SMA’s Future of Global Competition & Conflict (GCC) China Panel Discussion

June 2019 No Comments

Future of Global Competition & Conflict (GCC) China Panel Discussion

Author | Editor: Jafri, A. (NSI, Inc.)

Discussion Details

On 27 February 2019, the Strategic Multilayer Assessment (SMA, Joint Staff, J39) office—with the support of the Office of the Director of National Intelligence (ODNI) and National Defense University (NDU) – convened a panel discussion on China in support of the SMA Future of Global Competition and Conflict effort. The scope of the day’s event was to assess how the United States Government (USG) should consider China’s power in relation to other states for the purpose of understanding the implications for future geopolitical competition.

Panel 1: How does China view strategic competition?

The first panel “How does China View Strategic Competition?” examined the nature of strategic competition, and China’s role therein. Dr. Cynthia Watson, Dean of Faculty and Academic Programs at the National War College, introduced the panel. She underscored the necessity of understanding Chinese intent within a context broader than bilateral relationships. Indeed, Dr. Watson highlighted the relevancy of this examination within the larger arena of great power competition. Additionally, Dr. Watson encouraged both panelists and attendees to broaden the scope of the conversation of strategic competition to include alternative topics, viewpoints, and ideas within the national security community.

Brigadier General (ret) Dr. Rob Spalding, GTRI, began his remarks by challenging the notion that the United States has not been operating with a cohesive top-down strategy. He noted that one of the central themes of the most recent National Security Strategy was that military power alone is insufficient to achieving United States interests; not only is the current force structure insufficient to counter China in the Pacific, but the economic path for strengthening the military has not yet been actualized. Whereas the military has an outsized role in executing national interests because of the resources it is afforded, it is not sufficiently oriented towards an appropriate understanding of the inherent conflict between the United States and China. He cited the example of the primacy of the information domain and suggested that policymakers are not investing the requisite time and energy into competing in this domain. Relatedly, Dr. Spalding suggested that providing for the common defense of the citizenry within the information domain is incumbent on the military. He underscored the necessity of a more expansive toolkit with which to execute national policy by bringing up the nature of alliances and suggested cooperation in economic, diplomatic, and information relationships would undergird security cooperation.

The concept of operating within a set of principles was also highlighted by Dr. Spalding, who noted the shift in such an idea around the Cold War. Prior to the end of the Cold War, the United States’ trade relationships were more ideologically based; however, since that time, the free market has become a more useful determinant of trade patterns. Dr. Spalding conceptualizes this shift as the marriage between democratic and free market principles. Furthermore, he suggested using the strengths of liberal democracies as avenues of attacks on alternative systems and encouraged the panel to no longer rely on 20th century solutions to the problems of today, particularly those that reside within the information domain.

On China, Dr. Spalding suggested reframing thought around the Communist Party, rather than the 1.4 billion citizens of China; the former, according to him, acts as the sovereign of the latter. He noted the particular social contract in China, using President Franklin Roosevelt’s Four Freedoms as a framework. Specifically, Dr. Spalding noted that the Chinese Communist Party satisfies the polity’s “freedom from want” and, in exchange, the population sublimates their remaining freedoms (i.e., freedom of religion, freedom of speech, and freedom from fear).

Following Dr. Spalding’s comments, Mr. Roy Kamphausen of the National Bureau of Asian Research stressed several points. First, Mr. Kamphausen asserted that China has been engaged with strategic competition with the U.S., but in ways that will not resemble what the United States national security community might expect. Not least, Beijing desperately wants to avoid competition that features built-in military conflict, but China’s own actions might be pushing the United States in that direction.

Mr. Kamphausen argued that China’s desire to avoid military conflict as a part of the strategic competition is in great measure reflective of a risk aversion that is part of Chinese strategic DNA. This risk aversion derives from several factors: Chinese view of its own history, particularly the “Century of Humiliation;” real and deep concerns about the capabilities of the People’s Liberation Army, as expressed by Chinese leadership; concern that military conflict could put at risk China’s economic development goals; and finally, a reluctance to precipitate a military crisis prematurely, out of a conviction that time is fundamentally on Beijing’s side.

This principle of competition in areas where the adversary has a perceived weakness is a long-held tenet in Chinese strategic thinking. Mr. Kamphausen noted that eschewing traditional security competition in favor of “gray zone competition” in areas where the United States is unlikely to respond with force is a good example of this approach. Mr. Kamphausen warned of the misalignment between US and Chinese military conceptions on escalation management. Finally, he noted that China will only have occasional partners of convenience, rather than substantive allies. He stated this is the greatest opportunity to create leverage on China: the U.S. both has productive alliance relationships and China most fears the isolation that American-led allies can produce.

Panel 2: What are the capabilities or elements of power China uses to compete and how should we measure them?

Following the first panel was a discussion on the capabilities and elements of power that China uses to compete. Mr. Dan Flynn, Director of the IC Net Assessments Division, introduced the speakers, and offered comments on how to best identify and consider Chinese power. Speaking via videoconference was Dr. Michael Beckley of Tufts University, who suggested that the United States, despite many estimates, remains far ahead of China economically and militarily the competition with China. This assertion was based on analysts using gross indicators (such as gross domestic product (GDP)) that account for resources but do not deduct the costs. This is an analytical trap that befalls those who fail to account for social welfare and security burdens. It also does not account for the asymmetric nature of the Chinese threat. A traditional balance sheet that measures assets and liabilities on opposite sides of a ledger would be a more appropriate way to measure national wealth, according to Dr. Beckley.

Further, he noted that China has the world’s largest number of useless infrastructure projects. Additionally, China also leads the world in capital flight. Similarly, even though China’s input production is high, enormous amounts of money are wasted in research and development, and many Chinese innovators end up relocating to places where they can monetize patents and royalties. Dr. Beckley also characterized China’s role in Asian trade in context (i.e. that many Chinese companies were merely nodes on a continental assembly line). Militarily, while Chinese spending has increased, and it has acquired powerful missiles, China’s military expansion is constrained by China’s relative lack of power-projection platforms and by the anti-access/area-denial (A2AD) forces of its neighbors. Also, the costs of securing the borders of such a large country are very significant and ought to be measured.

Determinants of future national economic growth include favorable geography, institutions, and demographics. On each of these indicators, Chinese future prospects have been scaled back from prior estimates. With respect to geography, China has hostile, or unstable, neighbors and has decimated its own natural endowment in pursuit of the economic growth it is enjoying. Institutionally, China’s track as an oligarchy ruled by a dictator-for-life projects limited long-term growth potential. Additionally, the Chinese system of propping up state firms at the expense of private institutions is problematic for China’s long-term prospects. Demographically, China’s workforce will shrink by 200 million workers, around the same time it will add 300 million senior citizens, for whom the state will have to extend social services, representing a reversal of the demographic trends that have propelled China thus far.

In concluding his remarks, Dr. Beckley explored the implications of a faltering Chinese growth trajectories for United States policy. He noted that as China becomes more vulnerable to the aforementioned indicators, it will likely act more aggressively, as the windows of opportunity to realize its national ambitions will be slowly closing. While recognizing the priority on keeping China in check, he noted that there is no need to gear up for another Cold War. He argued that the United States can maintain checks on China while simultaneously working with them. Indeed, he suggested that the bigger threat to the United States is not China’s rise in and of itself, but a gross American overreaction to that rise.

Interrogating the macroeconomic indicators of Chinese growth was Dr. Derek Scissors of the American Enterprise Institute (AEI). He followed Dr. Beckley’s presentation largely in agreement with his predecessor but provided a more specifically economic look at China’s rise. He derided conventional indicators, specifically purchasing power parity (PPP) and underscored the methodological problems with using GDP. Specifically, since GDP measures transactions, it does not correct when goods get oversupplied. Dr. Scissors presented an example of this, when he noted the number of large, dubious infrastructure projectswhich are often quickly replaced and thus essentially count double towards GDP. In household wealth, the United States enjoys a comfortable lead.

Further, China is vulnerable when examining capital, labor, land, and innovation indicators. Dr. Scissors noted Chinese debt is over 250% of its total GDP, and both corporate and consumer debt levels have been rising. He supplemented earlier points about an aging Chinese population and added that national land use policy can be an impediment to innovation. For instance, the economic model that has powered the shale-gas revolution in the United States is virtually impossible in a state-run economy such as China’s. In general on innovation, the top-down involvement of the state in economic affairs has made it nearly impossible for private entities to innovate, create, and compete with state-owned enterprises.

Looking forward, Dr. Scissors saw three distinct futures for China. The first is a reform path, which, given Xi Jinping’s tendencies towards centralization, seems highly unlikely. The second is crisis, punctuated by China’s debt burden and demographic strain. A full-blown crisis is also highly unlikely, Dr. Scissors postulated; rather, a third scenario of a large but stagnated economy looms. The United States faces its own challenges, principally getting its fiscal house in order. If the United States does so, it will remain tens of trillions of dollars ahead of China in aggregate wealth. Dr. Scissors also noted that China’s ambitious Belt and Road Initiative is technically being built with American money, because the hard currency China uses to fund the Belt and Road now comes exclusively from merchandise exports to the United States.

What followed was analysis by Mr. Dean Cheng of the Heritage Foundation on China’s self-image, how it sees the future, and how it considers information. The Chinese measures their place in the world through the concept of “comprehensive national power,” which is a collection of capabilities and influence in economics, military, political cohesion, diplomacy, science and technology, and cultural security. In pursuit of a greater level of comprehensive national power, China is seeking out natural resources, as well as market access; this is rooted in the failure of Chinese national strategy from the late 19th century, which is remembered as China’s “Century of Humiliation.” Perhaps as a means of preventing yet another sustained period of national malaise, China has been seeking to balkanize global common spaces, such as the South and East China Seas as well as the internet in order to challenge today’s rules-based order.

Discussions about the Chinese future are incomplete if they do not mention the power given to the information domain. The Chinese Communist Party has internalized a shift in the measure of global power from the industrial age, during which time physical assets could be counted and cataloged, to the information age; the latter era is less quantitatively oriented, for measures are made on metrics such as the ability to gather, analyze, exploit, and transmit information more rapidly and more accurately than one’s adversaries. This information is critical in traditional computer technology, but also in outer space. As an example of the shift from prioritizing physical assets, China understands its presence in space as not merely a collection of objects in orbit; rather, it understands the space domain as powerful because of the information that is transmitted between data links in outer space and terrestrially.

Information dominance has proven important on a strategic level and can be understood to be a component of political warfare wherein supremacy in public opinion, legal, and cyber issues can help buttress national power. Particularly in societies such as China, information is seen as a whole-of- society commodity that can be levied and exploited. China has been seeking to use information on an operational level, for example, by linking electronic hardware and data together. On a tactical level, the Chinese have been engaging in a variety of influence activities to create a deterrent climate. In pursuit of this strategy, China has placed a priority on gathering information; the re-direction of a meaningful amount of the world’s internet traffic into China has been a means of achieving this outcome. In many of its national struggles, China is facing a familiar set of adversaries and is on a familiar terrain, whereas the United States is acting as an expeditionary entity. Complicating this dynamic are misalignments in each state’s concept of escalation. Mr. Cheng cited numerous Chinese incursions into India, a large, nuclear-armed neighbor, as an example of a difference in risk perception and escalation control.

Dr. Jacqueline Deal, President and CEO of the Long Term Strategy Group, concluded the panel with comments on Chinese power projection, focused on drivers, observable behavior, and implications for the United States. She noted that China’s journey from a state that thought deeply about how to target US power projection via counter-intervention or anti-access/area denial (A2/AD) capabilities to one that engages in its own power projection merited further discussion. Material drivers of Chinese power projection can be traced to the early 1990s, when, as a result of its rise as a global manufacturing hub, China became a net energy importer and an importer of other key commodities; its reliance on sea lines of communications (SLOCs) for both imports of raw materials and exports of finished goods exposed China to potential delivery disruptions, and Chinese political-military strategists perceived a requirement to protect seaborne commerce to and from the mainland. The choice to not rely on the US Navy as the security guarantor for China’s SLOCs was a reflection of the choice Deng Xiaoping made to reform Chinese trading relationships. That decision to reform and open China to trade was a pragmatic one animated by the Chinese Communist Party’s (CCP’s) desire to stay in power. The party does not trust the United States, which it calls a “hegemon” or “the strong enemy.” Nor does the CCP believe in the free market. Rather, it has a mercantilist understanding of the world.

Accordingly, intellectual drivers of Chinese power projection include CCP strategists’ view of the world as home to a zero-sum competition for wealth and power. By the early 2000s, Chinese foreign policy discourse developed a concept of the “big periphery,” a zone well beyond China’s near-abroad where China would and should be influential, thanks to economic relationships, trade ties, consular links, and terrestrial and/or high-tech infrastructure connections. In concrete terms, then-CCP leader Hu Jintao assigned the PLA the mission of protecting China’s overseas interests in 2004. This mission was further institutionalized at the 18th Party Congress, during which Xi asserted that China should strive to be a “maritime great power.” Not long after that declaration, Xi kicked off the Belt and Road Initiative. PLA textbooks began describing the need for “forward defense” and studying the history of other powers’ overseas basing. By 2015, the Chinese navy announced its first overseas base in Djibouti. Scholars have also identified a range of potential dual-use or paramilitary Chinese facilities, e.g., at Gwadar (Pakistan) and in Tajikistan, respectively.

Dr. Deal identified two main implications of this Chinese strategic expansion, the first being a new set of Chinese vulnerabilities (i.e., the requirement to protect its access to overseas bases and investments, in addition to the bases and investments themselves), and a direct challenge to how the United States operates globally. To minimize its signature, China has been operating through dual- use technology and trying to use light footprint tactics in challenging terrain, but as the Djibouti case shows, in some places the PLA will eventually want to establish a formal presence. Additionally, US policymakers will increasingly have to take into account potential Chinese interference in American efforts to project power in locations far from China; moreover, the United States can no longer see potential conflicts in East Asia (e.g., over Taiwan) as being geographically bound. China’s global footprint means that even “local” issues could have global reverberations.

Panel 3: Summary & Implications for the United States

The final panel of the day was a discussion between Dr. Cynthia Watson and Mr. Dan Flynn, who placed the conversations in a larger context, and considered the implications for US policymakers. Mr. Flynn spoke about how China is attempting to compete in a number of domains, beyond just military and trade. China’s preference appears to be to compete below the level of armed conflict. This partly reflects the People’s Liberation Army’s assessment that it must continue to modernize before it reaches US capabilities. In competing in the “gray zone” short of armed conflict, managing escalation dynamics becomes critically important, particularly given differences in Chinese and US conceptions of deterrence. Looking ahead to China’s future challenges, Mr. Flynn suggested that in assessing China’s foreign policies, analysts must also keep in mind China’s domestic situation. In the past, when the Chinese Communist Party has felt insecure at home, it has been more willing to compromise on foreign policy issues. However, in such situations, it is also possible for the CCP to be overly sensitive and reactive to perceived threats to its security interests.

The primacy of domestic issues within the Chinese mainland was also mentioned by Dr. Cynthia Watson. The Chinese Communist Party does face domestic vulnerabilities, and President Xi is presented with a very complex set of challenges. Since the PLA is a party army, it cannot chart its own trajectory, and is subservient to the party. Therefore, the party may be more inclined to use the PLA as an instrument of state power if it feels threatened. Dr. Watson also challenged the notion that isolated clashes in Asia would encourage China to retreat from its power projection in the continent; she underscored the geographic centrality of China to Asia, and vice-versa, and underscored that competition therein will not be confined to Chinese borders.