The coming Global Backlash against China

Is China in a quandary over Quad and the AUKUS?​

China has identified a major challenge to its dream of a China-centric Asia Pacific, in the face of Quad. Quad’s unstated priority of countering China’s growing power is rankling the communist leadership in Beijing. The Quad calls for a free, open, inclusive and prosperous Indo-Pacific region that is anchored by democratic values, and unconstrained by any kind of coercion. China, in fact, views the Quad as a component of a broader toolkit devised by the US who, strongly encouraged by Japan, is scheming to adopt a Cold War-style plot to strategically encircle China by adding India as a member. China is under this fear that If the United States is indeed pursuing a containment strategy, it would face pressure both along its eastern frontier, southern and western flanks. Furthermore, some Chinese analysts even went on to brand the Quad as an incipient “Asian NATO”.


The informal group first came together in 2007, only to disband within months due to a lack of participation and no proper institutional framework. Its revival a decade later in 2017 came amid hardening of attitudes towards China among all the Quadrilateral partners. At first China did not take the Quad seriously. However, Chinese attitudes toward the Quad started changing in late 2020 after the grouping showed increasing momentum. The virtual summit of Quad on 12th March, 2021 forced the Chinese observers to treat the group more seriously. As the Quad conducted the Malabar Naval drills in the Indian Ocean in November 2020, Chinese state media responded by condemning the Malabar naval exercises, calling the drills a risk to regional stability but at the same time, it kept a close eye on it. Evidently, Chinese strategists are increasingly seeing the group transitioning from a loose diplomatic configuration with imperceptible impact into a more institutionalized and worrisome arrangement.


However, Chinese experts argue that China’s status as the most important trading partner of the Indian Ocean region and as the largest export market for the United States, Japan, and Australia and largest overall trade partner for India (despite recent competition from the United States), would dissuade the Quad partners from cooperating in a way that would seriously harm China’s interests. This implies that the enthusiasm varies with the political winds in each Quad member as some of them are wary of provoking China too directly.


A possible way adopted by China to tackle this challenge posed by this informal alliance could be the ‘Divide and Rule’ policy, which would simply mean creating conflicts among the members and reducing the pace of the activities of the group. Besides, Chinese analysts do acknowledge that growing disputes between China and other states contributed to these developments. The deadly, historic June 2020 Galwan valley clash at the Sino-Indian border marred China’s earlier attempts to stabilize relations with India. This led India to become much more actively engaged in the Quad. Similarly, a deteriorating Sino-Australian relationship led Canberra to become even more inseparable from the United States. China has been using coercive trade practices to target Australia who supported the demand for asking for an independent probe into the origin of the coronavirus. China retaliated by targeting Australian beef exports and banning Australian wine. It is not that the Chinese government cares about wine, beef, or any such commodities, but the real game is to create societal splits that pressure the governments to change their respective foreign policy towards China.


Furthermore, some Chinese strategists took the Quad’s coalescence in 2020 as a signal that China should refocus its attention on sidelining the Quad from larger regional institutions and arrangements that are perceived to be less beholden to the U.S. interests. Some other Chinese analysts assert that China, by deepening strategic interactions and increasing maritime security cooperation with the Association of Southeast Asian Nations (ASEAN), would be able to counterweight the Quad. However, China’s diabolic behavior in other parts of Asia and its increasing encroachment into the South China sea only incentivizes the Quad to work together more closely.


On top of this, adding fuel to the fire, is the formation of a new purpose-built security alliance, on 15th september 2021, among the US, UK and Australia under which Australia would be equipped with a fleet of eight nuclear-powered submarines (SSNs) by the US and the UK, presumably to handle the undeclared objective of countering China’s expansion in the Indo-pacific region. The Aukus seems to be another step towards reconfiguring the Indo-pacific balance of power and countering China’s soaring might. It is a security alliance that links disparate parts of the world- Europe, the Americas and Australasia, and is again thereby instrumental in encircling China. This trilateral pact reflects some of China’s worst fears and has garnered serious backlashes from the country as well.


China and its mouthpiece ‘Global Times’ reacted predictably and it was one of anger and recrimination. Beijing condemned the agreement as “extremely irresponsible” and that it “seriously undermines regional peace and stability and intensifies the arms race”. Furthermore, China’s embassy in Washington went on to accuse the Aukus countries of forming the pact with a “Cold War mentality and ideological prejudice”.


At the same time, China has, somehow, got the feeling that it itself is the prime reason for the rise of Aukus. The dragon is embarking on one of the biggest military spends in history. It is growing its navy and air force at a rapid rate and has been accused of raising tensions in disputed territories.


Nevertheless, the Chinese government believes that it can dwarf Quad’s prospects by leveraging its status as a top trade and political partner for both the Quad and non-Quad states alongside showing that America’s commitment to Asian security was diminishing as well as by driving wedges between the four states. India is the only Quad member which has an unsettled land border with China who has done its best to create some apprehension in the minds of the other Quad members, by keeping Sino-India relations fluctuating between tension and harmony with incidents like Doklam, Wuhan, Malappuram and the Galwan valley.


China mishandling its relations with its own ASEAN neighbours like Vietnam and Philippines is a strategic blunder that the both the Trump and Biden administrations effectively exploited to advance their own strategy. As a result, China needs, as some analysts opine, to balm the disputes with its neighbors so that they don’t become an outpost for the U.S. to subvert China.


What is vital to take note of is that no single nation can go alone against China, not even the US. Strength is found in multilateralism and China seems to be fearing the strength that emanates from multilateralism. Even though it is a newbie in invigilating the Indo-Pacific, the Aukus marks the consolidation of China’s worst fears and can be taken as crucial for sharpening the claws of the Quad.


It’s too early to say whether the Quad will achieve its unstated goal- stopping an authoritarian China from becoming Asia’s undisputed hegemon. But the four nations have signed on to an ambitious strategy, spanning cooperation on vaccines, infrastructure and technology, all designed to blunt Beijing’s sharpness. Taken together with the new Aukus military pact and a thickening web of bilateral agreements across the region, these initiatives signal a clear intent to combat China. Importantly, China has always tried to deal with every country on bilateral terms, using its Comprehensive National Power (CNP) to its advantage. In any forthcoming bilateral engagements with the US, Japan and India, China will continue to aim for weakening the Quad, by some bilateral concessions. So it will be quite interesting to observe what more tactics China employs to maneuver its path filled with spikes placed by Quad and the Aukus.
moderndiplomacy.eu

Is China in a quandary over Quad and the AUKUS?

China has identified a major challenge to its dream of a China-centric Asia Pacific, in the face of Quad. Quad’s unstated priority of countering China’s growing power is rankling the communist leadership in Beijing. The Quad calls for a free, open, inclusive and prosperous Indo-Pacific region...
moderndiplomacy.eu moderndiplomacy.eu
 

Australia Shows the World What Decoupling From China Looks Like​

When Australia had the temerity to call for an independent inquiry into the origins of COVID-19 last year, China was incensed. It responded with an unprecedented wave of trade restrictions that froze many categories of Australian exports, rapidly decoupling economic ties. But if Beijing hoped to punish Canberra for its defiance with economic pain—and send a warning to other countries not to oppose China—it has failed on both accounts. The impacts on Australia have so far been surprisingly minimal. If this is what decoupling from China looks like, Australia’s resilience suggests the costs are far lower than many have assumed. That fact will not be lost on other countries that have differences with China.

Australia-China relations have long been marked by a fundamental tension. Economically, the two sides have been increasingly intertwined, with Australia providing many of the commodities on which China’s industry relies. But politically, much divides them. Beyond differences on values and human rights, Australia is concerned by China’s increasingly belligerent behavior in the Indo-Pacific. China, meanwhile, bristles at what it believes to be Australia’s anti-China stance. Over the past several decades, the two countries operated under an implicit bargain to shelter their rapidly growing economic ties from any political differences.

It worked: From 2009 to 2019, Australian exports to China tripled to 149 billion Australian dollars (around $110 billion) per year. Around half of that is iron ore, which fuels China’s insatiable need for steel to fuel its construction boom. The rest is mainly coal, gas, and agricultural products, plus substantial Australian earnings from Chinese students and tourists. This bargain held even when relations hit a rough patch—such as in 2009 and 2017—with trade increasing every year.

The bargain suddenly broke down last year. In April 2020, the Australian government led an international call for an independent inquiry into the still-murky origins of COVID-19 in Wuhan, China. An incensed Beijing quickly denounced Canberra’s call as an affront and political witch hunt.

Australia demonstrates that China’s bark is worse than its bite.

The reprisal came just one week later, when the Chinese ambassador to Australia, Chen Jingye, threatened consumer boycotts of several products in response to Australia’s call for the investigation. Then, in May 2020, China applied massive anti-dumping duties on Australian barley, pricing a $1 billion industry out of its principal export market overnight. But it did not have the intended effect of getting Australia to back down: Instead, the government responded defiantly, with Australian Foreign Minister Marise Payne publicly accusing China of economic coercion.

With the barley ban failing to produce the desired response, China doubled and tripled down. Beef was next, with several Australian producers losing their export licenses. More tariffs were applied to wine, while customs bans were slapped on wheat, wool, lobsters, sugar, copper, timber, and table grapes. Chinese importers were instructed to stop purchasing Australian coal and cotton, and electric utilities were encouraged not to buy liquefied natural gas on the spot market. The trade guns were still smoking when, in November 2020, the Chinese Embassy in Canberra issued a list of “14 grievances” that Australia was expected to correct to return to a normal relationship.

This is not China’s first attempt to force trading partners to toe its line. It has previously applied trade coercion during diplomatic disputes to eight other countries: Canada, Japan, Lithuania, Mongolia, Norway, the Philippines, South Korea, and Taiwan. But its massive onslaught against Australia was like nothing before. Whereas China usually sanctions minor products as a warning shot—Norwegian salmon, Taiwanese pineapples—Australia was the first country to be subjected to an economywide assault. Iron ore was the only major commodity spared, a purely self-interested move given the dependence of China’s steel industry on Australian supplies.

If the scale of China’s trade coercion against Australia is unprecedented, it also offers an intriguing experiment: What does a sudden economic decoupling from China look like? With China accounting for nearly 40 percent of Australian exports, one might assume the costs of Canberra’s defiance would be grave.

But in fact, the effects have been surprisingly mild. The reason is trade diversion: When a trade barrier is erected, businesses seek alternate outlets for their products. In open international markets, the outcome is rarely the destruction of export industries. Most of the time, trade flows adjust around the barrier.


Coal provides an illustrative example. Once China banned imports of Australian coal in mid-2020, Chinese utilities had to turn to Russian and Indonesian suppliers instead. This, in turn, took Russian and Indonesian coal off the market, creating demand gaps in India, Japan, and South Korea—which Australia’s stranded coal was able to fill. What’s more, the global energy crunch has pushed up the price of coal, leading Australian coal producers’ export earnings to rise this year—not exactly the effect China had in mind. The result of decoupling for one of Australia’s core industries was therefore just a game of musical chairs—a rearrangement of who traded with whom, not a material injury.

Many Australian industries successfully applied this tactic. Barley was redirected to Saudi Arabia and Southeast Asia, copper to Europe and Japan, and cotton to Bangladesh and Vietnam. Other sectors developed more creative workarounds. The beef industry sent cattle to be processed at abattoirs that still had export licenses, while lobster farmers used gray routes—for example via Hong Kong—to enter the mainland. These successful diversion tactics greatly cushioned the blow for industries whose trade with China was suspended.

As a result, the cost of decoupling the Australian economy from China has been far lower than anyone had expected. According to Australian Treasury estimates, sectors affected by Chinese trade restrictions lost AU$5.4 billion (around $4 billion) in exports to China during the first full year of sanctions, but they simultaneously found AU$4.4 billion ($3.3 billion) of new markets elsewhere. The net loss of AU$1 billion is a mere 0.25 percent of Australian exports. What’s more, due to surging iron ore prices, the value of Australian exports to China actually grew by 10 percent since sanctions have been in effect. “Our economy has … proven to be remarkably resilient,” Australian Treasurer Josh Frydenberg said.

To be sure, diverting trade won’t always work as a response to coercive decoupling. Australia could reroute many exports relatively easily because much of its trade with China is in generic commodities that can go anywhere. Australian timber and wine, mainly produced specifically for the Chinese market, have struggled to find alternative destinations. For more complex supply chains in the technology and manufacturing sectors, decoupling is an even more difficult exercise. Still, Australia’s experience offers an important lesson: Trade decoupling does not automatically mean trade destruction.

While the adjustment process is not pain-free, it is far less costly—and less of a deterrent to political action—than most assume.

If China intended to bully Australia into silence, the campaign has been a spectacular failure. With economic costs proving trivial, an emboldened Australian government suddenly had a free hand to press ahead with policies to oppose China. At the 2021 G-7 summit in Rome, the Australian delegation distributed copies of the “14 grievances” to highlight Chinese coercion. Australia pressed ahead with efforts to strengthen the Quadrilateral Security Dialogue with India, Japan, and the United States. And in its most provocative move, it formed the AUKUS security partnership with the United Kingdom and the United States with the explicit purpose of countering China militarily in the region. Far from producing a quiescent Australia, coercion has had the opposite effect and hardened its stance.

More importantly, Australia’s experience offers broader lessons on the strategic implications of decoupling from China. First, governments can no longer count on separating their economic and political relationships with China; difficulties on the political side will quickly be met with economic threats. Second, Australia demonstrates that China’s bark is worse than its bite.

China may be a large and important economic partner, but it is far from the only one out there. International markets quickly rearrange themselves to adapt to sanctions, greatly reducing their actual impact. While the adjustment process is not pain-free, it is far less costly—and less of a deterrent to political action—than most assume.

Indeed, Australia’s resilience may now be inspiring others to take a stand. In May, Lithuania withdrew from the controversial 17+1 group consisting of China and Eastern European nations, and it has since agreed to establish a representative office in Taiwan. The Chinese response was predictable: a suspension of rail services to Vilnius and the rejection of food export licenses.

Perhaps inspired by Australia’s example, Lithuania—a small country of 2.8 million people—is undeterred. “We are ready to talk [to China], but we would not be ready to reconsider … our decision,” Lithuanian President Gitanas Nauseda said. Lithuania is now pushing for European Union unity and support on the issue.

Australia has shown the world it can say no to China and still prosper despite trade sanctions and a forced economic decoupling. It may not be long until more countries start to follow.
foreignpolicy.com

Australia Shows the World What Decoupling From China Looks Like

The bottom line: Beijing’s attempt to bully Canberra has been a spectacular failure.
foreignpolicy.com foreignpolicy.com
 

Australia looks to wall off sensitive tech from China​

Sydney (AFP) – Australia on Wednesday announced measures to ring-fence dozens of sensitive technologies from foreign interference, stepping up efforts to safeguard against "national security risks" from China and others.

Prime Minister Scott Morrison unveiled a list of 63 "critical technologies" to be promoted and protected at an online forum in Sydney -- a step toward limiting what government, industry and universities can and cannot share with foreign counterparts.

The list includes 5G communications, quantum technologies -- which are based on the physics of sub-atomic particles -- artificial intelligence, advanced magnets, 3D printing, drones and vaccines.

The measures aim to "balance the economic opportunities of critical technologies with their national security risks", Morrison told a forum hosted by the Australian Strategic Policy Institute.

Items on the list will not be automatically banned for export or proscribed, but may be subject to "additional risk management", including measures to stop "unwanted tech transfer".

Australia has become increasingly concerned about the transfer of sensitive technology to foreign military powers, particularly to China, under the guise of academic cooperation.

Canberra has also moved to limit the ability of Chinese state-linked firms to operate critical infrastructure in Australia.

A decision to effectively bar Huawei from running Australia's 5G network was the catalyst for a major diplomatic rift between the two countries.
For almost two years, high-level diplomatic contacts have been frozen and Beijing has levied a raft of sanctions that some have called a "shadow trade war".

Australia is currently in the process of auctioning 5G spectrum licenses.

'Norms and values'​

Morrison on Wednesday also listed nine critical technologies that will be the focus for investment, hoping the expertise will help "uphold our liberal democratic traditions" in what he described as an era of "strategic competition".

"The simple fact is that nations at the leading edge of technology have greater economic, political and military power," he said.

"And, in turn, greater capacity to influence the norms and values that will shape technological development in the years to come."

The list also includes nuclear technology -- a marked departure for a country that has long been opposed to fission power and currently only has one research reactor.

Australia recently signalled its intention to purchase long-range, ultra-stealthy nuclear-powered submarines from the United States or Britain, cancelling a vast order of diesel-powered subs from France.

But the list goes further, including a range of nuclear technologies linked to power generation, space travel, reprocessing and isotope production.

Many of the other listed technologies have military or dual-use applications, such as synthetic materials that bend light or radio waves, self-fixing materials designed for advanced body armour, laser communications or quantum cryptography.
www.france24.com

Australia looks to wall off sensitive tech from China

Australia on Wednesday announced measures to ring-fence dozens of sensitive technologies from foreign interference, stepping up efforts to safeguard against "national security risks" from China and others.
www.france24.com www.france24.com
 
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