 5 October 2012
The world now waits with some anticipation, as well as some intrepidation, for the outcome of two very different electoral processes.
The first on Tuesday 6 November in the United States.
The second, beginning on Thursday 8 November in the People’s Republic of China.
Let us assume for the purposes of our discussion here that President Obama is successful on 6 November.
And let us assume with even greater certainty that Xi Jinping will be elected General Secretary of the Chinese Communist Party when the 18th Party Congress convenes on 8 November.
My argument today is that what happens in Sino-US relations during President Obama’s second Presidential term through to January 2017 and Xi Jinping’s first Presidential term (based on precedent he is likely to serve two such terms through until 2022) will very much determine the future peace, stability and prosperity of the Asian hemisphere through until mid-century.
For it is during Xi Jinping’s second term that China could well surpass the United States as the world’s largest economy.
And this will be the first time since George III that a non-Western democracy will become the world’s largest economy.
Both in reality and perception, this in turn will challenge many of the foreign policy and security policy assumptions that have underpinned the stability of this hemisphere since the Second World War.
Furthermore, given that the Chinese leadership articulate values of a different type to those which have characterised the post-war Western consensus, China as a permanent member of the UN Security council and as the dominant global economic power, will in turn influence a number of the assumptions that currently underpin the post-war global order.
In other words, what happens in Sino-US relations in the period ahead is important not just for the region but also for the world.
In approaching these historically significant geopolitical and geo-economic changes, our core challenges are as follows:
- First to minimise and manage Sino-US tensions during this extended period of transition;
- Second to prevent conflict and war;
- Third, to carve our an agreed rules-based order that will enhance the strategic stability of the Asian hemisphere by providing a mechanism that will assist in the management of one and two above;
- Fourth, to engineer (or perhaps reengineer) Chinese, American and other regional strategic mindsets to enable us to build over time a regional order based on the principles of common security, rather than on the perceived inevitability of armed conflict;
- And fifth, to advance the common prosperity and collective environmental responsibilities of the region, to the benefit of all the peoples of the region, in a region of inclusive and sustainable growth.
Looked at from a different historical perspective, what we are now seeking to do in Asia is to avoid repeating the mistakes of Europe over the 300 hundred years between the Treaty of Westphalia and the Fall of Berlin.
Across the centuries of rampant European nationalism, most particularly the first half century concluding with the Second World War, the cost in lost lives and lost prosperity was unprecedented in human history.
Until finally the Europeans in the post-war period decided that there had been enough bloodshed.
And so the beast of European nationalism was finally tamed in the new institutions of Europe.
Here is Asia, as I’ve often said before, we find ourselves in the midst of the competing cross-currents of history.
The new forces of economic globalisation drawing our countries, our economies and our peoples ever closer together.
While at the same time the ancient, almost primordial forces of political nationalism always seeking to tear our countries and our peoples apart.
At various times over the last half century, we have seen this on the Korean Peninsula.
Across the Taiwan Straits.
In the border clashes between India and Pakistan over Kashmir.
As most recently, the many unresolved territorial disputes involving multiple regional states across the South China Sea, the East China Sea and the Sea of Japan.
As I said last month at the Singapore Global Dialogue, the challenge for our region is ultimately one of whether the globalists or the nationalists will prevail.
The political and economic stakes are very high indeed.
Which brings us back to the future we choose to construct for ourselves here in this our own region.
I have never believed there is anything determinist about the inevitability about the drift towards conflict and war – as some sort of later-day fulfilment of Huntington’s “Clash of Civilisations”.
No, it is for us, the women and men of this region, to choose what future we would build for ourselves.
And for this purpose, the mindsets we bring to this task are fundamentally important.
I have always belonged to a school of politics, both domestic and foreign, which believes that ideas matter.
And it is ideas that shape our conceptual framework (in other words our mindset) which in turn influences how we behave to one another.
In international relations theory, the strategic “realists” would argue that the natural, dismal state of humankind is one of anarchy interspersed with conflict and war;and that the only way of minimising these risks is through the elaborate construction of a balance of power.
By contrast, so-called liberal institutionalists would argue that the things that unite the various states of the world are far greater than those which divide us and therefore we can construct global institutional arrangements and agreements to maximise the positive and to minimise and manage the negative.
Personally I believe there is a perfectly rational synthesis which can be crafted between these two world views – one which is mindful of underpinning, strategic realities, power politics and balances with power; while at the same time constructing regional and global institutions which not only take the edge off the acute nature of strategic competition and rivalry, but in time build the level of mutual confidence and trust necessary to craft a different and significantly more cooperative future.
Australian foreign policy falls much within this frame – in what I have long called creative middle-power diplomacy.
I believe that as a significant power within our region, and a middle-power within the world, we have not only a voice but also ideas to bring to the international diplomatic table.
And none more so than how to secure a sustainable, long-term regional rules-based order which preserves our common peace and prosperity, while not compromising the values for which we have long stood.
And the kernel of this problem (or, as we should see it, this opportunity) is the development of Sino-US relations over the next half decade.
This will be a period of profound transition.
When the aggregate economic power of these two great countries will for the first time be of comparable magnitude.
This is indeed the time to craft what I have also called, not just an Asia-Pacific community but a wider Pax Pacifica to underpin our wider future.
The New Chinese Leadership
A core part of this equation is what the new Chinese leadership will want for its future relationship with the United States and the rest of the region.
First, the new leadership will seek to sustain the political pre-eminence of the Chinese Communist Party within the country.
This is no mean feat given the party’s endemic problems with institutional corruption which its own leadership continues loudly to criticise.
The Chinese Community Party is still a Leninist party - but no longer a Marxist-Leninist party.
Its ideological legitimacy depends not on national or global class struggle but on its ability to continue to support rising living standards as well as continuing to restore China’s international stature in the eyes of the world, as it once enjoyed in the past.
For the Party, therefore, both the economy and nationalism matter.
If these were seen to be significantly impinged or impaired by future developments, it would impact on the Party’s perceived legitimacy.
At the same time, democratic forces within China also now have greater space to operate then used to be the case. There is now a much more open debate about Chinese policy questions in the Chinese media.
Of course there are subjects that are still off limits which go to the heart of the Party’s internal political life.
But the public debate, both in the mainstream media, the social media and on the ground through popular protest activity over local decisions, is now a firm and probably fixed feature of Chinese national political life.
It is difficult to predict how much further the new leadership would be prepared to go on these questions – that is China’s long-term democratisation.
Historically it has always been safe to assume that China, under the Communist Party will not democratise.
The Party’s emphasis to date has been to improve what is called “internal party democracy”.
And with a mass political membership of 87 million, this is no mean feat in itself, particularly given the traumatic leadership transitions which occurred virtually every decade in China’s modern political history until we reached the 1990s.
My own instinct is that the new leadership will use its first term to both entrench and deepen China’s domestic economic reform agenda.
This is a gargantuan task in itself.
And that any formal steps towards more political reform are more likely to be deferred to Xi Jinping’s second term – assuming the economic reform program is properly implemented and the Chinese economy itself continues to perform.
The second priority of the new leadership, consistent with its predecessors will be to maintain the national political unity of the People’s Republic.
Any form of separatism remains inconceivable within domestic Chinese politics – be in Tibet, Xinjiang or Taiwan.
In Chinese political history, the heroes are those who unite the Chinese empire. The villains are those who allow it to fall apart, or else make it vulnerable to foreign invasion.
Repressing separatist movements in these three regions have long been defined as China’s core interests – “hexin liyi”.
More problematic has been more recent Chinese claims that various off-shore islands in the South China Sea and elsewhere (including their surrounding territorial seas) are also part of China’s core interests.
This claim is hotly contested by a range of regional powers and is the source of considerable regional instability at present.
Nonetheless, China’s military posture is in large part shaped by these “core interest” considerations concerning “the unity of the Motherland”.
China has had little, if any, history of significant external invasion of either neighbouring countries or beyond – including when the Chinese Empire was the undisputed superpower of Asia.
Nonetheless, China in recent times has exhibited an increasing interest in defending its own international sea lines of communication covering its energy supply routes across the Indian Ocean to The Gulf.
As well as extending the range of consular services that China is now required to provide to millions of Chinese nationals now living and working abroad, often in some of the most dangerous parts of the world, including most recently Libya.
Third, where I believe the new leadership is likely to most significantly depart from the previous leadership over the last decade is in the pace, intensity and direction of China’s domestic economic reform program.
It is true that the 12th 5 year plan delivered at the end of 2010 by China’s outgoing leadership represents a fundamental conceptual break with the past – substituting its old growth model of low wage, labour intensive manufacturing for export, to a new growth model based increasingly on rising domestic consumption, lower savings and investment and the rapid expansion of Chinese services industries.
But while China’s transformation to a new growth model has been officially proclaimed, it has not yet been effectively implemented.
That will fall squarely into the in-tray of the incoming Chinese leadership.
This brings into sharp focus the likely composition, character and policy predilections of the new Chinese leadership.
The core of the Chinese political leadership structure is the Standing Committee of the Politburo.
This nine member body is the closest China comes to a cabinet system of government.
Together with the Central Military Commission, it lies at the core of Chinese political power.
The State Council, chaired by the Premier (himself a member of the Standing Committee of the Politburo), is a both a policy and administrative body that formally presides over China’s government (as opposed to its party and military) apparatus.
While significant in policy terms, it is the most junior of these three entities – although the Chinese would argue that the functions of all three are radically different.
At the apex of the Politburo Standing Committee will be Xi Jinping who will be elected General Secretary of China’s Communist Party, President of the country, as well as Chairman of the Central Military Commission (although there may be a two year delay in his transition to the latter at position, consistent with the transition that occurred between Jiang Zemin and Hu Jintao) a decade ago.
I believe Xi Jinping to be experienced, confident and self-assured and because of his family’s political pedigree, comfortable with the mantle of political leadership.
He is the son of a former Politburo member Xi Zhongxun who’s political career mirrored that of Deng Xiaoping – with all the rises and falls from political favour that his generation endured under the increasingly erratic leadership of Mao Zedong.
Xi Zhongxun has a significant PLA background prior to 1949, and a significant role in the economic management and reform tasks that China faced post 1949 when Deng Xiaoping was either Vice Premier or Premier.
The point of all this is that I believe Xi Jinping is confident of both his military and economic reformist credentials, and this therefore places him in a good position to negotiate the complex internal shoals of high-level party politics.
In addition to this, Xi brings to the table vast experience of both municipal and provincial level administration across both China’s richer and poorer regions.
As for Xi’s views of the world, in his domestic roles he has had extensive engagement with foreign corporations given that his own administrative career has coincided with a period of China’s most intense program of domestic economic reform and global economic engagement.
Over the last five years since he was first elected to the Standing Committee, he has travelled extensively around the world (including Australia) and has spent extended periods of time in the United States as the guest of Vice-President Biden, and earlier as Biden’s host during the latter’s extensive tour of China.
By instinct Xi has an inquiring mind and is deeply interested in the world.
He is confident in the knowledge that he has accumulated, but equally clear about what he does not know – and that which he seeks to understand more completely.
I have long said that I believe Xi Jinping is a Chinese leader that the Americans can do business with – not just in shaping the long-term contours of Sino-US relations in a new, constructive strategic direction, but also in shaping the broad architecture of a new rules-based order for Asia.
Leadership matters in the PRC and it matters very much who sits at the apex of the Chinese political structure.
Because the Chinese political structure is intensely hierarchical, the ultimate calls are made by the Standing Committee of the Politburo, and in that context final calls are often made by the President himself.
History may well prove me wrong – but given the formidable strategic and economic challenges that lie ahead, both for China itself, and China’s place in the region and the world, on balance I believe Xi Jinping to be the man for the times.
And what of the rest of the Standing Committee of the Politburo?
The current nine member body is most likely to be reduced to seven to make it more manageable.
Xi Jinping will be joined by Li Keqiang (current Executive Vice Premier) as Premier.
Also by Wang Qishan, currently Vice Premier and an important figure in China’s overall international engagement, including with the United States.
Other members of the Standing Committee are likely to be drawn from the likes of Zhang Dejiang (current Vice Premier and temporarily Chongqing Party Secretary replacing Bo Xilai), Li Yuanchao (Head of the Party Organisation Department), Zhang Gaoli (current Tianjin Party Secretary), Liu Yunshan (Head of the Propaganda Department).
The bottom line is this, if the Standing Committee is drawn from individuals such as these, its centre of policy gravity is likely to be significantly reformist in terms of the future direction of Chinese economic management.
These individuals are sufficiently experienced to know what must now be done with the Chinese economy in order to sustain high levels of economic growth, continued increases in living standards, the lifting of the remaining hundreds of millions of Chinese people still in poverty into a better life;, and providing sufficient jobs for the tens of millions of young, educated Chinese bursting onto the labour market each year.
As I said yesterday in an address in Brisbane, the new Chinese leadership may well embrace the following directions.
We are likely to see further market reforms of the Chinese economy.
I believe we’ll see reforms to China’s state-owned enterprises and the possible privatisation of some.
I believe we’ll see reforms to the Chinese financial services industry and a greater ability for Chinese private enterprises to have easier and more competitive access to finance, sustain and expand their operations.
I believe we’ll also see further reforms to Chinese currency markets which over time is likely to make Chinese imports more competitive in their domestic market.
None of this is to underestimate the formidable domestic policy changes that the new Chinese leadership will confront as they seek to implement this next phase of economic reform.
- Long-term energy and resource security;
- The imposition of carbon controls to limit environmental and economic damage to China itself;
- Water scarcity;
- Land management decisions giving rise to massive local protest activity;
- Inequality (between cities and the countryside and between coastal, inland and western provinces);
- An increasingly open social media debate; the assault of materialism on traditional socialist values; and the rise of new religious forces and alternative belief structures;
- And, from Beijing’s perspective, an increasingly non-benign foreign policy environment in relation to many of China’s neighbours.
The challenge therefore for the new leadership will be to implement a further large-scale transformation of the Chinese economy and to manage the range of other policy and political pressures that will also dominate the domestic landscape over the next five years.
If President Obama wins the next election, he will also be well positioned to extend a hand of new strategic cooperation to China’s new political leadership.
Congress is unlikely to grant him an easy ride in terms of the passage of core elements of his domestic legislative reform program.
Foreign policy, therefore, presents itself as a likely domain for Presidential leadership over a second term.
Furthermore, his hand will be emboldened by the fact that he will not face the prospects of negotiating a further re-elect.
Also, the Obama Administration has laid down some fundamental pillars in its future engagement both with China in particular, and the Asian hemisphere in general.
At the military level the administration has executed its “rebalance” to Asia, underlined in black and white, and in the numbers of nuts and bolts on US naval vessels, for America’s long-term strategic engagement in Asia and the Pacific.
Diplomatically, the administration under the leadership of US Secretary of State Hillary Clinton has been more active in the region than most of its predecessors; and has further entrenched its regional engagement in Asia by becoming a full member of the East Asia Summit.
Economically, the administration has backed the enhancement of the Trans-Pacific Partnership to include other major economies in the region (including Japan) as well as prospectively leaving the door ajar for China as well.
Despite the inevitable diplomatic frictions arising from each of these measures, the overall strategic settings for US continued engagement in Asia have been put in place.
They have also been responded to positively by most (albeit not all) countries in the region.
So the question arises: what must be done next?
I argue that President Obama and President Xi need to outline a five year US-China Strategic Roadmap.
In the absence of such a strategic roadmap, there is always a danger of strategic drift.
Furthermore it provides central organising principles within both administrations, therefore forcing the various agencies within both administrations to agree to and implement a central strategic policy – with agreed rules of diplomatic engagement.
The Chinese often complain about US policy being inconsistent both within and between administrations.
The US often complains that the Chinese government does not always speak or act with the full engagement or compliance of the Chinese military.
A US-China Strategic Roadmap would assist in removing some of these uncertainties and ambiguities.
Further I would recommend five elements to such a roadmap for the future.
First, President Xi and President Obama need to meet regularly with all the key members of their respective staff.
These individuals need to become highly familiar with each other. At present they are not.
This should involve four to five sets of substantial engagements scheduled regularly throughout each calendar year.
Fortunately the G20, APEC, the UN General Assembly (and possibly the EAS) provide opportunities for regular engagement.
But these need to be substantive half or full day engagements around a long-term structured agenda – not just the protocol requirements of the day or, for that matter, the issue management of the day.
As these regular summits tend to occur in the second half of the year – there should also be agreement for a regular bilateral summit in each other’s capitals in the first half of the year.
Other international conferences could also be utilised, but a regular structure is necessary.
Second, both President Xi and President Obama need to have an undisputed “point person” to be the ultimate “go to” person on the relationship.
At the US end, this should mean the National Security Advisor or a senior official within the NSC who can speak comfortably across the administration, and with authority.
At this critical juncture of US-China relations, America needs the next Henry Kissinger for all the back channelling that is necessary, both behind and between official Presidential meetings.
Similarly China needs to appoint such a person as well.
The Chinese system does not have a NSC. It needs one.
In the absence of an NSC, it needs a senior official who can speak across the political, security and economic agenda with authority.
Trust between these two individuals on the US and China sides is critical.
Third, the US and China should embark on a realistic program to make the current global rules-based order work.
Increasingly it doesn’t.
We are all familiar with the impasse over Syria which is not likely to be resolved in the near term.
But in other critical blockages in the UN System (e.g. the Doha Round and climate change) both the US and China have an interest in demonstrating that the rules–based order can work – and deliver real results.
Furthermore, a new period of Sino-US strategic cooperation will also make the G20 work more effectively given the complex array of global financial and global macroeconomic challenges that lie before us.
As China becomes the world’s largest economy, a properly functioning G20 becomes even more important.
The deep regulatory problems in global financial markets have not yet been finally resolved.
Nor have the deep structural economic imbalances identified in Pittsburgh in September 2009 been dealt with.
Sino-US strategic economic cooperation is critical to avoiding a report of 2008/2009 and to the strategic undergirding of global economic recovery.
Fourth, a new US-China Strategic Roadmap should embrace the principles of how to build a new rules-based security order for East Asia.
I outlined the possible principles of such an order in recent address to the Asia Society in New York and again in late September at the Singapore Global Dialogue.
The latter in particular details a range of specific measures of how we can create a new Pax Pacifica which is neither a new Pax Americana by another name; nor a Pax Sinica.
This involves working and agreeing on the strategic and conceptual language of such a regional rules-based order – that is comprehensible in both countries and the rest of the region.
A Pax Pacifica also involves agreement on core principles inducing mutual acceptances of China’s peaceful rise; the continued strategic presence of the US and its alliances; agreement on the non-use of force dispute resolution mechanisms, and possibly the freezing of territorial claims.
Furthermore, a new Pax Pacifica could be given new operational focus through the agreement on a set of new confidence and security building measures, (agreed between the region’s Defence Ministers), and as a detailed in my Singapore remarks.
Finally, a new US-China Strategic Roadmap should seek to include both Japan and China in a new Trans-Pacific Partnership.
A genuine free trade area of Asia and the Pacific (as it would ideally become) would help harness all the positive forces of economic globalisation that have helped change much of the region for the better so far.
APEC has made extraordinary progress over the last 25 years.
We now need to go to the next stage with regional economic integration.
I have always been an optimist about the future of our region.
I have always been an optimist about China’s future.
As I have always been an optimist about Australia’s future in this region as well.
But to secure that future will require proactive political leadership from both Beijing and Washington and in the other principal capitals of the region as well.