The Avoidable War: The Dangers of a Catastrophic Conflict between the US and Xi Jinping's China

by Kevin Rudd

The current state of US-China relations is the product of a long, complex, and contested history. This complexity has been compounded over the last 150 years by each side blaming the other for the relationship’s failings. What emerges across the centuries is a recurring theme of mutual noncomprehension and deep suspicion, often followed by periods of exaggerated hopes and expectations that then collapse in the face of fundamentally different political and strategic imperatives.

This deepening chasm of distrust did not develop overnight. It has been growing over many years, fueled by a vast array of accumulated political and strategic perceptions. There is a deep belief in the capitals of both countries that the diplomatic formulations used by each side about the other are no longer believable, that they are a diplomatic fiction, detached from the world of strategic fact, where an entirely different reality has unfolded. Washington no longer believes in China’s self-proclaimed “peaceful rise.” The US national security establishment, in particular, now holds the view that the CCP has never had any compunction about lying to deceive its political or strategic adversaries.

In Thucydides’s History of the Peloponnesian War, the ancient historian concluded that “it was the rise of Athens and the fear that this instilled in Sparta that made war inevitable.”

Inevitability of war

Deng Xiaoping, as a guide to the PRC’s actions in the world: “Hide your strength; bide your time; never take the lead.”

Deng Xiao Ping

For many reasons, much of the American strategic community discounts the idea of China’s peaceful rise or peaceful development altogether. Instead, there is a deep view that some form of armed conflict or confrontation with Beijing is inevitable—unless, of course, China were to change strategic direction. Under Xi Jinping’s leadership, any such change is deemed to be virtually impossible. In Washington, therefore, the question is no longer whether such confrontation can be avoided, but when it will occur and under what circumstances. And to a large extent, this mirrors the position in Beijing as well.

There is, therefore, both a moral and a practical obligation for friends of China and friends of the United States to think through what has become the single hardest question of international relations of our century: how to preserve the peace and prosperity we have secured over the last three-quarters of a century while recognizing the reality of changing power relativities between Washington and Beijing. We can allow the primordial dimensions of Thucydidean logic to simply take their natural course, ultimately culminating in crisis, conflict, or even war. Or we can identify potential strategic off-ramps, or at least guardrails, which may help preserve the peace among the great powers while also sustaining the integrity of the rules-based order that has underpinned the stability of the wider international relations system since 1945.

1. Agreeing on principles and procedures for navigating each other’s strategic redlines (for example, over Taiwan) that, if inadvertently crossed, would likely result in military escalation. 2. Mutually identifying the areas of nonlethal national security policy—foreign policy, economic policy, technology development (for example, over semiconductors)—and ideology where full-blown strategic competition is accepted as the new normal. 3. Defining those areas where continued strategic cooperation (for example, on climate change) is both recognized and encouraged.

There is no time to waste. Hypernationalists are gaining ground in the politics of both capitals. Self-described realists with confrontationist agendas seek to influence their respective national security policies. Liberal internationalists, let alone multilateralists, are usually written off as weak-kneed. The United States, under first the Trump administration and now the Biden administration, has formally concluded that after forty years, strategic engagement between China and the United States has outlived its usefulness as a strategy. Instead, we have entered a new, uncharted era where there are, as yet, no new rules of the road. China has reached a similar conclusion. The time has therefore come to craft some new ones before it’s too late.

When the American republic was in its infancy in the immediate aftermath of the Revolutionary War, China was at its height as the largest, wealthiest, and most populous country on earth. The Qing dynasty (1644–1911) extended the territorial reach of the Celestial Kingdom to its greatest extent since China first became a unified kingdom in 221 BCE. Under the Qianlong Emperor (1735–1796), the Chinese economy represented 40 percent of global GDP, despite the fact that relatively little of China’s wealth was derived from external trade.

China at it's largest

China, therefore, as seen through the framework of its national historiography, had been a relatively successful self-contained, self-referential political, economic, philosophical, cultural, and religious system. Foreigners, by contrast, were viewed with a combination of suspicion and condescension: as episodic invaders; culturally inferior; and, in most practical respects, irrelevant to China’s essential national needs. It was within this wider frame that, by the mid-nineteenth century, neither the West nor the British, let alone their distant American cousins, loomed large in the collective Chinese imagination.

The decisions made in Paris immediately sparked widespread protests in China and radicalized Chinese politics. America’s status, in the eyes of China’s emerging political class, collapsed overnight from national savior to spineless hypocrite. Mao Zedong (1893–1976), who had been one of many young Chinese who had been initially inspired by Wilson’s commitments to China, now described the United States and the other Western powers as a “bunch of robbers” who “cynically championed self-determination.” Had Woodrow Wilson stood up to Japan at Versailles, the twentieth-century history of China may have been significantly different.

In the end, fearing it risked outright war with Japan, the Roosevelt administration held back from offering official military support for Chiang despite professing sympathy for China. Indeed, until America’s entry into the war in 1941, 80 percent of all foreign aid to China came from the Soviet Union. Even after Pearl Harbor, Roosevelt pursued a policy of Europe first, regarding China as a secondary theater of operations and, therefore, warranting no serious US troop presence.

To put it another way, from the outset, Beijing saw the relationship as a transactional one, as a means of enhancing China’s national security and prosperity. Whereas Washington came to see it, at least in part, as transformational, carrying with it the deeper objective of changing the fundamental nature of Communist China itself.

Misunderstanding of relation China / USA

Deng saw China’s modernization not as any kind of political, let alone ideological, transformation but as a pragmatic economic move in the tradition of the various national self-strengthening movements from China’s imperial past. While opposed to the political and economic chaos brought about by Mao’s mass movements during the Great Leap Forward and the Cultural Revolution, Deng had no interest in any form of fundamental democratic reform. While Deng may not have seen the United States as a source of political reform, he did see it as a source of foreign trade, investment, technology, training, and modern financial and economic management. While not an orthodox Marxist, Deng remained a fully committed Leninist.

The net result of China’s entry into the WTO and unprecedented access to global markets, coupled with its currency’s deeply advantageous fixed exchange rate, was that over the next decade and a half, China became the world’s leading manufacturing power, as factories relocated to the country from many advanced economies, including the US. This led to China also becoming the world’s largest trading country and the world’s second-largest destination for global foreign direct investment. It set the scene for the decline of American industry and the rise of populist resentment against globalization in general—and China in particular.

It was this increasingly self-confident China that greeted the Obama administration when it came into office in 2008. Unlike Ronald Reagan, George H. W. Bush, Bill Clinton, and George W. Bush, Obama chose not to engage in bellicose rhetoric against Beijing during his election campaign. This was, in part, a reflection of his cautious intellectual temperament, but it was also because his foreign policy team had seen what happened with previously successful presidential candidates: after attacking their predecessors for being weak on China, an inevitable chill in the bilateral relationship followed, after which the winner would discover that he, too, would have to eat humble pie and justify to the American public a reopening of a line of communication with Beijing.

It’s for these reasons that I have described Xi’s worldview as “Marxist-Nationalist,” because while his appeal to the party remains ideological (not least because ideology is the backbone of Leninist discipline), his appeal to the people is assiduously nationalist. That is why Xi Jinping Thought is not, as Xi would have us believe, a new theoretical revision of the deepest precepts of Marxism-Leninism. Rather, it is a skillfully constructed primer that brings together an emotionally appealing, focus group–tested set of precepts, axioms, and anecdotes. It is an amalgam of simplified ideology and reified nationalism, which, when combined, represent an appeal to the mind and heart, respectively, with the latter aiming to bring forward the collective consciousness of an ancient people to the politics of the present. In that sense, it is potentially much more potent a nationally mobilizing force than Mao Zedong Thought was half a century ago.

At the same time, China has a remarkable incapacity to reflect on its Han ethnocentrism, including its historical predisposition for racial stereotyping and the widespread view that most non-Han ethnicities are racially inferior, or luohou (backward), and in need of Sinicization. But our question here is not one of relative moral virtue on the part of Chinese and Americans on the question of race. It is to understand that when China identifies what it sees as American policies of containment designed to frustrate China’s rise, these are interpolated through the prism of race, depicted and often seen as a last-ditch stand on the part of “white” Western civilization to prevent an Eastern civilization from supplanting it. China’s view of America is that it is insufferably arrogant, condescending, and systemically incapable of treating China or its leaders with appropriate national respect, let alone as equals.

China's 'view'

In Graham Allison’s analysis, the peaceful transition in global leadership after World War I between the UK and the US was made possible not just because of Britain’s postwar economic exhaustion. More importantly, it was because London concluded that, while it might have been undesirable to give up its global leadership role, it was not a catastrophe. America, in Britain’s view, was a familiar power, steeped in similar (though not identical) values, with an understandable worldview and national ambitions. America could, thus, be trusted to accommodate British interests and concerns, even if it took the lead. This logic simply does not apply between the United States and Xi Jinping’s China. The gulf between Chinese and American worldviews, communication, and trust is simply too vast to accommodate any such compromise.

one senior Chinese military leader once said to me, “No state is ever fully transparent with another state, particularly in the context of unfolding strategic rivalry.”

Lack of full transparency to rivals

To understand China’s long-term strategy toward the United States and how the US might most profitably respond to it is to understand where America fits within the wider framework of the Communist Party’s worldview. While Xi Jinping, given his unprecedented power within the party, has had a profound impact on how the CCP sees its and the country’s future, there are also many consistencies from the past. If Xi is not China’s paramount leader tomorrow, much of what is described in this chapter would remain in place. In many respects, what Xi has done is intensify and accelerate priorities and plans that have long been part of the party’s strategy. Where

Xi has changed China’s worldview has been in the reinvigoration of the party’s Marxist-Leninist foundations, the turbocharging of Chinese nationalism, and the sharpening of the country’s national ambitions.

XJP's changes to China

The centrality of Xi and the party and the hard business of staying in power: Core to the CCP is its overriding determination to remain in power. While radically different from the worldview of Western political parties, this deeply Leninist reality should never be forgotten. Under Xi Jinping, this fundamental interest dictates every other interest of the Chinese party and state. In that context, Xi himself is also determined to secure his position, including an enduring legacy in national and party history superior to that of Deng Xiaoping and at least equal to Mao Zedong.

XJP centrality to stay in power

Maintaining and securing national unity: Xi’s second core interest is the unity and territorial integrity of the motherland. Maintaining firm control over Tibet, Xinjiang, Inner Mongolia, and Hong Kong is nonnegotiable for the CCP. Even more fundamental is the “return” of Taiwan, which remains the holy grail of party politics because it would complete the sole task left unfinished following Mao’s revolution and establishment of the PRC in 1949. These internal security priorities will always remain central to the party’s perception of its continuing political legitimacy, given that Chinese history has always been kind to those emperors who have held the empire together and unforgiving to those who have allowed it to fall apart.

Growing the Chinese economy:

3.Growing economy

Environmental sustainability:

4.environmental sustainable

Modernizing the military:

5. Modern Military

Managing China’s neighboring states:

6.Managing neighbours

Securing China’s maritime periphery in East Asia and the west Pacific: China may see its continental periphery as problematic, but it sees its maritime periphery as deeply hostile. Here, China perceives a region strategically allied against it—with a ring of US allies from South Korea to Japan to Taiwan to the Philippines and Australia. China’s strategic response to this is clear. It seeks to fracture US alliances. It has said as much repeatedly in its declaratory statements, claiming that they are relics of the Cold War. Meanwhile, as noted above, Xi has overseen a transformation of China’s military capabilities in which the army continues to shrink and its naval and air forces continue to expand, along with an arsenal of missiles and other asymmetric weapons.

7.Secure maritime periphery

Securing China’s western continental periphery:

8.Securing western continental periphery

Increasing Chinese leverage across the developing world:

9. Increase developing world leverage

Rewriting the global rules-based order:

10. Rewriting Global rule based order

Xi Jinping Thought includes a proliferation of new phrases seeking to define Xi’s vision for the party and the country. The cornerstone of this vision is the China Dream. It is defined by two goalposts. First, by China becoming a “moderately prosperous society” (defined as doubling China’s per capita income to $10,000 from where it stood in 2010) by the centenary of the party’s founding. This was achieved with great fanfare in 2021. The next goal is China becoming a fully advanced economy by the centenary of the founding of the People’s Republic in 2049, with average income levels to be the same as the US. To

XJP thought in 2 points

to stand still is, in fact, to fall behind.

Standing still falling behind

The core political challenge for Xi, therefore, is whether a crisis of business confidence prompts him to decisively throw his lot in with his economic reform team and accept a partial loss of political control as an acceptable price to pay for the realization of his much-cherished vision of the China Dream. This will cut against his instincts to strengthen party control over the private sector, but the pressures of ongoing trade and technology disputes with the United States and its allies may have made this an easier decision for him than it otherwise would be. The evidence so far, however, points in the reverse direction. China’s future, including its political future and its future influence in the world, will ultimately turn on this core decision.

That Xi implemented a wide-ranging crackdown against “bourgeois liberalization” in China’s education system during the first six months of his term in 2013 is, therefore, unsurprising. He identified seven sensitive topics that could no longer be the subject of any form of academic discussion or debate. These were “universal values, freedom of speech, civil rights, civil society, the historical errors of the Communist Party, crony capitalism, and judicial independence.” This was followed in 2017 by China’s new foreign NGO law, which placed new security restrictions on the operations of any NGO attracting philanthropic funding from abroad. With

XJP against burgoisey liberals

core precept of Confucianism is “know thy place,” the CCP intends to also know everyone’s place at all times. A vast network of CCTV cameras with AI-enabled facial, iris, voice, and gait recognition capabilities; geospatial monitoring of individual movements through cell phone positioning data; a nearly universal cashless payment system for monitoring all financial transaction (including, as is planned for the future, through a fully government-controlled digital currency); and, most recently, a carefully crafted “social credit system” that permanently monitors and rewards or punishes people’s political trustworthiness based on everything they say or do in China’s omnipresent digital world. Technology like this is creating a surveillance and police state of unprecedented power. Digital technologies not only allow the state to keep track of nearly everything its common citizens do but also enable party leadership to closely monitor the political compliance of local party cadres right across the country.

Know everything

Taken together, from Beijing’s perspective, Tibet, Inner Mongolia, Xinjiang, Hong Kong, and Taiwan have long been seen as major challenges to national unity. The difference today is that Xi Jinping has adopted a much harder line than any recent Chinese leader. Xi, unlike his recent predecessors, has been indifferent to international reaction. He believes that the national security imperatives of “complete security” are more important than any foreign policy or wider reputational cost to the regime. Xi also believes that the rest of the world now depends on the Chinese economy so much that international political reactions to Chinese measures will, in the main, be superficial, symbolic, and temporary.

Increasing living standards and improving the quality of life for the Chinese people is a core part of Xi’s effort to build the party’s political legitimacy in the post-Mao era. This is the unspoken social contract between party and people: that the public will continue to tolerate an authoritarian political system under the party so long as the people’s material livelihood continues to improve. While Xi is no economist and appears to have surprisingly limited feel for how market economies actually function (he is much more comfortable in the classical political domains of ideology, security, and international relations), he understands the axial link between continued public prosperity and the security of his long-term leadership.

Xi finds himself wrestling with five major interconnected, and in some cases conflicting, challenges in China’s unfolding political economy: (1) to maintain economic growth to provide employment and rising living standards; (2) to do so while maintaining an optimal internal balance between the state and the market without ceding the party’s political control to a new generation of entrepreneurs; (3) to ensure that growth is better distributed than in the past so that economic inequality is reduced; (4) to impose new carbon constraints on China’s previous economic development model to deal with the now accepted reality of climate change; and (5) to manage the external economic pressures now being applied by the United States on trade, investment, and technology.

XJP's 5 economic challenges

Xi Jinping is now implementing a fourth major pivot to restructure China’s economy, this time far larger in scope than anything since the 2013 Decision and reflecting his core priorities to protect China and the CCP against countervailing forces, both internal and external. Since 2020–2021, Xi has been implementing a new comprehensive economic strategy—now called the New Development Concept—to prioritize security, political stability, and economic equality over rapid individual wealth accumulation; societal cohesion over economic efficiency; and national self-sufficiency over the benefits of open international exchange. This new economic era also reflects a deeply waning commitment to the continuation in the future of the market reforms of the past.

So what does the NDC actually mean for Chinese economic policy? Although it first appeared in 2015 (when it was brought up by Xi at the Second Plenary Session of the Eighteenth Central Committee), for the next few years, the term New Development Concept was of secondary significance in the party’s official discourse, left vague enough to encapsulate whatever Xi’s take on economic policy happened to be at the time. Its intended significance was then underscored by Xi’s decision to have it formally incorporated into the Chinese state constitution in March 2018. Over the years that followed, Xi gradually imbued the concept with more meaning, and by 2020, the NDC came to embody the confluence of three key priorities: nationalist self-reliance, his protectionist concept of a dual-circulation economy, and his new redistributive doctrine of common prosperity.

XJP NDC

tangping, or lying flat, in which people resolve to do the absolute bare minimum of work in life, relying instead on the generosity of the state.

Tang ping

However, the takeaway message for investors is that capital must be directed to industries Beijing wishes to develop. Internet platform companies are off-limits because foreigners holding such data would threaten the state. On the other hand, wealth management has been given the green light because Beijing needs foreign expertise to guide and develop a sector where investible assets are projected to surpass $70 trillion by 2030. That is a crucial need for a country with a fast-growing middle-income class and accumulated savings. Doing so does not conflict with Beijing’s sensitivity to foreign capital leaving China; rather it doubles down on Beijing’s belief that the weight of China’s economic gravitational force will continue to attract more foreign capital.

In the race to produce the most effective and efficient semiconductors and computer chips, a significant advantage is still held by the US and a number of other non-Chinese firms. In terms of semiconductors, as of 2018, China was only manufacturing 5 percent of total global supply. By contrast, the US provided 45 percent of the total global supply, primarily through its major corporate leader in the field, Intel. The other two global leaders in semiconductor technology are the Taiwan Semiconductor Manufacturing Company (China’s largest supplier) and Korea’s Samsung. Indeed, as of 2019, the US semiconductor industry represented about 50 percent of total US exports to China. China’s

Semiconductors in china US , Taiwan then Korea

However, the prospects for decoupling US and Chinese capital markets presents a different and more complex picture than we find elsewhere in the US-China economic relationship. The reason is that the current scale, interdependency, and mutual exposure of Chinese and American financial interests are simply too great. As of 2021, the US-China bilateral financial relationship stood at just over $5 trillion. This includes Chinese listings on US stock exchanges ($1.9 trillion), $1.5 trillion in Chinese stocks and bond holdings on Chinese and Hong Kong exchanges intermediated by US firms, $200 billion in Chinese holdings of US corporate stocks and bonds, $100 billion in US cross-border lending to Chinese firms, $1.1 trillion in Chinese official holdings of US Treasuries, and a further $200 billion in other US government bond holdings. The bottom line is that these are very large numbers indeed.

China’s military and political leaders have also studied Alfred Thayer Mahan’s classic work on the relationship between sea power and national greatness and cite it frequently, along with historical examples of British and American naval power during the nineteenth and twentieth centuries. In this view, sea power has an axiomatic relationship with global great power status, including the power that subjugated imperial China during the Century of Humiliation. They, therefore, see this as an important strategic lesson for China in the twenty-first century. As a result, China has concluded that the PLA’s maritime power must be expanded, not only to defend China’s shores but also to offer an important means of asserting Chinese power, influence, and prestige into the wider Indo-Pacific region and perhaps, in time, other theaters beyond.

China’s strategic approach has also been influenced by having carefully studied the history of America’s Monroe Doctrine. Beijing observed Washington’s ruthless determination under this doctrine and how it sought, over nearly two hundred years, to secure its wider strategic environment by denying access to the “American” hemisphere to any other great power. By extension, the US repeatedly acted to ensure that its regional neighbors across the Americas complied with Washington’s political and strategic interests. This was codified by the 1904 Roosevelt Corollary to the Monroe Doctrine, which asserted the United States’ right to intervene in the internal economic affairs of Central American and Caribbean states if they were unable to pay their international debts. This policy led to political cartoons of President Teddy Roosevelt patrolling America’s “Caribbean Lake,” threatening small countries with his big stick.

While Xi Jinping sees Russia as a declining economic power with limited global reach beyond its impressive military capabilities, he nonetheless recognizes great value in Moscow being prepared to act far more adventurously than China itself. Moscow has always been prepared to push back, both militarily and in foreign policy, against the Americans and Europeans much more aggressively than Beijing. This suits Xi well, as Russia’s international reputation as a potential global “spoiler” has enabled China to project an image of being a more conservative, consultative, and responsible actor in the eyes of the wider international community—characteristics that, in Beijing’s eyes, are seen as more befitting of the world’s next superpower. All this has made the Sino-Russian relationship of great value to China’s overall strategic interests.

Perhaps most significantly, in 2021, Tokyo spoke out publicly for the first time on Taiwan, reflecting the conclusions of a Defense Ministry white paper that concluded that the regional balance of power was shifting dangerously in China’s favor. Kishi declared that Japan had an obligation “to protect Taiwan as a democratic country,” while Japan’s deputy prime minister Taro Aso warned that an attack on Taiwan, or “various situations, such as not being able to pass through the Taiwan Strait,” would pose “an existential threat” to Japan, which would “need to think hard that Okinawa could be next.” He noted that “if that is the case, Japan and the US must defend Taiwan together.” In August 2021, Tokyo and Taipei held their first bilateral security talks.

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