Wednesday, 12 December 2012


International Institute for Strategic Studies Oberoi Lecture

Trident Hotel, Mumbai
I thank the International Institute for Strategic Studies for their invitation to deliver the 2012 Oberoi Lecture here in India.
The IISS has a long and distinguished history in bringing analytical and policy focus to the greater strategic challenges of our time.
And it is appropriate that this lecture series be delivered in India, given this country’s significant role in the evolution of the current global and regional order.
It was my privilege to visit India as Prime Minister in 2009 again as Foreign Minister last year.

Prime Minister Gillard of course concluded a successful visit here most recently.
In 2009 we agreed for the first time to frame this relationship as a strategic partnership. This was not an idle term. It reflected the fact that we have so many fundamental interests and values in common as we approach the foreign policy complexities of the current century.
Historical impediments in relation to the relationship have been dealt with.
FTA negotiations are well underway. But if we are to make the most of this future relationship we must both agree to unlock its economic potential.
Australia is the 12th largest economy in the world, a member of the G20 with India and the fourth largest economy in Asia after China, Japan and India.
There is therefore much business to be done together as we transform this relationship from the old and a little too distant relationship of the past into a dynamic relationship for the future across all levels – strategic, economic and political.
We in Australia see ourselves as a middle power with both regional and global interests.
We pursue an active diplomacy, regionally and globally, and look forward to continuing to work closely with our friends in New Delhi in all the major councils of the world.
I note that the specific space which the Oberoi Lecture seeks to occupy in our crowded international agenda is to make sense, both in analysis and policy, of the great geo-economic developments of the twenty-first century.
Some may argue that geo-economic analysis occupies an uncertain terrain between the more defined certitudes of geo-politics on the one hand and geo-strategic analysis on the other.
Within the academy, there are some parallels with the emergence over the last 30 years of IPE (International Political Economy) as a recognised discipline occupying a necessary, but nonetheless contested, conceptual space between the more established disciplines of International Relations and Economics.
Of course, history teaches us that ‘no man’s land’ can be a very dangerous place to be.
But I for one agree that to ignore the political and strategic impact of the core driving forces of the global economy is a little like the sound of one hand clapping.
Furthermore, even in this great age of economic globalisation, geography still matters. 
If geography did not still matter, we would be hard pressed to explain, for example, the intensity of intra-regional trade and investment patterns within North America, greater Europe and, of course, our own hemisphere here in Asia.
A core task of foreign policy in the 21st century is to make analytical sense of international economics, international security and international politics in an age of globalisation where literally everything is connected to everything else.
And, based on integrated analysis, to make pro-active policy recommendations to our respective governments on how to best maintain the stability of the post-war international order while at the same time managing the individual policy challenges of the day.
It has long been my view that analysis without policy (that is, without asking ourselves, “And then what should we now do?”) is little better than a dead letter.
At the same time, policy in the absence of a detached analysis of what is happening in the world, and why, can be just plain dangerous.
I have long said that the beginning of wisdom in foreign policy is first, to understand the interests, values and identity of others; second, to understand with equal clarity the interests, values and a sense of identity that we have about ourselves; and then, based on one and two above, maximise cooperation, minimise conflict and manage the rest.
Or, as his Excellency Shyam Saran noted recently in his lecture China in the Twenty-First Century: What India Needs to Know About China's World View, “To see ourselves as others see us, is a valuable gift without doubt.  But in international relations what is rarer and far more useful is to see others as they see themselves.”
Here, his Excellency was quoting the historian, Jacques Barzun, in the former Foreign Secretary’s own provocative analysis of the deep civilisational underpinnings of the contemporary worldviews of both China and India, and the mindsets that these create.
For it is on this core question of mindsets that I would like to focus my remarks today, on one of the central questions of our age – namely, the rise of China and the response of the US, the West and the rest, including the great civilisation, nation and emerging economy that is India.
So let us all be clear: the rise of China is no ordinary event.  It is, in fact, an extraordinary event.  And one which has materialised before our eyes over the last 20 or 30 years – almost a nanosecond within the vast context and canvas of human history.
When in the course of the next decade, the Chinese economy surpasses that of the United States in aggregate size, this will be the first time since George III that a non-English speaking, non-Western, non-democratic state will be the largest economy in the world.
This is already having a profound effect both on the objective reality and subjective perceptions that characterise contemporary international relations.
Not only is the centre of geo-economic gravity shifting from North America and Europe to Asia – or, from a maritime perspective, from the Atlantic to the Indo-Pacific.
So, too, is the centre of geo-political and geo-strategic gravity shifting to this Asian hemisphere as well.
The axiom “where economic power goes, political and strategic power soon follow” continues to exhibit its own intrinsic and rigorous logic.
That is not to dismiss the power of ideas, of values and of identity.  For these, too, continue to shape the way in which we think and act.
But we would be guilty of collective naïveté if we failed to recognise and respond to the great shifts in international relations that are currently underway.
And to return, once again, to the normative theme that I have referred to above: the business of diplomacy can either adopt a passive, analytical posture and profile which simply describes the great events unfolding before us across the global and regional order - by implication, almost concluding that there is nothing that can profitably be done about it other than to be well-informed bystanders or even brilliant raconteurs describing what is unfolding before us. 
Or alternatively, our combined diplomacies can actively seek to shape the sort of international order that we continue to need to underpin our responses to the great policy challenges of our age.
I, for one, have never believed that there is anything determinist about history.  I believe that ideas matter.  I believe that policy, including foreign policy, matters.  Just as I believe that politics matters in providing the capacity to translate policy into reality.
So therefore, when our friends in China, and our friends here in India, together with those of us in Australia look at the great changes unfolding before us, I believe our analysis should be clear and our foreign policy bold in seeking to realise our common objectives of ensuring the continued peace, prosperity and unfolding freedoms so fundamental to the future of this Asian hemisphere.
The new Chinese leadership
So how do we apply these bold conceptual declarations to the immediate practical task of understanding what China wants for its own future; what strategy is it pursuing to realise that future; will it succeed or fail; and what should the rest of us do about it.
This brings us to the core question of China’s new political leadership and the prospects for policy continuity and change.
I’ve been writing on China’s leadership transition over the last three months and its implications for the Chinese economy, Chinese political reform, and the future shape of Chinese foreign and security policy.
But something particularly significant happened last weekend of which we should all take note. 
In his first travel outside Beijing since being elected General Secretary and Chairman of the Central Military Commission at the 18th Party Congress last month, Xi Jinping chose to travel to Shenzhen.
Shenzhen has a particular significance within the Chinese political and economic policy mindset.
It was here during the early 1980s that Deng Xiaoping unveiled the first of China’s then four special economic zones which became the country’s national and international symbols of Deng’s determination to internationalise the Chinese economy and to implement a vast program of market-based economic reforms.
Significantly, Xi Jinping’s father, Xi Zhongxun, himself a revolutionary hero within the annals of the People’s Liberation Army, also took a leading role in promoting the Shenzhen economic experiment 30 years ago.
Xi Zhongxun’s political and military career had very much mirrored that of the ups and downs of Deng Xiaoping’s career – including him being purged during the Cultural Revolution and then returning with Deng to the Politburo in the late 1970s, following the purge of the Gang of Four.
Xi Jinping is enormously proud of his father’s achievements and, of course, Xi Jinping himself experienced the personal impact of his father’s fall from political grace and subsequent rehabilitation.
Over the weekend Xi Jinping placed a wreath at a statute of Deng Xiaoping in Shenzhen. 
He is also reported to have stated, “The decision the party central leadership made about opening and reform was correct.  Hereafter, we will still go down this correct road… we must unswervingly take the road of enriching the nation, enriching the people, but we must also open it up even further.”
For students of modern Chinese political history, Xi Jinping’s remarks and where he chose to make them are of particular political significance in providing a critical insight into the priorities of the new leadership.
Not only was Xi Jinping saying that both Deng Xiaoping and his father, Xi Zhongxun, got it right, way back in the late 70s and early 80s.
Xi Jinping was also deliberately commemorating Deng Xiaoping’s famous “southern expedition”, when as an 88 year old, three years after the political implosions in Tiananmen Square in 1989 and the conservative political reaction that followed, he made a public political point of returning to Shenzhen, the symbolic cornerstone of his post-1978 economic reform program, to pronounce both to China and the international community that the Chinese economic reform program had to proceed “even faster” than before.
In political terms, Deng Xiaoping was rescuing China’s economic reform project from conservative forces within the Chinese leadership at the time who pointed to Tiananmen as the reason why these reforms should stop.
Deng Xiaoping’s Shenzhen declaration represented a defiant repudiation of the conservatives and as a result he reset the political foundations for the direction of the Chinese economy for the next 20 years.
The significance will not be lost on anyone in Chinese politics that, 20 years later, Xi Jinping on his first official visit within the country has elected not only to go to Shenzhen but also to emulate Deng’s 1992 declaration by stating today that, not only was Deng right, but that China must now open up even further.
By contrast, 10 years ago, Xi Jinping’s predecessor, Hu Jintao, upon his election as General Secretary, chose to visit Xibaipo (a pre-1949 revolutionary base of both the Party and the PLA) where Hu instead made a speech urging the country to recall the achievements of Chairman Mao Zedong.
Xi Jinping’s decision to travel south is as clear an indication of anything we’ve seen so far that Xi’s intention is to lead China through the next phase of its economic reform program.
Xi’s visit to the south is also sending a message about not just policy substance but also political style. 
Xi’s visit apparently was not covered extensively by the central Chinese media.
Instead his remarks were carried by Hong Kong based Phoenix Television, which has massive reach across China’s elites but also a broader audience as well.
His visit was also carried by China’s exploding social media with photographs and comments widely circulated in the Chinese twittersphere and blogosphere.
Xi also chose not to travel in a limousine but instead by mini-bus. 
And most significantly, in the eyes of the long-suffering Chinese commuters, Xi insisted that the traffic not be blocked while he travelled around Shenzhen, as has almost always occurred in the past with provincial visits by central Chinese leaders.
It is clear that at a level of political style, that Xi Jinping is determined to cut a different, less elitist, and even populist image with a Chinese people still reeling from the revelations of the Bo Xilai scandal, as well as their general revulsion at the world of privilege they believe is enjoyed by Party elites.
So what sort of man is Xi Jinping, and what sort of leader is he likely to be, and what of the other newly elected members of the seven-member Standing Committee?
For an international audience (and here I draw extensively on remarks I have made elsewhere), it is best to understand the Standing Committee as the equivalent of an Executive Cabinet – with allocated broad portfolio responsibilities, regular weekly meeting procedures and formal documentation associated with each decision.
This is where ultimate power resides within the Chinese political system.
Much has been written about Xi Jinping. It has been my privilege to spend time with Mr Xi and on different occasions with five of the other seven members of the newly announced Standing Committee.
Many people ask me what the leaders are like as both politicians and human beings.
My general response is that like the rest of us who have been associated with national political leadership during our careers, these are normal human beings confronted with the normal challenges of life, confronted with infinite expectations of what they can deliver and at the same time confronted with finite resources with which to meet those expectations.
In their case, however, they additionally confront the extraordinary challenge of negotiating the continued economic transformation of the most populous country on earth and doing so within the rigidities of a political system still dominated by a Leninist state.
On balance, my judgement is that this new Chinese leadership team is both sufficiently politically powerful and certainly technically competent to meet the formidable tasks which lie before it.
The new leadership team is on balance reformist in terms of the future direction of Chinese economic policy while remaining what I would describe as “small-c” conservative on the possibilities of further political reform within the Chinese system.
On foreign policy, the leadership team will continue to want to undergird the economic transformation process in China by continuing regional and global strategic stability.
And that means managing a continuing strategic accommodation with the United States, most particularly in Asia.
The core challenge for the period ahead for both Washington and Beijing will be how precisely to do that.
As for Xi Jinping himself, I have said many times 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.
I believe Xi Jinping is confident of both his military and economic reformist credentials based on his father’s achievements in both domains, as well as Xi Jinping’s own period in the PLA and his position as private secretary to former Defence Minister Geng Biao.
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.
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.
And on top of this, it is significant that the Party Congress appointed Xi Jinping immediately as Chairman of the Central Military Commission.
I believe this to be an important indication of the strength of his political standing given the continuing central role of the Chinese Military in Chinese politics.
He appointment now to take over the position represents a break in the convention 10 years ago when Hu Jintao had to wait another two years after his appointment as Party General Secretary to be appointed as Chairman of the Central Military Commission.
In the meantime, the previous party Secretary Jiang Zemin continued in the position as chair of the Central Military Commission. 
Many expected that the precedent would be applied on this occasion – allowing for Hu Jintao to gradually exit from the political scene over time. By contrast, Xi Jinping’s power has been confirmed almost immediately.
In overall terms Xi Jinping, while acknowledging and accepting the realities of collective leadership decision making processes, has the capacity to become more than a Primus inter Pares.
I do not believe it is within his temperament to simply be content with the policy status quo.  He has considerable political capital to draw on. But the key question is what domestic and international policy direction he will seek to take the country.
The new Premier will be Li Keqiang. It was my privilege to spent time with Li as senior Vice-Premier when he visited Australia in recent years.
Li is widely known as an economic reformer and as Premier he will chair the State Council which will be responsible for the implementation of China’s continued economic reform program.
Next in the Standing Committee hierarchy is Zhang Dejiang. Zhang is regarded as a highly reliable political manager having recently been entrusted with the complex task of taking over the Chongqing Provincial Party Committee after the purge of Bo Xilai following the multiple scandals concerning himself, his wife and his family.
Zhang since 2008 has been one of China’s Vice-Premiers. Most critically between 2002 and 2007 was responsible for the administration of the Party committee in one of China’s most wealthy provinces Guangdong.
Number four in the new hierarchy is Yu Zhengsheng. Yu since 2007 has been Party Secretary in Shanghai, China’s traditional and continuing commercial capital.
Shanghai’s reputation is that it lies at the forefront of further economic reform, more expansive markets and a greater role for the private sector.
Yu will be joined by Liu Yunshan. Of the seven men on the Standing Committee, Liu is regarded as a more conservative political leader given his responsibility of heading the Propaganda Department.
In that capacity Liu will be responsible for the complex and politically sensitive task of managing state control of China’s media at a time of China’s unfolding social media revolution and an increasingly questioning official and semi-official media as well.
One of the most critical additions to the standing committee will be Wang Qishan. Wang Qishan has supported much of China’s work in the G20 as well as in the annual U.S.-China Strategic and Economic Dialogue.
He is well known and generally well liked by the Americans.
He has a formidable public career including being Mayor of Beijing from 2004 onwards and having been the successful Secretary of the Beijing organising committee for the 2008 Olympics.
Wang is a no nonsense reformer. He is very much influenced by his mentor – former Premier Zhu Rongji.
It was Zhu who pioneered Chinese accession to the WTO – a massively controversial decision at the time.
Finally, the Standing Committee will include Zhang Gaoli. Zhang is also known as a pro-market economic reformer.
He is currently Party Secretary of Tianjin which has seen total economic transformation in recent years as one of China’s major centres of global economic engagement.
There are no known obvious political tensions between this seven member team.
It bodes well for China’s ability to deliver strong leadership for the critical period ahead.
For countries like Australia, we have had considerable exposure to most of these leaders and I believe this also bodes well for the future of our bilateral relationship.
This is also leadership that Australia can genuinely do business with.
This particularly applies to Xi Jinping and Li Keqiang – both of whom have undertaken visits to our country over the last two years prior to their current elections.
Domestic policy priorities
The first priority of this new Chinese leadership is the further reform of the economy in the context of a weakened global economy over the last five years and facing limited prospects of rapid global economic recovery.
The new Chinese leadership is 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.
China knows it must now change its economic growth model from one that has served it well for the last 30 years to one which will sustain it over the next 30. 
In the twelfth Five Year Plan, the Chinese recognised that the old growth model (based on low wages, labour intensive manufacturing for export made possible by high levels of state investment underpinned in turn by high levels of domestic savings) has already reached its use-by date in China’s coastal provinces and is working its way westwards across China’s central provinces and to Sichuan in the West.
The leadership has concluded that the new growth model should be based instead on higher levels of domestic consumption, lower savings, more generous government safety nets, the rapid expansion of the services sector to meet China’s equally rapid urbanisation process as well as greater opportunities for private capital.
I believe the new Chinese leadership may well embrace the following policy 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.
Many have asked the obvious question, what are the prospects for Chinese political reform?
My own belief is that if Xi Jinping’s leadership successfully prosecutes the formidable economic transformation tasks described above during his first term, then the leadership may embrace a form of “small p” political reform during his second five year term between 2017 and 2022.
None of us should forget that 2021 is an important year in Chinese political history, as it will mark the centenary of the foundation of the Chinese Communist Party.
In the lead up to 2021, the question will increasingly be asked within Chinese intellectual debate and broader political discussion as to whether the historical mission of this revolutionary party has been fulfilled – and whether the time for gradual political transformation to a new political model has therefore come.
History matters in Chinese politics.
Anniversaries matter in Chinese politics.
And historical analogy also matters.
Last year marked the 100th year anniversary of the Xinghai Revolution which brought to a conclusion a Chinese imperial system that had survived for more than 2000 years.
Nonetheless the Chinese Republic failed to discharge the Mandate of Heaven given to every Chinese administration in history – namely to maintain the unity of the motherland at home and to defend the motherland from aggression from abroad.
In China’s national perspective, the Chinese Communist Party has successful discharged both these missions.
Under Mao’s leadership the task was to unite the country. 
Under Deng’s leadership it has been to economically transform the country in order to return China to its historical position as a great power both within the region and the world.
Under Xi Jinping’s leadership, will it be his mission to complete the economic transformation process, raise China to middle-income status and entrench China’s position within the world order – but beyond that, to transform Chinese politics as well?
Taiwan may have an important role to play in this regard.  If Taiwan were to propose at some stage over the next decade to execute a form of political confederation with the Mainland (a sort of “one country three systems” approach) then the democratising forces which could be further unleashed from Taiwan’s own successful democratic experiment could become formidable across the Mainland.
Some have long feared that China’s long term strategy is simply to economically consume Taiwan’s own sense of local political identity. 
The reverse could also apply, whereby Taiwan, which becomes increasingly integrated into the mainstream economic life and political discourse with the Mainland, itself becomes something of a democratic Trojan horse within Mainland politics.
These reflections may seem fanciful to many but there are already quiet internal discussions underway within both political establishments as to what the political future may look like should both sides of the Taiwan Strait come together in some form of political condominium.
This leaves to one side the domestic drivers of political change within China itself, including the rise of the private sector, the rise of Chinese NGOs and the explosion in the Chinese social media world where, ultimately, no single agency of the Chinese state is able to exercise comprehensive control.
The challenge therefore for the Party is how to manage these processes of long term political transformation – rather than contemplating a repeat of Tiananmen on a greater scale or, for that matter, an Arab Spring or Colour Revolution that actually prevails.
No one should underestimate the capacity of China’s formidable security forces to maintain political control.
But the China of 2021 is likely to be a vastly different China to the China of 1989.
This raises the question of what type of political reform may be contemplated within Chinese politics during Xi Jinping’s second term.
Up until now, the focus of political reform in China has been the “internal democratisation” of the Chinese Communist Party and its 82 million members itself – to regularise Party procedures, appointments and leadership transitions.  And it is important to recognise that great progress has been achieved on this front when contrasted with non-peaceful leadership transitions in the past.
But beyond the Party, it is an open question as to what could or should be done.
There is a general recognition that China’s earlier experiments with village-level democratic elections has not been successful.
It is doubtful therefore that higher level experiments at the municipal and provincial levels can be contemplated in the absence of structural changes at the political centre.
Beyond the role of the Party itself, much discussion has occurred in relation to making the PLA answerable to the apparatus of the state rather than to the Party.
This is a debate fraught with political tension and controversy at this time.
Then there is the role of the National People’s Congress (China’s appointed Parliament) and its greater role in the scrutiny of government decisions and the regularisation and institutionalisation of the NPC’s policy committee structures.
The NPC is also slowly beginning to develop its own sense of institutional identity which is useful for any fundamental political transformational process in the future. 
Nonetheless, I believe it’s possible that the first area we may see signs of political change will be in relation to China’s so-called advisory Parliament – the Chinese People’s Political Consultative Conference (the CPPCC).
The CPPCC includes within its ranks members of China’s eight so-called democratic parties from the pre-1949 period.
It also played a core historical role in legitimising the coming to power of the Chinese Communist Party in 1949 – almost as a type specifically convened Constitutional Convention.
To this day, the CPPCC also has a defined constitutional role in providing advice to both the government and the Party on the administration of the Chinese state.
I have no factual evidence on which to base this observation but I believe it’s possible that one significant step in the Chinese political reform process would be to begin to elect the CPPCC in whole or in part through a universal democratic franchise.
Conservatives would argue that this would be the straw that broke the camel’s back and it would represent and unnecessary concession of political power by a revolutionary party.
Liberals on the other hand would critique such a move as too little to make any real difference.
It may however be one possible way in which the Chinese leadership begin to demonstrate to the Chinese people that a managed process of political transformation to a more contestable democracy is underway.
And once again, let none of us forget the particular anniversary significance of 2021 and whether it is seen by the Chinese leadership as an opportunity to begin transforming the Party into a type of Parliamentary party over time; or whether instead, it is seen as an opportunity for the Chinese leadership to declare to their own people and to the world that China’s Leninist party and the model of state capitalism as it has embraced so far will in fact be around for another hundred years as well.
But let us all remember that China’s domestic political destiny is ultimately a matter for the Chinese people alone.
At this point, it’s important to withdraw our gaze from the crystal ball and return to domestic and foreign policy reality, always with Zhou Enlai’s cautionary tale in our ears, that when once asked his views of the significance of the French Revolution, his reported elegant response was that it was “simply too early to tell”.
And none of this protracted discussion of the possibilities of Chinese political reform should distract us or cause us to underestimate the formidable domestic policy challenges that the new Chinese leadership will confront as they seek to implement this next phase of economic reform.
These include:
·         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.
Chinese foreign policy
So what continued or changed directions are we likely to see in Chinese foreign policy under the new leadership?
It is important to be clear in our own minds what China believes to be its own foreign policy priorities.
Maintaining the unity of the motherland remains at the absolute core of China’s foreign policy and security policy interests.
This includes Taiwan, Xinjiang and Tibet as well as China’s disputed territorial and maritime boundaries with various of its neighbours.
China’s second core foreign policy priority is driven by the economic imperative of ensuring the conclusion of the economic transformation task.
A core subset of this task is China’s national energy security policy and the critical strategic importance of energy pipelines and sea-lines of communication.
Third, and as a consequence of the second, China wishes to maintain a stable global and regional strategic and political environment so that its economic mission is not disrupted.
A subset of that is to maintain a stable albeit competitive relationship with the United States for the decade ahead.
Fourth, consistent with its economic objective and its territorial integrity objective, China also wishes to secure a benign foreign policy environment with its immediate neighbours in particular, and with East Asia more broadly.
But of course this objective runs headlong into China’s first objective and therefore underpins much of the tension we’ve seen in recent times in various border disputes with Japan and South East Asia in particular.
Relations with Vietnam, for example, are particularly fraught and should be monitored closely by us all.
Fifth, and somewhat more opaque than the first four, is China’s role in the global order.  And it is here where we see the full range of China’s conflicting and competing interests and values, together with those of the rest of the world, on full display.
China’s attitude to the current global order is worthy of further reflection.
China’s approach is at best ambiguous; it is neither a hard line opponent nor a wild enthusiast of the current architecture but rather simply accepts it as the reality which was dictated to the rest of the world by the Anglo-American victors after the Second World War.
Nonetheless, if you were to ask Chinese political leaders, or for that matter foreign policy think-tanks, whether they have developed an alternative to the current international order, the answer, by and large, is no.
Certainly China sees itself possessing enormous advantages as a result of its membership of the P5.
China also sees itself increasingly called upon to contribute to UN peacekeeping operations as well as being an increasingly active participant in most UN specialised agencies and the Bretton Woods institutions.
But the core question facing us all is how China sees itself, to borrow Bob Zoellick’s famous phrase, as a responsible global stakeholder in sustaining and enhancing the order into the future given the range of global pressures the order currently confronts.
This in turn leads to a wider discussion of what sort of global and regional great power China wants to be.
We all know that after 100 years of foreign humiliation from the Opium Wars to the Japanese occupation, Chinese reformers of all political hues dreamt of China’s national “wealth and power”.
According to these reformers, whose careers spanned the century from the 1890s to the 1990s, if China could maintain its national unity and make its economy function, China would once again return to the glories of previous centuries in the ages of the Ming, the Tang and the Han.
But the question the international community is now asking China is pretty basic: now that you have national wealth and power, how will you choose to deploy it around the region and around the world?
This is not a question about whether China is likely to invade another country or not.  China has very little history of this and virtually none compared with the United States and the European colonial powers.
But this is a straw-man argument.  The real question is how China would seek to exercise its foreign and security policy influence across the wider region and the world more broadly.
My own view is that China has yet to develop an agreed internal script on this question.  Much analytical work is underway within China itself on this subject.  But it is still very much an open ended question.
Importantly, therefore, for the rest of the region and the rest of the world, in the period ahead, there remains a window of opportunity in which to engage our Chinese friends on what sort of cooperative future we can imagine together with the Chinese within the twenty-first century global and regional order.
This is a time for ideas, for policy creativity, and for fresh conceptual thinking – albeit within the framework of the multilateral rules-based order that we have shared together since the conflagration of the Second World War.
In the meantime, however, in the absence of definitive Chinese statements about their view of their global role, once they emerge as the world’s largest economy (most probably during Xi Jinping’s presidency) and given the significant continuing expansion of China’s military, it is almost inevitable that the rest of the region and the rest of the world will hedge their bets on what sort of China we will all face in the future.
I, for one, am an optimist about our ability to escape the determinist forces of history and through innovative political leadership in relevant capitals begin to craft a common cooperative future for us all.
This means fully engaging the globalising China that we have seen emerge over the last 30 years.
But the rest of the world is equally attentive to nationalist forces also alive in Chinese politics (and for that matter in other regional politics) and will therefore in their foreign and security policies hedge against the possibility of more negative security outcomes.
This therefore looms as an exciting, but equally potentially dangerous period ahead, on how we deliberate on and then define what sort of regional and global order we want for the future.
China-US relations
Last month, we saw President Obama’s re-election for the next four years and President Xi’s appointment for the next five.
I believe this presents a unique opportunity for the US and China to forge a new strategic roadmap capable of guiding us through many of the shoals that lie ahead for all of us.
President Obama for his part will be well-positioned to extend a hand of new strategic cooperation to China’s new political leadership.
Again as I have noted elsewhere, 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.
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.
Security cooperation in the Asian hemisphere
As noted above, a core element of the new US Strategic Roadmap for the next five years lies in developing a new regional security order for the Asian hemisphere.
A Pax Pacifica would seek consciously to build the habits, customs and norms of security and strategic cooperation from the ground up.
Such a concept does not ignore the underlying strategic realities of the region – the rise of China, continuing military and diplomatic engagement of the United States the region’s future.
Rather it accepts these realities. But it also seeks to create new possibilities based on these realities.
Remember in the darkest days of the Cold War, the Americans, the Soviets and the Europeans managed to conclude the Helsinki Accords.
They developed a Conference on Security Cooperation in Europe, they began to build basic confidence and security building measures to reduce the risk of unintended or accidental conflict.
The truth is, in Asia we have embraced very few confidence and security building measures of any description.
That is in part why our security policy environment is so brittle.
So what might the principles of a new Pax Pacifica look like?
To begin with, one area of concrete work that could be advanced is to be clear about some basic principles.
One, that China’s peaceful rise should be accommodated by the United States and by the rest of the region, and that China has legitimate national security interests.
Two, China equally needs to accept that continuing US strategic presence in the region is normal and that US alliances are to be respected.
Three, that China and the US need to accept that the other member states of the region also have major equities in the region’s future, and hence an equitable voice in the region’s management.
Four, that all states should collectively develop, agree and accept the basic norms of behaviour for our regional rules-based order.
Five, this should include the non-use of force in dispute resolution.
Six, region-wide dispute resolution mechanisms along the lines outlined in the TAC and the ASEAN Code of Conduct.
Seven, the freezing of all existing interstate territorial claims, and the development of protocols for joint development commissions for the common extraction of resources from disputed territories.
Furthermore, the East Asia Summit and the ASEAN Defence Ministers Meeting (+8) should enhance a program of practical action to create a set of confidence building measures to enhance regional security cooperation:
First, hotlines between the relevant national security agencies within all member states to deal with incident management
Second, detailed protocols for managing incidents at sea;
Third, regular high-level meetings between all the region’s militaries so that networks and relationships are developed over time;
Fourth, joint exercises in search and rescue and counter disaster, counter- terrorism and counter-organised crime;
And fifth, in time, transparency of military budgets and national military exercises.
The basic reality is this, most of our armed forces are trained to fight and win wars.
If at the same time we have a number of them engaged in a complex network of confidence and security building measures, including joint exercises and joint operations in counter-disaster, it is remarkable what impact this could have on our collective security policy mindset over time.
For example, if you are to ask what the good people of Asia what their number one physical security threat is today, they will most likely respond natural disasters.
Why not respond to their stated needs, consistent with the Australian and Indonesian paper agreed to at the 2011 East Asia Summit – and turn this vision into a reality.
In fact the first such counter-disaster exercise involving all the region’s militaries will soon be held in Brunei. This is a good first step.
A further practical recommendation in developing a Pax Pacifica (or what perhaps might one day be called the Organisation for Security Cooperation in Asia – OSCA) is institutional.
Both the EAS and the ADMM +8, have an identical membership, the former with heads of government and foreign ministers, the latter with defence ministers.
On one level, an EAS at Summit level can help agree on the broad directions for security policy cooperation.
At a different, practical level, the ADMM +8 could be given specific responsibility to develop the raft of Confidence and Security Building Measures referred to above.
Furthermore, the EAS over time will need a dedicated secretariat.
For various reasons, the analogy with Brussels does not quite work.
The EAS is not an alliance. Nor is it an economic union.
But the truth is that Brussels as an intuition (both NATO and the EU) has had a remarkable and positive impact over the decades in taming the passions of rabid nationalism in Europe.
In time our good friends in ASEAN should give consideration to the hosting of an expanded EAS secretariat function.
Because the truth is, none of the above will happen by magic. Or by permanently rotating chairs.
We will need to start to think together as a region – as we shape together the region’s future.
In this lecture I have deliberately chosen not to elaborate on the specific implications of the rise of China for India, or what India should do in response.
As a visiting Australian, that would be presumptuous.
I’m also aware that these two high civilisations, India and China, have been evolving their own modus vivendi for the last two and a half thousand years – a little longer than the 225 years of European settlement in Australia.
But as Prime Minister Singh has so wisely observed, the China-India relationship is complex – both cooperative and competitive.
I also believe we need together to embrace the complexity of China’s rise, recognising both these realities.
And here the question of mindsets, I believe, is critical.  If for example we believe that one form of conflict that would arise in China is inevitable, then the likelihood of that occurring increases accordingly.
If, however, we cultivate a mindset which is capable of imagining a different future – where conflict is avoided, cooperation maximised and competition managed, then I think we may be worthy of our children’s future.
In the past we’ve often been locked into a binary mindset in dealing with the rise of China.  As I’ve written elsewhere, either conflict or kowtow.
China, too, has also exhibited from time to time the continuation of this Cold War mindset into a post-Cold War world, where foreigners are again subject to a binary classification of either being pro-China or anti-China.
There is in fact a third way of dealing with China, and that is what the region and the world expect of us all today.
That third way is best summarised by the Chinese term “zhengyou” which is perhaps best translated as an enduring friendship based on candour – anchored in mutual respect, animated by active friendship but one always prepared to speak one’s mind when it really matters without running the risk of fundamentally destroying the relationship.
That I believe is a potentially helpful attribute for us all as we embrace the new Chinese leadership in the decade ahead.
I remain an optimist that we can succeed in this task. 
That we can succeed in building a genuinely peaceful, prosperous and open twenty-first century for this, the Indo-Pacific region – based on open economies, open societies and over time open politics.
And in rising to this great civilisational challenge, we in Australia look forward to working closely and partners both in India and in China and also how we might turn this vision into a reality.


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